Television Broadcasts Limited - Proxy Solicitation & Information Statement 2005

THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

If you are in any doubt as to any aspect of this circular or as to the action to be taken, you should consult a 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 China Conservational Power Holdings Limited (the “Company”), you should at once hand this circular with the accompanying form of proxy to the purchaser(s) or transferee(s), or to the bank, stockbroker or other agent through whom the sale or transfer was effected for transmission to the purchaser(s) or transferee(s).

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

==> picture [316 x 32] intentionally omitted <==

(Incorporated in the Cayman Islands with limited liability) (Stock Code: 290)

MAJOR AND CONNECTED TRANSACTION PROPOSED DISPOSAL OF 51% EQUITY INTEREST IN THE JV COMPANY IN THE PRC

Independent financial adviser to the independent board committee and the independent shareholders of the Company

Baron Capital Limited

A letter from the independent board committee of the Company is set out on page 18 of this circular. A letter from Baron Capital Limited, the independent financial adviser, containing its advice to the independent board committee and the independent shareholders of the Company is set out on pages 19 to 31 of this circular.

A notice convening the extraordinary general meeting of the Company to be held at Unit 3606, 36/F, China Merchants Tower, Shun Tak Centre, 168-200 Connaught Road Central, Sheung Wan, Hong Kong on 3 June 2005 at 11:30 a.m. is set out on pages 110 to 112 of this circular. Whether or not you are able to attend the meeting in person, please complete and return the accompanying form of proxy in accordance with the instructions printed thereon and return the same to the Company’s branch registrar and transfer office in Hong Kong, Hong Kong Registrars Limited at 46th Floor, Hopewell Centre, 183 Queen’s Road East, Hong Kong as soon as practicable but in any event not less than 48 hours before the time appointed for the holding of the meeting. Completion and return of the accompanying from of proxy will not preclude you from attending and voting at the meeting should you so wish.

17 May 2005

	Page
Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
Letter from the Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	5
Letter from the Independent Board Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	18
Letter from Baron . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	19
Appendix I – Financial information of the Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	32
Appendix II – General information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	102
Notice of EGM. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	110

– i –

DEFINITIONS

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

“associates”

has the meaning ascribed thereto in the Listing Rules

“Baron”
Baron Capital Limited, which is a licensed corporation under the SFO permitted to carry out types 1 and 6 regulated activities (as defined in the SFO) and the independent financial adviser to the Independent Board Committee and the Independent Shareholders
“Board”

the board of Directors

“Company”
China Conservational Power Holdings Limited, a company incorporated in the Cayman Islands with limited liability and the shares of which are listed on the Main Board of the Stock Exchange
“Completion” completion of the Disposal in accordance with the terms of the S&P Agreement
“Connected Person(s)”
has the meaning ascribed thereto in the Listing Rules
“Consideration Shares”
the 100 million Preference Shares in the share capital of CSCP to be issued by CSCP pursuant to the S&P Agreement
“Conversion Shares”
new ordinary shares of CSCP that may fall to be allotted and issued by CSCP upon conversion of the Preference Shares
“CSCP”
China Sciences Conservational Power Limited, a company incorporated in Hong Kong with limited liability and the ordinary shares of which are listed on the Main Board of the Stock Exchange
“CSCP Share(s)” the ordinary share(s) of HK$0.01 each in the share capital of CSCP
“CSEG”
中科實業集團（控股）公司 (China Sciences Enterprise Group (Holding) Corporation*), a company incorporated in the PRC
“Director(s)” the director(s) of the Company
“Disposal” the disposal of the Sale Shares and the Sale Loan by the Company pursuant to the S&P Agreement

– 1 –

DEFINITIONS

“EGM” the extraordinary general meeting of the Company to be held at Unit 3606, 36/F, China Merchants Tower, Shun Tak Centre, 168200 Connaught Road Central, Sheung Wan, Hong Kong on 3 June 2005 at 11:30 a.m. for approving the S&P Agreement and the transactions contemplated thereunder, the exercise of the conversion rights attaching to the Preference Shares and the New Options
“Group” the Company and its subsidiaries “HK$” Hong Kong dollars, the lawful currency of Hong Kong “Hong Kong” The Hong Kong Special Administrative Region of PRC “HTH” Hong Tong Hai Investments Limited, a company incorporated in Hong Kong with limited liability and an indirect wholly-owned subsidiary of the Company
“HTH Group” HTH and its subsidiaries “Independent Board an independent board committee of the Board comprising all of Committee” the independent non-executive Directors, namely Messrs. Loo Chung Keung, Steve, Au Yeung Ka Cheung and Tsoi Wai Kwong
“Independent Shareholders” Shareholders other than Mr. Hon and his associates “JV Company” 東莞中科環保電力有限公司 (Dongguan China Sciences Conservational Power Co., Ltd.*), a sino-foreign equity joint venture established in Dongguan, the PRC
“Latest Practicable Date” 12 May 2005, being the latest practicable date prior to the printing of this circular for ascertaining certain information in this circular
“Listing Rules” The Rules Governing the Listing of Securities on the Stock Exchange
“Mr. Chan” Mr. Chan Tat Chee, a Director and the Chairman of the Company “Mr. Hon” Mr. Hon Ming Kong, a Director and a substantial Shareholder

– 2 –

DEFINITIONS

“New Options”
the aggregate of 50,000,000 options to be granted by CSCP pursuant to the S&P Agreement, each New Option entitles the holder to subscribe for one New Option Share in accordance with the terms of grant, subject to adjustment
“New Option Shares” new CSCP Shares to be allotted and issued by CSCP upon the exercise of the New Options
“PRC” The People’s Republic of China, for the purpose of this circular only, excludes Hong Kong, Taiwan and Macau Special Administrative Region
“Preference Shares” the convertible preference shares to be issued by CSCP pursuant to the S&P Agreement
“RMB” Renminbi, the lawful currency of the PRC
“S&P Agreement”
the sale and purchase agreement dated 7 April 2005 entered into between the Company and CSCP, pursuant to which, inter alia, the Company agreed to sell and CSCP agreed to purchase, or procure the purchase of the Sale Shares and the Sale Loan
“Sale Loan” the amount due from HTH to the Company as at the date of Completion
“Sale Loan Consideration” an amount equivalent to the Sale Loan and shall not exceed HK$76 million
“Sale Shares”
2 shares of HK$1.00 each in the capital of HTH, representing the entire issued share capital of HTH
“Sale Shares Consideration”
an amount equivalent to the difference between HK$76 million and the Sale Loan Consideration, or in the event the Sale Loan is equivalent to or greater than HK$76 million, the amount of HK$1
“SFO”
The Securities and Futures Ordinance (Chapter 571 of the laws of Hong Kong)
“Share(s)”
share(s) in the issued share capital of the Company

– 3 –

DEFINITIONS

“Shareholder(s)” holder(s) of Shares “Stock Exchange” The Stock Exchange of Hong Kong Limited “Supplemental Agreement” the supplemental agreement dated 8 April 2005 entered into between the Company and CSCP in respect of the S&P Agreement “Target Equity Interest” the entire equity interest of the JV Company legally and beneficially owned by the Company (being not less than 51% thereof) as at the date of the S&P Agreement and at Completion “%” per cent.

for identification purposes only

For the purpose of this circular, all amounts in RMB are translated into HK$ at an exchange rate of RMB1.0638:HK$1. The conversion rate is for the purpose of illustration only and does not constitute a representation that any amounts have been, could have been or may be exchanged at the aforementioned or any other rates.

– 4 –

LETTER FROM THE BOARD

==> picture [316 x 32] intentionally omitted <==

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 290)

Executive Directors:

Mr. Chan Tat Chee (Chairman) Mr. Hon Ming Kong Mr. Lee Yu Leung Mr. Ting Pascal Mr. Lin Hoi Kwong

Registered Office: P.O. Box 309 Ugland House South Church Street George Town, Grand Cayman Cayman Islands British West Indies

Non-Executive Director:

Mr. Li Yong, Alfa

Independent Non-Executive Directors:

Mr. Loo Chung Keung, Steve Mr. Au Yeung Ka Cheung Mr. Tsoi Wai Kwong

Principal place of business in Hong Kong: Unit 3606, 36/F China Merchants Tower Shun Tak Centre 168-200 Connaught Road Central Hong Kong

17 May 2005

To the Shareholders,

Dear Sir or Madam,

MAJOR AND CONNECTED TRANSACTION PROPOSED DISPOSAL OF 51% EQUITY INTEREST IN THE JV COMPANY IN THE PRC

INTRODUCTION

On 12 April 2005, the Board announced that on 7 April 2005, the S&P Agreement (as supplemented by the Supplemental Agreement dated 8 April 2005) was entered into by the Company as vendor and CSCP as purchaser in respect of the Sale Shares and the Sale Loan for an aggregate consideration of HK$76 million. The Sale Shares represent the entire issued share capital of HTH, the principal asset of which is the 51% equity interest in the JV Company.

– 5 –

LETTER FROM THE BOARD

The Disposal constitutes a major transaction for the Company under the Listing Rules. As CSCP is deemed to be an associate of Mr. Hon who is a Director and a substantial Shareholder and an associate of Mr. Chan who is a Director and the Chairman of the Company, the Disposal also constitutes a connected transaction for the Company under the Listing Rules and is therefore subject to the approval of the Independent Shareholders at the EGM by poll. Mr. Hon being a substantial Shareholder, together with his associates are interested in approximately 11.83% of the issued share capital of the Company as at the Latest Practicable Date, will abstain from voting at the EGM in respect of the resolutions to approve the S&P Agreement and transactions contemplated thereunder and the exercise of the conversion rights attaching to the Preference Shares and the New Options.

The Board currently intends to exercise the conversion rights attaching to the Preference Shares and the New Options at appropriate time depending on the then prevailing market conditions during the three years conversion/exercise period. In the event the Board exercises the conversion rights attaching to the Preference Shares at the minimum conversion price of HK$0.50 per Preference Share and/or the New Options at the fixed subscription price of HK$0.76 per New Option Share in full, the Company would be interested in a maximum of approximately 16.45% of the issued share capital of CSCP as enlarged by the issue of the 152,000,000 Conversion Shares and the 50,000,000 New Option Shares. The exercise of the conversion rights attaching to the Preference Shares and the New Options in full will constitute a major and connected transaction of the Company. In light of the intention of the Board, a separate resolution will be proposed at the EGM for the Independent Shareholders to approve by poll the exercise of the conversion rights attaching to the Preference Shares and the New Options in whole or in part at any time during the conversion/exercise period.

The Independent Board Committee has been appointed to consider the S&P Agreement and to advise the Independent Shareholders as to (i) whether the terms of the S&P Agreement are fair and reasonable so far as the Independent Shareholders are concerned and in the interest of the Company; and (ii) whether the exercise of the conversion rights attaching to the Preference Shares and the New Options by the Company is in the interest of the Independent Shareholders and the Company as a whole. In addition, Baron has been appointed as the independent financial adviser to advise the Independent Board Committee and the Independent Shareholders in this regard.

The purpose of this circular is to give you further information on the Disposal, the S&P Agreement and transactions contemplated thereunder, the Preference Shares and the New Options and as well as to give you the notice of the EGM at which ordinary resolutions will be proposed to consider and, if thought fit, approve the S&P Agreement and transactions contemplated thereunder, the exercise of the conversion rights attaching to the Preference Shares and the New Options.

– 6 –

LETTER FROM THE BOARD

THE S&P AGREEMENT DATED 7 APRIL 2005 AS SUPPLEMENTED BY THE SUPPLEMENTAL AGREEMENT DATED 8 APRIL 2005

Parties

Vendor: the Company Purchaser: China Sciences Conservational Power Limited, a company incorporated in Hong Kong with limited liability and the ordinary shares of which are listed on the Main Board of the Stock Exchange. The principal businesses of CSCP are computer hardware and provision of maintenance support services, software design and development. As stated in an announcement made by CSCP dated 1 April 2005, it is committed to diversify its existing business into waste incineration and processing business in the PRC.

Assets to be disposal

Sale Shares: 2 shares of HK$1.00 each in the capital of HTH, representing the entire issued share capital of HTH.

Sale Loan: The amounts due from HTH to the Company as at the date of Completion. Based on the unaudited consolidated balance sheet of HTH as at 31 December 2004, the amount due from HTH to the Company as at 31 December 2004 was HK$61,609,473.12.

Consideration and payment terms

The consideration for the Disposal comprises the Sale Shares Consideration and the Sale Loan Consideration. The Sale Shares Consideration is an amount equivalent to the difference between HK$76 million and the Sale Loan Consideration, or in the event the Sale Loan is equivalent to or greater than HK$76 million, the Sale Shares Consideration shall be the amount of HK$1. The Sale Loan Consideration is an amount equivalent to the Sale Loan and shall not exceed HK$76 million even if the Sale Loan as at the date of Completion exceeds HK$76 million.

The aggregate consideration for the Sale Shares and the Sale Loan is HK$76 million, which was negotiated on an arm’s length basis and was determined with reference to the unaudited consolidated net liabilities of HTH of HK$2,908,947.54 as at 31 December 2004 and the value of the Sale Loan of HK$61,609,473.12 as at 31 December 2004 and shall be satisfied at Completion by the issue and allotment of 100 million Preference Shares in the share capital of CSCP to the Company or its nominee as it may direct.

– 7 –

LETTER FROM THE BOARD

Principal terms of the Preference Shares

Amount:

100 million Preference Shares

Nominal Value: HK$0.01 per Preference Share

Form:

Cumulative redeemable convertible Preference Shares in registered form

Life of the Preference Shares: 3 years from the date of issue

Dividend:

Fixed cumulative preferential dividend at 3% per annum, payable semiannually out of funds of CSCP available for dividend or distribution in priority to holders of other shares of CSCP in issue

Conversion rights:

The number of CSCP Shares to be issued and allotted to any holder of Preference Shares on the exercise of the conversion rights will be calculated in accordance with the formula:–

0.76 x A/B = C

where:

A is the number of Preference Shares stated in the relevant conversion notice;

B is (i) for the period beginning on (and including) the date of issue of the Preference Shares (“Date of Issue”) and ending on (and including) the first anniversary of the Date of Issue, HK$0.76, and (ii) for the period from (and including) the day after the first anniversary of the Date of Issue and ending (and including) the third anniversary of the Date of Issue, the higher of: (a) 90% of the average of the closing prices on the Stock Exchange for one CSCP Share for the five trading days up to and including the conversion date (or, if such day is not a trading day, the last trading day before the conversion date) and (b) HK$0.50, provided that if trading in the CSCP Shares is suspended on any day during such period, the average of the closing prices shall be calculated by reference to the latest five consecutive trading days on which the trading in the CSCP Shares is not suspended up to and including the conversion date;

– 8 –

LETTER FROM THE BOARD

C is the number of CSCP Shares to be issued on conversion of the Preference Shares as stated in the relevant conversion notice rounded down to the nearest whole number.

Conversion notice:

A written notice of conversion must be deposited at the Hong Kong registered office of CSCP at least 7 business days in advance of conversion.

Ranking:

The CSCP Shares falling to be issued upon exercise of the conversion rights attaching to the Preference Shares will, when issued, rank equally in all respects with the CSCP Shares then in issue.
Voting rights: Holders of Preference Shares will have the right to receive notice of, but not the right to attend or vote at, general meetings of CSCP unless a resolution is proposed at the general meeting for the winding-up of CSCP or for varying or abrogating the rights or privileges of the holders of Preference Shares.
Redemption by holders:

No redemption by holders of Preference Shares.

Redemption by the Company: Any unconverted Preference Shares shall be redeemed by CSCP on the third anniversary of the date of issue of the Preference Shares at the issue price of HK$0.76 per Preference Share.
Return of capital:
On winding up of CSCP, holders of Preference Shares will be entitled to the return of capital in priority to any other class of shares on the basis of the nominal value of the Preference Shares.
Variation of rights:
The rights attached to the Preference Shares cannot be altered without the prior written consent of the holders of the ordinary shares of CSCP and of the holders of Preference Shares holding not less than 75% of the outstanding Preference Shares for the time being.

– 9 –

LETTER FROM THE BOARD

Transferability:

The Preference Shares are freely transferable by the holders thereof, in integral multiple of two and transfer of two Preference Shares shall be accompanied by the transfer of one New Option, subject to the requirements of the Listing Rules.

CSCP has confirmed that it will immediately notify the Stock Exchange upon becoming aware of any dealings in the Preference Shares by any connected person of CSCP (as defined in the Listing Rules).

Transfer of Preference Shares: Subject to fulfillment of the connected transaction requirements of the to connected person Listing Rules, the Preference Shares may be transferred to any connected person of CSCP (as defined in the Listing Rules).

CSCP has confirmed that it will immediately notify the Stock Exchange upon becoming aware of any transfers in the Preference Shares to any connected person of CSCP (as defined in the Listing Rules).

No pre-emptive Rights:

In the event that CSCP shall at any time issue to holders of ordinary shares securities convertible into ordinary shares, CSCP shall not be obliged to, offer such shares/securities to holders of Preference Shares for subscription.

Listing:

The Preference Shares will not be listed on any stock exchange.

Based on the conversion price of HK$0.76 per Conversion Share, the 100,000,000 Preference Shares shall be converted into 100,000,000 Conversion Shares, representing approximately 9.75% of the existing issued share capital of CSCP and approximately 8.88% of its issued share capital as enlarged by the issue of the Conversion Shares only. As stated in the sub-paragraph “Conversion rights” above, the number of Conversion Shares may be adjusted based on the conversion price calculated by reference to the formula set out therein. If the Preference Shares are fully converted at the minimum conversion price of HK$0.50, 152,000,000 Conversion Shares will be allotted and issued, representing approximately 14.81% of the existing issued share capital of CSCP and approximately 12.90% of the issued share capital of CSCP as enlarged by the issue of the 152,000,000 Conversion Shares only.

– 10 –

LETTER FROM THE BOARD

The conversion price of HK$0.76 per Conversion Share represents a discount of approximately 9.52% to the closing price of HK$0.84 per CSCP Share as quoted on the Stock Exchange on 22 March 2005, being the last trading day before the date of the S&P Agreement, and a discount of approximately 6.17% to the average closing price of HK$0.81 per CSCP Share as quoted on the Stock Exchange for the last 10 trading days up to and including 22 March 2005.

New Options

In consideration of the amount of HK$1.00 payable by the Company to CSCP on Completion, CSCP agrees to grant and the Company agrees to accept the right to subscribe at the price of HK$0.76 per New Option Share for 50,000,000 New Option Shares. The 50,000,000 New Option Shares represent approximately 4.87% of the existing issued share capital of CSCP and approximately 4.65% of the issued share capital of CSCP as enlarged by the issue of the New Option Shares only.

Subject to Completion taking place, the Company may exercise in all or some New Options granted to it at any time during the period from (and including) the date of Completion to (and including) the day immediately preceding the third anniversary of that date provided that any exercise of the New Options must be accompanied by the conversion of two Preference Shares at the same time. To exercise the New Options, the holder of the New Options shall deliver to CSCP a notice specifying the number of New Options which are the subject of that exercise and a remittance in favour of CSCP for the aggregate subscription price for the New Option Shares subject to those New Options being exercised. Once given, such notice shall be irrevocable. The New Options are transferable subject to the requirements of the Listing Rules and transfer of one New Option shall be accompanied by the transfer of two Preference Shares.

The number of New Option Shares to be issued and allotted under the New Options shall be subject to adjustment on consolidation or sub-division so that the holder of the New Options shall upon exercise of the relevant New Option be entitled to the same percentage of the issued share capital of CSCP before and after such adjustment.

