Snack Empire Holdings Limited - Proxy Solicitation & Information Statement 2002

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

This circular does not constitute an offer or invitation to subscribe for or purchase any securities of Fourseas.com Limited nor is it calculated to invite any such offer or invitation.

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

If you have sold or transferred all your shares in Fourseas.com Limited, you should at once hand this circular and the accompanying form of proxy to the purchaser or the transferee or to the bank, stockbroker or other agent through whom the sale or transfer was effected for transmission to the purchaser or the transferee.

The Stock Exchange of Hong Kong Limited 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.

Fourseas.com Limited

(incorporated in Bermuda with limited liability)

MAJOR AND CONNECTED TRANSACTION INJECTION OF CAPITAL IN

(Shanghai New Century Shui Qing Mu Hua Property Development Company Limited)

Financial adviser to Fourseas.com Limited

Shenyin Wanguo Capital (H.K.) Limited

Independent financial adviser to the Independent Board Committee of Fourseas.com Limited

Kingsway Capital Limited

A letter from the Independent Board Committee is set out on page 12 of this circular. A letter from Kingsway, the independent financial adviser to the Independent Board Committee, containing its advice to the Independent Board Committee is set out on pages 13 to 19 of this circular.

A notice convening a Special General Meeting of Fourseas.com Limited to be held at 10:00 a.m. on 13 May, 2002 at Room 2301, 23/F, Great Eagle Centre, 23 Harbour Road, Wan Chai, Hong Kong is set out on pages 84 to 85 of this circular. A form of proxy for use at the Special General Meeting is enclosed. Whether or not you are able to attend and vote at the Special General Meeting, you are requested to complete the enclosed proxy form and return it to the Company’s branch registrar in Hong Kong, Secretaries Limited at 5th Floor, Wing On Centre, 111 Connaught Road Central, Hong Kong as soon as possible and in any event not less than 48 hours before the time appointed for holding the Special General Meeting. Completion and return of the proxy form will not preclude you from subsequently attending and voting at the Special General Meeting or any adjourned meetings should you so wish.

25 April, 2002

Fourseas.com Limited

Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Letter from the Board Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . The Capital Injection Agreement dated 25 March, 2002 Information on . . . . . . . . . . . . . . . . . . . . . . . . Reasons for the proposed Capital Injection . . . . . . . . . . Major and connected transaction . . . . . . . . . . . . . . . . . . The Independent Board Committee . . . . . . . . . . . . . . . . The SGM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Recommendation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Additional Information . . . . . . . . . . . . . . . . . . . . . . . . . Letter from the Independent Board Committee . . . . . . . . . Letter from Kingsway . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Appendix I — Financial information on the Group . Appendix II — Accountants’ report on Appendix III — Financial information on Appendix IV — Property valuation . . . . . . . . . . . . . . Appendix V — General information . . . . . . . . . . . . . Notice of Special General Meeting . . . . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . .	Page . . . . . . . . . . . . . . . 1 . . . . . . . . . . . . . . . 4 . . . . . . . . . . . . . . . 5 . . . . . . . . . . . . . . . 8 . . . . . . . . . . . . . . . 9 . . . . . . . . . . . . . . . 9 . . . . . . . . . . . . . . . 10 . . . . . . . . . . . . . . . 10 . . . . . . . . . . . . . . . 10 . . . . . . . . . . . . . . . 11 . . . . . . . . . . . . . . . 12 . . . . . . . . . . . . . . . 13 . . . . . . . . . . . . . . . 20 . . . . . . . . . . 55 . . . . . . . . 72 . . . . . . . . . . . . . . . 73 . . . . . . . . . . . . . . . 79 . . . . . . . . . . . . . . . 84

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Fourseas.com Limited

DEFINITIONS

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

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“ ” (Shanghai New Century
Shui Qing Mu Hua Property Development Company Limited),
a limited liability company established in the PRC and its
registered share capital is owned as to 25% by Shanghai
Zendai Land and 75% by Mr. Dai
“associate(s)” has the meaning ascribed to it under the Listing Rules
“Best East” Best East Developments Limited, a company incorporated in
British Virgin Islands with limited liability and is a wholly-
owned subsidiary of the Company
“BMI” BMI Appraisals Limited, a firm of independent professional
valuers
“Board” the executive directors of the Company
“Business Day” a day (other than a Saturday or Sunday) on which banks are
open for business in Hong Kong
“Capital Injection” the injection of RMB20,000,000 (equivalent to approximately
HK$18,692,000) equivalent Hong Kong dollars by Best East
as additional registered capital to pursuant to the
Capital Injection Agreement
“Capital Injection Agreement” a conditional agreement in relation to the Capital Injection
dated 25 March, 2002 entered into between Best East,
Shanghai Zendai Land and Mr. Dai (as amended by a
supplemental agreement entered into between the parties of
the same date)
“Company” or “Fourseas.com” Fourseas.com Limited, a company incorporated in Bermuda,
the shares of which are currently listed on the Stock Exchange
“Completion” the completion of the Capital Injection, which shall take place
within 10 Business Days after the consents and approvals for
the conversion of into a sino-foreign equity joint
venture and for the New Joint Venture Agreements having
been obtained from the relevant PRC governmental
authorities subject to the fulfillment of all the Conditions
“Conditions” conditions under the Capital Injection Agreement
“Director(s)” the director(s) of the Company
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Fourseas.com Limited

DEFINITIONS

“Giant Glory”	Giant Glory Assets Limited, a limited company established in
	the British Virgin Islands and is a substantial shareholder of
	the Company holding approximately 40.19% of the entire
	issued share capital of the Company
“Group”	the Company and its subsidiaries
“HK GAAP”	the generally accepted accounting principles in Hong Kong
“Hong Kong”	the Hong Kong Special Administrative Region of the PRC
“Independent Board Committee”	the independent board committee of the Company comprising
	independent non-executive Directors
“Independent Shareholders”	Shareholders of the Company other than Mr. Dai Zhi Kang,
	Giant Glory and their respective associates as defined in the
	Listing Rules
“Kingsway”	Kingsway Capital Limited, an investment adviser registered
	under the Securities Ordinance (Chapter 333 of the Laws of
	Hong Kong), appointed as the independent financial adviser
	to the Independent Board Committee
“Latest Practicable Date”	25 April, 2002, being the latest practicable date prior to the
	printing of this circular for the purpose of ascertaining certain
	information for inclusion in this circular
“Listing Rules”	the Rules Governing the Listing of Securities on the Stock
	Exchange
“Mr. Dai”	, a shareholder interested in 75% of the registered
	capital of , also the brother of Mr. Dai Zhi Kang, a
	Director
“New Joint Venture Agreements”	new agreements to be entered into between Shanghai Zendai
	Land, Mr. Dai and Best East in respect of the conversion of
	into a sino-foreign joint venture, including the joint
	venture agreement and articles of association
“PRC”	the People’s Republic of China which, for the purpose of this
	circular, excludes Hong Kong and the Macau Special
	Administrative Regions and Taiwan
“SDI Ordinance”	Securities (Disclosure of Interests) Ordinance (Chapter 396 of
“Shanghai Zendai Land”	the Laws of Hong Kong) , a limited liability company incorporated
	in the PRC with limited liability
“Share(s)”	share(s) of HK$0.02 each in the capital of the Company

Fourseas.com Limited

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DEFINITIONS

“Shareholders”	holder(s) of the Shares
“Special General Meeting”	a special general meeting of Fourseas.com to be convened and
or “SGM”	held on 13 May, 2002 for approving the Capital Injection
	Agreement
“Stock Exchange”	The Stock Exchange of Hong Kong Limited
“HK$”	Hong Kong dollars
“RMB”	Renminbi
“%”	per cent.

Translation of Renminbi into Hong Kong dollars is based on the exchange rate of RMB1.00 = HK$0.9346.

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Fourseas.com Limited

LETTER FROM THE BOARD

Fourseas.com Limited

(incorporated in Bermuda with limited liability)

Executive Directors: He Xuechu Ku Wai Kwan Zhou Teng Wong Hing Kwok Dai Zhi Kang

Independent non-executive Directors: Goh Gen Cheung Chan Wai Dune

Registered office: Cedar House 41 Cedar Avenue Hamilton HM12 Bermuda

Principal place of business in Hong Kong: Room 2301, 23/F. Great Eagle Centre 23 Harbour Road Wan Chai Hong Kong

25 April, 2002

To the Shareholders

Dear Sir or Madam,

MAJOR AND CONNECTED TRANSACTION INJECTION OF CAPITAL IN

(Shanghai New Century Shui Qing Mu Hua Property Development Company Limited)

INTRODUCTION

The Board announced that, on 25 March, 2002, Best East, a wholly-owned subsidiary of the Company, had entered into the Capital Injection Agreement with Shanghai Zendai Land and Mr. Dai, pursuant to which Best East has conditionally agreed to inject RMB20,000,000 (equivalent to approximately HK$18,692,000) as additional registered captial into such that the registered capital of will be increased from RMB60,000,000 (equivalent to approximately HK$56,076,000) to RMB80,000,000 (equivalent to approximately HK$74,768,000). Upon Completion, Best East will be interested in 25% of the registered capital of . The Company intends to finance the Capital Injection by its internal resources. is a project company incorporated in the PRC to engage in property development and property management services. The Capital Injection is conditional and is subject to conditions set out under “Conditions of the Capital Injection” below.

The terms of the Capital Injection Agreement were arrived at after arm’s length negotiation and the Directors believe that the terms of the Capital Injection Agreement are on normal commercial terms.

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Fourseas.com Limited

LETTER FROM THE BOARD

Currently, Mr. Dai Zhi Kang is interested in 65.67% of equity interest in , which in turn is interested in 35% equity interest in Shanghai Zendai Land and is also Mr. Dai’s brother. Mr. Dai Zhi Kang is a Director and holds 36% interest in the entire issued share capital of Giant Glory. Giant Glory is the controlling shareholder of the Company and is holding approximately 40.19% interest in the entire issued share capital of the Company. Accordingly, the Capital Injection constitutes a major and connected transaction for the Company under the Listing Rules and is subject to the approval of Independent Shareholders at the SGM. Mr. Dai Zhi Kang, Giant Glory and their respective associates will abstain from voting in respect of the ordinary resolution to be proposed at the SGM to approve the Capital Injection.

In addition, the Group’s total investment in amounts to RMB20,000,000 (equivalent to approximately HK$18,692,000) representing approximately 66.8% of the adjusted unaudited consolidated net tangible assets of the Group of approximately HK$28 million based on the proforma adjusted consolidated net tangible assets upon completion of the financial restructuring pursuant to the circular dated 2 August, 2001 as adjusted by the effect of a private placement of 100,000,000 new Shares in December 2001. Therefore, the Capital Injection also constitutes a major transaction of the Company under the Listing Rules.

The Independent Board Committee has been set up to advise the Independent Shareholders on the terms and conditions of the Capital Injection Agreement. Kingsway has been appointed as the independent financial adviser to advise the Independent Board Committee. The recommendation of the Independent Board Committee and the advice of Kingsway are also included in this circular.

The purpose of this circular is to give you further information on the proposed Capital Injection, to set out the advice of Kingsway to the Independent Board Committee and the recommendation of the Independent Board Committee in respect of the proposed Capital Injection as well as to give you notice of the SGM at which the ordinary resolution will be proposed to approve the proposed Capital Injection.

THE CAPITAL INJECTION AGREEMENT DATED 25 MARCH, 2002

Parties
a. Best East;
b. Shanghai Zendai Land, a shareholder of interested in 25% of its registered capital as at the date of this Announcement; and
c. Mr. Dai, a shareholder of interested in 75% of its registered capital as at the date of this Announcement.
Particulars of the Capital Injection Agreement

Pursuant to the Capital Injection Agreement, Best East, Shanghai Zendai Land and Mr. Dai have conditionally agreed that the registered capital of will be increased from RMB60,000,000 (equivalent to approximately HK$56,076,000) to RMB80,000,000 (equivalent to approximately HK$74,768,000) by Best East injecting RMB20,000,000 (equivalent to approximately HK$18,692,000) into the registered capital of . Total investment of will be RMB200 million.

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Fourseas.com Limited

LETTER FROM THE BOARD

Pursuant to the Capital Injection Agreement, Shanghai Zendai Land and Mr. Dai, both existing shareholders of , have agreed that any funding requirement in excess of the registered capital of , would be satisfied by obtaining additional financing from banks and financial institutions by itself. Failing which, Shanghai Zendai Land and Mr. Dai will procure additional financing to and undertake to Best East that it will not be required to provide any financing to in excess of its required contribution to the registered capital of under the Capital Injection Agreement. The Directors confirmed that save for the contribution of RMB20,000,000 to the registered capital of , Best East does not have any obligations to provide further financing to .

will be converted from a PRC domestic company into a sino-foreign equity joint venture.

Existing shareholding structure of :

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Shanghai
Mr. Dai
Zendai Land
25% 75%
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Shareholding structure of immediately after the Capital Injection and conversion into a sino-foreign equity joint venture company:

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Shanghai
Mr. Dai Best East
Zendai Land
18.75% 56.25% 25%
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Upon Completion, Best East, Shanghai Zendai Land and Mr. Dai will respectively be interested in 25%, 18.75% and 56.25% of the entire registered capital of .

Profit and loss of will be shared among its shareholders in accordance with their respective equity interests in the registered capital.

The Directors consider that the terms of the Capital Injection Agreement were arrived at after arm’s length negotiation and that the terms of the Capital Injection Agreement are on normal commercial terms.

3. Source of Funding of the Capital Injection

The Capital Injection will be funded by the Company’s internal resources.

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Fourseas.com Limited

LETTER FROM THE BOARD

4. Conditions of the Capital Injection

Capital Injection is conditional upon, among other things, the following occurring on or before 25 July, 2002 or such other date as the parties to the Capital Injection Agreement may otherwise agree:

(a) the grant of unanimous approval by the board of directors of and approval from the relevant government authorities;
(b) the passing by the Independent Shareholders of an ordinary resolution at the SGM to approve the Capital Injection Agreement and the transactions as contemplated therein;
(c) the due execution of the New Joint Venture Agreements by Best East and the existing shareholders of ;
(d) Best East has conducted due diligence (including but not limited to relevant legal, financial and business aspects) against and the results of which are satisfactory and acceptable to Best East in all respects;
(e) the permissions and approvals in respect of the Capital Injection and the New Joint Venture Agreements having been obtained from the relevant PRC governmental authorities, including but not limited to the new business licence for ;
(f) the obtaining of all necessary consents and approvals from all relevant regulatory authorities in the PRC with regard to all the transactions contemplated in the Capital Injection Agreement;
(g) the obtaining of a legal opinion by Best East issued by licenced PRC legal advisers on PRC securities laws, confirming:
(i) the legality and effect of the Capital Injection Agreement upon signing;
(ii) the conditions as set out in paragraphs (a), (c), (e) and (f) above having been satisfied;
(iii) no change in the permitted scope of business of after its conversion into a sino-foreign equity joint venture;
(iv) the legality of the businesses in respect of the real estate property and other transactions carried on by ;
(v) the appointment of a director to the board of directors of nominated by Best East become effective;
(vi) all other matters reasonably requested by Best East.

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Fourseas.com Limited

LETTER FROM THE BOARD

5. Completion of the Capital Injection

Subject to the satisfaction of the Conditions, completion of the Capital Injection will take place within 10 Business Days after the consents and approvals for the conversion of into a sino-foreign equity joint venture and for the New Joint Venture Agreements having been obtained from the relevant PRC governmental authorities. If the Conditions are not satisfied within the deadline set out above, the Capital Injection Agreement will lapse and all the obligations and liabilities of the parties to the Capital Injection Agreement will cease and terminate.

INFORMATION ON

is a company incorporated in the PRC with limited liability on 12 July, 2000 with fully paid up registered capital of RMB60,000,000 (equivalent to approximately HK$56,076,000). is principally engaged in property development and property management services and is solely, as at the date of this Announcement, developing a residential property project named “ ” in Shanghai. Currently, the board of directors of has three members and upon completion, Best East will be entitled to appoint one additional director to the board of directors of .

comprises the development of two contiguous parcels of land located at Land Parcel R, Lian Yang Residential Area, Pudong New District, Shanghai, the PRC which is located adjacent to (Century Park) and is in close proximity to (Lujiazui), with a total site area of approximately 73,672 square metres. According to the business development plan, will be a large-scale residential real estate development divided into two phases with a total gross floor area of approximately 139,684 square metres. Apartments and condominiums will be developed to target the middle to high end market. It is intended that full scale development will be commenced in April 2002 and the entire project is expected to be completed in 2004.

According to the management of , total investment for is estimated to be approximately RMB500 million and the development will be divided into different phases. The development is expected to be funded by the registered capital of , sale proceeds from the pre-sale of units of and external financing to be arranged by . Save for the contribution of additional registered capital to under the Capital Injection Agreement, Best East does not have any commitment to provide additional funding or financing to .

Currently, Shanghai Zendai Land and Mr. Dai are respectively interested in 25% and 75% of the entire registered capital of . According to the accountants’ report of as set out in Appendix II to this circular, audited net assets of under HK GAAP as at 31 December, 2001 was approximately RMB50,547,023 (equivalent to approximately HK$47,241,248) and the loss for the year ended 31 December, 2001 amounted to approximately RMB8,222,377 (equivalent to approximately HK$7,684,634). The proforma unaudited adjusted net tangible assets of , adjusted for the property valuation according to the valuation report as set out in Appendix IV to this circular, is approximately RMB64,952,405 (equivalent to approximately HK$60,704,518). Details of which are also set out in Appendix II and Appendix III to this circular.

Under the Capital Injection Agreement, a reorganisation of will take place in which will be converted from a PRC company with limited liability into a sino-foreign equity joint venture.

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Fourseas.com Limited

LETTER FROM THE BOARD

REASONS FOR THE PROPOSED CAPITAL INJECTION

Before the completion of the financial restructuring of the Group as mentioned in the circular of the Company dated 2 August, 2001, the Group’s financial position had shown steady deterioration. As such, the Group underwent a financial restructuring under which equity capital was raised and most of the Group’s properties, substantially located in Hong Kong, together with their respective mortgage and instalment loans were disposed of in order to restore the Group’s financial position. After completion of the financial restructuring of the Group as mentioned in the circular of the Company dated 2 August, 2001, the Directors have been consistently reviewing the existing operations of the Group and seeking potential investment opportunities in order to improve the earnings and prospects of the Group. Given the Directors’ experience and business networks in the PRC, the Directors are of the opinion that the PRC economy will continue to show strong momemtum and believe that the Group can leverage on the tremendous business opportunities in the PRC.

The Group does not currently undertake any property related projects in the PRC but intends to expand its business into the PRC property market. Mr. He Xuechu and Mr. Ku Wai Kwan, both are Directors, have extensive experience in investment in and development of property projects in the PRC. The Directors believe that investment in provides the Group with an excellent opportunity to capitalise on the robust property market in Shanghai, one of the fastest growing financial centers in Asia. In addition, given the prime location of , the Directors consider that the Capital Injection will enable the Group to enjoy the potential benefits, through equity participation in , in the development of the . Upon completion of the Capital Injection Agreement, Best East will appoint one director to the board of directors of so as to participate in the management of .