Conditions

Completion of the S&P Agreement is conditional upon, the following conditions precedent being satisfied or waived (as the case may be):

(a) the approval of the S&P Agreement and the transactions contemplated hereunder, including the Disposal, issue and the allotment of the 100 million Preference Shares, the grant of the New Options and any CSCP Shares that may fall to be issued upon the exercise of the conversion rights attaching to the Preference Shares and any New Options, by the shareholders of CSCP in a manner as required under the Listing Rules;

– 11 –

LETTER FROM THE BOARD

(b) the passing of a resolution by the shareholders of CSCP approving the creation of the Preference Shares;
(c) CSEG, the other JV party to the JV Company, agreeing in principle to the change in the beneficial owner of HTH in terms as contemplated hereunder;
(d) obtaining a legal opinion from a firm of PRC lawyers appointed by CSCP in connection with the transactions contemplated under the S&P Agreement and CSCP’s beneficial ownership and holding of the Target Equity Interest, including without limitation to the generality of the foregoing, to the effect that:–
(i) the JV Company was duly established under the laws of the PRC and validly in existence, the registered capital of the JV Company has been fully paid up and none of the respective holders of the registered capital of the JV Company have any unfulfilled capital contribution obligations;
(ii) the HTH is the legal and beneficial owner of the Target Equity Interest at and after Completion; and
(iii) the change of ownership of HTH as contemplated hereunder will not result in a termination of the “Build-Operation-Transfer” contract entered into between the JV Company and the Dongguan City Public Utilities Management Bureau.
(e) the Listing Committee of the Stock Exchange granting listing of and permission to deal in the shares to the issued by CSCP upon the exercise of the conversion rights attaching to the Preference Shares and the New Option Shares;
(f) approval by Independent Shareholders of the S&P Agreement and the transactions contemplated hereunder, including the sale of the Sale Shares and the Sale Loan in terms set out in the S&P Agreement in consideration for the Preference Shares in a manner as required under the Listing Rules; and
(g) all parties having obtained the consent, the approvals and permissions from the relevant government and/or regulatory bodies or other third parties as required to give effect to the transactions contemplated under the S&P Agreement.

If the conditions set out above are not fulfilled or waived in writing on or prior to 31 August 2005 (or such later date as may be agreed between the Company and CSCP), the S&P Agreement shall be terminated and none of the parties shall have any claim against the others for costs, damages, compensation or otherwise (save in respect of any prior breach of the S&P Agreement). CSCP may unilaterally waive the condition set out in (d) above. Apart from the condition set out in (d) above, none of other conditions may be waived by any party.

– 12 –

LETTER FROM THE BOARD

Both parties agree that the S&P Agreement shall be terminated immediately if as a result of entering into the S&P Agreement and performing any of the obligations hereunder: (a) the Stock Exchange rules that CSCP is or will be treated as a new listing applicant under the Listing Rules; or (b) the Executive under the Hong Kong Code on Takeovers and Mergers rules that a general offer obligation will arise on the part of the Company and its concert parties requiring it to acquire all outstanding securities of CSCP not already owned by it and its concert parties, and upon termination neither party shall have any claim against the other for costs, damages, compensation or otherwise (save in respect of any prior breach of the S&P Agreement).

Completion

Completion shall take place on the third business day next following the date on which all the conditions of the S&P Agreement shall have been fulfilled and/or waived, which is expected to be on or before 31 August 2005 (or such other date as shall be agreed between the Company and CSCP). Upon Completion, HTH will cease to be a subsidiary of the Company and the Group will not hold any interest in the JV Company except through its interest in CSCP by virtue of the Preference Shares or the CSCP Shares upon the exercise of the conversion rights attaching to the Preference Shares and/or the New Options.

Information of HTH and the JV Company

HTH, a company incorporated in Hong Kong with limited liability, is an indirect whollyowned subsidiary of the Company. The principal asset of HTH is its 51% equity interest in the JV Company. The JV Company is principally engaged in the waste incineration and processing business in Dongguan, the PRC. The JV Company is in the process of constructing an incinerator with capacity to handle 1,000 metric tons of waste per day for generating electricity. The JV Company is a sino-foreign equity joint venture established on 5 November 2004 in the PRC with the term of 25 years.

The equity interest of the JV Company is registered as to 51% by HTH and as to 49% by CSEG. As at the Latest Practicable Date, based on the confirmation issued by CSEG, CSEG has been holding 39% of the equity interest of the JV Company for the benefit of an independent third party and based on the confirmation issued by the independent third party, it has been holding 39% of the equity interest of the JV Company for the benefit of CSCP. CSEG is a large scale enterprise group established by 中國科學院 (Chinese Academy of Science). As CSEG is a substantial shareholder of the JV Company, a subsidiary of the Company, CSEG is a connected person of the Company (as defined in the Listing Rules) as at the Latest Practicable Date.

– 13 –

LETTER FROM THE BOARD

The registered capital of the JV Company is RMB110 million (approximately HK$103.4 million) and the total investment amount of the JV Company is RMB328.26 million (approximately HK$308.57 million). The registered capital of the JV Company has been fully paid up by the joint venture parties. The difference between the registered capital and the total investment amount in the amount of RMB218.26 million (approximately HK$205.17 million) shall be financed by external banking facilities.

Based on the audited financial statements of HTH for the period from 17 April 2002 (date of incorporation) to 31 March 2004, HTH recorded loss before and after taxation of HK$820,396. Based on the unaudited consolidated management accounts of HTH for the nine months ended 31 December, 2004, HTH recorded loss before and after taxation before minority interest of HK$3,540,185.93 and recorded loss before and after taxation after minority interest of HK$1,969,315.44. Based on the unaudited consolidated balance sheet of HTH Group as at 31 December 2004, the net deficits of HTH Group as at 31 December 2004 were HK$2,908,947.54.

REASONS FOR THE DISPOSAL

The Group is principally engaged in electrical engineering contracting business, trading in electrical equipment and material, investment holding, securities brokerage and finance business, company secretarial services and sea freight forwarding services.

As mentioned in the announcement made by the Company dated 24 December 2003 and the circulars issued by the Company dated 14 January 2004 and 9 March 2004, the formation of the JV Company represented a further step by the Group to diversify into the business of waste incineration and process. The Directors were of the view that the income generated from the operation of the waste incineration and process business of the JV Company will provide the Group to diversify its income base . Accordingly, the JV Company has been formally established on 5 November 2004 with a term of 25 years. Apart from the 51% equity interest in the JV Company, the Group currently has no interest in any other waste incineration and process business. As stated in the announcements made by CSCP, it is setting up a joint venture in Guilin, the PRC to carry on waste incineration and processing business, the Board is of the view that, in the event the Company exercises the conversion/exercise rights attaching to the Preference Shares and the New Options, the Disposal would allow the Group to continue to have an exposure to the waste incineration and process business through its interest in the CSCP Shares and to enjoy potential returns from the two power plants in Dongguan and Guilin, both of which will be managed by the management of CSCP. The Preference Shares bear a fixed preferential dividend at the rate of 3% per annum. As the Preference Shares are convertible into ordinary shares of CSCP as well as being redeemed by CSCP on the third anniversary of the date of allotment of the Preference Shares (if the same have not been converted into CSCP Shares), the Directors consider that the holding of the Preference Shares could provide the Group with an opportunity to enjoy a stable dividend return with redemption in full amount as well as to capture any potential returns from the businesses of CSCP by converting the Preference Shares into CSCP Shares and exercising the New Options. The Group is able to increase its share of return from the businesses of CSCP by increasing its interest in CSCP via the exercise of the New Options at the current share price of CSCP during the three-year option period.

– 14 –

LETTER FROM THE BOARD

On such basis, the Directors are of the view that the terms of the S&P Agreement including, inter alia, the issue and allotment of the Preference Shares in satisfaction of the consideration for the Disposal and the granting of the New Options, are fair and reasonable in so far as the Shareholders are concerned and in the best interest of the Company and the Shareholders.

In spite of the Disposal, the Company will continue its diversification policy. As stated in previous announcement, the Company has entered into an investment framework agreement in relation to the proposed acquisition of up to 49% of the equity interest in a pharmaceutical products distribution and investment company in the PRC, the Disposal could also allow the Group to allocate more human resources on the existing businesses of the Group and to identify suitable projects for diversification while at the same time continue to enjoy the potential returns from the waste incineration and processing business through its interest in CSCP in the event the Company exercises the conversion/exercise rights attaching to the Preference Shares and the New Options.

FINANCIAL AND TRADING PROSPECTS OF THE GROUP

As mentioned in the annual report of the Company for the year ended 31 March 2004, the Group recorded an audited loss attributable to shareholders of approximately HK$57,198,000 for the year 2004 compared to loss of approximately HK$40,555,000 for the year 2003. Turnover of the year was HK$166,243,000, representing a decrease of 16.8% as compared to the corresponding period last year. The decrease was mainly attributable to the local sluggish construction industry as well as the structural changes in government housing policies which have brought public housing projects to a halt. The increase in losses of the year mainly came from the provision for non-core businesses and the share of losses of a joint venture. Recognising the importance of effective cost control during the period of transition, the management implemented various cost-cutting measures during the year, resulting in a 20.1% decrease in administrative expenses.

According to the interim report of the Company for the six months ended 30 September 2004, during the period, the Group recorded an unaudited loss attributable to shareholders of approximately HK$24,708,000 (2003: loss of approximately HK$7,692,000). The increase in loss was mainly attributable to the sale of certain listed investments of the Group, thus generated a loss of approximately HK$4,753,000. Such investment recorded an unrealised profit of approximately HK$5,213,000 in the corresponding period of last year.

Due to the changes in public housing and the infrastructure policies in recent years, the demand for the Group’s electrical engineering and electrical equipment trading are relatively weak and it is expected that this situation will continue. Meanwhile, the PRC has recorded tremendous progress with giant strides. In view of this, the Group has therefore been exploring new investment opportunities in the PRC. Apart from the existing businesses of electrical engineering and electrical equipment trading, the Group has diversified into waste combustion electric power business and logistic business, and has been actively identifying potential investments that generate stable revenue as its long-term investments in the PRC.

– 15 –

LETTER FROM THE BOARD

FINANCIAL EFFECTS ON THE GROUP

As HTH is a wholly-owned subsidiary of the Company, the investment of the Group in HTH has been consolidated in the financial statements of the Group prior to Completion. Upon Completion, the 100 million Preference Shares with a value of HK$76,000,000 will be booked as investments in securities and net off against the net deficits of HTH and the amount due from HTH to the Company. Accordingly, as a result of the Disposal and based on the unaudited consolidated management accounts of HTH as at 31 December 2004, the Board estimates that the Group will record a gain of about HK$17 million and the net assets of the Group will be increased by about HK$17 million upon Completion.

The gain or loss on the disposal of the 100 million Conversion Preference Shares will depend on the market price of the CSCP Shares when the Company exercises the conversion rights attaching to the 100 million Preference Shares and disposes of the 100 million Conversion Shares immediately after Completion.

If the Group chooses to convert the Preference Shares into CSCP Shares, regardless of the market price of the CSCP, the Group can still enjoy the upside of the market when the trading prices of CSCP Shares is higher than the conversion price and can thus to realize a gain on disposal of the Conversion Shares.

If the Group chooses not to convert the Preference Shares into CSCP Shares, the Group can receive dividend income of approximately HK$2 million per year for the first two years and the principal amount of HK$76 million plus the preferential dividend at the rate of 3% per annum in the third year. Any unconverted Preference Shares shall be redeemed by CSCP on the third anniversary of the date of issue of the Preference Shares at the issue price of HK$0.76 per Preference Share.

RECOMMENDATIONS

Your attention is drawn to the letters from the Independent Board Committee and Baron which set out their recommendations in respect of the S&P Agreement, the terms of the Preference Shares and the New Options and the principal factors considered by them in arriving at their recommendations.

THE EGM

A notice convening the EGM at which ordinary resolutions will be proposed to consider, and if thought fit, to approve the S&P Agreement and the transactions contemplated therein and the exercise of the conversion rights attaching to the Preference Shares and the New Options is set out on pages 110 to 112 of this circular.

– 16 –

LETTER FROM THE BOARD

A form of proxy for use at the EGM is enclosed with this circular. Whether or not you intend to attend the EGM, you are requested to complete and return the accompanying form of proxy in accordance with the instructions printed thereon to the Company’s branch registrar and transfer office in Hong Kong, Hong Kong Registrars Limited at 46th Floor, Hopewell Centre, 183 Queen’s Road East, Hong Kong 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 EGM should you so wish.

ADDITIONAL INFORMATION

Your attention is drawn to the additional information contained in the appendices to this circular.

By Order of the Board China Conservational Power Holdings Limited Chan Tat Chee Chairman

– 17 –

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

==> picture [316 x 32] intentionally omitted <==

(Incorporated in the Cayman Islands with limited liability) (Stock Code: 290)

17 May 2005

To the Independent Shareholders

Dear Sir or Madam,

MAJOR AND CONNECTED TRANSACTION PROPOSED DISPOSAL OF 51% EQUITY INTEREST IN THE JV COMPANY IN THE PRC

We have been appointed as the Independent Board Committee to advise you in connection with the ordinary resolutions to be proposed at the EGM to approve the S&P Agreement and the transactions contemplated therein and the exercise of the conversion rights attaching to the Preference Shares and the New Options. Details of the S&P Agreement, the terms and conditions of the Preference Shares and the New Options are set out in a circular to be issued by the Company dated 17 May 2005 (the “Circular”), of which this letter forms part. Terms defined in the Circular shall have the same meanings when used herein unless the context otherwise requires.

Having taken into account the principal factors and reasons considered by Baron and its advice in relation thereto as set out on pages 19 to 31 of the Circular, we are of the opinion that the terms of the S&P Agreement are fair and reasonable as far as the Independent Shareholders are concerned and in the interest of the Company; and the exercise of the conversion rights attaching to the Preference Shares and the New Options by the Company is in the interest of the Independent Shareholders and the Company as a whole. We therefore recommend that you vote in favour of the ordinary resolutions to be proposed at the EGM to approve the Disposal as terms and conditions of the S&P Agreement and the exercise of the conversion exercise rights attaching to the Preference Shares and the New Options.

Yours faithfully, Yours faithfully, Yours faithfully, LOO Chung Keung, Steve AU YEUNG Ka Cheung TSOI Wai Kwong Member of the Member of the Member of the Independent Board Committee Independent Board Committee Independent Board Committee

– 18 –

LETTER FROM BARON

The following is the text of a letter of advice to the Independent Board Committee and to the Independent Shareholders from Baron Capital Limited dated 17 May 2005 prepared for the purpose of incorporation in this circular:

Baron Capital Limited

4/F, Aon China Building 29 Queen’s Road Central Central, Hong Kong

17 May 2005

To the Independent Board Committee and the Independent Shareholders

Dear Sirs,

MAJOR AND CONNECTED TRANSACTION PROPOSED DISPOSAL OF 51% EQUITY INTEREST IN THE JV COMPANY IN THE PRC

INTRODUCTION

We refer to our appointment by the Company to advise the Independent Board Committee and the Independent Shareholders in respect of the S&P Agreement and the transactions contemplated therein and the exercise of the conversion rights attaching to the Preference Shares and the New Options, details of which are set out in the “Letter from the Board” contained in the circular of the Company dated 17 May 2005 (the “Circular”), of which this letter forms part. Terms defined in the Circular shall have the same meanings in this letter unless the context otherwise requires.

The Board announced that on 7 April 2005, the S&P Agreement was entered into by the Company as vendor and CSCP as purchaser in respect of the Sale Shares and the Sale Loan for a total consideration of HK$76 million (which was supplemented by the Supplemental Agreement on 8 April 2005). The Sale Shares represent the entire issued share capital of HTH, the principal asset of which is the 51% equity interest in the JV Company.

– 19 –

LETTER FROM BARON

The Disposal constitutes a major transaction for the Company under the Listing Rules. As CSCP is deemed to be an associate of Mr. Hon who is a Director and a substantial shareholder of the Company and an associate of Mr. Chan who is a Director and the Chairman of the Company, the Disposal also constitutes a connected transaction for the Company under the Listing Rules and is therefore subject to the approval of Independent Shareholders at the EGM, as voted by poll. As at the Latest Practicable Date, Mr. Hon and his associates are the substantial shareholders of the Company and are interested in approximately 11.83% of the issued share capital of the Company in aggregate. Mr. Hon and his associates shall abstain from voting in respect of the resolutions to approve S&P Agreement and transactions contemplated thereunder and the exercise of the conversion rights attaching to the Preference Shares and the New Options at the EGM.

The Independent Board Committee has been established by the Company to advise the Independent Shareholders in respect of the terms and conditions of the S&P Agreement and the transactions contemplated therein and the exercise of the conversion rights attaching to the Preference Shares and the New Options and to give a recommendation to the Independent Shareholders in relation to the voting of the relevant resolutions at the EGM.

BASIS OF OUR OPINION

In arriving at our opinion and recommendation, we have relied on the information supplied and the opinion expressed by the Directors and the management of the Company. We have assumed that the information contained and representations made to us or referred to in the Circular are true, accurate and complete at the time they were made and continue to be so at the date of the Circular.

We consider that we have been provided with sufficient information on which to form a reasonable basis for our opinion. We have no reason to suspect that any relevant information has been withheld, nor are we aware of any fact or circumstance which would render the information provided and representations and opinions made to us untrue, inaccurate or misleading.

Having made all reasonable enquiries, the Directors have collectively and individually accepted full responsibility for the accuracy of the information contained in the Circular and further confirmed that, to the best of their knowledge, they believe there are no other facts or representations the omission of which would make any statement in the Circular, including this letter, misleading.

– 20 –

LETTER FROM BARON

We have not, however, carried out any independent verification of the information provided by the Directors and the management of the Company, nor have we conducted an independent investigation into the business and affairs of the Company and nor have we considered the taxation implication on the Group or the Shareholders as a result of the Disposal.

PRINCIPAL FACTORS AND REASONS CONSIDERED

In arriving at our opinion and recommendation to the Independent Board Committee and the Independent Shareholders in respect of the S&P Agreement and the exercise of the conversion rights attaching to the Preference Shares and the New Options, we have taken into consideration the following principal factors and reasons:

1. Background of and reasons of the Disposal

The JV Company is a sino-foreign equity joint venture established in the PRC and is principally engaged in the waste incineration and processing business in Dongguan, the PRC. The JV Company was established on 5 November 2004 by HTH, an indirect wholly-owned subsidiary of the Company and CSEG in the PRC for a term of 25 years, with a total investment of RMB328.26 million (equivalent to approximately HK$308.57 million), out of which RMB110 million (equivalent to approximately HK$103.4 million) is the registered capital. All of the registered capital of the JV Company has been fully paid up by the joint venture parties. The JV Company will finance the difference between the registered capital and the total investment amount of RMB218.26 million (equivalent to approximately HK$205.17 million) by external banking facilities. The equity interest of the JV Company is presently registered as to 51% by HTH and as to 49% by CSEG.

Based on the audited financial statements of HTH for the period from 17 April 2002 (date of incorporation) to 31 March 2004, HTH recorded loss before and after taxation of HK$820,396. Based on the unaudited consolidated management accounts of HTH for the nine months ended 31 December 2004, HTH recorded loss before and after taxation before minority interest of HK$3,540,185.93 and recorded loss before and after taxation after minority interest of HK$1,969,315.44. Based on the unaudited consolidated balance sheet of HTH Group as at 31 December 2004, the net deficits of HTH Group as at 31 December 2004 were HK$2,908,947.54.

– 21 –

LETTER FROM BARON

Reasons for the Disposal are as follows:

(a) Enjoy flexibility in participating in the waste incineration and process business:

The Board is of the view that despite the Disposal, the Group could still continue to have an exposure on the waste incineration and process business through its interest in the Preference Shares and the New Options and to enjoy potential returns from not only the plant in Dongguan but also enjoy potential returns from existing businesses of CSCP in the event the Company exercises the conversion/exercise rights attaching to the Preference Shares and the New Options. As stated in the “Letter from the Board” contained in the Circular, the Preference Shares can be converted into ordinary shares of CSCP as well as being redeemed by CSCP on the third anniversary of the date of allotment of the Preference Shares (if the same have not been converted into CSCP Shares). The Directors consider that the holding of Preference Shares could provide the Group with an opportunity to enjoy a stable dividend return with redemption in full amount as well as to capture any potential returns from the businesses of CSCP by converting the Preference Shares into CSCP Shares and exercising the New Options. In addition, the Group is able to increase its share of return from the businesses of CSCP by increasing its interest in CSCP via the exercise of the New Options at the current share price of CSCP during the option period.

The benefits to the Group in receiving Preference Shares in lieu of cash are as follows:

The Group has the opportunity to exercise the conversion rights attaching to the Preference Shares and the New Options during the 3 years conversion/exercise period if the Preference Shares and the New Options are in the money. The exercise of the conversion rights will enable the Group to enjoy the upside of the market when the trading price of CSCP Shares is higher than the conversion/exercise price and also enable the Group to capture potential returns from the businesses of CSCP as a shareholder of CSCP. If the Group chooses not to exercise the conversion rights attaching to the Preference Shares, it will receive stable dividend income on the Preference Shares of approximately HK$2 million per year for the first two years and the principal amount of HK$76 million plus the preferential dividend at the rate of 3% per annum in the third year.

– 22 –

LETTER FROM BARON

If the Group chooses to receive cash consideration of HK$76 million instead, the Group will earn bank interest rate for savings account of approximately 0.25% to 0.5%, which is lower than the fixed dividend income of 3% from the Preference Shares. In view of the fact that any unconverted Preference Shares will be redeemed by CSCP on the third anniversary of the date of issue of the Preference Shares at the issue price of HK$0.76 per Preference Share, the Group can receive stable dividend income on the Preference Shares of approximately HK$2 million per year for the first two years and the outstanding principal amount of up to HK$76 million plus the preferential dividend at the rate of 3% per annum in the third year. In deciding whether or not to exercise the conversion rights attaching to the Preference Shares, the Board will take into account the fundamental financials, market potentials and market price of the CSCP Shares. The Group can have flexibility and enjoy the upside of the market when the trading prices of CSCP Shares is higher than the conversion price of HK$0.76. Otherwise, the Group can choose to receive dividend income of approximately HK$2 million per year for a term of 3 years. Accordingly, we consider the satisfaction of the consideration with the Preference Shares enables the Group to continue to enjoy flexibility in participating in the waste incineration and process business and capture any upside gain by converting the Preference Shares and exercising the New Options.

(b) Stable income return: The Preference Shares bear a fixed preferential dividend at the rate of 3% per annum. The Preference Shares can be converted into ordinary shares of CSCP as well as being redeemed by CSCP on the third anniversary of the date of allotment of the Preference Shares. We concur with the view of the Directors that the holding of Preference Shares could provide the Group with an opportunity to enjoy a stable dividend return with redemption in full amount at the end of the threeyear period. Taking into account that the Group can receive stable dividend income per year at the rate of 3% per annum for 3 years from the date of issue of the Preference Shares, we consider the Disposal to be in the interests of the Company and the Independent Shareholders as a whole.
(c) Diversification benefits: As stated in the section headed “Financial and trading prospects of the Group” in the “Letter from the Board” contained in the Circular, the PRC has recorded tremendous progress with giant strides. In view of this, the Board has therefore been exploring new investment opportunities in the PRC. Apart from the existing businesses of electrical engineering and electrical equipment trading, the Group has diversified into waste combustion electric power business and logistic business, and has been actively identifying potential investments that generate stable revenue as its long-term investments in the PRC.

– 23 –

LETTER FROM BARON

As stated in the previous announcements issued by the Company, the Company has entered into an investment framework agreement in relation to the proposed acquisition of up to 49% equity interest in a pharmaceutical products distribution and investment company in the PRC. The Board is of the view that the Disposal could allow the Group to allocate more human resources on the existing businesses of the Group and to identify suitable projects for diversification while at the same time continue to enjoy potential returns from the waste incineration and processing business through its interest in CSCP in the event the Company exercises the conversion/exercise rights attaching to the Preference Shares and the New Options. We are of the view that the Disposal will allow the Group to expand its interests in the waste incineration and processing business through the Company’s interest in CSCP and allows the Group to enjoy the benefits of business and risk diversification benefits by indirectly holding the JV Company. We also consider that, in general, CSCP has human resources with technical know-how on waste incineration and process business when compared to the Company, and accordingly, we are of the opinion that the Disposal will provide the Group with benefits of business and risk diversifications while at the same time, allocating its human resources on the existing businesses of the Group and identifying suitable projects for diversification. Based on the above information, we consider that the Disposal to be in the interests of the Company and the Shareholders as a whole.

2. Principal terms of the S&P Agreement

(a) Basis of the consideration and settlement terms

The aggregate consideration for the Disposal was negotiated on an arm’s length basis and was determined with reference to (i) the unaudited consolidated net liabilities of HTH of HK$2,908,947.54 as at 31 December 2004 and (ii) the value of the Sale Loan of HK$61,609,473.12 as at 31 December 2004. The consideration shall be satisfied at Completion by issue and allotment of 100 million Preference Shares in the share capital of CSCP to the Company or its nominee as it may direct. Upon Completion, the 100 million Preference Shares with a value of HK$76 million will be booked as an investment in securities and net off against the net deficits of HTH and the amount due from HTH to the Company. Accordingly, as a result of the Disposal and based on the unaudited consolidated management accounts of HTH as at 31 December 2004, the Board estimates that the Group will record a gain of approximately HK$17 million upon Completion.

The gain or loss on the disposal of the 100 million Conversion Shares will depend on the market price of the CSCP Shares when the Company disposes of the 100 million Conversion Shares immediately after Completion.

– 24 –

LETTER FROM BARON

Having taken into consideration that (i) the Disposal was negotiated on an arm’s length basis; (ii) HTH has net liabilities; and (iii) the Group will record a gain of approximately HK$17 million as a result of the Disposal, we are of the view that the consideration is fair and reasonable so far as the Independent Shareholders are concerned.

(b) Conversion price

The following chart sets out the conversion price of HK$0.76 per CSCP Share as compared to the closing price performance of the CSCP Shares as quoted on the Stock Exchange during the period from 22 March 2004 (being 12 months preceding the date of the announcement of the Disposal (the “Announcement Date”)) to 22 March 2005 (the “Pre Announcement Period”), and from such date up to and including the Latest Practicable Date (the “Post Announcement Period”):

==> picture [397 x 197] intentionally omitted <==

Source: Bloomberg

– 25 –

LETTER FROM BARON

As shown in the above chart, during the Pre Announcement Period, the CSCP Shares were traded as between HK$0.19 to HK$0.85 and from HK$0.68 to HK$0.84 during the Post Announcement Period.

The following table summaries the premiums/discounts of the conversion prices over/ to the closing prices of the CSCP Share for different periods:

		Premium/(Discount)
		of the Conversion
		Price over/to
	Closing	the closing
	price/average	price/average
	closing price per	closing price per
	CSCP Share for the	CSCP Share for the
	respective period/NTA	respective period/NTA
Date/Period	per CSCP Share	per CSCP Share
	HK$	%
As at 22 March 2005 (being the last trading day
prior to the date of suspension of trading in the
CSCP Shares pending the issue of the
announcement regarding the Disposal)	0.84	(9.5)
10 trading days up to and including 22 March 2005	0.81	(6.2)
20 trading days up to and including 22 March 2005	0.71	7.0
30 trading days up to and including 22 March 2005	0.67	13.4
As at the Latest Practicable Date	0.71	7.0
From 13 April 2005 (being the first trading day after
the issue of the announcement regarding the Disposal)
to the Latest Practicable Date	0.76	–
		(Note)
Net tangible asset value (“NTA”) of the CSCP as at
31 December 2004 based on 812,897,100 shares in
issue as at the Latest Practicable Date	0.12	533.3

Note: the average closing price of CSCP from 13 April 2005 to the Latest Practicable Date is approximate the same as the conversion price

– 26 –

LETTER FROM BARON

As illustrated above, the conversion price of HK$0.76 represents:

a discount of approximately 9.5% to the closing price of HK$0.84 per CSCP Share as quoted on the Stock Exchange on 22 March 2005, being the last trading day prior to the suspension in the trading of the CSCP Shares pending the release of an announcement by CSCP on the S&P Agreement;
a discount of approximately 6.2% to the average closing price of HK$0.81 per CSCP Share as quoted on the Stock Exchange for the last 10 trading days up to and including 22 March 2005;
a premium of approximately 7.0% over the average closing price of HK$0.71 per CSCP Share as quoted on the Stock Exchange for the last 20 trading days up to and including 22 March 2005;
a premium of approximately 13.4% over the average closing price of HK$0.67 per CSCP Share as quoted on the Stock Exchange for the last 30 trading days up to and including 22 March 2005;
a premium of approximately 7.0% over the average closing price of HK$0.71 per CSCP Share as quoted on the Stock Exchange on the Latest Practicable Date;
no premium or discount to the average closing price of HK$0.76 per CSCP Share as quoted on the Stock Exchange from 13 April 2005 (being the first trading day after the issue of the announcement regarding the Disposal) up to and including the Latest Practicable Date; and
a premium of approximately 533.3% over the average closing price of HK$0.12 per CSCP Share as quoted on the Stock Exchange for the NTA of CSCP Share up to and including the Latest Practicable Date.

We note that the conversion price of HK$0.76 represents a premium of approximately 7.0% over the average closing price of HK$0.71 per CSCP Share as quoted on the Stock Exchange for the last 20 trading days up to and including 22 March 2005 and a premium of approximately 533.3% over the average closing price of HK$0.12 per CSCP Share as quoted on the Stock Exchange for the NTA of CSCP Share up to and including the Latest Practicable Date. Despite the fact that the market price was continuously trading below the conversion price of HK$0.76 during the period 22 March 2004 to 7 March 2005, we have considered the benefits of entering into the S&P Agreement, such that the Disposal (i) allows the Group continue to enjoy flexibility in participating the waste incineration and process business; (ii)

– 27 –

LETTER FROM BARON

to receive stable interest income per year with redemption in full amount; and (iii) to obtain diversification benefits by allocating more human resources of the Group, on the proposed investment on the pharmaceutical business and the existing businesses of the Group while at the same time continue enjoying potential returns from the waste incineration and processing business through its interest in CSCP.

Given that the conversion price of HK$0.76 represents (i) a discount of approximately 9.5% to the closing price of HK$0.84 per CSCP Share as quoted on the Stock Exchange on 22 March 2005, being the last trading day prior to the suspension in the trading of the CSCP Shares pending the release of an announcement by CSCP on the S&P Agreement; and (ii) a discount of approximately 6.2% to the average closing price of HK$0.81 per CSCP Share as quoted on the Stock Exchange for the last 10 trading days up to and including 22 March 2005, we are of the view that the conversion price is in the interest of the Company and the Shareholders as a whole and are fair and reasonable insofar as the Company and the Independent Shareholders are concerned.

(c) Preferential dividend

The Preference Shares bear a fixed preferential dividend at a rate of 3% per annum. According to information contained in the official bank websites, interest rate for saving account with the Group’s principal bankers are approximately 0.25% to 0.7% and the Directors are of the view that the effective interest rate on the cash and bank balances of the Group is approximately 0.25% to 0.5%. Despite the recent increase in interest rate and there is potential credit risks on Preference Shares, we are of the view that the Group can receive dividend income of approximately HK$2 million at the rate of 3% per annum for 3 years from the date of issue of the Preference Shares and on winding up of CSCP, holders of Preference Shares will be entitled to the return of capital in priority to any other class of shares on the basis of the nominal value of the Preference Shares. Taking into account that the Group is still earning a higher rate on the Preference Shares than the effective interest rates offered from both banks and holders of Preference Shares have priority to receive return of capital as upon the winding up of CSCP, we consider that the interest rate is in the interest of the Company and the Independent Shareholders as a whole.

– 28 –

LETTER FROM BARON

3. Other terms of Preference Shares

We note that there are other clauses in respect of the issue of the Preference Shares that should brought to the Shareholders’ attention. Based on the conversion price of HK$0.76 per Conversion Share, the 100,000,000 Preference Shares shall be converted into the 100,000,000 Conversion Shares, representing approximately 9.75% of the existing issued share capital of CSCP and approximately 8.88% of its issued share capital as enlarged by the issue of the Conversion Shares. The Board intends to exercise the conversion rights attaching to the Preference Shares and the New Options at appropriate time depending on the market condition during the three-year conversion/exercise period. In the event that the Board exercise such conversion/exercise rights attaching to the Preference Shares at the minimum conversion price of HK$0.50 per Preference Share and/or the New Options at the fixed subscription price of HK$0.76 per New Option Share, the Company would be interested in a maximum of 16.45% of the issued share capital of the CSCP as enlarged by the issue of the 152,000,000 Conversion Shares and the 50,000,000 New Option Shares.

In addition, the Preference Shares are freely transferable by the holders thereof, in integral multiple of two and transfer of two Preference Shares shall be accompanied by the transfer of one New Option (subject to the requirements of the Listing Rules). Having taken into the account (i) the Board can exercise the conversion/exercise rights attaching to the Preference Shares and the New Options in whole or in part at any time during the conversion/exercise period and (ii) the Preference Shares are freely transferable by the holders, we consider the terms of the Preference Shares are fair and reasonable so far as the Company and the Independent Shareholders are concerned.

4. Financial effects of the Disposal

Net asset value and net asset value per Share

As stated in the “Letter from the Board” contained in the Circular, based on the unaudited consolidated management accounts of HTH, the Board estimates that the Group will record a gain of approximately HK$17 million as a result of the Disposal and the net assets of the Group will be increased by approximately HK$17 million upon Completion. In respect of the increase in net assets immediately following the Completion, the net asset value per Share will have a positive effect given other things remain constant. In the event the Company fully exercises the conversion rights attaching to the 100 million Preference Shares and disposes of the 100 million Conversion Shares immediately after Completion, the gain or loss on the disposal of the 100 million Conversion Shares will depend on the then market price of the CSCP Shares.

– 29 –

LETTER FROM BARON

Earnings

As set out in the “Letter from the Board” contained in the Circular, the Group is expected to record a gain of approximately HK$17 million in relation to the Disposal. By holding the Preference Shares, the Group can earn an interest return of approximately HK$2 million per year. In the event the Company fully exercises the conversion rights attaching to the 100 million Preference Shares and disposes of the 100 million Conversion Shares immediately after Completion, the gain or loss on the disposal of the 100 million Conversion Shares will depend on the then market price of the CSCP Shares. As stated in the interim report in 2004, it is anticipated that the plant in Dongguan will commence production by the third quarter of 2005. Therefore, the Disposal will not have any material effect on the Group’s profit.

5. Conclusion

Having taken into account the above, in particular:

(a) The satisfaction of the consideration with the Preference Shares enables the Group continue to enjoy flexibility in participating in the waste incineration and process business and capture any upside gain by converting the Preference Shares and exercising the New Options;
(b) holding of Preference Shares could provide the Group with an opportunity to enjoy a stable dividend return with redemption in full amount at the end of the three-year period;
(c) the Disposal could allow the Group to allocate more human resources on the existing businesses of the Group and to identify suitable projects for diversification while at the same time continue to enjoy potential returns from the waste incineration and processing business through its interest in CSCP;
(d) the aggregate consideration for the Disposal was (i) negotiated on an arm’s length basis; (ii) HTH has net liabilities; and (iii) the Group will record a gain of approximately HK$17 million after the Disposal;
(e) The Group is earning a higher interest rate on the Preference Shares than the effective interest rates offered from the Group’s principal bankers and holders of Preference Shares have priority over shareholders of CSCP to receive return of capital as when winding up of CSCP;

– 30 –

LETTER FROM BARON

(f) the Board can exercise the conversion rights attaching to the Preference Shares and the New Options in whole or in part at any time during the conversion/exercise period and the Preference Shares are freely transferable by the holders, and
(g) the Disposal will have positive effect on the net asset value and net asset value per Share of the Group immediately following the Completion;

we consider that the Disposal on terms and conditions of the S&P Agreement and the exercise of the conversion/exercise rights attaching to the Preference Shares and the New Options are in the interest of the Company and the Independent Shareholders as a whole.

RECOMMENDATION

Having considered the above principal factors and reasons, we are of the opinion that the S&P Agreement and the exercise of the conversion rights attaching to the Preference Shares and the New Options are in the interests of the Company and the terms of which are fair and reasonable so far as Independent Shareholders are concerned. Accordingly, we advise the Independent Board Committee to recommend the Independent Shareholders to vote in favor of the relevant ordinary resolutions to be proposed at the EGM to approve the Disposal on terms and conditions of the S&P Agreement and the exercise of the conversion/exercise rights attaching to the Preference Shares and the New Options.

Yours faithfully,

For and on behalf of

Baron Capital Limited Chiu Sui Keung, Thomas Managing Director

– 31 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

1. SUMMARY OF FINANCIAL INFORMATION

The following is a summary of the audited consolidated profit and loss accounts and the assets and liabilities of the Group for the three years ended 31 March 2004:

RESULTS
Turnover
Cost of sales
Gross profit
(Loss)/Profit from operations
Finance costs
Share of results of associates
Share of results of a joint venture
(Loss)/Profit before taxation
Taxation
(Loss)/Profit before minority interests
Minority interests
Net (loss)/profit for the year
Dividends
Loss/earnings per share
– basic
ASSETS AND LIABILITIES
Total assets
Total liabilities
Minority interests
Shareholders’ funds

For the year ended 31 March
2004
2003
2002
HK$’000
HK$’000
HK$’000
166,243
199,722
106,217
(146,396)
(172,222)
(81,818)
19,847
27,500
24,399
(42,925)
(37,068)
2,862
(326)
(106)
(193)
(294)
(629)
–
(13,854)
(2,645)
–
(57,399)
(40,448)
2,669
(86)
(113)
(1,784)
(57,485)
(40,561)
885
287
6
–
(57,198)
(40,555)
885
–
–
–
(23.1 cents)
(18.5 cents)
0.5 cents
283,818
235,342
155,180
(64,171)
(51,536)
(49,396)
219,647
183,806
105,784
(247)
(484)
–
219,400
183,322
105,784

– 32 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

2. AUDITED FINANCIAL STATEMENTS

The following is an extract of the audited financial statements of the Group from the annual reports of the Company for the year ended 31 March 2004:

CONSOLIDATED INCOME STATEMENT

For the year ended 31 March 2004

Notes Turnover 4 Cost of sales Gross profit Other operating income 6 Selling expenses Administrative expenses Unrealised holding gains on listed other investments Unrealised holding loss on unlisted other investments Impairment losses 7 Loss from operations 8 Finance costs 10 Share of results of associates Share of results of a joint venture Loss before taxation Taxation 11 Loss before minority interests Minority interests Net loss for the year Dividends 12 Loss per share 13 – basic	2004 HK$’000 166,243 (146,396) 19,847 3,601 (585) (51,291) 7,513 – (22,010) (42,925) (326) (294) (13,854) (57,399) (86) (57,485) 287 (57,198) – (23.1 cents)	2003 HK$’000 199,722 (172,222) 27,500 3,009 (1,385) (64,204) 2,524 (2,500) (2,012) (37,068) (106) (629) (2,645) (40,448) (113) (40,561) 6 (40,555) – (18.5 cents)

– 33 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

CONSOLIDATED BALANCE SHEET

At 31 March 2004

Notes Non-current assets Property, plant and equipment 14 Goodwill 16 Interests in associates 17 Interest in a joint venture 18 Intangible asset 19 Other assets 20 Investments in securities 21 Retention money receivable 22 Investment deposits 31 Current assets Development rights 23 Inventories 24 Amounts due from customers for contract work 25 Progress payments receivable 26 Retention money receivable 22 Loans receivable 27 Amount due from an investee company 28 Amounts due from minority interests Amount due from an associate 29 Accounts receivable 30 Prepayments, deposits and other receivables Investment deposits 31 Taxation recoverable Pledged bank deposits 45 Bank balances and cash	2004 HK$’000 9,643 1,798 6,063 2,601 753 370 27,360 5,220 21,231 75,039 3,000 1,187 8,706 11,466 4,857 55,745 5,995 490 29 20,156 31,980 24,000 73 4,012 37,083 208,779	2003 HK$’000 11,638 23,433 6,357 16,455 1,004 205 23,143 8,996 –
		91,231
		– 5,388 4,180 16,480 1,304 18,192 5,995 490 – 6,474 9,124 22,000 43 10,951 43,490
		144,111

– 34 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

CONSOLIDATED BALANCE SHEET

At 31 March 2004

Notes Current liabilities Retention money payable 32 Accounts payable, other payables and accrued charges 33 Amounts due to associates 29 Bills payable Taxation payable Obligations under finance leases 34 Borrowings 35 Net current assets Minority interests Non-current liabilities Obligations under finance leases 34 Retention money payable 32 Deferred taxation 44 Total net assets Capital and reserves Share capital 36 Reserves 38 Shareholders’ funds	2004 HK$’000 1,710 53,122 2,080 75 551 235 4,466 62,239 146,540 247 180 1,750 2 1,932 219,400 32,227 187,173 219,400	2003 HK$’000 939 40,260 2,080 3,313 465 231 1,077
		48,365
		95,746
		484
		258 2,913 –
		3,171
		183,322