Upon completion of the Capital Injection, the Group will become a minority shareholder of and will not have any control in its management, the Group’s 25% equity interests in will be carried as an investment in its financial statements. Upon completion of the Capital Injection, the Directors expect that the travel business will remain the major source of the Group’s revenue. The Group’s 25% equity interests in will be equity accounted for by the Group. As the Capital Injection will be funded from the Company’s internal resources and the Group’s capital commitment in respect of is capped under the Capital Injection Agreement, the Directors are of the opinion that the Capital Injection will not have any material impact on the gearing of the Group.

Currently, the Group is principally engaged in travel related business. Upon completion of the Capital Injection, the Group will still be principally engaged in travel related business. The Directors are of the opinion that the Group’s investment and participation in the development of through a minority shareholding in is a continuation of its property business which have been substantially scaled down since September 2001. The Directors also confirm that save for the Capital Injection, they have no present intention to acquire further equity interest in .

MAJOR AND CONNECTED TRANSACTION

Currently, Mr. Dai Zhi Kang is interested in 65.67% of equity interests in , which in turn interested in 35% equity interest in Shanghai Zendai Land and is also Mr. Dai’s brother. Mr. Dai Zhi Kang is a Director and holds approximately 36% interest in the entire issued share capital of Giant Glory. Giant Glory is the controlling shareholder of the Company and is holding approximately 40.19% interest in the entire issued share capital of the Company.

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Fourseas.com Limited

LETTER FROM THE BOARD

Accordingly, the Capital Injection constitutes a connected transaction for the Company under the Listing Rules and is subject to the approval of Independent Shareholders at the SGM. Mr. Dai Zhi Kang, Giant Glory and their respective associates will abstain from voting in respect of the ordinary resolution to be proposed at the SGM.

In addition, the Group’s total investment in amounts to RMB20,000,000 (equivalent to approximately HK$18,692,000) representing approximately 66.8% of the adjusted unaudited consolidated net tangible assets of the Group of approximately HK$28 million based on the proforma adjusted consolidated net tangible liabilities upon completion of the financial restructuring pursuant to the circular dated 2 August, 2001 adjusted by the effect of a private placement of 100,000,000 new Shares in December 2001. Therefore, the Capital Injection also consitutes a major transaction of the Company under the Listing Rules.

THE INDEPENDENT BOARD COMMITTEE

The Independent Board Committee comprising the independent non-executive Directors has been formed for the purpose of advising the Independent Shareholders on the terms and conditions of the Capital Injection Agreement. Kingsway has been appointed as independent financial adviser to advise the Independent Board Committee on the same.

THE SGM

A notice convening the SGM at which the ordinary resolution will be proposed to approve the proposed Capital Injection Agreement is set out on pages 84 to 85 of this circular.

A form of proxy for use at the SGM is enclosed with this circular. Whether or not you intend to attend the SGM, you are requested to complete and return the enclosed form of proxy in accordance with the instructions printed thereon as soon as practicable and in any event by not later than 48 hours before the time appointed for holding such meeting or any adjournment thereof. Completion and return of the form of proxy shall not preclude you from attending and voting in person at the SGM should you so wish.

RECOMMENDATION

Your attention is drawn to (i) the letter from the Independent Board Committee containing its recommendation to the Independent Shareholders in respect of the Capital Injection as set out on page 12 of this circular; and (ii) the letter from Kingsway containing its advice to the Independent Board Committee in respect of the Capital Injection and the principal factors and reasons taken into account in arriving at its advice as set out on pages 13 to 19 of this circular.

The Independent Board Committee has considered the terms and conditions of the Capital Injection and the advice given by Kingsway and is of the opinion that the Capital Injection is in the interests of the Company and that the terms and conditions of the Capital Injection Agreement are fair and reasonable so far as the Independent Shareholders are concerned. Accordingly, the Directors and the Independent Board Committee recommend the Independent Shareholders to vote in favour of the ordinary resolution to be proposed at the SGM.

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Fourseas.com Limited

LETTER FROM THE BOARD

ADDITIONAL INFORMATION

Your attention is also drawn to the respective recommendation and advice given by the Independent Board Committee and Kingsway as well as the additional information set out in the appendices to this circular.

Yours faithfully By Order of the Board He Xuechu Chairman

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Fourseas.com Limited

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

Fourseas.com Limited

(incorporated in Bermuda with limited liability)

Room 2301, 23/F. Great Eagle Centre 23 Harbour Road Wan Chai Hong Kong

25 April, 2002

To the Independent Shareholders

Dear Sir or Madam,

MAJOR AND CONNECTED TRANSACTION INJECTION OF CAPITAL IN

(Shanghai New Century Shui Qing Mu Hua Property Development Company Limited)

We refer to the circular dated 25 April, 2002 (the “Circular”) issued by the Company of which this letter forms part. Terms used herein shall have the same meanings as defined in the Circular unless the context otherwise requires.

We have been appointed by the Board to be the members of the Independent Board Committee for the purpose of considering the terms and conditions of the Capital Injection Agreement, details of which are set out in the text of the letter form the Board as set out on pages 4 to 11 of the Circular.

We wish to draw your attention to the letter from Kingsway as set out on pages 13 to 19 of the Circular which contains, inter alia, its advice to us as regards the terms and conditions of the Capital Injection Agreement together with the principal factors and reasons for its advice.

Having taken into account the advice of Kingsway, we consider that the Capital Injection is in interests of the Company and that the terms and conditions of the Capital Injection Agreement are fair and reasonable so far as the Independent Shareholders are concerned. Accordingly, we recommend the Independent Shareholders to vote in favour of the ordinary resolution approving the Capital Injection to be proposed at the SGM.

Yours faithfully For and on behalf of

The Independent Board Committee Goh Gen Cheung Chan Wai Dune Independent Non-executie Directors

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Fourseas.com Limited

LETTER FROM KINGSWAY

Kingsway Group

5/F., Hutchison House, 10 Harcourt Road, Central, Hong Kong. Tel. No.: (852) 2877-1830 Fax No.: (852) 2868-3570

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25 April, 2002

To the Independent Board Committee

Dear Sirs,

MAJOR AND CONNECTED TRANSACTION INJECTION OF CAPITAL IN

(Shanghai New Century Shui Qing Mu Hua Property Development Company Limited)

We have been appointed as the independent financial adviser to advise the Independent Board Committee in relation to the terms of the proposed Capital Injection, details of which are contained in the circular dated 25 April, 2002 (the “Circular”) to the Shareholders, of which this letter forms a part. Terms used in this letter shall have the same meanings as defined in the Circular unless the context otherwise requires.

Pursuant to the Listing Rules, the Capital Injection Agreement constitutes a major and connected transaction for the Company and is subject to the approval of the Independent Shareholders at the SGM. In view of Mr. Dai Zhi Kang’s relationship with Shanghai Zendai Land and Mr. Dai, Mr. Dai Zhi Kang and his associates will abstain from voting on the ordinary resolution proposed to approve the Capital Injection Agreement at the SGM. Accordingly, Giant Glory, which is owned as to approximately 36% by Mr. Dai Zhi Kang, and its associates will abstain from voting at the SGM.

In formulating our opinion and recommendation, we have assumed that all information and representations made or referred to in the Circular, or otherwise supplied to us by the Company, were true, accurate and complete in all respects at the time they were made and continue to be true, accurate and complete as at the date of the Circular. Accordingly, we have relied on them. We have also assumed that all statements of belief, opinion and intention made by the Directors in the Circular were reasonably made after due and careful enquiry. We have no reason to doubt the truth, accuracy and completeness of the information and representations provided to us. The Directors have confirmed, having made all reasonable enquiries, that to the best of their knowledge and belief, there are no other facts the omission of which would make any statement in the Circular misleading.

We consider that we have been provided with sufficient information to reach an informed view and to justify our reliance on the accuracy of the information and representations contained in the Circular and to provide a reasonable basis for our recommendation. We have no reason to suspect that any relevant information has been withheld by the Company. We have not, however, carried out any independent verification of the information, nor have we conducted any form of investigation into the business, financial standing or affairs of Shanghai Zendai Land, Mr. Dai, and the Group. Furthermore, we have not conducted any form of investigation regarding the commercial viability of the business of .

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Fourseas.com Limited

LETTER FROM KINGSWAY

SUMMARY OF THE CAPITAL INJECTION

Capital Injection Agreement

On 25 March, 2002, Best East entered into the Capital Injection Agreement with Shanghai Zendai Land and Mr. Dai, pursuant to which Best East has conditionally agreed to inject RMB20,000,000 (equivalent to approximately HK$18,692,000) as additional registered capital into such that the registered capital of will be increased from RMB60,000,000 (equivalent to approximately HK$56,076,000) to RMB80,000,000 (equivalent to approximately HK$74,768,000). Total investment of will be RMB200 million.

Upon Completion, Best East, Shanghai Zendai Land and Mr. Dai will respectively be interested in 25%, 18.75% and 56.25% of the entire registered capital of . Under the Capital Injection Agreement, a reorganisation of will take place in which will be converted from a PRC company with limited liability into a sino-foreign equity joint venture.

Profit and loss of will be shared among its shareholders in accordance with their respective equity interests in the registered capital.

The Directors confirm that the terms of the Capital Injection Agreement were arrived at after arm’s length negotiation and that the terms of the Capital Injection Agreement are on normal commercial terms.

Conditions of the Capital Injection

The Capital Injection is conditional upon, among other things, the following occurring on or before 25 July, 2002 or such other date as the parties to the Capital Injection Agreement may otherwise agree:—

(a) the grant of unanimous approval by the board of directors of and approval from the relevant government authorities;
(b) the passing by the Independent Shareholders of an ordinary resolution at the SGM to approve the Capital Injection Agreement and the transactions as contemplated therein;
(c) the due execution of the New Joint Venture Agreements by Best East and the existing shareholders of ;
(d) Best East has conducted due diligence (including but not limited to relevant legal, financial and business aspects) against and the results of which are satisfactory and acceptable to Best East in all respects;
(e) the permissions and approvals in respect of the Capital Injection and the New Joint Venture Agreements having been obtained from the relevant PRC governmental authorities, including but not limited to the new business licence for ;
(f) the obtaining of all necessary consents and approvals from all relevant regulatory authorities in the PRC with regard to all the transactions contemplated in the Capital Injection Agreement; and

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Fourseas.com Limited

LETTER FROM KINGSWAY

(g) the obtaining of a legal opinion by Best East issued by licenced PRC legal advisers on PRC securities laws, confirming:
(i) the legality and effect of the Capital Injection Agreement upon signing;
(ii) the conditions as set out in paragraphs (a), (c), (e) and (f) above having been satisfied;
(iii) no change in the permitted scope of business of after its conversion into a sino-foreign equity joint venture;
(iv) the legality of the businesses in respect of the real estate property and other transactions carried on by ;
(v) the appointment of a director to the board of directors of nominated by Best East become effective; and
(vi) all other matters reasonably requested by Best East.

PRINCIPAL FACTORS AND REASONS CONSIDERED

In formulating our recommendation, we have taken into consideration the following principal factors and reasons:

Principal business

According to its business development plan, comprises the development of two contiguous parcels of land located at Land Parcel R, Lian Yang Residential Area, Pudong New District, Shanghai, the PRC which is located adjacent to (Century Park) and is in close proximity to (Lujiazui), with a total site area of approximately 73,672 square metres. will be developed into a large-scale residential real estate development with a total gross floor area of approximately 139,684 square metres. Divided into two phases, will comprise apartments and condominiums and target the middle to high end market. It is intended that full scale development will be commenced in April 2002 and the entire project is expected to be completed in 2004.

The Independent Shareholders should note that the Capital Injection involves a property development project in the PRC and is subject to the risks associated with property development in the PRC, which mainly relate to the property market in the PRC, general economic developments, relevant government policies and approvals, financing, construction and joint venture risks. There is a possibility that undesired results may arise as a result of any of these factors. Therefore, the Independent Shareholders should carefully consider the nature and the risks associated with the Capital Injection.

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Fourseas.com Limited

LETTER FROM KINGSWAY

As stated in the Circular, total investment for is estimated to be approximately RMB500 million and the properties will be developed in phases. The total investment is expected to be funded by the registered capital of , sale proceeds from the pre-sale of units of and external financing to be arranged by . Save for the contribution of additional registered capital to under the Capital Injection Agreement, Best East does not have any commitment to provide additional funding or financing to .

Financial information and property valuation

As stated in the accountants’ report on set out in Appendix II to the Circular, the audited net asset value of as at 31 December, 2001 was RMB50,547,023 (equivalent to approximately HK$47,241,248). recorded audited losses of RMB1,230,600 and RMB8,222,377 respectively for the period from 12 July, 2000 (date of incorporation) to 31 December, 2000 and the year ended 31 December, 2001. had not commenced the pre-sale/sale of units of during such periods. The relevant losses were mainly attributable to selling and promotional expenses and general and administrative expenses of .

BMI Appraisals Limited has valued the land and property of as at 28 February, 2002 at RMB303,000,000, representing approximately 104.9% of the audited book value of the land and property of of RMB288,594,618 as at 31 December, 2001. As set out in Appendix IV to the Circular, such valuation was carried out on an open market value basis by the Direct Comparison Approach, which involves making reference to comparable transactions in the locality and have taken into account the construction cost and professional fees already spent and the remainder to be expended to complete the development of . The pro forma unaudited adjusted net tangible assets of amount to RMB64,952,405 after adjustment of a net surplus on property revaluation of RMB14,405,382 as set out in Appendix III to the Circular, which represents approximately 108.3% of the present paid-up registered capital of .

Shareholding structure and profit distribution

At present, Shanghai Zendai Land and Mr. Dai are respectively interested in 25% and 75% of the entire registered capital of . Upon Completion, Best East, Shanghai Zendai Land and Mr. Dai will be respectively interested in 25%, 18.75% and 56.25% of the entire registered capital of , which are in proportion to their respective contributions to the registered capital of .

As stated in the Circular, the profit and loss of will be shared among its shareholders in accordance with their respective equity interests in the registered capital, which we consider as fair and reasonable.

In view of the foregoing, we are of the opinion that the consideration payable by the Company for the 25% interest in is fair and reasonable.

Composition of the board of directors

Currently, the board of directors of comprises three members and upon Completion, Best East will be entitled to appoint one additional director to the board of directors of .

As Best East will be entitled to appoint one additional director to the board of directors of , the Group would be able to participate in the management of , which is in the interests of the Company and its Shareholders.

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Fourseas.com Limited

LETTER FROM KINGSWAY

Background information on Shanghai Zendai Land

As advised by the Company, Shanghai Zendai Land, the controlling shareholder of , is a subsidiary of (Shanghai Zendai Investment (Group) Company Limited) (“Shanghai Zendai Group”). Shanghai Zendai Group and its subsidiaries are principally engaged in securities investment and property development in the PRC. Shanghai Zendai Group and its subsidiaries have since 1993 been engaged in residential properties development in the PRC.

2. Source of Funding of the Capital Injection

As stated in the Circular, the Capital Injection will be funded from the Company’s internal resources.

In December 2001, the Company effected a private placement of 100,000,000 new Shares and raised approximately HK$31 million for working capital and funding potential investment projects.

According to the section headed “Letter from the Board” in the Circular, the adjusted unaudited consolidated net tangible assets of the Group is approximately HK$28 million, which is based on the pro forma adjusted consolidated net tangible liabilities of approximately HK$3 million upon completion of the financial restructuring pursuant to the Company’s circular dated 2 August, 2001 and the net proceeds of approximately HK$31 million from the private placement of new Shares in December 2001.

The Directors have confirmed that the Company has sufficient financial resources to effect the Capital Injection.

3. Reasons for the proposed Capital Injection

Recent developments of the Group

As stated in the Circular, before the completion of the financial restructuring of the Group as mentioned in the circular of the Company dated 2 August, 2001, the Group’s financial position had shown steady deterioration. As such, the Group underwent a financial restructuring under which equity capital was raised and most of the Group’s properties, substantially located in Hong Kong, together with their respective mortgage and installment loans were disposed of in order to restore the Group’s financial position. After completion of the above-mentioned financial restructuring of the Group, the Directors have been consistently reviewing the existing operations of the Group and seeking potential investment opportunities in order to improve the earnings and prospects of the Group. In addition, the Company effected a private placement in December 2001 to strengthen the Group’s financial position, with a view to capturing potential investment projects when opportunities arise. Given the Directors’ experience and business networks in the PRC, the Directors are of the opinion that the PRC economy will continue to show strong momentum and believe that the Group can leverage on the tremendous business opportunities in the PRC.

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Fourseas.com Limited

LETTER FROM KINGSWAY

The Group does not currently undertake any property related projects in the PRC but intends to expand its business into the PRC property market. Mr. He Xuechu and Mr. Ku Wai Kwan, both of whom are Directors, have extensive experience in investment in and development of property projects in the PRC. The Directors believe that investment in provides the Group with an excellent opportunity to capitalise on the robust property market in Shanghai, one of the fastest growing financial centers in Asia. In addition, given the prime location of , the Directors consider that the Capital Injection will enable the Group to enjoy the potential benefits, through equity participation in , in the development of .

The Directors are of the opinion that the Group’s investment and participation in the development of through a minority shareholding in is a continuation of its property business which has been substantially scaled down since September 2001. The Directors also confirm that save for the Capital Injection, they have no present intention to acquire further equity interest in .

Taking the above into consideration, we concur with the view of the Directors that the proposed Capital Injection is in line with the Group’s development strategies and objectives.

4. Future capital commitments for

Pursuant to the Capital Injection Agreement, Shanghai Zendai Land and Mr. Dai have agreed that any funding requirement in excess of the registered capital of would be satisfied by obtaining additional financing from banks and financial institutions by itself. Failing which, Shanghai Zendai Land and Mr. Dai will procure additional financing to and undertake to Best East that it will not be required to provide any financing to in excess of its required contribution to the registered capital of under the Capital Injection Agreement. The Directors confirmed that save for the contribution of RMB20,000,000 to the registered capital of , Best East does not have any obligations to provide further financing to .

In view of the fact that Best East does not have any obligations to provide further financing to , we concur with the Directors’ view that the Capital Injection provides the Company and its Shareholders with opportunity to invest in the property market in the PRC with a capped capital commitment.

5. Information on Pudong New District and Shanghai

General economic development

According to the statistics bureau of the Pudong New District, the Pudong New District (“Pudong”) reported an economic growth of 16.1% in 2001, which was 5.9% higher than the growth rate of Shanghai as a whole. In addition, the year 2001 is the 10th consecutive year in which Pudong has reported a growth rate of above 16%.

Pudong’s gross domestic product (“GDP”) reached a high of RMB108.2 billion in 2001, amounting to 21.9% of the GDP of Shanghai. Pudong also recorded fixed asset investment worth RMB42 billion in 2001, and 2 billion U.S. dollars worth of contracted overseas investment. Since the establishment of Pudong, the district has introduced more than 7,000 foreign investment projects from nearly 70 countries and regions, with total investment reaching 40 billion U.S. dollars.

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Fourseas.com Limited

LETTER FROM KINGSWAY

Residential properties market of Shanghai

Statistics showed that in the first half of 2001, Shanghai’s luxury residential markets continued the upward trend that began in 2000 due to a rapid inflow of expatriates and limited new supply. It is expected that Shanghai’s residential market will continue to grow for the next few years as a result of the expected economic growth of Shanghai. A significant number of large-scale residential developments recently being developed by overseas developers in Shanghai also suggested that the market is optimistic about the future growth.

In view of the above, we concur with the Directors’ view that the proposed Capital Injection provides an opportunity for the Group to capitalise on the robust property market in Shanghai.