		22,380 160,942
		183,322

– 35 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

BALANCE SHEET

BALANCE SHEET
At 31 March 2004 Notes Non-current assets Property, plant and equipment 14 Investments in subsidiaries 15 Current assets Prepayments, deposits and other receivables Amounts due from subsidiaries net of allowances Bank balances and cash Current liabilities Other payables and accrued charges Unsecured bank borrowing Net current assets Total net assets Capital and reserves Share capital 36 Reserves 38 Shareholders’ funds	2004 HK$’000 102 14,796 14,898 510 203,686 51 204,247 486 – 486 203,761 218,659 32,227 186,432 218,659	2003 HK$’000 141 14,796
		14,937
		250 146,895 19,554
		166,699
		590 251
		841
		165,858
		180,795

		22,380 158,415
		180,795

– 36 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the year ended 31 March 2004

At 1 April 2002 Issue of new shares Share issue expenses Exchange difference arising on translation of financial statements of operations outside Hong Kong not recognised in the consolidated income statement Indemnity from former controlling shareholders (note 38) Net loss for the year At 31 March 2003 Issue of new shares Share issue expenses Net loss for the year At 31 March 2004	Share capital HK$’000 20,000 2,380 – – – – 22,380 9,847 – – 32,227	Share premium HK$’000 4,242 119,714 (4,595) – – – 119,361 85,939 (2,510) – 202,790	Special reserve HK$’000 (Note 38a) 13,524 – – – – – 13,524 – – – 13,524	Capital reserve HK$’000 (Note 38b) 1,848 – – – – – 1,848 – – – 1,848	Accumulated Translation profits reserve (losses) HK$’000 HK$’000 – 66,170 – – – – (37) – – 631 – (40,555) (37) 26,246 – – – – – (57,198) (37) (30,952)	Total HK$’000 105,784 122,094 (4,595) (37) 631 (40,555) 183,322 95,786 (2,510) (57,198) 219,400

– 37 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

CONSOLIDATED CASH FLOW STATEMENT

For the year ended 31 March 2004

Operating activities Loss before taxation Adjustments for: Impairment loss recognised in respect of goodwill Impairment loss recognised in respect of intangible asset Unrealised holding loss on unlisted other investments Unrealised holding gains on listed other investments Depreciation Interest income Unlisted investment income Interest expense Interest on obligations under finance leases Allowance for doubtful debts Bad debts written off Gain on disposal of investments in unlisted other investments Loss on disposal of property, plant and equipment Motor vehicle expenses settled through finance lease Share of results of associates Share of results of a joint venture Amortisation of goodwill Amortisation of intangible asset Operating cash flows before movements in working capital Decrease in inventories Increase in amounts due from customers for contract work Decrease in progress payments receivable Decrease in retention money receivable Increase in development rights (Increase) decrease in accounts receivable Increase in prepayments, deposits and other receivables Increase in amount due from an investee company Increase in amount due from an associate Decrease in amounts due to customers for contract work Decrease in retention money payable Increase in accounts payable, other payables and accrued charges Increase in amounts due to associates (Decrease) increase in bills payable Decrease in amount due to a director Cash used in operations Interest received Interest paid Interest on obligations under finance leases Hong Kong Profits Tax paid Net cash used in operating activities	2004 HK$’000 (57,399) 22,010 – – (7,513) 3,557 (2,635) – 310 16 187 11 (500) 103 18 294 13,854 1,501 251 (25,935) 4,201 (4,526) 5,014 223 (3,000) (8,060) (22,856) – (29) – (392) 12,662 – (3,238) – (45,936) 2,635 (310) (16) (82) (43,709)	2003 HK$’000 (40,448) 1,112 900 2,500 (2,524) 2,797 (1,282) (1,241) 87 19 1,469 951 – 23 – 629 2,645 1,067 476 (30,820) 93 (886) 6,386 2,650 – 4,728 (5,351) (5,995) – (3,542) (3,961) 1,358 2,080 2,414 (56) (30,902) 1,282 (87) (19) (34) (29,760)

– 38 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

CONSOLIDATED CASH FLOW STATEMENT

For the year ended 31 March 2004

Notes Investing activities Purchase of property, plant and equipment Purchase of subsidiaries 43 Purchase of investments in securities Purchase of intangible asset Investments in associates Investment in a joint venture Purchase of other assets Investment deposits paid Bank deposits released (pledged) Unlisted investment income Increase in loans receivable Proceeds from disposal of property, plant and equipment Net cash used in investing activities Financing activities Proceeds on issue of ordinary shares, net of issue expenses Indemnity from former controlling shareholders Repayment of short-term bank loans Repayment of obligations under finance leases Contribution from minority shareholders Net cash from financing activities Decrease in cash and cash equivalents Cash and cash equivalents at the beginning of the year Effect of foreign exchange rate changes Cash and cash equivalents at the end of the year Analysis of the balance of cash and cash equivalents Bank balances and cash Bank overdrafts	2004 HK$’000 (1,555) (1,965) (1,704) – – – (165) (23,231) 6,939 – (37,553) 36 (59,198) 93,276 – – (215) 50 93,111 (9,796) 42,413 – 32,617 37,083 (4,466) 32,617	2003 HK$’000 (11,862) (20,414) (20,619) (2,380) (7,000) (19,100) (205) (22,000) (10,951) 1,241 (18,192) 201 (131,281) 117,499 631 (288) (144) – 117,698 (43,343) 85,793 (37) 42,413 43,490 (1,077) 42,413

– 39 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

NOTES TO THE FINANCIAL STATEMENTS

For the year ended 31 March 2004

1. General

China Conservational Power Holdings Limited (formerly known as “Hong Tong Holdings Limited”) (the “Company”) was incorporated in the Cayman Islands on 2 January 2001 as an exempted company with limited liability under the Companies Law (2000 Revision) of the Cayman Islands.

The Company is an investment holding company. Its subsidiaries are principally engaged in electrical engineering contracting, trading of electrical equipment and materials, internet travel booking services, investment holding, securities brokerage, company secretarial services and sea freight forwarding services. Its shares have been listed on The Stock Exchange of Hong Kong Limited (the “Stock Exchange”) since 3 May 2001.

2. Adoption of Hong Kong Financial Reporting Standard

In the current year, the Company and its subsidiaries (collectively referred as the “Group”) have adopted, for the first time, the following Hong Kong Financial Reporting Standard (“HKFRS”) issued by the Hong Kong Society of Accountants (“HKSA”). The term of HKFRS is inclusive of Statements of Standard Accounting Practice (“SSAP”s) and Interpretations approved by the HKSA.

Income taxes

The principal effect of the adoption of SSAP 12 (Revised) is in relation to deferred tax. In previous years, partial provision was made for deferred tax using the income statement liability method under which a liability was recognised in respect of timing differences arising, except where those timing differences were not expected to reverse in the foreseeable future. SSAP 12 (Revised) requires the adoption of a balance sheet liability method, whereby deferred tax is recognised in respect of all temporary differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, with limited exceptions. The adoption of SSAP 12 (Revised) has had no material effect on the results for the current or prior accounting periods. Accordingly, no prior period adjustment has been required.

3. Significant Accounting Policies

The financial statements have been prepared under the historical cost convention as modified for the revaluation of certain investments in securities.

– 40 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

The financial statements have been prepared in accordance with accounting principles generally accepted in Hong Kong. The principal accounting policies adopted are as follows:

Basis of consolidation

The consolidated financial statements incorporate the financial statements of the Company and its subsidiaries made up to 31 March each year.

The results of subsidiaries acquired during the year are included in the consolidated income statement from the effective date of acquisition.

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

Investments in subsidiaries

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

Interests in associates

An associate is an enterprise over which the Group is in a position to exercise significant influence, including participation in financial and operating policy decisions.

The consolidated income statement includes the Group’s share of the post-acquisition results of its associates for the year. In the consolidated balance sheet, the interests in associates are stated at the Group’s share of net assets of the associates less any identified impairment loss.

Joint ventures

A joint venture is a contractual arrangement whereby two or more parties undertake economic activities which are subject to joint control.

Joint venture arrangements which involve the establishment of a separate entity in which each venturer has an interest are referred to as jointly controlled entities.

The Group’s interests in jointly controlled entities are included in the consolidated balance sheet at the Group’s share of the net assets of the jointly controlled entities, less any identified impairment loss. The Group’s share of the post-acquisition results of its jointly controlled entities is included in the consolidated income statement.

– 41 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Investments in securities

Investments in securities are recognised on a trade-date basis and are initially measured at cost.

At subsequent reporting dates, other investments are measured at fair value, with unrealised gains and losses included in net profit or loss for the year.

Revenue recognition

Revenue on installation contracts is recognised using the percentage of completion method by reference to the value of work carried out during the year.

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

Revenue from sea freight forwarding is recognised when the services are rendered, which generally coincides with the time of shipment.

Income from investments is recognised when the Group’s rights to receive payment have been established.

Brokerage commission income is recognised on a trade date basis when services are rendered.

Securities handling charges are recognised when services are rendered.

Service income is recognised when services are rendered.

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

Goodwill

Goodwill represents the excess of the purchase consideration over the fair value ascribed to the Group’s share of the identifiable net assets at the date of acquisition of a subsidiary. Negative goodwill represents the excess over the purchase consideration of the fair value ascribed to the Group’s share of the identifiable net assets at the date of acquisition of a subsidiary.

– 42 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Goodwill arising on acquisition is capitalised and amortised over its estimated useful life. Negative goodwill arising on acquisition 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.

Upon the disposal of an investment in a subsidiary, the remaining balances of goodwill (positive and negative) attributable to the subsidiary is included in the determination of profit or loss on disposal.

Property, plant and equipment

Property, plant and equipment is stated at cost less accumulated depreciation and impairment loss.

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

Leasehold improvements	20%
Furniture and fixtures	25%
Other equipment	25%
Motor vehicles	25%

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

Inventories

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

Installation contracts

When the outcome of an installation contract can be estimated reliably, contract revenue and costs are recognised in the income statement by reference to the stage of completion of the contract activity at the balance sheet date, as measured by surveys on work performed.

– 43 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

When the outcome of an installation contract cannot be estimated reliably, revenue is recognised only to the extent of contract costs incurred that is probable will be recoverable and contract costs are recognised as an expense in the period in which they are incurred.

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

Intangible asset

The intangible asset represents one trading right in the Stock Exchange which is stated at cost less accumulated amortisation and impairment loss. Amortisation is provided for to write off the cost of the asset over its estimated useful life, which is 5 years.

Development rights

Development rights held for resale are stated at the lower of cost or net realisable value.

Impairment

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

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

Taxation

Income tax expense represents the sum of the tax currently payable and deferred tax.

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

– 44 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

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

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

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

Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised. Deferred tax is charged or credited to the income statement, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity.

Leases

Leases are classified as finance leases whenever the terms of the leases transfer substantially all the risks and rewards of ownership of the leased assets to the Group. Assets held under finance leases are capitalised at their fair value at the date of acquisition. The corresponding principal portions of leasing commitments are shown as obligations under finance leases. The finance costs, which represent the difference between the total leasing commitments and the original principal outstanding at the inception of the leases, are charged to the income statement over the period of the relevant leases so as to produce a constant periodic rate of charge on the remaining balances of the obligations for each accounting period.

All other leases are classified as operating leases and their rentals payable are charged to the income statement on a straight line basis over the term of the relevant lease.

– 45 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Retirement benefit schemes

The retirement benefit costs charged in the income statement represent the contributions payable in respect of the current year to the Group’s defined contribution schemes.

Foreign currencies

Transactions in currencies other than Hong Kong dollars are initially recorded at the rates prevailing on the dates of the transactions. Monetary assets and liabilities denominated in such currencies are retranslated at the rates prevailing on the balance sheet date. Gains and losses arising on exchange are dealt with in the income statement.

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

4. TURNOVER

Turnover represents the aggregate of the value of contract work carried out, sea freight forwarding service income, the proceeds from sales of goods, brokerage income, margin interest earned, company secretarial service income and internet travel booking service income during the year, and is analysed as follows:

Electrical engineering contracting Sea freight forwarding service income Sales of goods Brokerage income from securities dealing Margin interest from securities brokerage business Company secretarial service income Internet travel booking service income	2004 HK$’000 104,812 34,637 19,782 4,960 1,400 642 10 166,243	2003 HK$’000 168,749 – 29,741 516 520 – 196
		199,722

– 46 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

5. Business And Geographical Segments

(a) Business segments

For management purposes, the Group is currently organised into five operating divisions. These divisions are the bases on which the Group reports its primary segment information. Principal activities are as follows:

Electrical engineering contracting
Sale of electrical goods
Securities brokerage
Sea freight forwarding services
Internet travel booking services

==> picture [370 x 207] intentionally omitted <==

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

Sea Internet
Electrical Sale of freight travel
engineering electrical Securities forwarding booking
contracting goods brokerage services services Others Eliminations Consolidated
HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
For the year ended
31 March 2004
TURNOVER
External sales 104,812 19,782 6,360 34,637 10 642 – 166,243
Inter-segment sales – 7,078 4 – – 78 (7,160) –
Total revenue 104,812 26,860 6,364 34,637 10 720 (7,160) 166,243
----- End of picture text -----

Inter-segment sales are charged at prevailing market rates.

– 47 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Electrical engineering contracting HK$’000 RESULTS Segment results 154 Other operating income Unrealised holding gains on listed other investments Unallocated expenses Loss from operations Finance costs Share of results of associates Share of results of a joint venture Loss before taxation Taxation Loss before minority interests Minority interests Net loss for the year	Sale of electrical goods HK$’000 722	Securities brokerage HK$’000 1,276	Sea freight forwarding services HK$’000 111	Internet travel booking services HK$’000 (23,964)	Others HK$’000 (291)	Eliminations Consolidated HK$’000 HK$’000 – (21,992) 3,334 7,513 (31,780) (42,925) (326) (294) (13,854) (57,399) (86) (57,485) 287 (57,198)	Eliminations Consolidated HK$’000 HK$’000 – (21,992) 3,334 7,513 (31,780) (42,925) (326) (294) (13,854) (57,399) (86) (57,485) 287 (57,198)
							(42,925) (326) (294) (13,854)
							(57,399) (86)
							(57,485) 287
							(57,198)

– 48 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

						Sea	Internet
		Electrical		Sale of		freight	travel
	engineering			electrical	Securities	forwarding	booking
		contracting		goods	brokerage	services	services	Others	Unallocated	Consolidated
		HK$’000		HK$’000	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000
As at 31 March 2004
ASSETS
Segment assets		31,224		5,902	30,330	1,660	1,122	1,987	–	72,225
Interests in associates										6,063
Interest in a joint
venture										2,601
Unallocated corporate
assets										202,929
Consolidated total
assets										283,818
LIABILITIES
Segment liabilities		24,992		3,750	14,331	225	7,726	237	–	51,261
Unallocated corporate
liabilities										12,910
Consolidated total
liabilities										64,171
OTHER INFORMATION
Additions of property,
plant and equipment
and intangible assets			12	278	484	–	–	1,899	1,059	3,732
Amortisation of goodwill
and trading right			–	–	251	–	1,423	78	–	1,752
Depreciation			338	139	375	–	257	4	2,444	3,557
Impairment losses
recognised in
income statement			–	–	–	–	22,010	–	–	22,010
Allowance for doubtful debts			–	187	–	–	–	–	–	187
Bad debts written off			–	–	–	–	–	11	–	11
Loss on disposal of property,
plant and equipment			–	99	–	–	–	–	4	103

– 49 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Electrical Sale of engineering electrical Securities contracting goods brokerage HK$’000 HK$’000 HK$’000 For the year ended 31 March 2003 TURNOVER External sales 168,749 29,741 1,036 Inter-segment sales – 21,065 – Total revenue 168,749 50,806 1,036 Inter-segment sales are charged at prevailing market rates. RESULTS Segment results (717) (2,884) (3,347) Other operating income Unrealised holding gains on listed other investments Unrealised holding loss on unlisted other investments Unallocated expenses Loss from operations Finance costs Share of results of associates Share of results of a joint venture Loss before taxation Taxation Loss before minority interests Minority interests Net loss for the year	Internet travel booking services HK$’000 196 – 196 (2,958)	Eliminations HK$’000 – (21,065) (21,065) –	Consolidated HK$’000 199,722 – 199,722 (9,906) 2,884 2,524 (2,500) (30,070) (37,068) (106) (629) (2,645) (40,448) (113) (40,561) 6 (40,555)

– 50 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Internet Electrical Sale of travel engineering electrical Securities booking contracting goods brokerage services Unallocated HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 As at 31 March 2003 ASSETS Segment assets 32,058 13,122 11,347 24,220 – Interests in associates Interest in a joint venture Unallocated corporate assets Consolidated total assets LIABILITIES Segment liabilities 26,911 6,190 768 6,874 – Unallocated corporate liabilities Consolidated total liabilities OTHER INFORMATION Additions of property, plant and equipment and intangible assets 480 141 3,871 26,392 10,227 Amortisation of goodwill and trading right – – 476 1,067 – Depreciation 283 238 197 232 1,847 Impairment losses recognised in income statement – – 900 1,112 – Allowance for doubtful – 1,469 – – – debts Bad debts written off 499 452 – – – Loss on disposal of property, plant and equipment – – – – 23	Consolidated HK$’000 80,747 6,357 16,455 131,783
	235,342

	40,743 10,793
	51,536

	41,111 1,543 2,797 2,012 1,469 951 23

– 51 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(b) Geographical segments

The Group’s operations are located in Hong Kong and the People’s Republic of China (the “PRC”). The Group’s electrical engineering contracting, sales of electrical goods, securities brokerage and sea freight forwarding services are located in Hong Kong. Internet travel booking services are located in the PRC.

Over 90% of the Group’s revenues during the two years ended 31 March 2004 were from Hong Kong. Accordingly, no geographical information on revenue is presented.

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

Hong Kong The PRC Others	Carrying amount of consolidated total assets At 31 March 2004 2003 HK$’000 HK$’000 203,662 150,833 80,083 84,466 283,745 235,299 73 43 283,818 235,342	Additions to property, plant, equipment and intangible assets For the year ended 31 March 2004 2003 HK$’000 HK$’000 3,732 14,719 – 26,392 3,732 41,111 – – 3,732 41,111	Additions to property, plant, equipment and intangible assets For the year ended 31 March 2004 2003 HK$’000 HK$’000 3,732 14,719 – 26,392 3,732 41,111 – – 3,732 41,111
			41,111 –
			41,111

– 52 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

6. Other Operating Income

Other operating income includes: Exchange gain Gain on disposal of investments in unlisted other investments Handling charges Interest income Unlisted investment income Sundry income 7. Impairment Losses Impairment losses in respect of: Trading right in respect of securities trading Goodwill arising from acquisition of subsidiaries_(Note 16)_	2004 HK$’000 – 500 267 2,635 – 199 3,601 2004 HK$’000 – 22,010 22,010	2003 HK$’000 48 – 125 1,282 1,241 313
		3,009

		2003 HK$’000 900 1,112
		2,012

– 53 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

8. Loss From Operations

2004 HK$’000 Loss from operations has been arrived at after charging: Allowance for doubtful debts 187 Amortisation of goodwill arising on acquisition of subsidiaries included in administrative expenses_(Note 16) 1,501 Amortisation of trading right in respect of securities trading included in administrative expenses(Note 19) 251 Auditors’ remuneration 484 Bad debts written off 11 Cost of inventories recognised as expense 13,140 Depreciation of property, plant and equipment Owned assets 3,387 Assets under finance leases 170 Exchange losses 105 Loss on disposal of property, plant and equipment 103 Operating lease rentals in respect of – rented premises 4,497 – motor vehicles 647 Staff costs Directors’ remuneration(Note 9) –fees 179 –other emoluments 5,926 –_retirement benefit scheme contributions 38 6,143 Other staff costs 17,870 Other staff retirement benefit scheme contributions 595 18,465 Total staff cost 24,608	2003 HK$’000 1,469 1,067 476 616 951 34,244 2,734 63 614 23 5,552 173 327 10,608 148
	11,083
	15,096 576
	15,672
	26,755

– 54 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

9. Directors’ and Employees’ emoluments

(a) Directors’ emoluments

Fees: Executive directors Independent non-executive directors Other emoluments for executive directors: Salaries and other benefits Performance related incentive payment Contributions to retirement benefit schemes	2004 HK$’000 – 179 179 5,926 – 38 5,964 6,143	2003 HK$’000 – 327
		327
		9,088 1,520 148
		10,756
		11,083

Note: The directors’ salaries and other benefits include operating lease rentals amounting to HK$2,218,000 (2003: HK$2,373,000) in respect of rented premises provided to directors. The amounts are also included in the minimum lease payments paid in respect of rented premises under note 8 above.

The emoluments of the directors were within the following bands:

Nil to HK$1,000,000 HK$1,000,001 to HK$1,500,000 HK$1,500,001 to HK$2,000,000 HK$3,000,001 to HK$3,500,000 HK$3,500,001 to HK$4,000,000	2004 Number of directors 7 1 – – 1 9	2003 Number of directors 9 – 2 1 –
		12

– 55 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(b) Employees’ emoluments

Of the five individuals with the highest emoluments of the Group, three (2003: three) were directors of the Company whose emoluments are included in the disclosures in (a) above. The emoluments of the remaining two (2003: two) highest paid individuals were as follows:

Salaries and benefits Contributions to retirement benefit schemes	2004 HK$’000 2,142 47 2,189	2003 HK$’000 4,295 129
		4,424

The emoluments of the employees were within the following bands:

Nil to HK$1,000,000 HK$1,000,001 to HK$1,500,000 HK$3,500,001 to HK$4,000,000	2004 Number of directors 1 1 – 2	2003 Number of directors 1 – 1
		2

Note: During the year ended 31 March 2003, two directors of the Company resigned and remained as employees of the Group. Their remuneration as directors amounting to HK$3,530,000 already disclosed in (a) above have also been taken into account with other remuneration received as employees of the Group for the determination of the two highest paid individuals during the year ended 31 March 2003. Accordingly, the remuneration of the remaining two highest paid individuals as disclosed above includes their remuneration as directors of HK$3,530,000.

– 56 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

10. Finance costs

Interest on bank borrowings and overdrafts wholly repayable within five years Interest on obligations under finance leases 11. Taxation The charge comprises: Company and subsidiaries Hong Kong Profits Tax Current year Overprovision in prior years Share of taxation attributable to the associates Taxation in other jurisdictions	2004 HK$’000 310 16 326 2004 HK$’000 324 (238) 86 – 86	2003 HK$’000 87 19 106 2003 HK$’000 465 (366) 99 14 113

Hong Kong Profits Tax is calculated at 17.5% (2003: 16%) of the estimated assessable profit for the year.

Taxation in other jurisdictions is calculated at the rates prevailing in the respective jurisdictions.

– 57 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

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

2004 HK$’000 % Loss before taxation 57,399 Tax credit at the domestic income tax rate of 17.5% (2003: 16%) 10,045 17.5 Tax effect of share of results of associates (51) (0.1) Tax effect of share of results of a joint venture (2,425) (4.2) Tax effect of expenses that are not deductible in determining taxable profit (4,292) (7.5) Tax effect of income that is not taxable in determining taxable profit 1,411 2.5 Tax effect of tax losses not recognised (5,377) (9.4) Tax effect of tax losses utilised but not previously recognised 256 0.5 Effect of different tax rates of subsidiaries operating in other jurisdictions 82 0.1 Overprovision in prior years 238 0.4 Others 27 0.1 Taxation charge for the year (86) (0.1)	HK$’000 40,448 6,472 (115) (423) (946) 297 (5,476) – 129 366 (417) (113)	2003 % 16.0 (0.3) (1.1) (2.3) 0.7 (13.5) – 0.3 0.9 (1.0) (0.3)

Details of deferred taxation are disclosed in note 44 to the financial statements.

12. Dividends

No dividend has been paid or declared by the Company during the year.

The directors do not recommend the payment of a final dividend.

– 58 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

13. Loss per share

The calculation of the basic loss per share is based on the following data:

Loss for the purposes of basic loss per share Weighted average number of ordinary shares for the purposes of basic loss per share	2004 HK$’000 (57,198) ’000 247,697	2003 HK$’000 (40,555) ’000 218,649

No diluted loss per share has been presented as the exercise of the Company’s outstanding share options would result in a decrease in the loss per share.

14. Property, plant and equipment

Leasehold improvements HK$’000 THE GROUP COST At 1 April 2003 5,421 Additions 987 Acquired on acquisition of subsidiaries – Disposals (121) At 31 March 2004 6,287 DEPRECIATION At 1 April 2003 995 Provided for the year 1,142 Acquired on acquisition of subsidiaries – Eliminated on disposals (103) At 31 March 2004 2,034 NET BOOK VALUES At 31 March 2004 4,253 At 31 March 2003 4,426	Furniture and fixtures HK$’000 5,522 42 3 (87) 5,480 2,184 1,162 – (70) 3,276 2,204 3,338	Office equipment HK$’000 3,933 82 22 (180) 3,857 2,031 619 2 (140) 2,512 1,345 1,902	Motor vehicles HK$’000 2,479 722 – (375) 2,826 507 634 – (156) 985 1,841 1,972	Total HK$’000 17,355 1,833 25 (763) 18,450 5,717 3,557 2 (469) 8,807 9,643 11,638

– 59 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

The net book value of motor vehicles of HK$1,841,000 (2003: HK$1,972,000) as at the balance sheet date included an amount of HK$530,000 (2003: HK$559,000) in respect of assets held under finance leases.

		Office
		equipment
		HK$’000
	THE COMPANY
	COST
	At 1 April 2003 and at 31 March 2004	157
	DEPRECIATION
	At 1 April 2003	16
	Provided for the year	39
	At 31 March 2004	55
	NET BOOK VALUES
	At 31 March 2004	102
	At 31 March 2003	141
15.	Investments in Subsidiaries
		THE COMPANY
		2004 & 2003
		HK$’000
	Unlisted shares	14,796

The carrying value of the unlisted shares is based on the fair values of the underlying net assets of the subsidiaries at the time they became members of the Group under the corporate reorganisation in April 2001 less any pre-acquisition dividend received.

Particulars of the Company’s principal subsidiaries at 31 March 2004 are set out in note 49.

– 60 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

16. Goodwill

	THE GROUP
	HK$’000
COST
At 1 April 2003	25,612
Arising on acquisition of subsidiaries during the year	1,876
At 31 March 2004	27,488
AMORTISATION AND IMPAIRMENT
At 1 April 2003	2,179
Charge for the year	1,501
Impairment loss recognised for the year	22,010
At 31 March 2004	25,690
NET BOOK VALUES
At 31 March 2004	1,798
At 31 March 2003	23,433

The amortisation period adopted for goodwill is 20 years.

As at the balance sheet date, an impairment loss of HK$22,010,000 (2003: HK$1,112,000) has been recognised in respect of the goodwill arising from the acquisition of internet travel booking business as the directors considered that the recoverable amount of the goodwill is minimal due to its continuing operating losses.

17. Interests in Associates

	THE GROUP	THE GROUP
	2004	2003
	HK$’000	HK$’000
Share of net assets	6,063	6,357

– 61 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Particulars of the associates as at 31 March 2004 are as follows:

	Form of	Place of		Percentage
	business	incorporation/	Class of	of equity	Principal
Name of associate	structure	operation	shares held	interest held	activities
Goldluck Investment	Incorporated	Hong Kong/	Ordinary	50%	Inactive
Limited		Hong Kong
Bright Rich International	Incorporated	Hong Kong/	Ordinary	50%	Inactive
Limited		Hong Kong
Sharpway Enterprises	Incorporated	British Virgin	Ordinary	50%	Inactive
Limited		Islands/
		The PRC

18. Interest in a joint venture

	THE GROUP	THE GROUP
	2004		2003
	HK$’000	HK$’000
Share of net assets	2,601		16,455

As at 31 March 2004, the Company had an interest in the following joint venture:

				Attributable
	Form of	Place of		equity
	business	incorporation	Class of	interest held	Principal
Name of company	structure	and operation	capital held	by the Group	activities
Dagong Credit	Incorporated	The PRC	Registered	50%	Provision
Information			Capital		of credit
Service					information
Co., Ltd.					rating
大公信用信息服務					services in
有限公司					the PRC

– 62 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

19. Intangible asset

	THE GROUP
	HK$’000
COST
At 1 April 2003 and at 31 March 2004	2,380
AMORTISATION AND IMPAIRMENT
At 1 April 2003	1,376
Charge for the year	251
At 31 March 2004	1,627
NET BOOK VALUES
At 31 March 2004	753
At 31 March 2003	1,004

The intangible asset represents one trading right in the Stock Exchange. For the year ended 31 March 2003, an impairment loss of HK$900,000 was recognised for the intangible asset by reference to the market value of that trading right.

20. Other assets

The Stock Exchange – Compensation fund deposits – Fidelity fund deposits – Stamp duty deposits Hong Kong Securities Clearing Company Limited – Guarantee fund contribution – Admission fees At 31 March	THE GROUP 2004 2003 HK$’000 HK$’000 50 50 50 50 30 5 190 50 50 50 370 205	THE GROUP 2004 2003 HK$’000 HK$’000 50 50 50 50 30 5 190 50 50 50 370 205
		205

– 63 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

21. Investments in securities

Other investments Equity securities: Listed, Hong Kong Unlisted At 31 March Market value of listed securities 22. Retention money receivable Retention money receivable _Less:_Amounts receivable within one year included in current assets Amounts receivable after one year	THE GROUP 2004 2003 HK$’000 HK$’000 16,660 7,443 10,700 15,700 27,360 23,143 16,660 7,443 THE GROUP 2004 2003 HK$’000 HK$’000 10,077 10,300 (4,857) (1,304) 5,220 8,996

The amounts represent retention money in respect of the progress payments receivable on contract work.

23. Development rights

The carrying amount represents the consideration paid by the Group for the acquisition of the development rights of a piece of land under a medium term lease in the New Territories, Hong Kong. The rights are held for resale.

– 64 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

24. Inventories

	THE GROUP	THE GROUP
	2004	2003
	HK$’000	HK$’000
Finished goods	1,187	5,388

Included above are finished goods of nil (2003: HK$894,000) which were carried at net realisable value as at the balance sheet date.

25. Amounts due from customers for contract work

Contract costs incurred plus recognised profits less recognised losses _Less:_Progress billings	THE GROUP 2004 2003 HK$’000 HK$’000 142,599 247,147 (133,893) (242,967 8,706 4,180	THE GROUP 2004 2003 HK$’000 HK$’000 142,599 247,147 (133,893) (242,967 8,706 4,180
		4,180

26. Progress payments receivable

The aged analysis of progress payments receivable is as follows:

0 to 30 days 31 to 60 days 61 to 90 days 91 to 180 days More than 180 days	THE GROUP 2004 2003 HK$’000 HK$’000 9,162 12,773 428 179 – 109 – 297 1,876 3,122 11,466 16,480	THE GROUP 2004 2003 HK$’000 HK$’000 9,162 12,773 428 179 – 109 – 297 1,876 3,122 11,466 16,480
		16,480

– 65 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

27. Loans receivable

Loans receivable, interest bearing Margin receivables_(Note)_	THE GROUP 2004 2003 HK$’000 HK$’000 38,795 9,444 16,950 8,748 55,745 18,192	THE GROUP 2004 2003 HK$’000 HK$’000 38,795 9,444 16,950 8,748 55,745 18,192
		18,192

Note: Margin receivables represent loans to securities margin clients which are secured by clients’ pledged securities. These are repayable on demand and bear interest at prevailing market rates. In the opinion of the Directors, no aged analysis is disclosed as the aged analysis does not give additional value.

28. Amount due from an investee company

The amount due from an investee is unsecured, interest bearing and has no fixed terms of repayment.

29. Amounts due from (to) associates

The amounts due from (to) associates are unsecured, interest free and have no fixed terms of repayment.

30. Accounts receivable

The credit period allowed by the Group to its customers is normally 90 days.

The aged analysis of accounts receivable is as follows:

0 to 30 days 31 to 60 days 61 to 90 days 91 to 180 days More than 180 days	THE GROUP 2004 2003 HK$’000 HK$’000 12,513 2,930 1,226 1,203 5,864 1,469 305 427 248 445 20,156 6,474	THE GROUP 2004 2003 HK$’000 HK$’000 12,513 2,930 1,226 1,203 5,864 1,469 305 427 248 445 20,156 6,474
		6,474

– 66 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

31. Investment deposits

Investment deposits comprise of: Deposit for acquisition of an investment engaged in technology development for application in waste incineration and process_(note a) Deposit for investment engaged in operating container depots and provision of logistics management services business(note b) Deposit for formation of a joint venture(note c) Deposit for acquisition of other investments(note d) Deposit for acquisition of interests in a PRC company(note e)_ Carrying amount analysed for reporting purposes as: Current assets Non-current assets	THE GROUP 2004 2003 HK$’000 HK$’000 10,000 – 21,231 – 10,000 10,000 4,000 – – 12,000 45,231 22,000 24,000 22,000 21,231 – 45,231 22,000	THE GROUP 2004 2003 HK$’000 HK$’000 10,000 – 21,231 – 10,000 10,000 4,000 – – 12,000 45,231 22,000 24,000 22,000 21,231 – 45,231 22,000
		22,000

		22,000 –
		22,000

Notes:

(a) The deposit was paid in accordance with a deposit payment agreement entered into on 9 March 2004 with an independent third party in connection with the proposed acquisition of a 32.89% interest in a PRC company, which holds certain technology for application in waste incineration and processing. The Group has commenced but yet to complete the due diligence exercise in respect of the affairs of the PRC company within three months from the date of the letter of intent which was entered into on 17 February 2004. The deposit is refundable should the Group be not satisfied with the results of the due diligence exercise. The completion of the due diligence exercise and the proposed acquisition was extended to 9 September 2004 (Note 48 (c)).
(b) On 29 March 2004, the Group entered into a conditional agreement with an independent third party to acquire a 40% interest in and an account receivable from a company which holds effectively 100% interest in a PRC company operating container depots and the provision of logistics management services for a consideration of HK 28,000,000, against which a deposit of HK$21,231,000 was paid. The transaction was completed in April 2004.

– 67 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

(c) The deposit for formation of a joint venture represents the amount paid in May 2002 under a letter of intent to the PRC party to a joint venture for the formation of a Sino-foreign joint venture in the PRC, in which the Group will own 49%. The joint venture is to be principally engaged in consultancy and advisory services in respect of various construction engineering. Under the joint venture agreement entered into on 19 December 2002, the Group is required to invest RMB4,802,000 (approximately HK$4,530,000) in the joint venture upon the granting of the business licence of the joint venture. The funds required for the capital injection to the joint venture will be out of the deposit paid. The balance of the deposit together with interest at the rate of 1.75% per annum will be refunded. As at the date of this report, the business licence has not been granted.
(d) The deposit represents the amounts for the intended acquisition of the investments which were subsequent cancelled after the balance sheet date and the deposit was refunded.
(e) At 31 March 2003, the amount represented the deposit paid to a PRC company in accordance with a letter of intent dated 5 August 2002 relating to the investment in not more than 24.9% of the enlarged equity interest in the PRC company, which was entered into between the PRC company and a subsidiary of the Company. On 5 May 2003, the Group served a written notice to the PRC company to suspend the proposed investment. The investment deposit paid together with interest thereon was recovered during the year.

32. Retention money payable

Retention money payable _Less:_Amounts payable within one year included in current liabilities Amounts payable after one year	THE GROUP 2004 2003 HK$’000 HK$’000 3,460 3,852 (1,710) (939) 1,750 2,913

The amounts represent retention money payable to subcontractors on contract work.

– 68 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

33. Accounts payable, other payables and accrued charges

Included in accounts payable, other payables and accrued charges are trade creditors amounting to HK$14,548,000 (2003: HK$8,002,000). The aged analysis of trade creditors is as follows:

0 to 30 days 31 to 60 days 61 to 90 days 91 to 180 days More than 180 days	THE GROUP 2004 2003 HK$’000 HK$’000 4,474 3,531 2,466 1,556 2,765 1,085 1,264 810 3,579 1,020 14,548 8,002	THE GROUP 2004 2003 HK$’000 HK$’000 4,474 3,531 2,466 1,556 2,765 1,085 1,264 810 3,579 1,020 14,548 8,002
		8,002

34. Obligations under finance leases

THE GROUP

Amounts payable under finance leases: Within one year More than one year but not exceeding two years More than two years but not exceeding five years _Less:_Future finance charges Present value of lease obligations _Less:_Amounts due for settlement within one year Amounts due for settlement after one year	Minimum lease payments 2004 2003 HK$’000 HK$’000 252 248 166 189 27 84 445 521 (30) (32) 415 489	Present value of minimum lease payments 2004 2003 HK$’000 HK$’000 235 231 155 178 25 80 415 489 – – 415 489 (235) (231 180 258	Present value of minimum lease payments 2004 2003 HK$’000 HK$’000 235 231 155 178 25 80 415 489 – – 415 489 (235) (231 180 258
			489 –
			489 (231
			258

– 69 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

35. Borrowings

Bank overdraft Secured Unsecured 36. Share capital Shares of HK$0.10 each Authorised: Balance as at 1 April 2002, 31 March 2003 and 31 March 2004 Issued and fully paid: Balance as at 1 April 2002 Shares issued on 19 June 2002_(note 1) Balance as at 31 March 2003 Shares issued on 21 October 2003(note 2) Shares issued on 5 March 2004(note 3)_ Balance as at 31 March 2004	THE GROUP 2004 2003 HK$’000 HK$’000 4,466 1,077 4,466 827 – 250 4,466 1,077 Number of shares Amount HK$’000 1,000,000,000 100,000 200,000,000 20,000 23,800,000 2,380 223,800,000 22,380 44,760,000 4,476 53,712,000 5,371 322,272,000 32,227	THE GROUP 2004 2003 HK$’000 HK$’000 4,466 1,077 4,466 827 – 250 4,466 1,077 Number of shares Amount HK$’000 1,000,000,000 100,000 200,000,000 20,000 23,800,000 2,380 223,800,000 22,380 44,760,000 4,476 53,712,000 5,371 322,272,000 32,227

		827 250
		1,077

		Amount HK$’000 100,000

		20,000 2,380
		22,380 4,476 5,371
		32,227

Notes:

On 19 June 2002, the Company placed a total of 23,800,000 new shares of HK$0.10 each of the Company at a consideration of HK$5.13 per share, through Kingston Securities Limited and Sanfull Securities Limited, to independent investors pursuant to the placing and underwriting agreement dated 21 May 2002. The net proceeds of the placing amounted to approximately HK$118 million, of which up to approximately HK$50 million was to be retained for the business operation of a new joint venture company to be established in the PRC and the remaining balance of approximately HK$68 million was to be retained for the future operation of a new securities firm established by the Company in Hong Kong. The new shares issued rank pari passu with the then existing shares in issue in all respects.

– 70 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

On 21 October 2003, the Company placed a total of 44,760,000 new shares of HK$0.10 each of the Company at a consideration of HK$1.18 per share, through Sanfull Securities Limited, to independent investors pursuant to the placing and underwriting agreement dated 19 September 2003. The net proceeds of the placing amounted to approximately HK$51.1 million and will be used for making future investments, inter alia, the acquisition of the proposed investment in a company incorporated in the British Virgin Islands, which has no assets and business operations and is a special purpose vehicle for entering into the co-operation agreement with a PRC party which is a specialist in waste processing and disposal in the PRC. In the event that no appropriate investment opportunity is identified, the net proceeds will be retained by the Group for general working capital purpose. The new shares issued rank pari passu with the then existing shares in issue in all respects.
On 5 March 2004, the Company placed a total of 53,712,000 new shares of HK$0.10 each of the Company at a consideration of HK$0.80 per share, through Kingston Securities Limited, to independent investors pursuant to the placing underwriting agreement dated 17 February 2004. The net proceeds of the placing amounted to approximately HK$41.6 million and will be applied towards partial funding the Group’s portion of capital contribution to a joint venture to be established for the waste incineration and processing business. The new shares issued rank pari passu with the then existing shares in issue in all respects.

37. Share options

The Company had a share option scheme (the “2001 share option scheme”) which was adopted on 3 April 2001. Pursuant to a shareholders’ resolution dated 12 February 2003, the 2001 share option scheme enabling the directors to grant options to employees, including executive directors of the Company and its subsidiaries, to subscribe for shares of the Company was terminated.

A new share option scheme (the “New Option Scheme”) was approved and adopted by the shareholders of the Company on 12 February 2003. The New Option Scheme is valid and effective for a period of 10 years after the date of adoption. Outstanding options granted pursuant to the 2001 share option scheme shall continue to be subject to the provisions of the 2001 share option scheme and the adoption of the New Option Scheme will not in any event affect the terms of the grant of such outstanding options.