6. Financial effects of the Capital Injection

Upon completion of the Capital Injection, the Group will become a minority shareholder of and will not be able to obtain control of the composition of a majority of the board of directors of . The Group’s 25% equity interest in will be equity accounted for by the Group.

As stated in the Circular, the Capital Injection will be funded from the Company’s internal resources and that the Group’s capital commitment in respect of is capped under the Capital Injection Agreement. The Directors also confirmed that the Capital Injection will not have any material adverse impact on the gearing position of the Group or its net asset value. Further, it is the opinion of the Directors that taking into account the net proceeds of a private placement of 100,000,000 new Shares in December 2001 and in the absence of unforeseen circumstances, the Group will have sufficient working capital for its present requirements.

RECOMMENDATION

Having considered the principal factors and reasons as mentioned above, we are of the opinion that the terms of the Capital Injection Agreement and the transactions contemplated thereunder are fair and reasonable so far as the Independent Shareholders are concerned and that the proposed Capital Injection is in the interests of the Company and the Shareholders as a whole. Accordingly, we advise the Independent Board Committee to recommend the Independent Shareholders to vote in favour of the ordinary resolution to be proposed at the SGM in respect of the Capital Injection Agreement and the transactions contemplated thereunder.

Yours faithfully, For and on behalf of Kingsway Capital Limited Katherine Lam Director

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Fourseas.com Limited

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

1. SUMMARY OF CONSOLIDATED PROFIT AND LOSS ACCOUNTS

The consolidated results of the Group for the last five financial years/periods, as extracted from the audited financial statements of the Group and reclassified as appropriate, are summarised below:

Year ended 31st December Period from 1st April 1999 to 31st December Year 2000 1999 1999 HK$’000 HK$’000 HK$’000 Results Turnover Continuing operations 719,995 440,400 816,367 Discontinued operations — — — 719,995 440,400 816,367 Operating (loss)/profit Continuing operations (39,020) (41,908) (98,503) Discontinued operations — — — (39,020) (41,908) (98,503) Share of losses of an associate — (316) (704) (Loss)/profit from ordinary activities before taxation (39,020) (42,224) (99,207) Taxation credit/(charge) — 1,597 — (Loss)/profit for the year/period (39,020) (40,627) (99,207) Dividends — — —	Year ended 31st December Period from 1st April 1999 to 31st December Year 2000 1999 1999 HK$’000 HK$’000 HK$’000 Results Turnover Continuing operations 719,995 440,400 816,367 Discontinued operations — — — 719,995 440,400 816,367 Operating (loss)/profit Continuing operations (39,020) (41,908) (98,503) Discontinued operations — — — (39,020) (41,908) (98,503) Share of losses of an associate — (316) (704) (Loss)/profit from ordinary activities before taxation (39,020) (42,224) (99,207) Taxation credit/(charge) — 1,597 — (Loss)/profit for the year/period (39,020) (40,627) (99,207) Dividends — — —	Year ended 31st December Period from 1st April 1999 to 31st December Year 2000 1999 1999 HK$’000 HK$’000 HK$’000 Results Turnover Continuing operations 719,995 440,400 816,367 Discontinued operations — — — 719,995 440,400 816,367 Operating (loss)/profit Continuing operations (39,020) (41,908) (98,503) Discontinued operations — — — (39,020) (41,908) (98,503) Share of losses of an associate — (316) (704) (Loss)/profit from ordinary activities before taxation (39,020) (42,224) (99,207) Taxation credit/(charge) — 1,597 — (Loss)/profit for the year/period (39,020) (40,627) (99,207) Dividends — — —	ended 31st 1998 HK$’000 1,212,816 — 1,212,816	March 1997 HK$’000 1,509,177 1,130 1,510,307 33,483 (2,351) 31,132 — 31,132 (3,958) 27,174 7,856
(39,020) — (39,020) — (39,020) —	(41,908) — (41,908) (316) (42,224) 1,597	(98,503) — (98,503) (704) (99,207) —	(23,553) — (23,553) (3,998) (27,551) 174	33,483 (2,351
				31,132 —
				31,132 (3,958
(39,020) —	(40,627) —	(99,207) —	(27,377) —

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Fourseas.com Limited

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

2. EXTRACT OF FINANCIAL STATEMENTS

a. Audited consolidated financial statements

The following audited consolidated financial statements of the Group are extracted from pages 13 to 41 of the annual report of Fourseas.com for the year ended 31st December, 2000.

CONSOLIDATED INCOME STATEMENT

FOR THE YEAR ENDED 31ST DECEMBER 2000

			Period from
		Year ended	1st April 1999 to
		31st December	31st December
	Note	2000	1999
		HK$’000	HK$’000
Turnover	3	719,995	440,400
Cost of sales		(690,433)	(421,113)
Gross profit		29,562	19,287
Other revenues	3	1,938	1,271
Operating and administrative expenses		(48,983)	(45,378)
Loss on disposals/write off of fixed assets		(353)	(358)
Gain arising on revaluation of leasehold
land and buildings		—	248
Loss from operations	4	(17,836)	(24,930)
Finance costs	5	(21,184)	(16,978)
Share of loss of an associate		—	(316)
Loss before taxation		(39,020)	(42,224)
Taxation credit	6	—	1,597
Loss attributable to shareholders	7	(39,020)	(40,627)
Loss per share - Basic	8	(HK1.6 cents)	(HK3.5 cents)

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Fourseas.com Limited

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

CONSOLIDATED BALANCE SHEET

AS AT 31ST DECEMBER 2000

Note Assets Non-current assets Fixed assets 11 Interests in an associate 12 Current assets Properties held for resale Inventories 13 Trade and other receivables 14 Tax recoverable Short term bank deposits Bank balances and cash Current liabilities Trade and other payables 15 Amount due to a related company 16 Current portion of interest - bearing borrowings 19 Net current liabilities Total assets less current liabilities Financed by: Capital and reserve Share capital 17 Reserves 18 Shareholders’ fund/(deficit) Non-current liabilities Long-term portion of interest - bearing borrowings 19	2000 HK$’000 219,350 (4,445)	1999 HK$’000 221,783 (4,409) 217,374 ------------ 1,443 2,703 32,868 1,702 12,394 4,496 55,606 ------------ 68,897 49,959 73,420 192,276 ------------ (136,670) ------------ ----------------------------------------------- 80,704 18,343 (22,709) (4,366) 85,070 80,704
	214,905 ------------ 1,443 1,302 40,101 1,091 — 1,832 45,769 ------------ 72,777 51,807 37,105	217,374 ------------ 1,443 2,703 32,868 1,702 12,394 4,496
		55,606 ------------ 68,897 49,959 73,420
	161,689 ------------ (115,920) ------------ ----------------------------------------------- 98,985
	76,157 (55,838) 20,319 78,666	18,343 (22,709
		(4,366 85,070
	98,985

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Fourseas.com Limited

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

BALANCE SHEET

AS AT 31ST DECEMBER 2000

Note Assets Non-current assets Fixed assets 11 Investments in subsidiaries 12 Current assets Other receivables 15 Bank balances and cash Current liabilities Other payables 16 Bank overdraft - secured 20 Net current liabilities Total assets less current liabilities Financed by: Capital and reserves Share capital 18 Reserves 19	2000 HK$’000 — 95,921	1999 HK$’000 — 36,464 36,464 ------------ 11 13 24 ------------ 2,931 231 3,162 ------------ (3,138) ------------ ----------------------------------------------- 33,326 18,343 14,983 33,326
	95,921 ------------ 73 1 74 ------------ 3,091 150	36,464 ------------ 11 13
		24 ------------ 2,931 231
	3,241 ------------ (3,167) ------------ ----------------------------------------------- 92,754
	76,157 16,597	18,343 14,983
	92,754

On behalf of the Board

Cheung Choi Ngor, Christina Hui Wai Yin Director Director

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Fourseas.com Limited

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

CONSOLIDATED CASH FLOW STATEMENT

FOR THE YEAR ENDED 31ST DECEMBER 2000

			Period from
		Year ended	1st April 1999 to
		31st December	31st December
		2000	1999
	Note	HK$’000	HK$’000
Net cash (outflow)/inflow from operating activities	21	(14,573)	30,050
		---------	---------
Returns on investments and servicing of finance
Interest paid		(20,618)	(16,497)
Interest received		178	490
Net cash outflow from returns on investments and
servicing of finance		(20,440)	(16,007)
		---------	---------
Taxation
Hong Kong profits tax refund/(paid)		611	(148)
		---------	---------
Investing activities
Proceeds from disposal of fixed assets		274	15
Decrease/(increase) in short-term pledged bank
deposits		12,394	(392)
Purchase of fixed assets		(1,057)	(1,898)
Increase in advances to an associate		—	(152)
Acquisition of a subsidiary		—	(1,839)
Net cash inflow/(outflow) from investing activities		11,611 ---------	(4,266) ---------
		-----------------------------------	-----------------------------------
Net cash (outflow)/inflow before financing		(22,791)	9,629
		---------	---------
Financing	22
New bank borrowings raised		34,302	55,438
Repayment of bank borrowings		(61,847)	(41,234)
Issue of shares		62,846	4,141
Capital element of finance leases		(7)	(253)
Net cash inflow from financing		35,294	18,092
		---------	---------
Increase in cash and cash equivalents		12,503	27,721
Cash and cash equivalents at the beginning of the
year/period		(24,109)	(51,830)
Cash and cash equivalents at the end of the year/period		(11,606)	(24,109)
Analysis of the balances of cash and cash equivalents
Bank balances and cash		1,832	4,496
Bank overdrafts	20	(13,438)	(28,605)
		(11,606)	(24,109)

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Fourseas.com Limited

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

CONSOLIDATED STATEMENT OF RECOGNISED GAINS AND LOSSES FOR THE YEAR ENDED 31ST DECEMBER 2000

			Period from
		Year ended	1st April 1999 to
		31st December	31st December
		2000	1999
	Note	HK$’000	HK$’000
Revaluation surplus on leasehold land and buildings	19	859	893
Net gains not recognised in the consolidated income
statement		859	893
Loss for the year/period	19	(39,020)	(40,627)
Total recognised losses		(38,161)	(39,734)
Discount on acquisition of subsidiary credited to reserves		—	77
		(38,161)	(39,657)

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Fourseas.com Limited

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

NOTES TO THE FINANCIAL STATEMENTS

1. Basis of preparation

In the preparation of the financial statements, the directors have reviewed the Group’s improved operations, the carrying values of the assets and liabilities and working capital requirements. As a result of the improved working capital situation and taking into account of funding to be made available from the investing group, the directors consider that the Group will have sufficient working capital for the ensuing twelve months. Accordingly, the accounts have been prepared on a going concern basis.

2. Principal accounting policies

The financial statements are prepared under the historical cost convention as modified by the revaluation of certain leasehold and investment properties, in accordance with generally accepted accounting principles in Hong Kong and comply with accounting standards issued by the Hong Kong Society of Accountants.

(a) Basis of consolidation

The consolidated financial statements include the financial statements of the Company and its subsidiaries made up to 31st December. The results of subsidiaries acquired or disposed of during the year are included in the consolidated income statement from the effective date of acquisition or up to the effective date of disposal, as appropriate. All significant inter-company transactions and balances within the Group are eliminated on consolidation.

Goodwill or capital reserve on consolidation represents respectively the excess or shortfall of the purchase consideration over the fair values ascribed to the separable net assets of subsidiaries acquired. Goodwill or capital reserve is written off or credited directly to reserves respectively in the year/period of acquisition.

The gain or loss on the disposal of a subsidiary represents the difference between the proceeds of the sale and the Group’s share of its net assets together with any goodwill or capital reserve which was not previously charged or recognised in the consolidated income statement.

(b) Subsidiaries

A subsidiary is a company in which the Company holds, directly or indirectly, more than 50% of its issued share capital as a long-term investment. In the Company’s balance sheet, investment in subsidiaries is stated at cost less provision, if necessary, for any permanent diminution in value. The results of subsidiaries are accounted for by the Company to the extent of dividends received and receivable.

(c) Associates

An associate is a company, not being a subsidiary or joint venture, in which an equity interest is held for the long term and significant influence is exercised in its management.

The consolidated income statement includes the Group’s share of the results of its associate for the year, and the consolidated balance sheet includes the Group’s share of the net assets of the associate.

In the Company’s balance sheet the investments in associate are stated at cost less provision, if necessary, for any permanent diminution in value. The results of associate are accounted for by the Company to the extent of dividends received and receivable.

(d) Revenue recognition

Revenue from the sales of air tickets is recognised when the tickets are issued and delivered to the customers.

Incentive commission from airlines is recognised on an accrual basis.

Revenue from the provision of other related travel services is recognised when the services are provided.

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Fourseas.com Limited

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

Revenue from the sales of goods is recognised on the transfer of risks and rewards of ownership, which generally coincides with the time when the goods are delivered to the customers and the title has passed.

Rental income is recognised on a straight-line basis over the lease period.

Interest income is accrued on a time proportion basis, taking into account the principal amounts outstanding and at the interest rates applicable.

(e) Fixed assets

(i) Investment properties

Investment properties are interests in land (including land-use rights) and buildings in respect of which construction work and development have been completed and which are held for their investment potential, any rental income being negotiated at arm’s length.

Investment properties held on leases with unexpired periods greater than 20 years are valued at their open market value based on professional valuations at the balance sheet date. The valuations are on an open market value basis related to individual properties and separate values are not attributed to land and buildings. Increases in valuation are credited to the investment properties revaluation reserve. Decreases in valuation are first set off against increases on earlier valuations on a portfolio basis and thereafter are debited to operating profit. Any subsequent increases are credited to operating profit up to the amount previously debited.

Investment properties held on leases with unexpired periods of 20 years or less are depreciated over the remaining portion of the leases.

Upon the disposal of an investment property, the relevant portion of the revaluation reserve realised in respect of previous valuations is released from the investment properties revaluation reserve to the income statement.

(ii) Other properties and tangible fixed assets

Other properties are interests in land and buildings other than investment properties and are stated at valuation. Revaluations are performed with sufficient regularity such that the carrying amount does not differ materially from that which would be determined using fair values at the balance sheet date. The valuations are on an open market basis related to individual properties and separate values are not attributed to land and buildings. Increases in valuation are credited to the fixed assets revaluation reserve. Decreases in valuation are first offset against increases on earlier valuations in respect of the same property and are thereafter debited to operating profit. Any subsequent increases are credited to operating profit up to the amount previously debited.

Other tangible fixed assets are stated at cost less accumulated depreciation.

Leasehold land and buildings are depreciated over the shorter of unexpired lease or their estimated useful lives on a straight-line basis.

Other tangible fixed assets are depreciated at rates sufficient to write off their cost over their estimated useful lives on a straight-line basis.

The principal annual rates are as follows:

Leasehold	land	2% - 4%
Leasehold	buildings	2.5% - 4%
Furniture	and fixtures, office equipment and motor vehicles	20%

Major costs incurred in restoring fixed assets to their normal working condition are charged to the income statement. Improvements are capitalised and depreciated over their expected useful lives to the Group.

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Fourseas.com Limited

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

The carrying amounts of fixed assets are reviewed regularly to assess whether their recoverable amounts have declined below their carrying amounts.

The gain or loss on disposal of a fixed asset other than investment properties is the difference between the net sales proceeds and the carrying amount of the relevant asset, and is recognised in the income statement. Any revaluation reserve balance remaining attributable to the relevant asset is transferred to retained earnings and is shown as a movement in reserves.

(f) Leases

(i) Finance leases

Leases that substantially transfer to the Group all the rewards and risks of ownership of assets, other than legal title, are accounted for as finance leases. At the inception of a finance lease, the fair value of the asset is recorded together with the obligation, excluding the interest element, to pay future rentals.

Payments to the lessor are treated as consisting of capital and interest elements. Finance charges are debited to the income statement in proportion to the capital balances outstanding.

Assets held under finance leases are depreciated over the shorter of their lease period or their economic useful lives. The principal rates used are set out in note 2(e)(ii).

(ii) Operating leases

Leases where substantially all the rewards and risks of ownership of assets remain with the leasing company are accounted for as operating leases. Rentals applicable to such operating leases are charged to the income statement on a straight-line basis over the lease term.

(g) Properties held for resale

Properties held for resale are included in current assets and are stated at the lower of cost and net realisable value. Cost includes land and building cost and other expenses incurred to bring the properties to their existing state. Net realisable value is the estimated price which a property can be realised less related selling expenses.

(h) Inventories

Inventories comprises goods held for resale and are stated at the lower of cost and net realisable value. Cost calculated on the first-in, first-out basis, comprises purchase cost, customs and transportation costs incurred in bringing the stocks to their present location and condition. Net realisable value is determined on the basis of anticipated sales proceeds less estimated selling expenses.

(i) Accounts receivable

Provision is made against accounts receivable to the extent they are considered to be doubtful. Accounts receivable in the balance sheet are stated net of such provision.

(j) Deferred taxation

Deferred taxation is provided under the liability method in respect of significant timing differences between profit as computed for taxation purposes and profit as stated in the financial statements, except when it is considered that no liability will arise in the foreseeable future. Deferred tax assets are not recognised unless the related benefits are expected to crystallise in the foreseeable future.

— 28 —

Fourseas.com Limited

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

Turnover and Revenues

The Group is principally engaged in the sale of air tickets and provision of other related travel services and property investment. Revenues recognised during the year are as follows:

Year ended 31st December 2000 Period from 1st April 1999 to 31st December 1999 HK$’000 HK$’000 Turnover Sale of air tickets, including commission from airlines, and other related travel services 714,892 434,408 Gross rental income 3,847 3,595 Others 1,256 2,397 719,995 440,400 - - - - - - - - - - - - - - - - - - Other revenues Interest income 178 490 Secondment fee — 112 Other income 1,760 669 1,938 1,271 - - - - - - - - - - - - - - - - - - Total revenues 721,933 441,671	Year ended 31st December 2000 Period from 1st April 1999 to 31st December 1999 HK$’000 HK$’000 Turnover Sale of air tickets, including commission from airlines, and other related travel services 714,892 434,408 Gross rental income 3,847 3,595 Others 1,256 2,397 719,995 440,400 - - - - - - - - - - - - - - - - - - Other revenues Interest income 178 490 Secondment fee — 112 Other income 1,760 669 1,938 1,271 - - - - - - - - - - - - - - - - - - Total revenues 721,933 441,671	Year ended 31st December 2000 Period from 1st April 1999 to 31st December 1999 HK$’000 HK$’000 Turnover Sale of air tickets, including commission from airlines, and other related travel services 714,892 434,408 Gross rental income 3,847 3,595 Others 1,256 2,397 719,995 440,400 - - - - - - - - - - - - - - - - - - Other revenues Interest income 178 490 Secondment fee — 112 Other income 1,760 669 1,938 1,271 - - - - - - - - - - - - - - - - - - Total revenues 721,933 441,671
	719,995 - - - - - - - - - 178 — 1,760	440,400 - - - - - - - - - 490 112 669
	1,938 - - - - - - - - - 721,933	1,271 - - - - - - - - - 441,671

An analysis of the Group’s turnover and contribution to loss from operations for the year by principal activity is as follows:

	Turnover	Turnover		Loss from operation	Loss from operation
		Period from			Period from
	Year ended	1st April 1999 to		Year ended	1st April 1999 to
	31st December	31st	December	31st December	31st December
	2000		1999	2000	1999
	HK$’000		HK$’000	HK$’000	HK$’000
Sale of air tickets, and
other related travel services	714,892		434,408	(15,990)	(21,450)
Rental of properties	3,847		3,595	(1,057)	(496)
Other operations	1,256		2,397	(789)	(2,984)
	719,995		440,400	(17,836)	(24,930)

No geographical analysis is provided as all the consolidated turnover and loss from operations of the Group are attributable to the Hong Kong market.