Under the terms of the New Option Scheme, the directors of the Company may, at their discretion, grant options to the full-time employees, including executive directors of the Company and its subsidiaries, to subscribe for shares of the Company for recognition of their contribution as incentives or rewards. Options granted must be taken up within 30 days of the date of grant. A nominal consideration of HK$1 is payable on acceptance of the grant of an option which will entitle the holders to subscribe for shares of the Company during a period of 5 years commencing on the date of acceptance of the option at a price not less than the higher of (i) the nominal value of the shares of the Company, (ii) the closing price of the shares of the Company on the Stock Exchange on the date of grant and (iii) the average of the closing prices of the shares of the Company on the Stock Exchange for the five trading days immediately preceding the date of the grant of the option. The maximum number of shares which may be issued upon the exercise of all

– 71 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

outstanding options granted and yet to be exercised under the New Option Scheme and any other schemes of the Company must not exceed 30% of the shares of the Company in issue from time to time. Subject to the shareholders’ approval, the maximum number of shares in respect of which options may be granted under the New Option Scheme shall not exceed 10% of the shares in issue as at the date of the approval, or the maximum number of shares in respect of which options may be granted to any employee may not exceed 1% of the shares in issue from time to time in a 12-month period. Subject to the entitlements of dividends, bonus, rights declared before the exercise of options, any shares allotted and issued on the exercise of an option will rank pari passu with the other shares in issue at the date of exercise of the relevant option.

At 31 March 2004, the number of shares in respect of which options had been granted and remaining outstanding under share option schemes of the Company was 24,680,000 (2003: 8,500,000), representing 7.7% (2003: 3.8%) of the shares of the Company in issue at that date.

The following table discloses details of the Company’s share options held by employees (including directors) and movements in such holdings during the year:

For the year ended 31 March 2004

Option type 2002A 2003A 2003B 2003C 2003D 2004A 2004B 2004C Total	Outstanding at 1 April 2003 2,000,000 500,000 2,000,000 2,000,000 2,000,000 – – – 8,500,000	Granted during the year – – – – – 2,400,000 10,600,000 5,380,000 18,380,000	Lapsed Outstanding during at the year 31 March 2004 – 2,000,000 – 500,000 (2,000,000) – – 2,000,000 – 2,000,000 (200,000) 2,200,000 – 10,600,000 – 5,380,000 (2,200,000) 24,680,000	Lapsed Outstanding during at the year 31 March 2004 – 2,000,000 – 500,000 (2,000,000) – – 2,000,000 – 2,000,000 (200,000) 2,200,000 – 10,600,000 – 5,380,000 (2,200,000) 24,680,000
				24,680,000

– 72 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

For the year ended 31 March 2003

Option type 2002A 2002B 2003A 2003B 2003C 2003D Total	Outstanding at 1 April 2002 4,000,000 500,000 – – – – 4,500,000	Granted during the year – – 500,000 2,000,000 2,000,000 2,000,000 6,500,000	Lapsed Outstanding during at the year 31 March 2003 (2,000,000) 2,000,000 (500,000) – – 500,000 – 2,000,000 – 2,000,000 – 2,000,000 (2,500,000) 8,500,000	Lapsed Outstanding during at the year 31 March 2003 (2,000,000) 2,000,000 (500,000) – – 500,000 – 2,000,000 – 2,000,000 – 2,000,000 (2,500,000) 8,500,000
				8,500,000

Details of the share options held by the directors included in the above table are as follows:

For the year ended 31 March 2004

Outstanding at Option type 1 April 2003 2002A 2,000,000 2003B 2,000,000 2003D 2,000,000 2004A – 2004B – Total 6,000,000 For the year ended 31 March 2003 Option type 2002A 2003B 2003D Total	Granted during the year – – – 2,000,000 4,000,000 6,000,000 Outstanding at 1 April 2002 2,000,000 – – 2,000,000	Lapsed Outstanding during at the year 31 March 2004 – 2,000,000 (2,000,000) – – 2,000,000 – 2,000,000 – 4,000,000 (2,000,000) 10,000,000 Granted Outstanding during at the year 31 March 2003 – 2,000,000 2,000,000 2,000,000 2,000,000 2,000,000 4,000,000 6,000,000	Lapsed Outstanding during at the year 31 March 2004 – 2,000,000 (2,000,000) – – 2,000,000 – 2,000,000 – 4,000,000 (2,000,000) 10,000,000 Granted Outstanding during at the year 31 March 2003 – 2,000,000 2,000,000 2,000,000 2,000,000 2,000,000 4,000,000 6,000,000
			6,000,000

– 73 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Details of specific categories of options are as follows:

			Closing price
			immediately	Exercise
			before/on the	price
Option type	Date of grant	Exercise period	date of grant	per share
			HK$	HK$
2002A	1 February 2002	1 September 2002 to	1.520	1.4944
		31 August 2007
2003A	2 April 2002	3 October 2002 to	3.000	3.0550
		2 October 2007
2003B	8 April 2002	9 October 2002 to	3.300	3.3000
		8 October 2007
2003C	3 May 2002	3 November 2002 to	4.530	4.6200
		2 November 2007
2003D	14 May 2002	14 November 2002 to	4.950	4.9600
		13 November 2007
2004A	28 July 2003	28 July 2003 to	1.350	1.3500
		27 July 2008
2004B	27 August 2003	27 August 2003 to	1.170	1.3060
		26 August 2008
2004C	16 January 2004	16 January 2004 to	0.840	0.8520
		15 January 2009

The financial impact of share options granted is not recorded in the Company’s or the Group’s balance sheet until such time as the options are exercised, and no charge is recognised in the income statement in respect of the value of options granted in the year. Upon the exercise of the share options, the resulting shares issued are recorded by the Company as additional share capital at the nominal value of the shares, and the excess of the exercise price per share over the nominal value of the shares is recorded by the Company in the share premium account. Options which lapse or are cancelled prior to their exercise date are deleted from the register of outstanding options.

– 74 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

38. Reserves

THE GROUP

Share premium HK$’000 At 1 April 2002 4,242 Share premium arising from issue of shares 119,714 Share issue expenses (4,595) Exchange difference arising on translation of financial statements of operations outside Hong Kong – Indemnity from former controlling shareholders (Note) – Net loss for the year – At 31 March 2003 119,361 Share premium arising from issue of shares 85,939 Share issue expenses (2,510) Net loss for the year – At 31 March 2004 202,790	Special reserve HK$’000 13,524 – – – – – 13,524 – – – 13,524	Capital reserve HK$’000 1,848 – – – – – 1,848 – – – 1,848	Accumulated Translation profits reserve (losses) HK$’000 HK$’000 – 66,170 – – – – (37) – – 631 – (40,555) (37) 26,246 – – – – – (57,198) (37) (30,952)	Total HK$’000 85,784 119,714 (4,595) (37) 631 (40,555) 160,942 85,939 (2,510) (57,198) 187,173

The accumulated profits/(losses) of the Group included accumulated losses of HK$17,436,000 (2003: HK$3,288,000) attributable to associates and the joint venture of the Group.

Note: The amount represented the indemnity from the former controlling shareholders to the Group for any underprovision of profits tax in the companies comprising the Group for the periods before the listing of shares of the Company on the Stock Exchange.

– 75 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

THE COMPANY

At 1 April 2002 Net loss for the year Share premium arising from issue of shares Share issue expenses At 31 March 2003 Net loss for the year Share premium arising from issue of shares Share issue expenses At 31 March 2004	Share Contributed Accumulated premium surplus losses HK$’000 HK$’000 HK$’000 4,242 80,657 (589) – – (41,014) 119,714 – – (4,595) – – 119,361 80,657 (41,603) – – (55,412) 85,939 – – (2,510) – – 202,790 80,657 (97,015)	Total HK$’000 84,310 (41,014) 119,714 (4,595) 158,415 (55,412) 85,939 (2,510) 186,432

Notes:

(a) The special reserve of the Group represents the difference between the nominal value of the shares of the acquired subsidiaries and the nominal value of the Company’s shares issued for the acquisition under the corporate reorganisation of the Group.
(b) The capital reserve represents the contributions made by the then controlling shareholder under the corporate reorganisation of the Group.
(c) The contributed surplus of the Company represents the difference between the fair values of the underlying net assets of the subsidiaries at the date on which they were acquired by the Company and the nominal amount of the Company’s shares issued under the corporate reorganisation of the Group.
(d) The Company’s reserves available for distribution to shareholders as at 31 March 2004 represent the net balance of the share premium, contributed surplus and accumulated losses of HK$186,432,000 (2003: HK$158,415,000).

39. Major non-cash transactions

(a) During the year ended 31 March 2004, the Group entered into a finance lease for HK$226,000 in respect of the acquisition of a motor vehicle. The finance lease is determined with reference to the total capital value of the motor vehicle of HK$278,000 and settlement of related expenses of HK$18,000 after the deduction of the trade-in value of HK$70,000 of a motor vehicle of the Group at a book value of HK$83,000.

– 76 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

(b) During the year ended 31 March 2004, the Group disposed of a motor vehicle at a carrying value of HK$136,000 for HK$114,000, which was settled by assumption of the outstanding finance lease obligations of the Group of HK$85,000 and HK$29,000 in cash.
(c) During the year ended 31 March 2004, the Group disposed of one of its other investments for HK$5,500,000, which is yet to be received as at the balance sheet date.
(d) During the year ended 31 March 2003, the Group entered into finance lease arrangements in respect of assets with a total capital value of HK$477,000 at the inception of the finance leases.

40. Contingent liabilities

As at the balance sheet date, the Group had no material contingent liabilities for both years.

The Company has executed guarantees in favour of the landlords of certain properties leased by a subsidiary for due performance of obligations under the tenancy agreements. As at the balance sheet date, the aggregate outstanding leasing commitments of the subsidiary amounted to approximately nil (2003: HK$8,352,000).

In addition, the Company has executed guarantees of an unlimited amount and HK$6,000,000 in favour of a bank and a securities company respectively in respect of credit facilities granted to certain subsidiaries.

41. Capital commitments

Contracted for but not provided in the financial statements in respect of – the acquisition of a 40% interest in a company operating the container depots_(Note 31(b))_ – the capital contribution for a 51% interest in a joint venture to be established for the waste incineration and processing business in Dongguan, the PRC	THE GROUP 2004 2003 HK$’000 HK$’000 6,769 – 48,450 – 55,219 –	THE GROUP 2004 2003 HK$’000 HK$’000 6,769 – 48,450 – 55,219 –
		–

The Company had no material capital commitments as at the balance sheet date for both

years.

– 77 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

42. Operating Lease Commitments

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

Land and buildings: Operating lease which expire: – within one year – in the second to fifth year inclusive Others: Operating leases which expire within one year	THE GROUP 2004 2003 HK$’000 HK$’000 4,066 5,643 455 3,103 4,521 8,746 – 500	THE GROUP 2004 2003 HK$’000 HK$’000 4,066 5,643 455 3,103 4,521 8,746 – 500
		8,746

		500

Operating lease payments for land and buildings represent rentals payable by the Group for its office premises and employees’ quarters. Leases are negotiated for an average term of two (2003: two) years.

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

43. Purchase of subsidiaries

Net assets acquired: Property, plant and equipment Investments in securities Accounts receivable Prepayments, deposits and other receivables Bank balances and cash Taxation Deferred taxation Accounts payable, other payables and accrued charges Net assets (liabilities) acquired Goodwill arising on acquisition Cash consideration Net cash outflow of cash and cash equivalents in connection with the acquisition of subsidiaries: Cash consideration Bank balances and cash acquired	2004 HK$’000 23 – 320 – 35 (52) (2) (200) 124 1,876 2,000 2,000 (35) 1,965	2003 HK$’000 780 2,500 3 264 86 – – (8,745)
		(5,112) 25,612
		20,500

		20,500 (86)
		20,414

– 78 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

The subsidiaries acquired during the year contributed approximately HK$642,000 (2003: HK$196,000) to the Group’s turnover and a loss of approximately HK$124,000 (2003: HK$5,453,000) to the Group for the year.

44. Deferred taxation

The following are the major deferred tax liabilities and (assets) recognised and movements thereon during the current and prior reporting periods:

THE GROUP

At 1 April 2002 Charge (credit) to income for the year At 31 March 2003 (Credit) charge to income for the year Acquired on acquisition of a subsidiary Effect of change in tax rate charge (credit) to the income statement At 31 March 2004	Accelerated tax depreciation HK$’000 123 518 641 (452) 2 60 251	Tax losses HK$’000 (123) (518) (641) 452 – (60) (249)	Total HK$’000 – –
			– – 2 –
			2

For the purposes of balance sheet presentation, certain deferred tax assets and liabilities have been offset in accordance with the conditions set out in SSAP 12 (Revised). The following is the analysis of the deferred tax balances for financial reporting purposes:

Deferred tax liabilities Deferred tax assets	2004 HK$’000 2 – 2	2003 HK$’000 – –
		–

– 79 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

At 31 March 2004, the Group has unused tax losses of approximately HK$68,500,000 (2003: HK$40,500,000) available to for offset against future profits. A deferred tax asset has been recognised for the year ended 31 March 2004 in respect of approximately HK$1,420,000 (2003: HK$4,006,000) of such losses. No deferred tax asset has been recognised in respect of the remaining tax losses due to the unpredictability of future profit streams. Included in unrecognised tax losses are of approximately HK$3,200,000 (2003: HK$2,300,000) that will expire after 5 years from the year of assessment they relate to. Other unrecognised tax losses may be carried forward indefinitely.

45. Pledge of assets

At 31 March 2004, the Group had pledged bank deposits of approximately HK$4 million (2003: HK$11 million) to secure certain bank facilities available to the Group.

In addition, the Group’s overdrafts as at the balance sheet date were secured on the securities held by the Group on behalf of its customers.

46. Retirement benefits schemes

The Group has joined a Mandatory Provident Fund Scheme (“MPF Scheme”) for all its employees. The MPF Scheme is registered with the Mandatory Provident Fund Scheme Authority under the Mandatory Provident Fund Schemes Ordinance. The assets of the MPF Scheme are held separately from those of the Group in funds under the control of an independent trustee. Under the rules of the MPF Scheme, the employer and its employees are required to make contributions to the MPF Scheme at rates specified in the rules. The only obligation of the Group in respect of the MPF Scheme is to make the required contributions under the MPF Scheme.

The group companies operating in the PRC have participated in defined contribution retirement schemes organised by the relevant local government authorities in the PRC. All PRC employees are entitled to an annual pension equal to a fixed portion of their ending basic salaries at their retirement dates. These group companies are required to make specific contributions to the retirement schemes at a rate of 19% (2003: 19%) of basic salary of its PRC employees and have no further obligation for postretirement retirement benefits beyond of the annual contributions made.

The amounts charged to the income statement represented contributions payable to the MPF Scheme by the Group at rates specified in the rules of the MPF Scheme.

– 80 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

47. Related party transactions

During the year, the following related party transactions took place:

	2004	2003
	HK$’000	HK$’000
A company in which a former director of the Company
is a director and has beneficial interests
Operating lease rental of premises paid	–	827
Building management fees paid	–	107
A company in which a former director of the Company
is also a director
Sales of goods to	–	42
Purchases of goods from	–	3,242

The charges for lease payments, building management fees, sales of goods and purchases of goods were determined in accordance with the terms of the relevant agreements.

48. Post balance sheet events

Subsequent to the balance sheet date, the Group had the following material events:

(a) On 23 April 2004, the Group entered into a letter of intent with an independent third party in relation to the proposed acquisition of not more than 50% equity interest in a PRC company which is licenced to operate internet cafe chain in the PRC. Pursuant to the letter of intent, the Group was required to pay earnest money in the amount of HK$20 million. The Group further entered into a supplemental letter of intent with the independent third party on 21 July 2004 to extend the exclusivity period for conducting due diligence review on the affairs of the PRC company to 22 October 2004.
(b) In April 2004, the Group disposed of certain of its listed investments at a carrying value of HK$15,191,000 as at the balance sheet for HK$10,380,000, resulting in a loss of approximately HK$4,800,000.
(c) On 21 July 2004, the Group entered into a supplemental letter of intent to the vendor of interests in a PRC company holding technology for application in waste incineration and processing as mentioned in note 31(a) to extend the time for completion of the due diligence exercise to 9 September 2004.

– 81 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

49. Principal subsidiaries

Details of the Company’s principal subsidiaries as at 31 March 2004, all of which are wholly owned by the Company, unless otherwise stated, are as follows:

		Issued	and fully
	Place of	paid share capital/
Name of subsidiary	incorporation	registered capital			Principal activities
		Ordinary/
		registered	Deferred
Brongham Park Limited	Hong Kong	HK$20	HK$1,000,000		Trading in diesel
			(Note	4)	generating sets
China Legend International	Hong Kong	HK$10,000		–	Investment holding
Limited
Ever Ace Investment Limited	Hong Kong	HK$2		–	Administrative centre and
					investment holding
Hong Tong Hai Consultants	Hong Kong	HK$2		–	Investment holding
Limited
Hong Tong Hai Investments	Hong Kong	HK$2		–	Investment holding
Limited
Hong Tong Hai Logistics	British Virgin	US$100		–	Investment holding
Limited	Islands
Hong Tong Hai Securities	Hong Kong	HK$21,000,000		–	Securities brokerage
Limited
Jetcom Limited	British Virgin	US$1		–	Investment holding
	Islands
MindGenius Secretarial	Hong Kong	HK$10,000		–	Provision of company
Services Limited					secretarial services
Sinogear Enterprises Limited	British Virgin	US$1		–	Investment holding
	Islands

– 82 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

		Issued	and fully
	Place of	paid share capital/
Name of subsidiary	incorporation	registered capital			Principal activities
		Ordinary/
		registered	Deferred
TopStar Enterprises (Holdings)	British Virgin	US$1		–	Investment holding
Limited	Islands
Tribest Investments Limited	British Virgin	US$1		–	Investment holding
	Islands
Yew Sang Hong (China) Limited	British Virgin	US$1		–	Investment holding
	Islands
Yew Sang Hong (BVI)	British Virgin	US$1		–	Investment holding
Limited Islands	Islands
Yew Sang Hong Trading	Hong Kong	HK$2		–	Trading in electrical
(China) Limited					equipment and materials
Yew Sang Hong Building	Hong Kong	HK$2		–	Building maintenance
Services (Maintenance)
Engineering Limited
Yew Sang Hong Investment	British Virgin	US$1		–	Investment holding
Services Limited	Islands
Yew Sang Hong Limited	Hong Kong	HK$20	HK$12,524,000		Electrical engineering
			(Note	4)	contracting
Yew Sang Hong Trading Limited	Hong Kong	HK$2	HK$2		Trading in electrical
			(Note	4)	equipment and materials
Wellink Shipping Limited	Hong Kong	HK$2		–	Sea freight forwarding
					services
北京易行商盟在線網絡技術	PRC	US$300,000		–	Provision of internet travel
有限公司_(Note 3)_					booking services

– 83 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Notes:

Other than Yew Sang Hong (BVI) Limited, Yew Sang Hong (China) Limited, Yew Sang Hong Investment Services Limited and Hong Tong Hai Logistics Limited which are directly held by the Company, all other companies are indirectly held by the Company.
Other than those subsidiaries incorporated in the British Virgin Islands, whose place of operations are basically in Hong Kong, the places of operations of all other subsidiaries are the same as their places of incorporation.
This subsidiary is 60% held by the Group and is a foreign investment enterprise established in the PRC.
The deferred shares are shares whose shareholders are neither entitled to receive notices, attend, vote at any general meetings nor to receive any dividend out of operating profit and have very limited rights on return of capital of the subsidiaries. The deferred shares are held by the former directors of the Company, Mr. Lai Sai Sang and Ms. Leung Sau Che, Jennifer, who have granted options to the Group to acquire these deferred shares at nominal value.
None of the subsidiaries had issued any debt securities at the end of the year.
The above table lists the subsidiaries of the Group which, in the opinion of the directors, principally affected the results or assets and liabilities of the Group. To give details of other subsidiaries would, in the opinion of the directors, result in particular excessive length.

50. Approval of financial statements

The financial statements set out on pages 26 to 75 were approved and authorised for issue by board of directors on 26 July 2004.