— 29 —

Fourseas.com Limited

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

Loss from operations

		Period from
	Year ended	1st April 1999 to
	31st December	31st December
	2000	1999
	HK$’000	HK$’000
Loss from operations is stated after crediting and charging the following:
Crediting
Recovery of bad debts previously written-off	—	1,579
Reversal of bad debts provision	180	1,134
Charging
Cost of sales:
- air tickets and other related travel services	690,498	418,541
- trading of goods	1,276	1,767
- outgoings in respect of investment properties	1,563	805
Auditors’ remuneration	450	450
Provision for bad and doubtful debts	766	1,972
Staff costs:
- salary and benefits (excluding retirement benefits)	25,828	25,703
- retirement benefits scheme contributions, net of forfeited contributions
of HK$131,000 (1999: HK$189,000)	96	104
Redundancy costs	964	2,373
Depreciation	3,722	3,121
Operating lease rentals for
- land and buildings	1,216	761
- office equipment	145	414
Finance costs
		Period from
	Year ended	1st April 1999 to
	31st December	31st December
	2000	1999
	HK$’000	HK$’000
Interest on bank loans and overdrafts	13,333	13,313
Interest on other loans wholly repayable within five years	7,284	3,129
Interest element of finance leases	1	55
Other incidental borrowings costs	566	481
Total borrowing costs incurred	21,184	16,978

5. Finance costs

— 30 —

Fourseas.com Limited

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

6. Taxation credit

(a) The amount of taxation credited to the consolidated income statement represents:

		Period from
	Year ended	1st April 1999 to
	31st December	31st December
	2000	1999
	HK$’000	HK$’000
Hong Kong profits tax at 16%	—	(86)
Over-provision in prior years	—	1,683
	—	1,597

No provision has been made for Hong Kong profits tax as the companies comprising the Group have no estimated assessable profit for the year.

(b) At 31st December 2000, the Group has no material unprovided deferred taxation liabilities.
(c) The revaluation of investment properties and leasehold land and buildings does not constitute a timing difference for deferred taxation purposes as the realisation of the revaluation surplus would not result in a taxation liability.

7. Loss attributable to shareholders

The loss attributable to shareholders is dealt with in the financial statements of the Company to the extent of HK$3,418,000 (1999: HK$2,313,000).

8. Loss per share

The calculation of basic loss per share is based on the Group’s loss attributable to shareholders of HK$39,020,000 (1999: HK$40,627,000) and on the weighted average of 2,412,250,438 (1999: 1,171,558,899 shares, adjusted) ordinary shares in issue during the year as adjusted for the effect of the open offer of share (note 18(a)) on 17th July 2000. The loss per share for the period ended 31st December 1999 has been adjusted accordingly.

The exercise of warrants would have an anti-dilutive effect on the basis loss per share and accordingly no diluted loss per share for the year is presented.

9. Retirement benefit costs

The Group contributes to defined contribution retirement schemes, including the Mandatory Provident Schemes set up pursuant to the Mandatory Provident Scheme Ordinance, which are available to all qualifying employees. Contributions to the schemes by the Group and the employees are calculated as a percentage of the employees’ basic salaries. The retirement benefit scheme cost charged to the consolidated income statement represents contributions payable by the Group to the funds.

The Group’s contributions are reduced by contributions forfeited by those employees who leave the scheme prior to vesting fully in the contributions. Forfeited contributions totalling HK$131,000 (1999: HK$189,000) were fully utilised during the year. Contributions totalling HK$57,000 (1999: HK$38,000) were payable to the fund at the year-end and are included in accounts payable. The assets of the schemes are held separately from those of the Group in independently administered funds.

— 31 —

Fourseas.com Limited

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

Directors’ and senior management’s emoluments
(a) The aggregate amounts of emoluments payable to directors of the Company during the year are as follows:

Year ended 31st December Period from 1st April 1999 to 31st December 2000 1999 HK$’000 HK$’000 Directors’ fees: Executive directors 49 32 Independent non-executive directors 20 11 69 43 Other emoluments - executive directors: Salaries and other benefits 4,224 2,123 4,293 2,166	Year ended 31st December Period from 1st April 1999 to 31st December 2000 1999 HK$’000 HK$’000 Directors’ fees: Executive directors 49 32 Independent non-executive directors 20 11 69 43 Other emoluments - executive directors: Salaries and other benefits 4,224 2,123 4,293 2,166	Year ended 31st December Period from 1st April 1999 to 31st December 2000 1999 HK$’000 HK$’000 Directors’ fees: Executive directors 49 32 Independent non-executive directors 20 11 69 43 Other emoluments - executive directors: Salaries and other benefits 4,224 2,123 4,293 2,166
	69 4,224	43 2,123
	4,293	2,166

No directors waived emoluments in respect of the year ended 31st December 2000 and period ended 31st December 1999.

The emoluments of the directors fell within the following bands:

Emoluments bands

	Number	of directors
		Period	from
	Year ended	1st April 1999 to
	31st December	31st December
	2000		1999
HK$Nil - HK$1,000,000	7*		11*
HK$3,000,001 - HK$3,500,000	1		1

* Include 2 (1999: 2) non-executive directors.

(b) The five (1999: five) individuals whose emoluments were the highest in the Group for the year include two (1999: one) directors whose emoluments are reflected in the analysis presented above. The emoluments payable to the remaining three (1999: four) individuals during the year are as follows:

					Period from
				Year ended	1st April 1999 to
				31st December	31st December
				2000	1999
				HK$’000	HK$’000
Salaries	and	other	benefits	1,515	1,650

— 32 —

Fourseas.com Limited

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

The emoluments fell within the following bands.

Emoluments bands

						Number of individuals	Number of individuals
							Period from
					Year ended 1st		April 1999 to
					31st December 31st December
						2000	1999
	HK$Nil - HK$1,000,000					3		4
11.	Fixed assets
			The	Group		The Company
				Fixture,
			Leasehold	equipment			Fixture
		Investment	land and	and	motor			and
		properties	buildings	vehicles		Total	equipment
		HK$’000	HK$’000	HK$’000		HK$’000	HK$’000
	Cost or valuation
	At 1st January 2000	169,400	45,000		21,171	235,571		61
	Additions	—	—		1,057	1,057		—
	Disposals/write-off	—	—		(1,172)	(1,172)		—
	Transfers	13,300	(13,300)		—	—		—
	At 31st December 2000	182,700	31,700		21,056	235,456		61
		- - - - - - - - -	- - - - - - - - -	- - -	- - - - - -	- - - - - - - - -	- - - - -	- - - -
	Accumulated depreciation
	At 1st January 2000	—	—		13,788	13,788		61
	Charge for the year	—	859		2,863	3,722		—
	Disposals/write-off	—	—		(545)	(545)		—
	Revaluation (note (a))	—	(859)		—	(859)		—
	At 31st December 2000	—	—		16,106	16,106		61
		- - - - - - - - -	- - - - - - - - -	- - -	- - - - - -	- - - - - - - - -	- - - - -	- - - -
		-----------------------------------	-----------------------------------	-----------------------------------		-----------------------------------	-----------------------------------
	Net book values
	At 31st December 2000	182,700	31,700		4,950	219,350		—
	At 31st December 1999	169,400	45,000		7,383	221,783		—
	The analysis of the cost or valuation at 31st December 2000		of the above	assets is as follows:
	At cost	—	—		21,056	21,056		61
	At 2000 valuation	182,700	31,700		—	214,400		—
		182,700	31,700		21,056	235,456		61

— 33 —

Fourseas.com Limited

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

Notes:

(a) The leasehold land and buildings and investments properties of the Group were revalued at 31st December 2000 on the basis of their open market value by Sallmanns (Far East) Limited, a firm of independent professional valuer. The Group’s surplus arising on revaluation of HK$859,000 in aggregate has been credited to the fixed assets revaluation reserve of the Group (note 19).
(b) The Group’s interests in investment properties and other properties at their net book values are analysed as follows:

In Hong Kong held on: Leases of over 50 years Leases of between 10 to 50 years Outside Hong Kong held on: Leases of between 10 to 50 years (note (c))	Investment properties 2000 1999 HK$’000 HK$’000 42,800 42,800 111,100 97,800 28,800 28,800 182,700 169,400	Leasehold land and buildings 2000 1999 HK$’000 HK$’000 29,500 29,500 2,200 15,500 — — 31,700 45,000	Leasehold land and buildings 2000 1999 HK$’000 HK$’000 29,500 29,500 2,200 15,500 — — 31,700 45,000
			45,000

(c) The Group has obtained the land occupancy right in respect of its investment properties situated in the People’s Republic of China.
(d) The carrying amount of leasehold land and buildings of the Group would have been approximately HK$27,393,000 (1999: HK$36,645,000) had they been stated at historical cost less accumulated depreciation.
(e) At 31st December 2000, the net book value of the Group’s fixed assets pledged as security for the Group’s borrowings and banking facilities amounted to HK$175,900,000 (1999: HK$175,900,000).

12. Investment in subsidiaries

Unlisted shares, at cost Distribution of dividends from subsidiaries’ profits earned prior to the Group reorganisation Amounts due from subsidiaries Less: Provision for permanent diminuition in value and non-recovery of advances	Company 2000 1999 HK$’000 HK$’000 79,251 79,251 (2,050) (2,050) 121,681 62,224	Company 2000 1999 HK$’000 HK$’000 79,251 79,251 (2,050) (2,050) 121,681 62,224
	198,882 (102,961)	139,425 (102,961)
	95,921	36,464

Details of the principal subsidiaries of the Company are set out in note 26 to the financial statements.

The amounts due from subsidiaries are unsecured, interest-free and with no fixed term of repayment.

— 34 —

Fourseas.com Limited

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

13. Interests in an associate

Provision for losses (note below) Amount due from an associate	2000 HK$’000 (4,445) — (4,445)	1999 HK$’000 (4,445) 36
		(4,409)

Particulars of the associate at 31st December 2000 are as follows:

	Place of	Issued and fully	Principal	Interest held
Name	incorporation	paid share capital	activities	indirectly
HNF Credit Services Company
Limited (“HNF”)	Hong Kong	Ordinary - HK$3	Inactive	331⁄3%

Note:

In view of the substantial losses of HNF, the Group has ceased to further support HNF. In addition, the Group no longer exercises any influence over HNF and the financial information of HNF as at 31st December 2000 is not available.

Provision for losses represents the Group’s exposure in respect of an outstanding claim (see note 23).

14. Inventories

At 31st December 2000 and 1999, inventories represent goods held for resale carried at net realisable value.

15. Trade and other receivables

			Company	Company
	2000	1999	2000	1999
	HK$’000	HK$’000	HK$’000	HK$’000
Trade receivables (Note)	32,384	23,850	—	—
Prepayments, deposits and other receivables	7,717	9,018	73	11
	40,101	32,868	73	11

— 35 —

Fourseas.com Limited

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

Note:

The Group maintains a defined credit policy.

At 31st December 2000, the ageing analysis of the Group’s trade receivables were as follows:

Current 30-60 days Over 60 days	2000 HK$’000 30,464 1,446 474 32,384	1999 HK$’000 22,516 1,091 243
		23,850

16. Trade and other payables

Trade payables (Note) Rental and other deposits Accruals and other payables	Group 2000 1999 HK$’000 HK$’000 58,673 49,515 1,706 1,845 12,398 17,537 72,777 68,897	Company 2000 1999 HK$’000 HK$’000 — — — — 3,091 2,931 3,091 2,931	Company 2000 1999 HK$’000 HK$’000 — — — — 3,091 2,931 3,091 2,931
			2,931

Note:

At 31st December 2000, the ageing analysis of the Group’s trade payables were as follows:

Current 30-60 day Over 60 days	2000 HK$’000 56,276 1,011 1,386 58,673	1999 HK$’000 44,489 1,517 3,509
		49,515

17. Amount due to a related company — Group

The amount due to a related company is unsecured, repayable on demand and interest bearing at rates ranging from 0-2% above the Hong Kong prime lending rate.

— 36 —

Fourseas.com Limited

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

18. Share capital, options and warrants

(a) Share capital

Number of shares HK$’000 Authorised: Ordinary shares of HK$0.1 each at 1st April 1999 2,000,000,000 200,000 Sub-division of shares 8,000,000,000 — Ordinary shares of HK$0.02 each at 31st December 1999 10,000,000,000 200,000 Ordinary shares of HK$0.02 each at 1st January and 31st December 2000 10,000,000,000 200,000 Issued and fully paid: Ordinary shares of HK$0.1 each at 1st April 1999 179,286,050 17,929 Sub-division of shares 717,144,200 — 896,430,250 17,929 Issue of shares 20,706,000 414 Ordinary shares of HK$0.02 each at 31st December 1999 917,136,250 18,343 Ordinary shares of HK$0.02 each At 1st January 2000 917,136,250 18,343 Issue of shares (Note) 2,890,689,330 57,814 At 31st December 2000 3,807,825,580 76,157	Number of shares HK$’000 Authorised: Ordinary shares of HK$0.1 each at 1st April 1999 2,000,000,000 200,000 Sub-division of shares 8,000,000,000 — Ordinary shares of HK$0.02 each at 31st December 1999 10,000,000,000 200,000 Ordinary shares of HK$0.02 each at 1st January and 31st December 2000 10,000,000,000 200,000 Issued and fully paid: Ordinary shares of HK$0.1 each at 1st April 1999 179,286,050 17,929 Sub-division of shares 717,144,200 — 896,430,250 17,929 Issue of shares 20,706,000 414 Ordinary shares of HK$0.02 each at 31st December 1999 917,136,250 18,343 Ordinary shares of HK$0.02 each At 1st January 2000 917,136,250 18,343 Issue of shares (Note) 2,890,689,330 57,814 At 31st December 2000 3,807,825,580 76,157	Number of shares HK$’000 Authorised: Ordinary shares of HK$0.1 each at 1st April 1999 2,000,000,000 200,000 Sub-division of shares 8,000,000,000 — Ordinary shares of HK$0.02 each at 31st December 1999 10,000,000,000 200,000 Ordinary shares of HK$0.02 each at 1st January and 31st December 2000 10,000,000,000 200,000 Issued and fully paid: Ordinary shares of HK$0.1 each at 1st April 1999 179,286,050 17,929 Sub-division of shares 717,144,200 — 896,430,250 17,929 Issue of shares 20,706,000 414 Ordinary shares of HK$0.02 each at 31st December 1999 917,136,250 18,343 Ordinary shares of HK$0.02 each At 1st January 2000 917,136,250 18,343 Issue of shares (Note) 2,890,689,330 57,814 At 31st December 2000 3,807,825,580 76,157
		200,000
		200,000
	179,286,050 717,144,200 896,430,250 20,706,000	17,929 —
		17,929 414
	917,136,250 917,136,250 2,890,689,330 3,807,825,580	18,343
		18,343 57,814
		76,157

Note:

Pursuant to an open offer of shares on 17th July 2000, the Company issued a total of 2,855,869,185 ordinary shares of HK$0.02 each at a subscription price of HK$0.02 per share on the basis of three offer shares for every one ordinary share in issue on 27th June 2000.

In addition, 34,820,145 ordinary shares of HK$0.02 each were issued during the year pursuant to the exercise of 34,820,145 warrants at a subscription price of HK$0.2 per share.

All new shares issued during the year rank pari passu with the then existing shares in all respects.

(b) Share options

Pursuant to the Company’s share option scheme adopted on 8th October 1992, the directors of the Company may, at their discretion, grant options to employees of the Group, including directors of the Company and its subsidiaries, to subscribe for shares in the Company. No options were granted or exercised during the year. There was no outstanding share option during the year and at 31st December 2000.

(c)

Warrants

At 1st January 2000, the Company has 158,979,750 outstanding warrants entitling the holders to subscribe in cash at any time on or after 9th February 1998 to 8th December 2000 for ordinary share of HK$0.02 each of the Company at an initial subscription price of HK$0.2 per share, subject to adjustment. During the year, 34,820,145 warrants were exercised. The remaining 124,159,605 warrants lapsed on 8th December 2000 and there were no outstanding warrants at 31st December 2000.

— 37 —

Fourseas.com Limited

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

19. Reserves

Group

Share premium Capital redemption reserve HK$’000 HK$’000 32,066 1,074 3,727 — — — — — — — 35,793 1,074	Share premium Capital redemption reserve HK$’000 HK$’000 32,066 1,074 3,727 — — — — — — — 35,793 1,074	Capital reserve Fixed assets revaluation reserve Investment properties revaluation reserves Accumulated losses HK$’000 HK$’000 HK$’000 HK$’000 15,965 28,728 1,293 (65,905) — — — — 77 — — — — 893 — — — — — (40,627) 16,042 29,621 1,293 (106,532)	Capital reserve Fixed assets revaluation reserve Investment properties revaluation reserves Accumulated losses HK$’000 HK$’000 HK$’000 HK$’000 15,965 28,728 1,293 (65,905) — — — — 77 — — — — 893 — — — — — (40,627) 16,042 29,621 1,293 (106,532)	Capital reserve Fixed assets revaluation reserve Investment properties revaluation reserves Accumulated losses HK$’000 HK$’000 HK$’000 HK$’000 15,965 28,728 1,293 (65,905) — — — — 77 — — — — 893 — — — — — (40,627) 16,042 29,621 1,293 (106,532)	Capital reserve Fixed assets revaluation reserve Investment properties revaluation reserves Accumulated losses HK$’000 HK$’000 HK$’000 HK$’000 15,965 28,728 1,293 (65,905) — — — — 77 — — — — 893 — — — — — (40,627) 16,042 29,621 1,293 (106,532)	Total HK$’000 13,221 3,727 77 893 (40,627) (22,709) (18,264) (4,445) (22,709) (22,709) 5,032 859 (39,020) (55,838) (51,393) (4,445) (55,838)
	1,074
35,793 —	1,074 —	16,042 —	29,621 —	1,293 —	(102,087) (4,445)	(18,264 (4,445
35,793	1,074	16,042	29,621	1,293	(106,532)
35,793 5,032 — —	1,074 — — —	16,042 — — —	29,621 — 859 —	1,293 — — —	(106,532) — — (39,020)	(22,709 5,032 859 (39,020
40,825	1,074	16,042	30,480	1,293	(145,552)
40,825 —	1,074 —	16,042 —	30,480 —	1,293 —	(141,107) (4,445)	(51,393 (4,445
40,825	1,074	16,042	30,480	1,293	(145,552)

— 38 —

Fourseas.com Limited

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

Company

		Capital
	Share	redemption	Contributed	Accumulated
	premium	reserve	surplus	losses	Total
	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000
At 1st April 1999	32,066	1,074	77,001	(96,572)	13,569
Issue of shares, net of expenses	3,727	—	—	—	3,727
Loss for the period	—	—	—	(2,313)	(2,313)
At 31st December 1999	35,793	1,074	77,001	(98,885)	14,983
At 1st January 2000	35,793	1,074	77,001	(98,885)	14,983
Issue of shares, net of expenses	5,032	—	—	—	5,032
Loss for the year	—	—	—	(3,418)	(3,418)
At 31st December 2000	40,825	1,074	77,001	(102,303)	16,597

The contributed surplus of the Company arose when the Company issued shares in exchange for the shares of companies being acquired, and represents the difference between the nominal value of the Company’s shares issued and the value of net asset of the companies acquired.