– 84 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

3. UNAUDITED INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2004

The following is an extract of the unaudited financial statements of the Group from the interim report of the Company for the six months ended 30 September 2004:

CONDENSED CONSOLIDATED INCOME STATEMENT

For the six months ended 30 September 2004

Notes
Turnover
Cost of sales
Gross profit
Other operating income
Selling expenses
Administrative expenses
Unrealised holding (loss)/gain on listed other investments
Impairment losses
4
Loss from operations
3
Finance costs
Gain on disposal of a subsidiary
17
Share of results of associates
Share of results of a joint venture
Loss before taxation
Taxation
5
Loss before minority interests
Minority interests
Net loss for the period
Dividends
6
Loss per share
– basic
7
– diluted
7

Six months ended
30 September
2004
2003
HK$’000
HK$’000
(unaudited)
(unaudited)
63,930
70,361
(55,695)
(59,892)
8,235
10,469
2,349
785
(84)
(153)
(30,233)
(23,917)
(62)
5,213
(2,373)
–
(22,168)
(7,603)
(185)
(146)
569
–
(323)
(151)
(2,601)
195
(24,708)
(7,705)
–
–
(24,708)
(7,705)
–
13
(24,708)
(7,692)
–
–
(7.7) cents
(3.4) cents
N/A
N/A

– 85 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

CONDENSED CONSOLIDATED BALANCE SHEET

As at 30 September 2004

30 September 2004 Notes HK$’000 (unaudited) Non-current assets Property, plant and equipment 8 8,262 Goodwill 9 – Interests in associates 33,598 Interest in a joint venture – Intangible asset 628 Other assets 230 Investments in securities 10,782 Retention money receivable – Investment deposits 10 – 53,500 Current assets Development rights 22(d) 3,000 Inventories 1,509 Amounts due from customers for contract works 8,644 Progress payments receivable 11 5,601 Retention money receivable 6,588 Loans receivable 12 53,834 Amount due from an investee company 5,995 Amounts due from minority interests – Amount due from an associate 33 Accounts receivable 13 7,982 Prepayments, deposits and other receivables 27,467 Investment deposits 10 30,000 Taxation recoverable 40 Pledged bank deposits 19 8,354 Bank balances and cash 21,531 180,578	31 March 2004 HK$’000 (audited) 9,643 1,798 6,063 2,601 753 370 27,360 5,220 21,231
	75,039
	3,000 1,187 8,706 11,466 4,857 55,745 5,995 490 29 20,156 31,980 24,000 73 4,012 37,083
	208,779

– 86 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

CONDENSED CONSOLIDATED BALANCE SHEET

As at 30 September 2004

30 September 2004 Notes HK$’000 (unaudited) Current liabilities Retention money payable 2,671 Accounts payable, other payables and accrued charges 14 27,778 Amounts due to associates 2,940 Bills payable 442 Taxation payable 551 Obligations under finance leases 297 Borrowings 15 4,705 39,384 Net current assets 141,194 Total assets less current liabilities 194,694 Minority interests – Non-current liabilities Obligations under finance leases – Retention money payable – Deferred taxation 2 2 Total net assets 194,692 Capital and reserves Share capital 16 32,227 Reserves 162,465 Shareholders’ funds 194,692	31 March 2004 HK$’000 (audited) 1,710 53,122 2,080 75 551 235 4,466
	62,239
	146,540
	221,579
	247
	180 1,750 2
	1,932
	219,400

	32,227 187,173
	219,400

– 87 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the six months ended 30 September 2004

At 1 April 2004 Net loss for the period At 30 September 2004 At 1 April 2003 Net loss for the period At 30 September 2003	Share capital HK$’000 32,227 – 32,227 22,380 – 22,380	Share premium HK$’000 202,790 – 202,790 119,361 – 119,361	Special reserve HK$’000 13,524 – 13,524 13,524 – 13,524	Accumulated Capital Translation profits/ reserve reserve (losses) HK$’000 HK$’000 HK$’000 1,848 (37) (30,952) – – (24,708) 1,848 (37) (55,660) 1,848 (37) 26,246 – – (7,692) 1,848 (37) 18,554	Total HK$’000 219,400 (24,708) 194,692 183,322 (7,692) 175,630

CONDENSED CONSOLIDATED CASH FLOW STATEMENT

For the six months ended 30 September 2004

NET CASH USED IN OPERATING ACTIVITIES NET CASH USED IN INVESTING ACTIVITIES NET CASH (USED IN)/FROM FINANCING ACTIVITIES DECREASE IN CASH AND CASH EQUIVALENTS CASH AND CASH EQUIVALENTS AT BEGINNING OF THE PERIOD CASH AND CASH EQUIVALENTS AT END OF THE PERIOD ANALYSIS OF THE BALANCE OF CASH AND CASH EQUIVALENTS Bank balances and cash Bank overdrafts	Six months ended 30 September 2004 2003 HK$’000 HK$’000 (unaudited) (unaudited) (12,201) (28,967) (3,472) (15,676) (118) 8,364 (15,791) (36,279) 32,617 42,413 16,826 6,134 21,531 6,139 (4,705) (5) 16,826 6,134

– 88 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

NOTES TO THE CONDENSED FINANCIAL STATEMENTS

For the six months ended 30 September 2004

1. Basis of Preparation and Accounting Policies

The condensed financial statements have been prepared in accordance with the disclosure requirements of Appendix 16 to the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited and with the Statement of Standard Accounting Practice No. 25 “Interim financial reporting” issued by the Hong Kong Institute of Certified Public Accountants.

The condensed financial statements have been prepared under the historical cost convention as modified for the revaluation of certain investments in securities. These condensed financial statements should be read in conjunction with the 2004 annual report.

The basis of preparation and accounting policies adopted in the preparation of these condensed financial statements are consistent with those followed in the preparation of the Group’s annual audited financial statements for the year ended 31 March 2004.

2. Segment Information

For management purposes, the Group is currently organised into five operating divisions – electrical engineering contracting, sale of electrical goods, securities brokerage, sea freight forwarding services and sale of home electrical appliances. These divisions are the basis on which the Group reports its primary segment information.

– 89 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Business segments

Electrical engineering contracting HK$’000 For the six months ended 30 September 2004 Turnover External sales 27,887 Inter-segment sales – Total revenue 27,887 Inter-segment sales are charged at prevailing market rates Results Segment results 2,187 Interest income Other operating income Unrealised holding loss on listed other investments Unallocated expenses Loss from operations Finance costs Gain on disposal of a subsidiary Share of results of associates Share of results of a joint venture Loss before taxation Taxation Loss before minority interests Minority interests Net loss for the period	Sale of electrical goods HK$’000 1,788 1,191 2,979 (1,115)	Securities brokerage HK$’000 1,637 – 1,637 (595)	Sea freight forwarding services HK$’000 31,738 – 31,738 (20)	(Note) Sale of home electrical appliances HK$’000 858 – 858 (1,362)	Others Eliminations Consolidated HK$’000 HK$’000 HK$’000 22 – 63,930 – (1,191) – 22 (1,191) 63,930 (1) – (906) 1,847 502 (62) (23,549) (22,168) (185) 569 (323) (2,601) (24,708) – (24,708) – (24,708)

Note: The Group commenced this operation during the period ended 30 September 2004.

– 90 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Electrical engineering contracting HK$’000 For the six months ended 30 September 2003 Turnover External sales 56,508 Inter-segment sales – Total revenue 56,508 Inter-segment sales are charged at prevailing market rates Results Segment results 260 Interest income Other operating income Unrealised holding gains on listed other investments Unallocated expenses Loss from operations Finance costs Share of results of associates Share of results of a joint venture Loss before taxation Taxation Loss before minority interests Minority interests Net loss for the period	Sale of electrical goods HK$’000 11,590 3,813 15,403 1,332	Securities brokerage HK$’000 2,051 – 2,051 (235)	Others HK$’000 212 – 212 (332)	Eliminations Consolidated HK$’000 HK$’000 – 70,361 (3,813) – (3,813) 70,361 – 1,025 462 323 5,213 (14,626) (7,603) (146) (151) 195 (7,705) – (7,705) 13 (7,692)

– 91 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

3. Loss from Operations

Loss from operations has been arrived at after charging:
Depreciation of property, plant and equipment
Amortisation of goodwill arising on acquisition
of subsidiaries included in administrative expenses
Amortisation of trading right in respect
of securities trading included in administrative expenses
Loss on disposal of property, plant and equipment
Cost of inventories recognised as expense
Loss on disposal of investments in securities
Impairment Losses
Impairment losses in respect of:
Goodwill arising from acquisition of subsidiaries_(Note 9)_

Six months ended
30 September
2004
2003
HK$’000
HK$’000
1,770
1,797
78
743
125
185
169
80
3,213
11,938
4,753
–
Six months ended
30 September
2004
2003
HK$’000
HK$’000
2,373
–

4. Impairment Losses

5. Taxation

Hong Kong Profits Tax is calculated at 17.5% (2003: 17.5%) of the estimated assessable profit for the period. Taxation in other jurisdictions is calculated at the rates prevailing in the respective jurisdictions. No provision for taxation has been made as the Group had no assessable profits for the period.

The Group did not have any significant movements in deferred taxation for the six months ended 30 September 2004.

6. DIVIDENDS

No dividends were paid or declared during the period. The directors do not recommend the payment of any interim dividend for the six months ended 30 September 2004 (For the six months ended 30 September 2003: Nil).

– 92 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

7. Loss Per Share

The loss per share is calculated based on the loss for the period amounting approximately HK$24,708,000 (For the six months ended 30 September 2003: loss of approximately HK$7,692,000) and 322,272,000 shares (For the six months ended 30 September 2003: the weighted average of 223,800,000 shares) in issue. No diluted loss per share for the six months ended 30 September 2003 and 2004 has been presented as the exercise of the Company’s outstanding share options would result in a decrease in the loss per share for both periods.

8. Additions to Property, Plant and Equipment

During the period, the Group spent approximately HK$863,000 on property, plant and equipment (approximately HK$338,000 for the six months ended 30 September 2003).

9. Goodwill

Cost At 1 April 2004 Arising on acquisition of subsidiaries during the period At 30 September 2004 Amortisation and impairment At 1 April 2004 Charge for the period Impairment losses recognised for the period At 30 September 2004 Net book values At 30 September 2004 At 31 March 2004	The Group HK$’000 27,488 653
	28,141
	25,690 78 2,373
	28,141
	–

	1,798

The amortisation period adopted for goodwill is 20 years.

– 93 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

As at 30 September 2004, the Group performed an assessment of the fair value of its goodwill. The assessment was based on value in use of the assets as determined at the cash generating unit based on the present value of estimated future cash flows. As a result of this assessment, the Group has recognised impairment losses for goodwill of approximately HK$2,373,000 in the income statement for the six months ended 30 September 2004.

10. Investment Deposits

30 September 2004 HK$’000 Investment deposits comprise of: Deposit for acquisition of interests in a People’s Republic of China (“PRC”) company which is licensed to operate internet cafe chain_(Note)_ 20,000 Deposit for acquisition of an investment engaged in technology development for application in waste incineration and process – Deposit for investment engaged in operating container depots and provision of logistics management services business – Deposit for formation of a joint venture 10,000 Deposit for acquisition of other investments – 30,000 Carrying amount analysed for reporting purposes as: Current assets 30,000 Non-current assets – 30,000	31 March 2004 HK$’000 – 10,000 21,231 10,000 4,000
	45,231

	24,000 21,231
	45,231

Note: On 23 April 2004, the Group entered into a letter of intent with an independent third party in relation to the proposed acquisition of not more than 50% equity interest in a PRC company which is licensed to operate internet cafe chain in the PRC. Pursuant to the letter of intent, the Group was required to pay earnest money in the amount of HK$20 million. The Group further entered into a supplemental letter of intent with the independent third party on 24 November 2004 to extend the exclusivity period for conducting due diligence review on the affairs of the PRC company to 22 December 2004.

– 94 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

11. Progress Payments Receivable

The aged analysis of progress payments receivable is as follows:

30 September 2004 HK$’000 0 to 30 days 4,163 31 to 60 days 66 61 to 90 days 72 91 to 180 days 1,300 More than 180 days – 5,601 12. Loans Receivable 30 September 2004 HK$’000 Loans receivable, interest bearing 37,138 Margin receivables_(Note)_ 16,696 53,834	31 March 2004 HK$’000 9,162 428 – – 1,876
	11,466

	31 March 2004 HK$’000 38,795 16,950
	55,745

Note: Margin receivables represent loans to securities margin clients which are secured by clients’ pledged securities. These are repayable on demand and bear interest at prevailing market rates. In the opinion of the directors of the Company, no aged analysis is disclosed as the aged analysis does not give additional value.

– 95 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

13. Accounts Receivable

The credit period allowed by the Group to its customers is normally 90 days.

The aged analysis of accounts receivable is as follows:

30 September 2004 HK$’000 0 to 30 days 7,657 31 to 60 days 219 61 to 90 days 99 91 to 180 days 4 More than 180 days 3 7,982	31 March 2004 HK$’000 12,513 1,226 5,864 305 248
	20,156

14. Accounts Payable, other Payables and Accrued Charges

Included in accounts payable, other payables and accrued charges are trade creditors amounting to approximately HK$9,339,000 (At 31 March 2004: approximately HK$14,548,000). The aged analysis of trade creditors is as follows:

30 September 2004 HK$’000 0 to 30 days 2,425 31 to 60 days 1,493 61 to 90 days 913 91 to 180 days 3,653 More than 180 days 855 9,339	31 March 2004 HK$’000 4,474 2,466 2,765 1,264 3,579
	14,548

– 96 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

15. Borrowings

Bank overdrafts (secured) 16. Share Capital Shares of HK$0.10 each Authorised: Balance as at 30 September 2004 and 31 March 2004 Issued and fully paid: Balance as at 30 September 2004 and 31 March 2004	30 September 2004 HK$’000 4,705 Number of shares 1,000,000,000 322,272,000		31 March 2004 HK$’000 4,466

			Amount HK$’000 100,000

			32,227

17. Acquisition and Disposal of Subsidiaries

Acquisition

On 2 June 2004, the Group further acquired the remaining 49% of the issued share capital of a subsidiary, namely, Topeast Engineering Limited, for a cash consideration of HK$49,000. On 9 September 2004, the Group further acquired the remaining 49% of the issued share capital of another subsidiary, namely Country Super Limited, for a cash consideration of HK$490,000. These transactions have been accounted for using the purchase method of accounting.

– 97 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

The aggregate effect of these acquisitions is summarised as follows:

Net liabilities acquired Goodwill arising on acquisition Cash consideration Net cash outflow arising on acquisition Cash consideration	HK$’000 (114) 653 539 539

The above subsidiaries did not make any significant contribution to the results of the Group during the interim period.

Disposal

On 22 April 2004, the Group disposed 51% equity interest in China Ace Enterprises Limited for cash consideration of HK$51. This transaction gave rise to a gain of approximately HK$569,000 and a net cash inflow of HK$51. China Ace Enterprises Limited did not make any significant contribution to the results and cash flows of the Group during the interim period.

18. Contingent Liabilities

At 30 September 2004, the Group had no material contingent liabilities. The Company has executed guarantees of an unlimited amount in favour of a bank in respect of credit facilities granted to a subsidiary.

19. Pledge of Assets

At 30 September 2004, the Group had pledged bank deposits of approximately HK$8 million (At 31 March 2004: approximately HK$4 million) to secure certain bank facilities available to the Group.

In addition, the Group’s overdrafts as at the balance sheet date were secured on the securities held by the Group on behalf of its customers.

– 98 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

20. Capital Commitments

30 September 2004 HK$’000 Contracted for but not provided in the financial statements in respect of: – the acquisition of a 40% interest in a company operating the container depots – – the capital contribution for a 51% interest in a joint venture to be established for the waste incineration and processing business in Dongguan, the PRC 48,450 48,450	31 March 2004 HK$’000 6,769 48,450
	55,219

21. Operating Lease Commitments

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

30 September 2004 HK$’000 Land and buildings: Operating leases which expire: – within one year 2,499 – in the second to fifth year inclusive 153 2,652	31 March 2004 HK$’000 4,066 455
	4,521

– 99 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

22. Post Balance Sheet Events

Subsequent to the balance sheet date, the Group had the following material events:

(a) On 5 November 2004, the Company has conditionally agreed to place, through the placing agent, Kingston Securities Limited, on best effort basis in relation to the placing of 64,454,000 new shares of the Company to not fewer than six independent investors at a price of HK$0.23 per placing shares, further details of which are set out in the announcement of the Company dated 5 November 2004.
(b) The formation of joint venture company in the PRC has been formally established on 5 November 2004 for a term of 25 years to 4 November 2029. The registered capital in the amount of RMB110 million, equivalent to approximately HK$103.77 million, has been fully paid up by the parties in proportion to their respective equity interest by 24 November 2004 in cash. The contribution by the Group is RMB56.1 million, equivalent to approximately HK$52.93 million. Further details of the aforesaid transaction are set out in the announcement of the Company dated 6 December 2004.
(c) In December 2004, the Group entered into a legally-binding letter of intent with an independent third party relating to the right of acquisition up to 49% of the equity interest of a pharmaceutical products distribution and investment company in the PRC (the “Proposed Investment”). Under the letter of intent, the Group is entitled to carry out a due diligence review of the Proposed Investment for a four-month period commencing from the date of the letter of intent up to 5 April 2005 and the due diligence review period may be extended by agreement between the parties. The Proposed Investment is subject to the completion of due diligence review and negotiation and finalisation of the terms and conditions in relation thereof. Further details of the aforesaid transaction are set out in the announcement of the Company dated 6 December 2004.
(d) On 13 December 2004, the Group disposed of two development rights in respect of two pieces of land under a medium term lease in the New Territories, Hong Kong, at a consideration of HK$3,100,000 to a third party.

– 100 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

4. INDEBTEDNESS

As at the close of business on 31 March 2005, being the latest practicable date for the purpose of ascertaining information in this indebtedness statement prior to the printing of this circular, the Group had outstanding borrowings of approximately HK$11,556,000, comprising obligation under finance lease of approximately HK$85,000, bank overdrafts of approximately HK$9,397,000 of which approximately HK$8,490,000 was secured by the clients’ securities, unsecured loans from associated companies of approximately HK$2,050,000 and from a former Director of approximately HK$24,000.

Save as aforesaid and apart from intra-group liabilities and normal trade payables and bills payable, the Group did not have any mortgages, charges, debentures, loan capital, bank loans and overdrafts, debts securities or other similar indebtedness, finance leases and hire purchases commitments, liabilities under acceptances or acceptances credits or any guarantees or other material contingent liabilities outstanding at the close of business on 31 March 2005.

Save as disclosed in this circular, the Directors have confirmed that there has not been any material adverse change in the indebtedness and contingent liabilities of the Group since 31 March 2005.

5. WORKING CAPITAL

Taking into account the Group’s existing cash, bank balances and the financial resources available, including internally generated funds and the available credit facilities, the Directors are of the opinion that, in the absence of unforeseen circumstances, the Group has sufficient working capital for its present requirements and for the period ending 12 months from the date of this circular.

6. MATERIAL CHANGE

As at the Latest Practicable Date, the Directors are not aware of any material changes in the financial or trading position or prospects of the Group since 31 March 2004, being the date to which the latest audited consolidated financial statements of the Group were made up.

– 101 –

GENERAL INFORMATION

APPENDIX II

1. 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 jointly and severally accept responsibility for the accuracy of the information contained in this circular and confirm, having made all reasonable inquiries and that to the best of their knowledge and belief there are no other facts the omission of which would made any statement therein misleading.

2. DISCLOSURE OF INTERESTS

Interests of Directors

As at the Latest Practicable Date, the interests of the Directors in the share capital of the Company which were required to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests which they were taken or deemed to have under such provisions of the SFO), or were required, pursuant to section 352 of the SFO, to be entered in the register referred to therein, or were required, pursuant to the Model Code for Securities Transactions by Directors of Listed Companies in the Listing Rules, to be notified to the Company and the Stock Exchange were as follows:

Interests and short positions in the shares, underlying shares and debentures of the Company

(i) Long position in the shares of the Company

	Number of ordinary shares	Number of ordinary shares	Approximate
	beneficially	held and	percentage
	nature of	interest	of total
Name of Director	Personal	Corporate	shareholdings
Hon Ming Kong_(Note)_	–	54,900,000	11.83%
Tsoi Wai Kwong	174,000	–	0.04%
Au-Yeung Ka Cheung	400,000	–	0.09%

Note: These shares are owned by Highworth Venture Limited, a company incorporated in the British Virgin Islands which is wholly-owned by Mr. Hon.