Under the Companies Act 1981 of Bermuda (as amended), the contributed surplus is distributable to the shareholders subject to a solvency test.

20. Interest-bearing borrowings

Bank borrowings: Bank overdrafts - secured Bank loans - secured Mortgage loans - secured Total bank borrowings Obligation under finance leases Less: current portion shown under current liabilities Long term portion of interest-bearing borrowings Bank borrowings: Bank overdrafts - secured	Group 2000 1999 HK$’000 HK$’000 13,438 28,605 3,081 25,188 99,252 104,690 115,771 158,483 — 7 (37,105) (73,420) 78,666 85,070 Company 2000 1999 HK$’000 HK$’000 150 231

— 39 —

Fourseas.com Limited

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

At 31st December 2000, the Group’s bank loans, overdrafts and other borrowings were repayable as follows:

	Bank loans and overdrafts	Bank loans and overdrafts	Obligation under	finance leases
	2000	1999	2000	1999
	HK$’000	HK$’000	HK$’000	HK$’000
Within 1 year or on demand	37,105	73,413	—	7
Between 1-2 years	41,560	30,438	—	—
Between 2-5 years	22,126	32,979	—	—
After 5 years	14,980	21,653	—	—
	115,771	158,483	—	7

At 31st December 2000, the bank loans and overdrafts were secured by legal charges on the investment properties, leasehold land and buildings and properties held for resale of the Group with net book value of HK$144,200,000, HK$31,700,000 and HK$1,443,000 respectively.

Reconciliation of loss from operations to net cash (outflow)/inflow from operating activities

		Period from
	Year ended	1st April 1999 to
	31st December	31st December
	2000	1999
	HK$’000	HK$’000
Loss from operations	(17,836)	(24,930)
Interest income	(178)	(490)
Other incidental borrowing cost	(566)	(481)
Surplus on revaluation of properties	—	(248)
Depreciation	3,722	3,121
Loss on disposal/write-off of fixed assets	353	358
Loss on writing-off advances to an associate	36	—
Decrease in inventories	1,401	1,730
Increase in trade and other receivables	(7,233)	(20,263)
Increase in accounts payables and accruals including amounts
due to a related company	5,728	71,253
Net cash (outflow)/inflow from operating activities	(14,573)	30,050

— 40 —

Fourseas.com Limited

APPENDIX I

FINANCIAL INFORMATION ON THE GROUP

Analysis of changes in financing during the year

	Share capital	Bank loans	Obligations
	including	and	under
	premium	mortgage loans	finance leases
	HK$’000	HK$’000	HK$’000
Balance at 1st April 1999	49,995	115,674	260
Cash inflow from financing	4,141	55,438	—
Cash outflow from financing	—	(41,234)	(253)
Balance at 31st December 1999	54,136	129,878	7
Balance at 1st January 2000	54,136	129,878	7
Cash inflow from financing	62,846	34,302	—
Cash outflow from financing	—	(61,847)	(7)
Balance at 31st December 2000	116,982	102,333	—

Contingent liabilities

At 31st December 2000, the Group had the following material contingent liabilities:

(a) At 31st December 2000, the Company has a corporate guarantee in respect of the banking facilities granted to HNF in the amount of US$3 million (equivalent to approximately HK$23.3 million). Such facilities were also secured by an irrecoverable standby letter of credit issued by a bank established in the People’s Republic of China and guaranteed by a former director of the Company, and three other parties. At 31st December 2000, there was an outstanding legal claim originally lodged in March 1999 by the bank against the Company and other guarantors in respect of the outstanding borrowings of HNF of approximately HK$19 million. The directors, having sought independent legal advice, are in the opinion that the HK$4.4 million provision made in 1999 is adequate to cover the exposure under this guarantee.
(b) At 31st December 2000, there was an outstanding litigation in respect of a claim made by a third party against the Group for HK$3 million syndication fee in connection with the arrangement of a proposed HK$30 million loan to the Group. The directors consider the conditions of the loan agreement have not been fully complied with by the third party and that the HK$3 million is not payable. Accordingly, no provision has been made in the financial statements.

As 31st December 2000, the Company has corporate guarantees totalling HK$146,790,000 (1999: HK$124,500,000) to banks for facilities granted to certain subsidiaries.

Save as aforesaid, the Group and the Company had no material contingent liabilities and outstanding litigation as at 31st December 2000.

— 41 —

Fourseas.com Limited

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

24. Commitments

(a) Capital commitments

The Group and the Company had no material capital commitments at 31st December 2000 (1999: HK$4,579,000).

(b) Lease commitments

At 31st December 2000, the Group had commitments to make the following payments in the next twelve months under operating leases which expire:

Within one year In the second to fifth year inclusive	31st December 2000 Land and buildings Office equipment HK$’000 HK$’000 — — 145 — 145 —	31st December 1999 Land and buildings Office equipment HK$’000 HK$’000 253 8 1,105 — 1,358 8	31st December 1999 Land and buildings Office equipment HK$’000 HK$’000 253 8 1,105 — 1,358 8
			8

The Company did not have any lease commitments at 31st December 2000

25. Related party transactions

During the year, the Group had the following significant transactions with related parties:

			Period from
		Year ended	1st April 1999 to
		31st December	31st December
	Note	2000	1999
		HK$’000	HK$’000
Sale of air tickets and other travel related	b	3,722	—
services to related companies
Purchase of a subsidiary		—	2,746
Interest charged by South China Information and Technology	c	7,261	2,246
Limited, a related company, and its subsidiaries
(“South China IT Group”)
Management fee charged by South China IT Group	c	2,000	2,000

Notes:

(a) Related companies are members of the investing group which hold approximately 44% of the Company’s issued share capital at 31st December 2000.
(b) Sales was at prices and terms no less than those charged to other third party customers of the Group.
(c) Interest was charged by South China IT Group on the interest-bearing balances at rates ranging from 0-2% above the Hong Kong prime lending rate. Management fee was charged by South China IT Group based on the actual level of services provided and agreed at the end of the year.

— 42 —

Fourseas.com Limited

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

26. Principal subsidiaries

Details of the Company’s principal subsidiaries, all wholly-owned, at 31st December 2000 are as follows:

	Place of	Issued and
	incorporation/	fully paid
Name of subsidiary	operation	share capital	Principal activities
Four Seas Tours Limited	Hong Kong	Ordinary -	Sale of air tickets and
		HK$3,000,000	provision of other related
			travel services
Hong Kong Four Seas Tours Limited	Hong Kong	Ordinary -	Sale of air tickets and
		HK$1,800,000	provision of other related
		*Deferred -	travel services
		HK$1,200,000
Everspread Development Limited	Hong Kong	Ordinary -	Property investment
		HK$10,000
First City Limited	Hong Kong	Ordinary -	Property investment
		HK$10,000
Full Guests Hotel Investment Limited	Hong Kong	Ordinary -	Property investment
		HK$10,000
Gainfield Holdings Limited	Hong Kong	Ordinary -	Investment holding
		HK$8,000,000
Global Trinity Properties Limited	Hong Kong	Ordinary -	Property investment
		HK$2
Glorious Dragon Investment Limited	Hong Kong	Ordinary -	Property investment
		HK$2
Kingstep Limited	Hong Kong	Ordinary -	Property investment
		HK$10,000
Multilink Continental Limited	Hong Kong	Ordinary -	Property investment
		HK$2
Paraford Investment Limited	Hong Kong	Ordinary -	Property investment
		HK$2
Pioneer Faith Development Limited	Hong Kong	Ordinary -	Property investment
		HK$10,000
Power Sound Development Limited	Hong Kong	Ordinary -	Property investment
		HK$10,000

— 43 —

Fourseas.com Limited

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

	Place of	Issued and
	incorporation/	fully paid
Name of subsidiary	operation	share capital	Principal activities
Right Trinity Properties Limited	Hong Kong	Ordinary -	Property investment
		HK$2
Tamon Development Limited	Hong Kong	Ordinary -	Property investment
		HK$10,000
Thousand Property Investments Limited	Hong Kong	Ordinary -	Property investment
		HK$2
Victory Long Limited	Hong Kong	Ordinary -	Property investment
		HK$2
Wisetime Development Limited	Hong Kong	Ordinary -	Property investment
		HK$2

The deferred shares, practically carry minimal rights to dividend and no rights to receive notice of or to attend or vote at any general meeting of the Company. On a winding up, the holders of the deferred shares are entitled out of the remaining assets of the Company after a sum of HK$50,000,000,000 has been distributed amongst the holders of the ordinary shares of the Company.

The above list includes the subsidiaries which, in the opinion of the directors, materially affect the results or assets of the Group. To give details of other subsidiaries would, in the opinion of the directors, results in particulars of excessive length.

27. Approval of financial statements

The financial statements were approved by the board of directors on 24th April 2001.

— 44 —

Fourseas.com Limited

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

b. Unaudited consolidated financial statements

The following unaudited financial statements of the Group are extracted from pages 1 to 11 of the interim report of Fourseas.com for the six months ended 30th June, 2001.

CONDENSED CONSOLIDATED INCOME STATEMENT

For the six months ended 30 June 2001

Notes Turnover 3 Cost of sales Gross profit Other revenue Administrative expenses Deficit arising on revaluation of properties 8 Loss from operations 4 Finance costs Net loss for the period Loss per share Basic 7	Six months ended 30 June 2001 2000 Unaudited Unaudited HK$’000 HK$’000 333,878 339,336 (319,346) (324,366) 14,532 14,970 492 740 (17,528) (24,993) (84,041) — (86,545) (9,283) (8,907) (7,548) (95,452) (16,831) (25.07 cents) (13.71 cents)	Six months ended 30 June 2001 2000 Unaudited Unaudited HK$’000 HK$’000 333,878 339,336 (319,346) (324,366) 14,532 14,970 492 740 (17,528) (24,993) (84,041) — (86,545) (9,283) (8,907) (7,548) (95,452) (16,831) (25.07 cents) (13.71 cents)
	14,532 492 (17,528) (84,041) (86,545) (8,907)	14,970 740 (24,993 —
		(9,283 (7,548
	(95,452) (25.07 cents)

— 45 —

Fourseas.com Limited

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

CONDENSED CONSOLIDATED BALANCE SHEET

At 30 June 2001

		At 30 June	At 31 December
		2001	2000
	Notes	Unaudited	Audited
		HK$’000	HK$’000
Non-current assets
Fixed assets	8	106,026	219,350
Interest in an associate		(4,445)	(4,445)
		101,581	214,905
Current assets
Properties held for resale		20,943	1,443
Inventories		1,042	1,302
Trade and other receivables	9	42,387	40,101
Taxation recoverable		1,091	1,091
Bank balances and cash		800	1,832
		66,263	45,769
Current liabilities
Trade and other payables	10	75,344	72,777
Amount due to a related company		85,716	51,807
Bank borrowings - due within one year		22,662	37,105
		183,722	161,689
Net current liabilities		(117,459)	(115,920)
Total assets less current liabilities		(15,878)	98,985
Non-current liability
Bank borrowings - due after one year		67,557	78,666
		(83,435)	20,319
Capital and reserves
Share capital	11	76,157	76,157
Reserves	12	(159,592)	(55,838)
		(83,435)	20,319

— 46 —

Fourseas.com Limited

APPENDIX I FINANCIAL INFORMATION ON THE GROUP

CONDENSED CONSOLIDATED STATEMENT OF RECOGNISED GAINS AND LOSSES

For the six months ended 30 June 2001

	Six months ended 30 June	Six months ended 30 June
	2001	2000
	Unaudited	Unaudited
	HK$’000	HK$’000
Deficit arising on revaluation of properties not recognised
in the condensedconsolidated income statement	(8,302)	—
Net loss for the period	(95,452)	(16,831)
Total recognised losses	(103,754)	(16,831)

— 47 —

Fourseas.com Limited

APPENDIX I FINANCIAL INFORMATION ON THE GROUP

CONDENSED CONSOLIDATED CASH FLOW STATEMENT

For the six months ended 30 June 2001

	Unaudited
	HK$’000
NET CASH INFLOW FROM OPERATING ACTIVITIES	33,529
NET CASH OUTFLOW FROM RETURNS ON INVESTMENTS
AND SERVICING OF FINANCE	(8,774)
NET CASH OUTFLOW FROM INVESTING ACTIVITIES	(236)
NET CASH INFLOW BEFORE FINANCING	24,519
NET CASH OUTFLOW FROM FINANCING	(12,849)
INCREASE IN CASH AND CASH EQUIVALENTS	11,670
CASH AND CASH EQUIVALENTS AT 1 JANUARY 2001	(11,606)
CASH AND CASH EQUIVALENTS AT 30 JUNE 2001	64
ANALYSIS OF THE BALANCES OF CASH
AND CASH EQUIVALENTS
Bank balances and cash	800
Bank overdrafts	(736)
	64

— 48 —

Fourseas.com Limited

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

NOTES TO THE CONDENSED FINANCIAL STATEMENTS

For the six months ended 30 June 2001

1. BASIS OF PREPARATION

In preparing the interim financial report, the Directors have given careful consideration to the future liquidity of the Group. At 30 June 2001, the Group had net current liabilities of approximately HK$117,000,000 and net liabilities of approximately HK$83,000,000.

As set out in note 13 (ii), the Company raised HK$70,000,000 from the issue of 3,500,000,000 new shares of HK$0.02 each to Giant Glory Assets Limited (“Giant Glory”) subsequent to 30 June 2001. The proceeds were used to repay the amount due to a group company of South China Information and Technology Limited (“SCIT”), a controlling shareholder of the Company prior to the completion of the transaction disclosed in note 13 (ii). Since then, the financial position of the Group has improved significantly.

In addition, as set out in note 13 (iii), the Group disposed of the entire interest in certain of its subsidiaries engaged in property investment and 49% equity interest in certain subsidiaries engaged in the sales of air tickets and the provision of other related travel services to SCIT for a consideration of HK$15,000,000 subsequent to 30 June 2001. HK$14,000,000 of the proceeds were also used to repay the amount due to a group company of SCIT. As a result of this transaction, the corresponding mortgaged properties and bank borrowings have been disposed of and the amount of working capital required to meet the principal and interest repayment of such bank borrowings has been greatly reduced.

Pursuant to a management agreement entered into between the Group and SCIT on 18 June 2001, SCIT unconditionally and irrevocably undertakes with the Group for the provision of normal working capital for the operation of the Group’s sales of air tickets and the provision of other related travel services for a period of 12 months after the completion of transactions as set out above.

In light of the favourable outcomes of the above arrangements, the Directors of the Company are satisfied that the Group will be able to meet in full its financial obligations as they fall due for the foreseeable future and have, accordingly, prepared the interim financial report on a going concern basis.

2. PRINCIPAL ACCOUNTING POLICIES

The condensed financial statements have been prepared under the historical cost convention, as modified for the revaluation of properties, and have been prepared in accordance with Statement of Standard Accounting Practice (“SSAP”) 25 “Interim financial reporting” issued by the Hong Kong Society of Accountants (“HKSA”), except that in this first year of implementation of the standard, as permitted by the Rules Governing the Listing of Securities on the Stock Exchange of Hong Kong Limited, no comparative amounts have been presented for the condensed consolidated cash flow statement.

The accounting policies adopted are consistent with those followed in the preparation of the Group’s annual financial statements for the year ended 31 December 2000, except as described below.

In the current period, the Group has adopted, for the first time, a number of new SSAPs issued by the HKSA.

Segment reporting

In the current period, the Group has changed the basis of identification of reportable segments to that required by SSAP 26 “Segment reporting”. Segment disclosures for the six months ended 30 June 2000 have been amended so that they are presented on a consistent basis.

Goodwill

In the current period, the Group has adopted SSAP 30 “Business combinations” and has elected not to restate goodwill (negative goodwill) previously eliminated against (credited to) reserves. Accordingly, goodwill arising on acquisitions prior to 1 January 2001 is held in reserves and will be charged to the income statement at the time of disposal of the relevant subsidiary, or at such time as the goodwill is determined to be impaired. Negative goodwill arising on acquisitions prior to 1 January 2001 will be credited to income at the time of disposal of the relevant subsidiary.

— 49 —

Fourseas.com Limited

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

Goodwill arising on acquisitions after 1 January 2001 is capitalised and amortised over its estimated useful life. Negative goodwill arising on acquisitions after 1 January 2001 is presented as a deduction from assets and will be released to income based on an analysis of the circumstances from which the balance resulted.

3. SEGMENT INFORMATION

An analysis of the Group’s consolidated turnover and attributable loss from operations by business segments is as follows:

BUSINESS SEGMENTS

For the six months ended 30 June 2001

Sales of air
tickets, and
other related
travel services
Property
investment
HK$’000
HK$’000
REVENUE
External sales
331,456
2,187
Inter-segment sales
—
411
331,456
2,598
SEGMENT RESULTS
(2,296)
(83,901)
For the six months ended 30 June 2000
Sales of air
tickets, and
other related
travel services
Property
investment
HK$’000
HK$’000
REVENUE
External sales
336,262
2,364
Inter-segment sales
—
870
336,262
3,234
SEGMENT RESULTS
(8,981)
(165)

Other
activities
Eliminations
Consolidated
Total
HK$’000
HK$’000
HK$’000
235
—
333,878
—
(411)
—
235
(411)
333,878
(348)
—
(86,545)
Other
activities
Eliminations
Consolidated
Total
HK$’000
HK$’000
HK$’000
710
—
339,336
—
(870)
—
710
(870)
339,336
(137)
—
(9,283)

No analysis of the Group’s turnover and attributable loss from operations by geographic segment is presented as the Group’s turnover and loss from operations are mainly from Hong Kong market.

4. LOSS FROM OPERATIONS

Loss from operations for the current period has been arrived at after charging depreciation of HK$1,709,000 (2000: HK$1,772,000).

— 50 —

Fourseas.com Limited

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

5. TAXATION

No provision for Hong Kong Profits Tax has been made as the Company and its subsidiaries had no assessable profit for the period.

There was no significant unprovided deferred taxation for the period or at the balance sheet date.

6. DIVIDEND

There was no dividend paid during the period.

7. LOSS PER SHARE

The calculation of the basic loss per share is based on the net loss for the period of HK$95,452,000 (2000: HK$16,831,000) and on 380,782,558 shares (2000: weighted average number of 122,758,759 shares) in issue during the period after adjusting for the effect of the consolidation of the Company’s shares on 29 August 2001 as set out in note 13(i)(a).

The comparative weighted average number of ordinary shares in issue during the six months ended 30 June 2000 has also been adjusted for the effect of the open offer of shares (“Open Offer”) at a subscription price of HK$0.02 per offer share to those qualifying shareholders on 17 July 2000 on the basis of three offer shares for every one ordinary share in issue on 27 June 2000. Details of the Open Offer are set out in the announcement dated 29 May 2000. Accordingly, the basic loss per share for the six months ended 30 June 2000 has been adjusted.

There were no dilutive potential ordinary shares in issue for the six months ended 30 June 2001.

Diluted loss per share was not presented for the six months ended 30 June 2000 because the exercise price of the Company’s warrants was higher than the average market price for shares for that period.

8. MOVEMENTS IN FIXED ASSETS

The Group’s investment properties and leasehold land and buildings were revalued at 30 June 2001 by Sallmanns (Far East) Limited, an independent firm of professional property valuers, on an open market value basis.

The deficit arising on revaluation of the Group’s investment properties amounted to HK$81,000,000, of which HK$1,293,000 was charged to the investment property revaluation reserve and the balance of HK$79,707,000 was charged to the condensed consolidated income statement.

The deficit arising on revaluation of the Group’s leasehold land and buildings amounted to HK$11,343,000, of which HK$7,009,000 was charged to the property revaluation reserve attributable to the relevant properties and the balance of HK$4,334,000 was charged to the condensed consolidated income statement.

At 30 June 2001, certain of the Group’s investment properties with a revalued amount of HK$19,500,000 were transferred to properties held for resale as a result of a change in the Directors’ intention for holding these properties.

— 51 —

Fourseas.com Limited

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

9. TRADE AND OTHER RECEIVABLES

Included in trade and other receivables were trade receivables of HK$34,556,000 (31 December 2000: HK$32,384,000). The Group maintains a defined credit policy to its customers. An aging analysis of trade receivables is as follows:

At 30 June 2001 At 31 HK$’000 0-30 days 29,879 31-60 days 1,981 Over 60 days 2,696 34,556	December 2000 HK$’000 30,464 1,446 474
	32,384

10. TRADE AND OTHER PAYABLES

Included in trade and other payables were trade payables of HK$55,732,000 (31 December 2000: HK$58,673,000). An aging analysis of trade payables is as follows:

At 30 June 2001 At 31 HK$’000 0-30 days 54,348 31-60 days 237 Over 60 days 1,147 55,732	December 2000 HK$’000 56,276 1,011 1,386
	58,673

11. SHARE CAPITAL

There was no movement in the share capital of the Company during the six months ended 30 June 2001. Details of changes in the share capital of the Company subsequent to 30 June 2001 are set out in note 13.

— 52 —

Fourseas.com Limited

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

12. RESERVES

At 1 January 2000 Issue of shares, net of expenses Surplus arising on revaluation of properties Net loss for the year At 1 January 2001 Deficit arising on revaluation of properties Net loss for the period At 30 June 2001	Share premium Capital redemption reserve HK$’000 HK$’000 35,793 1,074 5,032 — — — — —	Share premium Capital redemption reserve HK$’000 HK$’000 35,793 1,074 5,032 — — — — —	Capital reserve Investment property revaluation reserve Property revaluation reserves Accumulated losses HK$’000 HK$’000 HK$’000 HK$’000 16,042 1,293 29,621 (106,532) — — — — — — 859 — — — — (39,020)	Capital reserve Investment property revaluation reserve Property revaluation reserves Accumulated losses HK$’000 HK$’000 HK$’000 HK$’000 16,042 1,293 29,621 (106,532) — — — — — — 859 — — — — (39,020)	Capital reserve Investment property revaluation reserve Property revaluation reserves Accumulated losses HK$’000 HK$’000 HK$’000 HK$’000 16,042 1,293 29,621 (106,532) — — — — — — 859 — — — — (39,020)	Capital reserve Investment property revaluation reserve Property revaluation reserves Accumulated losses HK$’000 HK$’000 HK$’000 HK$’000 16,042 1,293 29,621 (106,532) — — — — — — 859 — — — — (39,020)	Total HK$’000 (22,709) 5,032 859 (39,020) (55,838) (8,302) (95,452) (159,592)
	40,825 — —	1,074 — —	16,042 — —	1,293 (1,293) —	30,480 (7,009) —	(145,552) — (95,452)	(55,838 (8,302 (95,452
	40,825	1,074	16,042	—	23,471	(241,004)

13. EVENTS AFTER THE BALANCE SHEET DATE

Subsequently to 30 June 2001, the Group had the following significant events:

(i) Pursuant to a special resolution passed on 29 August 2001 at a special general meeting, the share capital of the Company were reorganised (“Capital Reorganisation”) with effect on the same date as follows:
(a) Share Consolidation - Every ten issued and unissued shares of HK$0.02 each were consolidated into one issued and unissued share of HK$0.20 each.
(b) Capital Reduction - Based on the number of issued shares and unissued shares immediately after the Share Consolidation, the nominal value of issued share of HK$0.20 were reduced to HK$0.02 by cancelling to the extent of HK$0.18 paid up on each issued share and the nominal value of all the unissued shares of HK$0.20 each were also reduced to HK$0.02 each.Accordingly, the authorised share capital of the Company has been reduced from HK$200,000,000 to HK$20,000,000.
(c) Increase of authorised capital - After the Share Consolidation and the Capital Reduction, the authorised share capital of the Company were increased from HK$20,000,000 to HK$200,000,000 divided into 10,000,000,000 shares of HK$0.02 each (“New Shares”).
(ii) Pursuant to an agreement entered into between the Company, Giant Glory and SCIT on 18 June 2001 (“Subscription Agreement”), the Company issued 3,500,000,000 New Shares (“Subscription Shares”) at a subscription price of HK$0.02 each to Giant Glory upon the completion of the Subscription Agreement on 3 September 2001, representing approximately of 90.19% of the Company’s enlarged issued capital after the Capital Reorganisation.

The proceeds from the issue of Subscription Shares amounting to HK$70,000,000 were used to repay the amount due to a group company of SCIT.

— 53 —

Fourseas.com Limited

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

Pursuant to an agreement entered into between the Group and SCIT on 18 June 2001, the Group disposed of the entire interest in certain of its subsidiaries engaged in property investment and 49% equity interest in certain subsidiaries engaged in the sales of air tickets and the provision of other related travel services to SCIT for a consideration of HK$15,000,000 upon the completion of the Subscription Agreement.

HK$14,000,000 of the proceeds were also used to repay the amount due to a group company of SCIT.

3. INDEBTEDNESS STATEMENT

At the close of business on 28 February, 2002, being the Latest Practicable Date for the purpose of ascertaining certain financial information relating to this indebtedness statement prior to printing of this circular, the Group had amount due to related companies of HK$7.5 million which are unsecured, non-interest bearing and repayable on demand.

Save for the above, the Group does not have any outstanding borrowings, pledge of assets and contingent liabilities.

The Directors are not aware of any material adverse changes in the Group’s indebtedness and contingent liabilities since 28 February, 2002.

4. WORKING CAPITAL

The Directors are of the opinion that taking into account of the net proceeds of a private placement of 100,000,000 Shares in December 2001 and in the absence of unforeseen circumstances, the Group will have sufficient working capital for its present requirements.

5. MATERIAL CHANGES

Save for the Group’s financial restructuring in September 2001 and the Group’s private placement of 100,000,000 Shares in December 2001, the Directors do not aware of any material changes in the financial or trading position or prospects of the Group since 31 December, 2000, the date to which the latest published audited consolidated financial statements of the Group for the year ended 31 December, 2000 were made up.

— 54 —

Fourseas.com Limited

APPENDIX II ACCOUNTANTS’ REPORT ON

1. Accountants’ report on

The following is the text of a report, prepared for the purpose of inclusion in this circular, received from the reporting accountants, K.L. Lee & Partners C.P.A. Limited, Certified Public Accountants, Hong Kong.

==> picture [107 x 130] intentionally omitted <==

K.L. Lee & Partners C.P.A. Limited Suite 1303

Shanghai Industrial Investment Building 60 Hennessy Road Wanchai Hong Kong

April 25, 2002

The Directors

(incorporated in the People’s Republic of China with limited liability)

Dear Sirs,

We set out below our report on the financial information (“Financial Information”) relating to (the “Company”) for the period from July 12, 2000 (date of incorporation) to December 31, 2000 and the year ended December 31, 2001 for inclusion in the circular of Fourseas.com Limited dated April 25, 2002 in connection with the proposed acquisition of .

The Company was incorporated as a limited liability company in the People’s Republic of China on July 12, 2000. The Company is mainly in the business of property development since the date of the incorporation.

The statutory accounts of the Company incorporated in the PRC were prepared in accordance with the applicable accounting principles and financial regulations in the PRC by the PRC auditors, Shanghai Zhonghua Certified Public Accountants Co., Ltd., for the period from July 12, 2000 (date of incorporation) to December 31, 2000 and the year ended December 31, 2001 (“Relevant Periods”). For the purpose of this report, we have undertaken our own independent audits of the accounts of the Company for the Relevant Periods, which were prepared in accordance with accounting principles generally accepted in Hong Kong and in accordance with the Statements of Auditing Standards in Hong Kong issued by the Hong Kong Society of Accountants.

We have examined the Financial Information in accordance with Statement of Auditing Standards in Hong Kong issued by the Hong Kong Society of Accountants and have carried out such additional procedures where are necessary, in accordance with the Auditing Guideline “Prospectuses and the reporting accountant” issued by the Hong Kong Society of Accountants.

— 55 —

Fourseas.com Limited

APPENDIX II ACCOUNTANTS’ REPORT ON

The directors of the Company are responsible for preparing these Financial Information which give a true and fair view. In preparing these Financial Information, it is fundamental that appropriate accounting policies are selected and applied consistently.

In our opinion, the Financial Information, for the purpose of this report, gives a true and fair view of the results and cashflows of the Company for the Relevant Periods and of the assets and liabilities of the Company as at December 31, 2000 and 2001.

FINANCIAL INFORMATION

I. PROFIT AND LOSS ACCOUNTS

The following is a summary of the profit and loss accounts of the Company for the Relevant Periods, prepared on the basis set out in Section V below:

		Period from
		July 12, 2000
		(date of
		incorporation)	Year ended
		to December 31,	December 31,
	Notes	2000	2001
		RMB	RMB
Turnover	3	—	—
Selling and promotional expenses		(644,858)	(4,886,607)
General and administrative expenses		(585,742)	(3,335,770)
Loss before taxation	4	(1,230,600)	(8,222,377)
Taxation	6	—	—
Loss for the period/year	20	(1,230,600)	(8,222,377)

— 56 —

Fourseas.com Limited

APPENDIX II ACCOUNTANTS’ REPORT ON

II. BALANCE SHEET

The following is a summary of the balance sheet of the Company as at the end of the Relevant Periods prepared on the basis set out in Section V below:

Notes NON-CURRENT ASSETS Fixed assets 10 Land and property held for/under development for sale 11 Interests in associated company 12 CURRENT ASSETS Prepayment and other receivable 13 Amounts due from related companies 14 Bank balances and cash 15 CURRENT LIABILITIES Other payable and accrued charges 16 Amount due to a related company 17 Amount due to a shareholder 17 Bank loans (secured) 18 NET CURRENT ASSETS/(LIABILITIES) TOTAL ASSETS LESS CURRENT ASSETS/(LIABILITIES) NON-CURRENT LIABILITIES Bank loans (unsecured) 18 NET ASSETS CAPITAL AND RESERVES Paid-up capital 19 Reserves 20	As at December 31, 2000 2001 RMB RMB 341,469 1,130,781 3,304,253 288,594,618 — 500,000 3,645,722 290,225,399 40,883,050 70,196,925 13,000,000 40,000 677,694 26,214,035 54,560,744 96,450,960 98,666 44,248,121 — 66,190,125 44,338,400 110,691,090 — 50,000,000 44,437,066 271,129,336 10,123,678 (174,678,376) 13,769,400 115,547,023 — 65,000,000 13,769,400 50,547,023 15,000,000 60,000,000 (1,230,600) (9,452,977) 13,769,400 50,547,023	As at December 31, 2000 2001 RMB RMB 341,469 1,130,781 3,304,253 288,594,618 — 500,000 3,645,722 290,225,399 40,883,050 70,196,925 13,000,000 40,000 677,694 26,214,035 54,560,744 96,450,960 98,666 44,248,121 — 66,190,125 44,338,400 110,691,090 — 50,000,000 44,437,066 271,129,336 10,123,678 (174,678,376) 13,769,400 115,547,023 — 65,000,000 13,769,400 50,547,023 15,000,000 60,000,000 (1,230,600) (9,452,977) 13,769,400 50,547,023
	3,645,722 40,883,050 13,000,000 677,694 54,560,744 98,666 — 44,338,400 — 44,437,066 10,123,678 13,769,400 —	290,225,399
		70,196,925 40,000 26,214,035
		96,450,960
		44,248,121 66,190,125 110,691,090 50,000,000
		271,129,336
		(174,678,376
		115,547,023
		65,000,000
	13,769,400
	15,000,000 (1,230,600)	60,000,000 (9,452,977
	13,769,400

— 57 —

Fourseas.com Limited

APPENDIX II ACCOUNTANTS’ REPORT ON

III. CASH FLOW STATEMENT

The following is a summary of the cash flow statement of the Company for the Relevant Periods, prepared on the basis set out in Section V below:

		Period from
		July 12, 2000
		(date of
		incorporation)	Year ended
		to December 31,	December 31,
	Notes	2000	2001
		RMB	RMB
Net cash outflow from operating activities	21 (a)	(45,313,506)	(278,570,854)
Taxation
PRC income tax paid		—	—
Investing activities
Purchase of fixed assets		(347,200)	(895,620)
Purchase of shares in associated company		—	(500,000)
Net cash outflow from investing activities		(347,200)	(1,395,620)
Net cash outflow before financing		(45,660,706)	(279,966,474)
Financing
New bank loans	21 (b)	—	115,000,000
Advance from related company	21 (b)	—	66,190,125
Advance from shareholder	21 (b)	44,338,400	66,352,690
Loan (to)/from related company	21 (b)	(13,000,000)	12,960,000
New issue of share capital	21 (b)	15,000,000	45,000,000
Net cash inflow from financing		46,338,400	305,502,815
Increase in cash and cash equivalents		677,694	25,536,341
Cash and cash equivalents at beginning
of the period/year		—	677,694
Cash and cash equivalents at end of the
period/year		677,694	26,214,035
Analysis of the balances of cash and cash equivalents
Bank balances and cash		677,694	26,214,035

— 58 —

Fourseas.com Limited

APPENDIX II ACCOUNTANTS’ REPORT ON

IV. STATEMENT OF RECOGNISED GAINS OR LOSSES

There was no recognised gains or losses arising during the period from July 12, 2000 (date of incorporation) to December 31, 2000 and year ended December 31, 2001.

V. NOTES TO THE FINANCIAL STATEMENTS

1. Basis of Preparation

These financial statements are prepared using the historical cost accounting method. The Financial Information in this report has been prepared under the historical cost convention in conformity with accounting principles generally accepted in Hong Kong (“HK GAAP”) and comply with accounting standards issued by the Hong Kong Society of Accountants (“SSAPs”).

2. Principal Accounting Policies

The principal accounting policies adopted by the Company in the preparation of Financial Information set out in this report are as follows:

a) Associated company

An associated company is a company, other than a subsidiary, if 20% or more of its voting issued shares or equity interests is held, directly or indirectly, by the Company for long term and over which the Company is in a position to exercise significant influence in management, including participation in commercial and financial policy decisions. Investments in associated companies are carried at cost less provision for diminution in value where in the opinion of the directors, such diminution is permanent.

b) Related companies

Companies 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 or operating decisions. Parties are also considered to be related if they are subject to common control or common significant influence.

c) Fixed assets

Fixed assets are stated at cost less depreciation. The cost of an asset comprises its purchase price and any directly attributable costs of bringing the asset to its present working condition and location for its intended use. Expenditure incurred after the asset has been put into operation, such as repairs and maintenance and overhaul costs, is charged to the profit and loss accounts in the year 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 asset, the expenditure is capitalised as an additional cost of the asset.

— 59 —

Fourseas.com Limited

APPENDIX II ACCOUNTANTS’ REPORT ON

Depreciation is provided to write off the cost of fixed assets over their estimated useful lives using the straight line method, at the following rates per annum:

Office equipment 20% Motor vehicles 20%

d) Land and property held for/under development for sale

Land and property held for/under development for sale are stated at cost which comprises land at cost, development and construction expenditures, borrowing costs capitalised and other direct costs attributable to the development, less provisions for foreseeable losses and sales instalments received.

e) Deferred taxation

Deferred taxation is accounted for at the current taxation rate in respect of timing differences between profit as computed for taxation purposes and profit as stated in the accounts to the extent that a liability to be payable or recoverable in the foreseeable future.

f) Borrowing costs

Borrowing costs that are directly attributable to the acquisition, construction or production of an asset that necessarily takes a substantial period of them to get ready for its intended use or sale are capitalised as part of cost of that asset. All other borrowing costs are charged to the profit and loss accounts in the year in which they are incurred.

g) Retirement benefit

The Company contributes to a defined contribution retirement scheme organized by the local municipal government which is available to all employees. Contributions to the scheme by the Company and employees are calculated as a percentage of employees’ basic salaries. The Company’s contributions to the defined contribution retirement scheme are charged to the profit and loss accounts in the year to which they relate.

h) Segment reporting

In accordance with the Company’s internal financial reporting the Company has determined that business segments be presented as the primary reporting format and geographical as the secondary reporting format.

Unallocated costs represent corporate expenses. Segment assets consist primarily of fixed assets, other investments, properties held for/under development for sale, receivables and operating cash. Segment liabilities comprise operating liabilities and exclude items such as taxation and certain corporate borrowings. Capital expenditure comprises additions to fixed assets.

In respect of geographical segment reporting, sales are based on the country in which the operation is located. Total assets and capital expenditure are where the assets are located.

— 60 —

Fourseas.com Limited

APPENDIX II ACCOUNTANTS’ REPORT ON

3. Turnover, Revenue and Segment Information

The Company is principally engaged in the property development. No turnover or revenue have been recognised in the relevant period as the properties are still under development during the relevant periods.

No business and geographic segment information has been presented as the Company conduct their business in the PRC and more than 90% the total assets are located in the PRC.

4. Loss before taxation

	Period from
	July 12, 2000
	(date of
	incorporation)	Year ended
	to December 31,	December 31,
	2000	2001
	RMB	RMB
The operating loss is stated after charging:
Depreciation of fixed assets	5,731	106,308
Staff cost	228,095	564,609
Auditors’ remuneration	5,000	15,000
Operating lease rentals of land and buildings	—	151,730
Retirement benefit costs (note 9)	1,580	46,171
Finance Costs
	Period from
	July 12, 2000
	(date of
	incorporation)	Year ended
	to December 31,	December 31,
	2000	2001
	RMB	RMB
Interest on bank loans	—	835,250
Interests on:
— amount due to a related company	—	190,125
— amount due to a shareholder	902,520	4,748,570
Less: Amount capitalised to land and property held
for/under development for sale	(902,520)	(5,773,945)
	—	—

Finance Costs

— 61 —

Fourseas.com Limited

ACCOUNTANTS’ REPORT ON

APPENDIX II

6. Taxation

The PRC income tax is based on the statutory rate of 33% of the assessable income for the company as determined in accordance with the relevant PRC income tax rules and regulations during the Relevant Period. No provision for taxation has been made since the Company did not earn any assessable profits in the Relevant Periods.

7. Earning per Share

No earnings per share is presented as this would be hypothetical.

8. Directors’ and Senior Management’s Emoluments

(a) Details of the emoluments paid and payable to the Directors during the Relevant Periods are as follows:

	Period from
	July 12, 2000
	(date of
	incorporation)	Year ended
	to December 31,	December 31,
	2000	2001
	RMB	RMB
Fees	—	—
Basic salaries, housing benefits,
other allowances and benefits in kind	—	—
Retirement scheme contributions	—	—
	—	—

— 62 —

Fourseas.com Limited

APPENDIX II ACCOUNTANTS’ REPORT ON

(b) The emoluments of the five highest emoluments individuals were as follows:

	Period from	Period from
	July 12, 2000
		(date of
	Incorporation)		Year ended
	to December 31,		December 31,
		2000	2001
		RMB	RMB
Salaries and other benefits		119,840	223,207
Their emoluments were within the following bands:
		No. of employees
		2000	2001
RMB nil to RMB100,000		5	5

(c) During the Relevant Periods, no directors waived any emoluments and no emoluments have been paid by the Company to the directors or the five highest paid individuals as an inducement to join the Company, or as compensation for loss of office.