– 102 –

GENERAL INFORMATION

APPENDIX II

(ii) Long position in the underlying shares of the Company

Share options in the Company

					Number of
	Date of		Exercise	Number of	total
	Grant of	Exercise period	price per	share options	underlying
Name of Director	share options	of share options	share	outstanding	shares
			HK$
Hon Ming Kong	14/5/02	14/11/02-13/11/07	4.960	2,000,000	4,000,000
	27/8/03	27/8/03-26/8/08	1.306	2,000,000
Lee Yu Leung	1/2/02	1/9/02-31/8/07	1.494	2,000,000	4,000,000
	27/8/03	27/8/03-26/8/08	1.306	2,000,000
Lin Hoi Kwong	3/5/02	3/11/02-2/11/07	4.620	2,000,000	2,000,000

Save as disclosed above, as at the Latest Practicable Date, none of the Directors or any chief executive of the Company had an interest or short position in any shares, underlying shares or debentures of the Company or any associated corporation (within the meaning of Part XV of the SFO) which would have to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short positions which he was taken or deemed to have under such provisions of the SFO) or which was required, pursuant to section 352 of the SFO, to be entered in the register referred to therein, or pursuant to the Model Code for Securities Transactions by Directors of Listed Companies in the Listing Rules to be notified to the Company and the Stock Exchange.

Save as disclosed herein, as at the Latest Practicable Date, none of the Directors was a director or employee of a company which had an interest or short position in the Shares and underlying shares of the Company which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO.

Substantial Shareholders

As at the Latest Practicable Date, so far as is known to the Directors, the following persons (other than a Director or chief executive of the Company) who have, directly or indirectly, interested in 5% or more of the nominal value of the share capital carrying rights to vote in all circumstances at general meetings of any subsidiary of the Company.

– 103 –

GENERAL INFORMATION

APPENDIX II

	Number of ordinary	Approximate percentage
Name of Shareholder(s)	shares held	of total shareholding
		(%)
Highworth Venture Limited_(Note a)_	54,900,000	11.83
AWH Fund Ltd.(Note b)	27,366,000	5.90

Notes:

(a) Highworth Venture Limited is a company beneficially owned by Mr. Hon.
(b) Based on the information available on the website of the Stock Exchange as at the Latest Practicable Date.

Save as disclosed herein, there is no person known to the Directors of chief executive of the Company, who, as at the Latest Practicable Date, had an interest or short position in the Shares and underlying Shares of the Company which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO, or who was directly or indirectly interested in 5% or more of the nominal value of any class of Shares of the Company or any other members of the Group.

Interests in contract or arrangement

Save as disclosed in the circular, as at the Latest Practicable Date, none of the Directors is materially interested in contract or arrangement subsisting which is significant in relation to the business of the Group.

Interests in assets

Save as disclosed in the circular, as at the Latest Practicable Date, none of the Directors has any direct or indirect interest in any assets acquired or disposed of by or leased to any member of the Group or is proposed to be acquired or disposed of by or leased to any member of the Group since 31 March 2004, being the date to which the latest published audited accounts of the Company were made up.

– 104 –

GENERAL INFORMATION

APPENDIX II

Service contracts

There is no service contract between any member of the Group and any Director (excluding contracts expiring or determinable by the Group within one year without payment of compensation (other than statutory compensations)).

3. LITIGATION

Neither the Company nor any of its subsidiaries is engaged in any litigation or arbitration of material importance and no litigation or claim of material importance is known to the Directors to be pending or threatened against the Company or any of its subsidiaries.

4. EXPERTS AND CONSENTS

The qualifications of the experts who have given opinions in this circular are as follows:

Name Qualification

Baron A corporation licensed to carry out Types 1 and 6 regulated activity under the SFO

As at the Latest Practicable Date, Baron has no shareholding in any company in the Group or the right (whether legally enforceable or not) to subscribe for or to nominate persons to subscribe for securities in any company in the Group and has no direct or indirect interest in any assets acquired or disposed of by or leased to any member of the Group or is proposed to be acquired or disposed of by or leased to any member of the Group since 31 March 2004, being the date to which the latest published audited accounts of the Company were made up.

Baron has given and has not withdrawn its written consent to the issue of this circular with inclusion of its letter and references to its name, in the form and context in which they appear.

– 105 –

GENERAL INFORMATION

APPENDIX II

5. PROCEDURES FOR DEMANDING A POLL BY SHAREHOLDERS

The Company’s Articles of Association sets out the procedure by which a poll may be demanded.

At any general meeting, a resolution put to the vote of the meeting shall be decided on a show of hands unless a poll is required under the Listing Rules or duly demanded (before or after the declaration of the results of the show of hands or on the withdrawal of any other demand for a poll). A poll may be demanded by:

(i) the Chairman of the meeting; or
(ii) at least five Shareholders present in person or in case of a corporation, by its duly authorised corporate representative or by proxy for the time being entitled to vote at the meeting; or
(iii) any Shareholder or Shareholders present in person or in the case of a corporation, by its duly authorised corporate representative or by proxy and representing not less than one-tenth of the total voting rights of all the Shareholders having the right to attend and vote at the meeting; or
(iv) any Shareholder or Shareholders present in person or by a duly authorised corporate representative or by proxy and holding Shares conferring a right to attend and vote at the meeting on which there have been paid up sums in the aggregate equal to not less than one-tenth of the total sum paid up on all the Shares conferring that right.

6. 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 preceding the date of this circular and are or may be material:

(a) a placing and underwriting agreement dated 19 September 2003 entered into between the Company and Sanfull Securities Limited as the placing agent in relation to the placing of 44,760,000 Shares at the price of HK$1.18 per Share;
(b) (i) a legally-binding letter of intent dated 19 September 2003 entered into between HTH as the purchaser and Angola Group Holdings Limited (“Angola Group”) as the seller in relation to the sale and purchase of the entire issued share capital of King Glory Development Limited (“King Glory”); and (ii) a sale and purchase agreement

– 106 –

GENERAL INFORMATION

APPENDIX II

dated 7 October 2003 entered into among HTH as the purchaser, Angola Group as the seller, Yan Youlan, Xing Xiaolin, Jin Lijing and Chen Lei as the warrantors in relation to the sale and purchase of the entire issued share capital of King Glory for a consideration of not more than HK$45,400,000;

(c) (i) a placing agreement dated 27 November 2003 entered into between the Company and Kingston Securities Limited (“Kingston Securities”) as the placing agent in relation to the placing of 53,712,000 Shares on a best effort basis at the price of HK$1.30 per Share; (ii) a supplemental agreement dated 23 December 2003 entered into between the Company and Kingston Securities postponing the completion date of the placing from 24 December 2003 to 21 January 2004; (iii) a second supplemental agreement dated 20 January 2004 entered into between the Company and Kingston Securities postponing the completion date of the placing from 21 January 2004 to 20 February 2004; and (iv) the termination agreement dated 17 February 2004 entered into between the Company and Kingston Securities terminating the placing;
(d) (i) a framework agreement dated 2 December 2003 entered into between HTH and CSEG in relation to the formation of the JV Company; (ii) a co-operation agreement dated 24 December 2003 entered into between HTH and CSEG in relation to the formation of the JV Company; and (iii) a tripartite co-operation agreement dated 13 February 2004 entered into among HTH, CSEG and 廣州保稅區環島貿易有限公司 (Guangzhou Tax Bond District Huandao Trading Co., Ltd.*) in relation to the termination of the co-operation agreement referred to in (ii) and the formation of the JV Company amongst the three parties;
(e) a framework agreement dated 24 December 2003 entered into between HTH and 杭州錦江集團有限公司 (Hangzhou Jinjiang Group Co., Ltd.) in relation to the acquisition of an interest in 杭州錦江綠色能源有限公司 (Hangzhou Jinjiang Green Power Co., Ltd.);
(f) (i) a letter of intent dated 17 February 2004 entered into between HTH and 北京旭策置業有限公司 (Beijing Xuce Development Co., Ltd.) (“Beijing Xuce”) in relation to the acquisition of a 33% equity interest in 北京中科通用能源環保有限責任公司 (Beijing China Sciences General Energy & Environmental Co., Ltd.); (ii) a deposit payment agreement dated 9 March 2004 in relation to the payment of a refundable deposit of HK$10,000,000 for the proposed acquisition referred to in (i); (iii) a supplemental letter of intent dated 21 July 2004 entered into between HTH and Beijing Xuce extending the latest time for completing the due diligence review in relation to the proposed acquisition referred to in (i) to 9 September 2004; and (iv) a termination agreement dated 24 August 2004 entered into between HTH and Beijing Xuce in relation to the termination of the letter of intent, the deposit payment agreement and the supplemental letter of intent referred to in (i) to (iii) and the refund of the deposit paid;

* For identification purpose only

– 107 –

GENERAL INFORMATION

APPENDIX II

(g) a placing agreement dated 17 February 2004 entered into between the Company and Kingston Securities in relation to the placing of 53,712,000 Shares on a fully underwritten basis at the price of HK$0.80 per Share;
(h) (i) a letter of intent dated 23 April 2004 entered into between Oriental Overseas Group Limited (“Oriental Overseas”), a direct wholly owned subsidiary of the Company and Mr. Tang Yat Fung, Cabot (“Party A”) in relation to the proposed acquisition of not more than 50% equity interest in a company established in the PRC and licenced to operate internet café chain in the PRC; (ii) a supplemental agreement dated 21 July 2004 entered into between Oriental Overseas and Party A extending the exclusivity period in relation to the proposed acquisition referred to in (i) to 22 October 2004;
(i) a placing agreement dated 4 November 2004 entered into between the Company and Kingston Securities in relation to the placing of 64,454,000 Shares on a best effort basis at the price of HK$0.23 per Share;
(j) (i) a letter of intent dated 6 December 2004 entered into between Country Super Limited (“Country Super”), an indirectly wholly owned subsidiary of the Company and a PRC party (the “PRC Party”) in relation to the proposed acquisition of not more than 49% equity interest of a company established in the PRC and engaged in pharmaceutical products distribution and investment in the PRC; and (ii) an investment framework agreement dated 3 February 2005 entered into among Country Super, the PRC Party and CITIC International Assets Management Limited in relation to the proposed acquisition referred to in (i);
(k) a placing agreement dated 22 March 2005 entered into between the Company and Kingston Securities in relation to the placing of 77,344,000 Shares on a fully underwritten basis at the price of HK$0.40 per Share; and
(l) the S&P Agreement and the Supplemental Agreement.

7. GENERAL

(a) The company secretary of the Company is Ms. Chow Man Ngan. She is an associate member of both the Institute of Chartered Secretaries and Administrators and the Hong Kong Institute of Company Secretaries.
(b) The qualified accountant of the Company is Mr. Chan Tak Hing, Kenji. He is an associate member of the Institute of Chartered Accountants in England and the Hong Kong Institute of Certified Public Accountants and the Taxation Institute of Hong Kong. He is a fellow associate member of the Association of Chartered Certified Accountants.

– 108 –

GENERAL INFORMATION

APPENDIX II

(c) The Company’s branch registrar and transfer office in Hong Kong is Hong Kong Registrars Limited at 46th Floor, Hopewell Centre, 183 Queen’s Road East, Hong Kong.

8. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents will be available for inspection at the principal place of business of the Company in Hong Kong at Unit 3606, 36/F., China Merchants Tower, Shun Tak Centre, 168-200 Connaught Road Central, Sheung Wan, Hong Kong during normal business hours up to and including 3 June 2005:

(a) the memorandum and articles of association of the Company;
(b) the annual reports of the Company for the two years ended 31 March 2004 and the interim report of the Company for the six months ended 30 September 2004;
(c) the letter from Baron, the text of which is set out on pages 19 to 31 of this circular;
(d) the material contracts referred to in the paragraph headed “Material Contracts” in this appendix; and
(e) the written consent referred to in the paragraph headed “Expert and Consent” in this appendix.

– 109 –

NOTICE OF EGM

==> picture [317 x 32] intentionally omitted <==

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 290)

NOTICE OF EXTRAORDINARY GENERAL MEETING

NOTICE IS HEREBY GIVEN that an extraordinary general meeting of the abovementioned company (the “Company”) will be held at Unit 3606, 36/F., China Merchants Tower, Shun Tak Centre, 168-200 Connaught Road Central, Sheung Wan, Hong Kong on 3 June 2005 at 11:30 a.m. for the purposes of considering and, if thought fit, passing the following resolutions as ordinary resolutions:

ORDINARY RESOLUTIONS

“ THAT the execution of an acquisition agreement dated 7 April 2005 between the Company as seller and China Sciences Conservational Power Limited (“CSCP”) as the purchaser in relation to the sale and purchase of two shares of HK$1.00 each in the capital of Hong Tong Hai Investments Limited (“HTH”), representing the entire issued share capital of HTH and the amount due from HTH to the Company as at the date of the completion of the said acquisition agreement (the “Disposal”) for a consideration of HK$76,000,000 to be satisfied by the issue and allotment of 100,000,000 preference shares in the capital of CSCP (the “S&P Agreement”) as supplemented by the supplemental agreement dated 8 April 2005 between the Company and CSCP (the “Supplemental Agreement”), a copy of each of the S&P Agreement and the Supplemental Agreement were produced to this meeting and marked “A” and “B” and signed by the chairman of the meeting for the purpose of identification, be and are hereby confirmed, ratified and approved; and that any one director of the Company be and is hereby authorised to sign or execute such other documents or supplemental agreements/ deeds on behalf of the Company and to do all such things and take such action as they may consider necessary or desirable for the purpose of giving effect to the S&P Agreement as supplemented by the Supplemental Agreement and completing the transactions contemplated in the S&P Agreement as supplemented by the Supplemental Agreement as any such director of the Company may consider necessary, desirable or expedient.”

– 110 –

NOTICE OF EGM

“ THAT :
(a) subject to the passing of resolution number 1 as set out in this notice of the extraordinary general meeting, the fulfillment and/or waiver of the conditions precedent to the S&P Agreement as supplemented by the Supplemental Agreement and the completion of the transaction contemplated in the S&P Agreement as supplemented by the Supplemental Agreement, the issue and allotment of the 100,000,000 preference shares in the capital of CSCP (the “Preference Shares”) by CSCP in satisfaction of the consideration for the Disposal and the grant of the options by CSCP to the Company and/or its nominee(s) to subscribe for 50,000,000 shares of HK$0.01 each in the capital of CSCP (the “CSCP Shares”) (the “New Options”) to the Company and/or its nominee(s) as it may direct be and is hereby approved and confirmed; and
(b) the directors of the Company be and are hereby authorised to deal with the Preference Shares and the New Options in such manner as they consider appropriate, including without prejudice to the generality of the foregoing, the transfer of the Preference Shares and the New Options, subject to the passing of resolution number 3 as set out in this notice of the extraordinary general meeting and the exercise of the conversion rights attaching to the Preference Shares and the New Options, to deal in the CSCP Shares to be issued and allotted to the Company and/or its nominee(s) upon the exercise of such conversion rights.”
“ THAT subject to the passing of resolutions number 1 and 2 as set out in this notice of the extraordinary general meeting and the issue and allotment of the Preference Shares by CSCP to the Company and/or its nominee(s) and the grant of the New Options to the Company and/or its nominee(s), the directors of the Company be and are hereby authorised to exercise the conversion rights attaching to the Preference Shares and the New Options on the terms and conditions of the Preference Shares and the New Options to subscribe for CSCP Shares as and when and in such manner as they consider appropriate and desirable.”

By order of the Board

CHINA CONSERVATIONAL POWER HOLDINGS LTD Chan Tat Chee

Chairman

Hong Kong, 17 May 2005

– 111 –

NOTICE OF EGM

Principal Place of Business in Hong Kong: Unit 3606, 36/F, China Merchants Tower Shun Tak Centre 168-200 Connaught Road Central Sheung Wan Hong Kong

Registered Office: P.O. Box 309 Ugland House South Church Street George Town, Grand Cayman Cayman Islands British West Indies

Notes:

Any member of the Company entitled to attend and vote at the Meeting may appoint one or more than one proxy to attend and to vote in his stead. A proxy need not be a member of the Company.
Where there are joint registered holders of any share, any one of such persons may vote at the Meeting, either personally or by proxy, in respect of such share of the Company as if he were solely entitled thereto; but if more than one or such joint holders be present at the Meeting personally or by proxy, that one of the said persons 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.
In order to be valid, the proxy form duly completed and signed in accordance with the instructions printed thereon together with the power of attorney or other authority, if any, under which it is signed or a notarially certified copy thereof must be delivered to the Company’s branch registrar and transfer office in Hong Kong, Hong Kong Registrars Limited, at 46th Floor, Hopewell Centre, 183 Queen’s Road East, Hong Kong, not less than 48 hours before the time appointed for holding the Meeting or any adjournment thereof.
Whether or not you propose to attend the Meeting in person, you are strongly urged to complete and return the proxy form in accordance with the instructions printed thereon. Completion and return of the proxy form will not preclude you from attending the Meeting and voting in person if you so wish. In the event that you attend the Meeting after having lodged the proxy form, it will be deemed to have been revoked.
Votes of members of the Company on ordinary resolutions (1) and (3) will be taken by poll and votes of members of the Company on ordinary resolution (2) will be taken on a show of hands.

– 112 –

AI assistant

Television Broadcasts Limited — Proxy Solicitation & Information Statement 2005

49261_rns_2005-05-17_99dfc219-d634-4d81-8b52-912607952151.pdf

MAJOR AND CONNECTED TRANSACTION PROPOSED DISPOSAL OF 51% EQUITY INTEREST IN THE JV COMPANY IN THE PRC

Baron Capital Limited

CONTENTS

DEFINITIONS

DEFINITIONS

DEFINITIONS

DEFINITIONS

(Stock Code: 290)

MAJOR AND CONNECTED TRANSACTION PROPOSED DISPOSAL OF 51% EQUITY INTEREST IN THE JV COMPANY IN THE PRC

INTRODUCTION

LETTER FROM THE BOARD

THE S&P AGREEMENT DATED 7 APRIL 2005 AS SUPPLEMENTED BY THE SUPPLEMENTAL AGREEMENT DATED 8 APRIL 2005

Parties

Assets to be disposal

Consideration and payment terms

LETTER FROM THE BOARD

Principal terms of the Preference Shares

LETTER FROM THE BOARD

LETTER FROM THE BOARD

LETTER FROM THE BOARD

New Options

Conditions

LETTER FROM THE BOARD

LETTER FROM THE BOARD

Completion

Information of HTH and the JV Company

LETTER FROM THE BOARD

REASONS FOR THE DISPOSAL

LETTER FROM THE BOARD

FINANCIAL AND TRADING PROSPECTS OF THE GROUP

LETTER FROM THE BOARD

FINANCIAL EFFECTS ON THE GROUP

RECOMMENDATIONS

THE EGM

LETTER FROM THE BOARD

ADDITIONAL INFORMATION

MAJOR AND CONNECTED TRANSACTION PROPOSED DISPOSAL OF 51% EQUITY INTEREST IN THE JV COMPANY IN THE PRC

LETTER FROM BARON

Baron Capital Limited

MAJOR AND CONNECTED TRANSACTION PROPOSED DISPOSAL OF 51% EQUITY INTEREST IN THE JV COMPANY IN THE PRC

INTRODUCTION

LETTER FROM BARON

BASIS OF OUR OPINION

LETTER FROM BARON

PRINCIPAL FACTORS AND REASONS CONSIDERED

1. Background of and reasons of the Disposal

LETTER FROM BARON

(a) Enjoy flexibility in participating in the waste incineration and process business:

LETTER FROM BARON

LETTER FROM BARON

2. Principal terms of the S&P Agreement

(a) Basis of the consideration and settlement terms

LETTER FROM BARON

(b) Conversion price

LETTER FROM BARON

LETTER FROM BARON

(c) Preferential dividend

LETTER FROM BARON

3. Other terms of Preference Shares

4. Financial effects of the Disposal

Net asset value and net asset value per Share

LETTER FROM BARON

Earnings

5. Conclusion

LETTER FROM BARON

RECOMMENDATION

1. SUMMARY OF FINANCIAL INFORMATION

2. AUDITED FINANCIAL STATEMENTS

CONSOLIDATED INCOME STATEMENT

CONSOLIDATED BALANCE SHEET

CONSOLIDATED BALANCE SHEET

APPENDIX I

BALANCE SHEET

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

CONSOLIDATED CASH FLOW STATEMENT

CONSOLIDATED CASH FLOW STATEMENT

NOTES TO THE FINANCIAL STATEMENTS

Television Broadcasts Limited Proxy Solicitation & Information Statement 2005