9. Retirement Benefit Costs

The Company participated in employees’ retirement scheme implemented by the local municipal government during the Relevant Periods under which the Company was required to make monthly defined contributions of certain percentage on basic monthly salary. The contributions made for the period ended December 31, 2000 and year ended December 31, 2001 amounted to approximately RMB1,580 and RMB46,171 respectively.

— 63 —

Fourseas.com Limited

ACCOUNTANTS’ REPORT ON

APPENDIX II

10. Fixed Assets

Office equipment RMB — 7,300	Motor vehicles RMB — 339,900	Total RMB — 347,200
7,300 — 236 236	339,900 — 5,495 5,495	347,200
		— 5,731
		5,731
7,064 — Office equipment RMB 7,300 206,721	334,405 — Motor vehicles RMB 339,900 688,899	341,469
		—
		Total RMB 347,200 895,620
214,021 236 16,579 16,815	1,028,799 5,495 89,729 95,224	1,242,820
		5,731 106,308
		112,039
197,206	933,575	1,130,781

— 64 —

Fourseas.com Limited

APPENDIX II ACCOUNTANTS’ REPORT ON

11. Land and Property Held For/Under Development For Sale

COST At July 12, 2000 Additions At December 31, 2000 COST At January 1, 2001 Additions At December 31, 2001	Land Construction in progress RMB RMB — — — 3,304,253 — 3,304,253 Land Construction in progress RMB RMB — 3,304,253 275,299,429 9,990,936 275,299,429 13,295,189	Total RMB — 3,304,253 3,304,253 Total RMB 3,304,253 285,290,365	Total RMB — 3,304,253
			3,304,253
		288,594,618

The land is located in the PRC and the Company has been granted the right to use by the relevant PRC authorities for a period for 70 years, which expires in October 2071.

12. Interests in Associated Company

			As at December 31,	As at December 31,
			2000	2001
			RMB	RMB
Unlisted investment, at	cost		—	500,000
Details of the associated company is as follows:
	Place of	Percentage of
	incorporation/	registered capital
Name of	registration and	held by the
associated company	operation The People’s	Company 25% direct holding	Principal Dormant	activities
	Republic of China

— 65 —

Fourseas.com Limited

APPENDIX II ACCOUNTANTS’ REPORT ON

The associated company has not yet commenced business. The aggregate amount of share of results for the period ended December 31, 2000 and year ended December 31, 2001 and share of net assets as at that date of the associated companies disclosed pursuant to Hong Kong SSAP 10 is as follows:

Share of profit before taxation Share of taxation Share of profit for the year Share of net assets at December 31 13. Prepayment and Other Receivables Prepayment (Note) Other receivables	As at December 31, 2000 2001 RMB RMB — — — — — — — 500,000 At at December 31, 2000 2001 RMB RMB 40,092,150 68,557,444 790,900 1,639,481 40,883,050 70,196,925	As at December 31, 2000 2001 RMB RMB — — — — — — — 500,000 At at December 31, 2000 2001 RMB RMB 40,092,150 68,557,444 790,900 1,639,481 40,883,050 70,196,925
		70,196,925

Note: The prepayment represents the deposit for acquisition of land and construction contracts.

— 66 —

Fourseas.com Limited

APPENDIX II ACCOUNTANTS’ REPORT ON

14. Amounts Due From Related Companies

Amounts due from related companies disclosed pursuant to Section 161B of the Companies Ordinance are as follows:

Name			Balance at July 12, 2000 (Date of incorporation) Balance at December 31, 2000 Balance at December 31, 2001 Maximum amount outstanding during the period ended December 31, 2000 Maximum amount outstanding during the year ended December 31, 2001 RMB RMB RMB RMB RMB — 12,000,000 — 12,000,000 12,000,000 — 1,000,000 — 1,000,000 1,000,000 — — 40,000 — 40,000 — 13,000,000 40,000

All the above advances are unsecured, non-interest bearing and have no fixed repayment terms. Mr. is the director of the Company and also the director of , and .

15. Bank Balances and Cash

The Company’s bank balances and cash were denominated in Renminbi and deposited with banks in the PRC. The conversion of these Renminbi denominated balances into foreign currencies is subject to the rules and regulations of foreign exchanges control promulgated by the PRC government.

16. Other Payable and Accrued Charges

Other payable (Note) Accrued charges	As at December 31, 2000 2001 RMB RMB 17,347 43,901,307 81,319 346,814 98,666 44,248,121	As at December 31, 2000 2001 RMB RMB 17,347 43,901,307 81,319 346,814 98,666 44,248,121
		44,248,121

Note: As at December 31, 2001, other payable at the amount of approximately RMB43 million represent the unsettled balance for the acquisition of land.

— 67 —

Fourseas.com Limited

APPENDIX II ACCOUNTANTS’ REPORT ON

17. Amount Due To A Related Company/A Shareholder

As at December 31, 2001, amount due to a related company, , of approximately RMB66 million is unsecured, interest bearing at rates with reference to prevailing bank commercial loan interest rates in PRC and has no fixed terms of repayment.

As at December 31, 2000 and 2001, amount due to a shareholder of approximately RMB44 million and RMB110 million respectively are unsecured, interest bearing at rates with reference to prevailing bank commercial loan interest rates in PRC and have no fixed terms of repayment.

18. Bank Loans

Bank loans repayable over the following periods: Secured (Note) Within one year classified as current liabilities Unsecured In the second year classified as non-current liabilities	As at December 31, 2000 2001 RMB RMB — 50,000,000 — 65,000,000 — 115,000,000 note 20(b)	As at December 31, 2000 2001 RMB RMB — 50,000,000 — 65,000,000 — 115,000,000 note 20(b)
		115,000,000
		note 20(b)

Note: The Company’s land and property held for/under development for sale have been pledged to its bankers to secure the bank borrowings of RMB50,000,000 granted to the Company.

19. Paid-up Capital

					As at	December 31,
					2000	2001
					RMB	RMB
Registered	and	fully	paid-up	capital	15,000,000	60,000,000

The Company was incorporated with a registered capital of RMB15,000,000.

On March 9, 2001, the registered capital of the Company was increased from RMB15,000,000 to RMB20,000,000. On the same date, RMB5,000,000 capital was fully paid up by shareholders.

On November 1, 2001, the registered capital of the Company was increased from RMB20,000,000 to RMB60,000,000. On the same date, RMB40,000,000 capital was fully paid up by shareholders.

— 68 —

Fourseas.com Limited

APPENDIX II ACCOUNTANTS’ REPORT ON

Reserves
(a)	Period from
	July 12, 2000
	(date of
	incorporation)	Year ended
	to December 31,	December 31,
	2000	2001
	RMB	RMB
Balance at the beginning of the period/year	—	(1,230,600)
Loss for the period/year	(1,230,600)	(8,222,377)
Balance at the end of the period/year	(1,230,600)	(9,452,977)

(b) During the Relevant Periods, the Company has no distributable reserves and no dividend were paid to the shareholders of the Company.
(c) No rate of dividend and numbers of shares ranking for dividends are presented as this would be hypothetical.

21. Notes to the Cash Flow Statement

(a) Reconciliation of operating loss to net cash outflow from operating activities:

	Period from
	July 12, 2000
	(date of
	incorporation)	Year ended
	to December 31,	December 31,
	2000	2001
	RMB	RMB
Operating loss	(1,230,600)	(8,222,377)
Depreciation	5,731	106,308
Increase in prepayment and other receivable	(40,883,050)	(29,313,875)
Increase in other payable and accrued charges	98,666	44,149,455
Increase in land and property held for/under
development for sale	(3,304,253)	(285,290,365)
Net cash outflow from operating activities	(45,313,506)	(278,570,854)

— 69 —

Fourseas.com Limited

ACCOUNTANTS’ REPORT ON

APPENDIX II

(b) Analysis of changes in financing during the Relevant Periods:

Balance as at 12/7/2000 Net inflow/(outflow) during the period Increase of capital Balance as at 31/12/2000 Net inflow during the year Increase of capital Balance as at 31/12/2001	Bank loan (secured) Amount due to a related company RMB RMB — — — — — —	Bank loan (secured) Amount due to a related company RMB RMB — — — — — —	Amount due to a shareholder Amount due from related companies RMB RMB — — 44,338,400 (13,000,000) — —	Amount due to a shareholder Amount due from related companies RMB RMB — — 44,338,400 (13,000,000) — —	Paid-up capital RMB — — 15,000,000
	— 115,000,000 —	— 66,190,125 —	44,338,400 66,352,690 —	(13,000,000) 12,960,000 —	15,000,000 — 45,000,000
	115,000,000	66,190,125	110,691,090	(40,000)	60,000,000

During the year ended December 31, 2001, the Company entered into agreements to acquire certain land use rights in the PRC with a total value of approximately RMB271 million.

22. Related Party Transactions

As disclosed in note 5, the Company had the following significant related party transactions in the normal course of business during the Relevant Periods.

	Period from
	July 12, 2000
	(date of
	incorporation)	Year ended
	to December 31,	December 31,
	2000	2001
	RMB	RMB
Loans interest paid to
— a related company	—	190,125
— a shareholder	902,520	4,748,570

— 70 —

Fourseas.com Limited

APPENDIX II ACCOUNTANTS’ REPORT ON

23. Deferred Taxation

No provision for deferred taxation has been made in the financial statements since there is no material timing differences.

24. Commitments

a) Capital commitments for land interests contracted but not recognised b) Commitments in respect of property development projects contracted but not recogniesd c) Future minimum lease payment under non-cancellable operating leases which fall due within 1 year	As at December 31, 2000 2001 RMB RMB 224,500,000 227,188,849 6,200,000 125,925,100 — 139,020	As at December 31, 2000 2001 RMB RMB 224,500,000 227,188,849 6,200,000 125,925,100 — 139,020
		125,925,100
		139,020

25. Contingent Liabilities

As at December 31, 2000 and 2001, there were no material contingent liabilities.

26. Subsequent Event

No material event took place subsequent to December 31, 2001.

27. Subsequent Accounts

No audited accounts have been prepared for the Company in respect of any period subsequent to December 31, 2001 and same as disclosed in this report, no dividend or other distribution has been declared, make or paid by the Company in respect of any period subsequent to December 31, 2001.

Yours faithfully, K.L. Lee & Partners C.P.A. Limited Lee Ka Leung, Daniel P.C. No. P01220

— 71 —

Fourseas.com Limited

APPENDIX III FINANCIAL INFORMATION ON

Proforma statement of unaudited adjusted net tangible assets of (“ ”) at December 31, 2001 Audited net assets of the as at December 31, 2001 Add: Net surplus on revaluation of land and property held for/under development for sales of the as at February 28, 2002 (Note 1) Unaudited net assets of the after revaluation	RMB 50,547,023 14,405,382
	64,952,405

Note 1: This represent the net surplus on revaluation of the land and properties held for/under development for sales of the of RMB14,405,382. The calculation is based on the valuation of the properties as at February 28, 2002,
performed by BMI Appraisals Limited on the basis as disclosed in the valuation reports.

— 72 —

Fourseas.com Limited

PROPERTY VALUATION

APPENDIX IV

The following is the text of a letter, summary of value and a valuation certificate, prepared for the purpose of incorporation in this circular received from BMI Appraisals Limited, an independent valuer, in connection with its valuation as at 28th February, 2002 of the property interest of the Company.

==> picture [43 x 43] intentionally omitted <==

BMI APPRAISALS LIMITED

Suite 1405-06 Harbour Centre, 25 Harbour Road, Wanchai, Hong Kong Tel: (852) 2802 2191 Fax: (852) 2802 0331 Email: [email protected] Website: http://www.bmi-appraisals.com

25th April, 2002

The Directors

Shanghai New Century Shui Qing Mu Hua Property Development Company Limited Rooms 1111 to 1113 Pudong Holiday Hotel No. 899 Dong Fang Road Pudong, Shanghai The People’s Republic of China

Dear Sirs,

In accordance with your instructions to value the property interest of Shanghai New Century Shui Qing Mu Hua Property Development Company Limited (hereinafter referred to as the “Company”) located in the People’s Republic of China (the “PRC”), we confirm that we have carried out inspections, made relevant enquiries and obtained such further information as we consider necessary for providing you with our opinion of the open market value of such property interest as at 28th February, 2002.

Basis of Valuation

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

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

— 73 —

Fourseas.com Limited

PROPERTY VALUATION

APPENDIX IV

Valuation Methodology

In valuing the property, which is currently held under development, we have assumed that it will be developed and completed in accordance with the Company’s latest development proposal provided to us. In arriving at our opinion of value, we have valued the land by the Direct Comparison Approach by making reference to comparable transactions in the locality and have taken into account the construction costs and professional fees already spent and the remainder to be expended to complete the development.

Title Investigation

We have been provided with extracts of title documents and have been advised by the Company that no further relevant documents have been produced. Moreover, due to the nature of the land registration system in the PRC, we have not been able to examine the original documents to verify ownership or to ascertain the existence of any amendment documents, which may not appear on the copies handed to us. Therefore, in the course of our valuation, we have relied on the advice and information given by the Company and its PRC legal adviser in the legal opinion regarding the title of such PRC property.

Valuation Assumptions

Our valuation has been made on the assumption that the property interest can be sold in the open market without the benefit of a deferred terms contract, leaseback, joint venture, management agreement or any other similar arrangement which could serve to affect the value of the property interest. In addition, no account has been taken of any option or right of pre-emption concerning or effecting the sale of the property interest and no forced sale situation in any manner is assumed in our valuation.

In valuing the property interest, we relied on the advice given by the PRC legal adviser of the Company that the Company has valid and enforceable title to the property interest which are freely transferable, and has free and uninterrupted right to use the same, for the whole of the unexpired term granted subject to the payment of annual Government rent / land use fees and all requisite land premium / purchase consideration payable has been fully settled.

Valuation Considerations

We have inspected the exterior and wherever possible, the interior of the property included within the attached valuation certificate. During the course of our inspection, we did not note any serious defects. However, no structural survey has been made and we are therefore unable to report as to whether the property is free from rot, infestation or other defects. No tests were carried out on any of the services.

We have relied to a considerable extent on the information provided by the Company and have accepted advice on such matters as planning approvals, statutory notices, easements, tenures, particulars of occupancy, site/floor areas, identification of the property and all other relevant matters.

— 74 —

Fourseas.com Limited

PROPERTY VALUATION

APPENDIX IV

We have not carried out detailed on-site measurements to verify the correctness of the site / floor areas in respect of the property but have assumed that the site / floor areas shown on the documents handed to us are correct. Dimensions, measurements and areas included in the valuation certificate are based on information contained in the documents provided to us by the Company and are therefore only approximations.

We have had no reason to doubt the truth and accuracy of the information provided to us by your Company. Your Company has also advised us that no material facts have been omitted from the information to reach an informed view, and have no reason to suspect that any material information has been withheld.

No allowance has been made in our valuation for any charges, mortgages or amounts owing on the property valued nor for any expenses or taxation which may be incurred in effecting a sale. Unless otherwise stated, it is assumed that the property is free from encumbrances, restrictions and outgoings of an onerous nature, which could affect its value.

Our valuation has been prepared under the generally accepted valuation procedures and in compliance with the Listing Rules of the Stock Exchange of Hong Kong Limited.

Our valuation has been prepared in accordance with the Hong Kong Guidance Notes on the Valuation of Property Assets (2nd Edition) published by the Hong Kong Institute of Surveyors in March 2000.

Remarks

Unless otherwise stated, all monetary sums stated are in Renminbi (RMB).

Our Summary of Value and the Valuation Certificate are enclosed herewith.

Yours faithfully For and on behalf of

BMI APPRAISALS LIMITED Tony C.H. Cheng BSc. MUD MRICS AHKIS MCIArb AFA MIIM

Director

Note: Mr. Tony C.H. Cheng is a Chartered Surveyor who has more than 10 years’ experience in valuations of properties in Hong Kong, the People’s Republic of China and the Asia-Pacific region.

— 75 —

Fourseas.com Limited

PROPERTY VALUATION

APPENDIX IV

SUMMARY OF VALUE

Value Capital Value attributable to in existing Interest the Company state as at attributable to as at 28th February, the Company 28th February, 2002 in percentage 2002 RMB RMB

No. Property 2002 in RMB Property interest held by the Company under development in the PRC

Development project known as 303,000,000 100% 303,000,000 Shui Qing Mu Hua Garden located at Land Parcel R, Lian Yang Residential Area, Pudong New District, Shanghai, the PRC Total: 303,000,000 Total: 303,000,000

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Fourseas.com Limited

PROPERTY VALUATION

APPENDIX IV

VALUATION CERTIFICATE

Property interest held by the Company under development in the PRC

				Capital Value in
			Particulars of	existing state as at
No.	Property	Description and Tenure	Occupancy	28th February, 2002
				RMB
1.	Development	The property comprises 2 contiguous land	The property is	303,000,000
	project known as	parcels (hereinafter referred to as Land A and	currently
	Shui Qing Mu Hua	Land B) with a total site area of 73,672 sq.m.	occupied by the	(100% interest
	Garden located at	upon which various construction works are	Company for	attributable to
	Land Parcel R,	being carried out.	development	the Company:
	Lian Yang		purposes.	303,000,000)
	Residential Area,	The proposed development is a large-scale
	Pudong New	residential scheme divided into 2 phases with a
	District,	total gross floor area of approximately 139,684
	Shanghai,	sq.m. upon completion.
	the PRC
		The total investment amount expended as at the
		date of valuation is approximately RMB21.5
		million.
		The land use rights of the property have been
		granted for a term of 70 years commencing from
		25th October, 2001 and expiring on 24th
		October, 2071.

Notes:

(1) Pursuant to State-owned Land Use Rights Grant Contract entered into between Shanghai Lian Yang Land Development Company Limited (“Party A”) and Shanghai New Century Shui Qing Mu Hua Property Development Company Limited (“Party B”) dated 21st April, 2000, the former has agreed to grant to the latter land use rights of the property with a site area of approximately 73,690 sq.m. at a land grant premium of RMB267,280,999 for a term of 70 years from the date of issue of the State-owned Land Use Rights Certificate for development purposes. Other salient development terms and conditions are listed as below:
a. Development use : Middle to high-class residential development b. Plot ratio : 1.9 subject to final approval from the government planning bureau
c. Building covenant : The construction works shall be commenced not later than July, 2001 and shall be completed not later than the end of 2003.
d. Land transfer premium : US$230 per sq.m. or RMB1,909 per sq.m. based on the total gross floor area erected on the property
(2) Pursuant to a Real Estate Title Certificate, Hu Fang Di Pu Zi (2001) Di No. 116988, issued by Shanghai City Building and Land Administration Bureau dated 30th October, 2001, the land use rights of Land A with a site area of 36,991 sq.m. have been granted to the Company for a term of 70 years from 25th October, 2001 to 24th October, 2071 for residential purposes.
(3) Pursuant to a Real Estate Title Certificate, Hu Fang Di Pu Zi (2001) Xi No. 116989, issued by Shanghai City Building and Land Administration Bureau dated 30th October, 2001, the land use rights of Land B with a site area of 36,681 sq.m. have been granted to the Company for a term of 70 years from 25th October, 2001 to 24th October, 2071 for residential purposes.

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Fourseas.com Limited

PROPERTY VALUATION

APPENDIX IV

(4) Pursuant to a Construction Land Use Planning Permit, Hu Pu Di (2001) No. 166, issued by Shanghai Pudong New District Development Project Bureau dated 2nd November, 2001, the property with a site area of 73,690 sq.m. is permitted to be developed for residential purposes.
(5) Pursuant to a Construction Works Planning Permit, Hu Pu Jian (2001) No. 470, issued by Shanghai Pudong New District Development Project Bureau dated 3rd December, 2001, a block of 2-storey clubhouse with a gross floor area of 3,776 is permitted to be developed at the property.
(6) Pursuant to a Construction Works Commencement Permit, issued by Shanghai Pudong New District Development Bureau dated 7th December, 2001, foundation and superstructure works in respect of Block Nos. 1 to 8 of Phase I residential scheme with a total gross floor area of 26,990 sq.m. is permitted to be carried out for the period between 20th December, 2001 and 25th November, 2002.
(7) The status of title and grant of major approvals and licences provided by the Group is as follows:

State-owned	Land Use Rights Grant Contract	Yes
State-owned	Land Use Rights Certificates	Yes
Construction	Land Use Planning Permit	Yes
Construction	Works Planning Permit	Yes
Construction	Works Commencement Permit	Yes

(8) According to the opinion given by the PRC legal adviser to the Company, the property is legally vested in the Company.
(9) We have prepared our valuation on the following assumptions:
a. The Company is in possession of a proper legal title to the property and is entitled to transfer the property with its residual term of land use rights at no extra land premium or other onerous payment payable to the government;
b. All land premium and other costs of ancillary utility services have been settled in full;
c. The design, construction of the property are in compliance with the local planning regulations and have been approved by the relevant government authorities; and
d. The property, whether as a whole or on a strata-title basis, may be disposed of freely to both local and overseas purchasers.

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Fourseas.com Limited

GENERAL INFORMATION

APPENDIX V

RESPONSIBILITY STATEMENT

This circular includes particulars given in compliance with the Listing Rules for the purpose of giving information with regard to the Group. The Directors collectively and individually accept responsibility for the accuracy of the information contained in this circular and confirm, having made all reasonable inquires, that to the best of their knowledge and belief there are no other facts the omission of which would make any statement herein misleading.

DIRECTORS’ INTERESTS IN SECURITIES

As at the Latest Practicable Date, the interests of the Directors and their associates in the share capital, warrants and options of the Company and its associated corporations within the meaning of the SDI Ordinance which have been notified to the Company and the Stock Exchange pursuant to Section 28 of the SDI Ordinance (including interests which they are deemed or taken to have under Section 31 of, or Part I of the Schedule to, the SDI Ordinance) or which are required pursuant to Section 29 of the SDI Ordinance to be entered in the register referred to therein, or which are required to be notified to the Company and the Stock Exchange pursuant to the Model Code for Securities Transactions by Listed Companies contained in the Listing Rules, were as follows:

	Personal	Family	Corporate	Other
Name of Director	interests	interests	interests	interests
Mr. He Xuechu			1,600,000,000
			(note 1)
Mr. Dai Zhi Kang			1,600,000,000
			(note 2)

Notes:

This represents the deemed interest held by Giant Glory Assets Limited, a company owned as to 40% by Mr. He Xuechu.
This represents the deemed interest held by Giant Glory Assets Limited, a company owned as to 36% by Mr. Dai Zhi Kang.

Save as disclosed in this circular, as at the Latest Practicable Date, none of the Directors had any personal, family, corporate or other interest in the Shares or other securities of the Company or any of its associated corporations (within the meaning of the SDI Ordinance) which will have to be notified to the Company and the Stock Exchange pursuant to Section 28 of the SDI Ordinance (including interests which any such Director is taken or deemed to have under Section 31 of, or Part I of the Schedule to, the SDI Ordinance); or which is required, pursuant to Section 29 of the SDI Ordinance, to be entered in the register referred to therein, or which is required, pursuant to the Model Code for Securities Transaction by Directors of Listed Companies in the Listing Rules, to be notified to the Company and the Stock Exchange.

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Fourseas.com Limited

GENERAL INFORMATION

APPENDIX V

Save as disclosed in the section headed “Service contract” below, none of the Directors was materially interested in any contract or arrangement entered into by any member of the Group since 31 December, 2000 being the date of the Company’s latest published audited accounts and which was significant in relation to the business of the Group.

Save as disclosed in the Company’s circular dated 2 August, 2001, none of the Directors nor experts named under the section headed “EXPERTS” is interested, directly or indirectly, in any assets which had since 31 December, 2000 (being the date to which the latest published audited financial statements of the Company were made up) been acquired or disposed of by or leased to any member of the Group, or are proposed to be acquired or disposed of by or leased to any member of the Group.

SUBSTANTIAL SHAREHOLDERS

As at the Latest Practicable Date, so far as is known to, or can be ascertained after reasonable enquiry by, the Directors, the following shareholder was, directly or indirectly, interested in 10% or more of issued share capital carrying of the Company as recorded in the register referred to be kept under Section 16 of the SDI Ordinance.

	Number of
Name of shareholder	ordinary shares
Giant Glory Assets Limited	1,600,000,000
Mr. He Xuechu	1,600,000,000	(note 1)
Mr. Dai Zhi Kang	1,600,000,000	(note 2)
Peak Smart Holdings Limited	1,000,000,000
Mr. Yang Yonggen	1,000,000,000	(note 3)

Notes:

The interest disclosed herein being the corporate interests of Mr. He Xuechu as referred to in note (1) under the section headed “Directors’ interest in securities” above.
The interest disclosed herein being the corporate interests of Mr. Dai Zhi Kang as referred to in note (2) under the section headed “Directors’ interest in securities” above.
1,000,000,000 shares are held by Peak Smart Holdings Limited, a company which is 100% owned by Mr. Yang Yonggen.
Save as disclosed herein, no other person was recorded in the register kept pursuant to Section 16 of the SDI Ordinance as having, directly or indirectly, an interest of 10% or more of the issued share capital of the Company as at the Latest Practicable Date.

MATERIAL CHANGE

The Directors are not aware of any material adverse change in the financial or trading position or contingent liabilities of the Group since 31 December, 2000, being the date to which the latest published audited financial statements of the Company were made up.

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Fourseas.com Limited

GENERAL INFORMATION

APPENDIX V

LITIGATION

So far as the Directors are aware, neither the Company nor any of its subsidiaries is engaged in any litigation or arbitration of material importance and there is no litigation or claim of material importance known to the Directors to be pending or threatened by or against the Company or any of its subsidiaries.

SERVICE CONTRACT

As at the Latest Practicable Date, each of Mr. He Xuechu, Mr. Ku Wai Kwan, Mr. Wong Hing Kwok and Mr. Zhou Teng has entered into a service contract with the Company on 15 April, 2002 which will continue unless and until terminated by either party. Save as disclosed, no other Directors had entered into any service contracts with any member of the Group (excluding contracts expiring or terminable) by the employer within one year without payment of compensation (other than statutory compensation).

SUMMARY OF MATERIAL CONTRACTS

The following contracts (not being contracts in the ordinary course of business) have been entered into by members of the Group within the two years immediately preceding the Latest Practicable Date:

a conditional underwriting agreement dated 29 May, 2000 entered into between the Company, South China Securities Limited and Universal Yield Limited in respect of the open offer;
a subscription agreement dated 18 June, 2001 entered into between Giant Glory, the Company and South China Information and Technology Limited (as amended and supplemented by the agreement between Giant Glory, the Company and South China Information and Technology Limited dated 27 June, 2001) in relation to the subscription by Giant Glory and the issue by the Company of 3,500,000,000 new Shares of the Company and the conditional grant of the right by South China Information and Technology Limited to the Company to require South China Information and Technology Limited to acquire the remaining 51% interest in each of Four Seas Travel (BVI) Limited, Four Seas (BVI) Limited, Four Seas Corporate Management Limited, Hong Kong Four Seas Tours Limited, Gainfield Holdings Limited and Four Seas Corporate Services Limited following completion of the disposal agreement dated 18 June, 2001 entered into between Four Seas Travel and South China Information and Technology Limited at a consideration of HK$8,000,000;
a supplemental agreement dated 27 June, 2001entered into between Giant Glory, the Company and South China Information and Technology Limited amending the subscription agreement dated 18 June, 2001 entered into between Giant Glory, the Company and South China Information and Technology Limited;
a disposal agreement dated 18 June, 2001 entered into between Four Seas Travel and South China Information and Technology Limited in relation to the disposal of the entire issued share capital of each of Four Seas Properties (BVI) Limited, Four Seas Investments (BVI) Limited, Four Seas China (BVI) Limited, Four Seas Travel Investments (China) Limited,

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Fourseas.com Limited

GENERAL INFORMATION

APPENDIX V

Four Seas Capital Limited and HKFS Tours Limited and 49% of the issued share capital in each of Four Seas Travel (BVI) Limited, Four Seas (BVI) Limited, Four Seas Corporate Management Limited, Hong Kong Four Seas Tours Limited, Gainfield Holdings Limited and Four Seas Corporate Services Limited;
a management agreement dated 18 June, 2001 entered into between the Company, Four Seas Travel (BVI) Limited, Four Seas (BVI) Limited, Four Seas Corporate Management Limited, Hong Kong Four Seas Tours Limited, Gainfield Holdings Limited and Four Seas Corporate Services Limited and South China Information and Technology Limited in relation to the appointment of South China Information and Technology Limited as a manager to provide management services to the Four Seas Travel (BVI) Limited, Four Seas (BVI) Limited, Four Seas Corporate Management Limited, Hong Kong Four Seas, Gainfield Holdings Limited and Four Seas Corporate Services Limited for a fee for a term of six years;
joint venture deeds in relation to each of Four Seas Travel (BVI) Limited, Four Seas (BVI) Limited, Four Seas Corporate Management Limited, Hong Kong Four Seas Tours Limited, Gainfield Holdings Limited and Four Seas Corporate Services Limited entered into by the shareholders thereof, South China Information and Technology Limited and each of the respective Four Seas Travel (BVI) Limited, Four Seas (BVI) Limited, Four Seas Corporate Management Limited, Hong Kong Four Seas Tours Limited, Gainfield Holdings Limited and Four Seas Corporate Services Limited regulating the operation and management of each of such companies with effect from completion of the disposal agreement dated 18 June, 2001 entered into between Four Seas Travel and South China Information and Technology Limited; and
a subscription agreement dated 6 December, 2001 entered into between Giant Glory and the Company relating to subscription of 100,000,000 new Shares of the Company by Giant Glory.

EXPERTS

The following are the qualifications of the professional advisers whose opinions or advice are contained in this circular:

Kingsway Registered investment adviser K. L. Lee & Partners Certified public accountants BMI Professional valuer

None of Kingsway, K.L. Lee & Partners and BMI has any shareholding in any member of the Group or the right (whether legally enforceable or not) to subscribe for or to nominate persons to subscribe for securities in any member of the Group.

CONSENT

Kingsway, K. L. Lee & Partners and BMI have given and have not withdrawn their respective written consent to the issue of this circular with the inclusion of their respective letters and/or reports and/or and references to their names, as the case may be, in the form and context in which they respectively appear.

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Fourseas.com Limited

GENERAL INFORMATION

APPENDIX V

DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents are available for inspection during normal business hours at the head office and principal place of business in Hong Kong of the Company at Room 2301, 23/F., Great Eagle Centre, 23 Harbour Road, Wan Chai, Hong Kong, up to and including 13 May, 2002:

(a) the memorandum of association and bye-laws of the Company;
(b) the Capital Injection Agreement;
(c) the letter from the Independent Board Committee, the text of which is set out on page 12 of this circular;
(d) the letter from Kingsway to the Independent Board Committee dated 25 April, 2002, the text of which is set out on pages 13 to 19 of this circular;
(e) the accountants’ report on as set out in Appendix II to this circular;
(f) the audited accounts of the for the periods from 12 July, 2000 (date of incorporation) to 31 December, 2000 and the year ended 31 December, 2001;
(g) the valuation certificate and report dated 25 April, 2002 from BMI, the texts of which is set out in Appendix IV to this circular;
(h) the financial statements of the Company for the nine months ended 31 December, 1999 and the year ended 31 December, 2000;
(i) the interim report of the Company for the six months ended 30 June, 2001;
(j) the written consent of Kingsway, K. L. Lee & Partners and BMI as referred to under the section headed “EXPERTS” above;
(k) the service contracts referred to in the section headed “Service Contracts” in this Appendix; and
(l) the material contracts referred to in this Appendix.

MISCELLANEOUS

(a) The secretary of the Company is Mr. Wong Hon Sum, who is a fellow member of the Association of Chartered Certified Accountants and the Hong Kong Society of Accountants.
(b) The registered office of the Company is at Cedar House, 41 Cedar Avenue, Hamilton HM12, Bermuda and its head office and principal place of business in Hong Kong is at Room 2301, 23/F., Great Eagle Centre, 23 Harbour Road, Wan Chai, Hong Kong.
(c) The share registrar and transfer office of the Company in Hong Kong is Secretaries Limited at 5th Floor, Wing On Centre, 111 Connaught Road, Central, Hong Kong.
(d) The English text of this circular and the form of proxy shall prevail over the Chinese text.

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Fourseas.com Limited

NOTICE OF SPECIAL GENERAL MEETING

Fourseas.com Limited

(incorporated in Bermuda with limited liability)

(“the Company”)

NOTICE IS HEREBY GIVEN that a special general meeting of the Company will be held at Room 2301, 23/F, Great Eagle Centre, 23 Harbour Road, Wan Chai, Hong Kong at 10:00 a.m. on 13 May, 2002 to consider and, if thought fit, pass with or without amendment, the following resolution which will be proposed as an ordinary resolution of the Company:

ORDINARY RESOLUTION

“ THAT the agreement dated 25 March, 2002 (the “Capital Injection Agreement”) and entered into between Best East Developments Limited (“Best East”), a wholly owned subsidiary of the Company, and for, amongst others, the injection of RMB20,000,000 by Best East as additional registered capital of , a copy of which has been produced to the meeting marked “A” and has been signed by the Chairman of the meeting for the purpose of identification, be and is hereby confirmed, ratified and approved; and the directors of the Company be and are hereby authorised on behalf of the Company:

(a) to sign, seal, execute, perfect and deliver all such documents and do all such deeds, acts, matters and things as they may in their discretion consider necessary or desirable for the purpose of or in connection with the implementation of and giving effect to the Capital Injection Agreement; and
(b) to complete the transactions contemplated by the Capital Injection Agreement with such changes as any such directors of the Company may consider necessary, desirable and expedient.”

By Order of the Board of Fourseas.com Limited He Xuechu Chairman

Hong Kong, 25 April, 2002.

Fourseas.com Limited

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NOTICE OF SPECIAL GENERAL MEETING

Principal place of business in Hong Kong: Room 2301, 23/F., Great Eagle Centre 23 Harbour Road Wan Chai Hong Kong

Registered office: Cedar House 41 Cedar Avenue Hamilton HM12 Bermuda

Notes:

(a) Any member entitled to attend and vote at a meeting of the Company is entitled to appoint another person as his proxy to attend and, vote instead of him. A proxy need not be a member of the Company.
(b) To be valid, a form of proxy and the power of attorney or other authority (if any) under which it is signed or a notarially certified copy of that power of attorney or authority must be deposited at the Company’s branch share registrar in Hong Kong, Secretaries Limited at 5th Floor, Wing On Centre, 111 Connaught Road Central, Hong Kong not less than 48 hours before the time fixed for the holding of the meeting or any adjournment(s) thereof.
(c) A form of proxy for use at the above meeting is enclosed herewith.
(d) Where there are joint holders of a share of the Company, any one of such holders may vote at the meeting either personally or by proxy in respect of such share as if he was solely entitled thereto, but if more than one of such holders be present at the meeting personally or by proxy, that one of such holders so present whose name stands first on the register of members of the Company in respect of such share shall alone be entitled to vote in respect thereof.

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Fourseas.com Limited

AI assistant

Snack Empire Holdings Limited — Proxy Solicitation & Information Statement 2002

50208_rns_2002-04-26_44ab9cd8-e4e1-44b4-8b76-885c48a0adac.pdf

Fourseas.com Limited

Shenyin Wanguo Capital (H.K.) Limited

Kingsway Capital Limited

CONTENTS

DEFINITIONS

DEFINITIONS

Fourseas.com Limited

MAJOR AND CONNECTED TRANSACTION INJECTION OF CAPITAL IN

(Shanghai New Century Shui Qing Mu Hua Property Development Company Limited)

INTRODUCTION

LETTER FROM THE BOARD

THE CAPITAL INJECTION AGREEMENT DATED 25 MARCH, 2002

3. Source of Funding of the Capital Injection

4. Conditions of the Capital Injection

5. Completion of the Capital Injection

INFORMATION ON

REASONS FOR THE PROPOSED CAPITAL INJECTION

MAJOR AND CONNECTED TRANSACTION

LETTER FROM THE BOARD

THE INDEPENDENT BOARD COMMITTEE

THE SGM

RECOMMENDATION

ADDITIONAL INFORMATION

Fourseas.com Limited

MAJOR AND CONNECTED TRANSACTION INJECTION OF CAPITAL IN

(Shanghai New Century Shui Qing Mu Hua Property Development Company Limited)

Kingsway Group

MAJOR AND CONNECTED TRANSACTION INJECTION OF CAPITAL IN

(Shanghai New Century Shui Qing Mu Hua Property Development Company Limited)

SUMMARY OF THE CAPITAL INJECTION

Capital Injection Agreement

Conditions of the Capital Injection

PRINCIPAL FACTORS AND REASONS CONSIDERED

Principal business

LETTER FROM KINGSWAY

Financial information and property valuation

Shareholding structure and profit distribution

Composition of the board of directors

Background information on Shanghai Zendai Land

2. Source of Funding of the Capital Injection

3. Reasons for the proposed Capital Injection

LETTER FROM KINGSWAY

4. Future capital commitments for

5. Information on Pudong New District and Shanghai

General economic development

Residential properties market of Shanghai

6. Financial effects of the Capital Injection

RECOMMENDATION

1. SUMMARY OF CONSOLIDATED PROFIT AND LOSS ACCOUNTS

CONSOLIDATED INCOME STATEMENT

CONSOLIDATED BALANCE SHEET

BALANCE SHEET

On behalf of the Board

CONSOLIDATED CASH FLOW STATEMENT

NOTES TO THE FINANCIAL STATEMENTS

1. Basis of preparation

2. Principal accounting policies

(a) Basis of consolidation

(b) Subsidiaries

(c) Associates

(d) Revenue recognition

(e) Fixed assets

(i) Investment properties

(ii) Other properties and tangible fixed assets

(f) Leases

(i) Finance leases

(ii) Operating leases

(g) Properties held for resale

(h) Inventories

(i) Accounts receivable

(j) Deferred taxation

APPENDIX I

5. Finance costs

6. Taxation credit

7. Loss attributable to shareholders

8. Loss per share

9. Retirement benefit costs

Snack Empire Holdings Limited Proxy Solicitation & Information Statement 2002