CORPORATE INFORMATION€¦ · to contain its operating overheads amidst severe pressure on revenue margins and business volume to record a loss of HK$422,000 for the six month period

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CORPORATE INFORMATION

Board of DirectorsFUNG Ka Pun

(Executive Co-Chairman)WONG Sin Just

(Executive Co-Chairman)ONGPIN Roberto V

(Independent Non-executive Director)CHUNG Cho Yee, Mico

(Independent Non-executive Director)

Company SecretaryCHEUNG Chung Wai, Billy

SolicitorsLinklaters & AllianceWoo, Kwan, Lee & Lo, Solicitors

AuditorsPricewaterhouseCoopers

Principal BankersStandard Chartered BankBank of America (Asia) LimitedThe Hongkong and Shanghai Banking

Corporation Limited

Share Registrar in BermudaButterfield Corporate Services Limited65 Front Street,Hamilton,Bermuda

Share Registrar in Hong KongComputershare Hong Kong Investor

Services LimitedRooms 1901-1905, 19th Floor,Hopewell Centre,183 Queen’s Road East,Hong Kong

Registered OfficeCedar House,41 Cedar Avenue,Hamilton HM12,Bermuda

Principal Place of Business in Hong Kong4th and 20th Floors, Henley Building,5 Queen’s Road Central,Hong Kong

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The Directors of E2-Capital (Holdings) Limited (“the Company”) are pleased to present theInterim Report of the Company and its subsidiaries (“the Group”) together with the condensedfinancial statements for the six-months ended 30 June 2002. The consolidated profit and lossaccount, consolidated cash flow statement and consolidated statement of changes in equity ofthe Group for the six months ended 30 June 2002, and the consolidated balance sheet as at 30June 2002 of the Group, all of which are unaudited and condensed, along with selectedexplanatory notes, are set out on pages 16 to 36 of this report.

INTERIM DIVIDEND

The Directors have declared an interim dividend for 2002 of 0.25 HK cent per share for the sixmonths ended 30 June 2002 (2001: 1 HK cent per share) payable on 5 November 2002 to thosepersons registered as shareholders of the Company on 25 October 2002. The Register of Memberswill be closed from Monday 21 October 2002 to Friday 25 October 2002, both days inclusiveduring which period no transfer of share will be effected. In order to qualify for the proposeddistribution, all transfers of shares accompanied by the relevant share certificates must belodged with the Company’s Share Registrar in Hong Kong, Computershare Hong Kong InvestorServices Limited of Rooms 1901-1905, 19/F, Hopewell Centre, 183 Queen’s Road East, HongKong for registration no later than 4:00 p.m. on Friday 18 October 2002.

MANAGEMENT DISCUSSION AND ANALYSIS

Despite some of the worst market conditions seen in years, and current uncertainty in respectof the economic recovery, E2-Capital (Holdings) Limited (“E2-Capital”, the “Group”) managedto contain its operating overheads amidst severe pressure on revenue margins and businessvolume to record a loss of HK$422,000 for the six month period ended 30 June 2002.

Notwithstanding the loss recorded for the period, strategic changes alongside prudent riskmanagement and stringent cost control, have enhanced and further strengthened the Group’soverall business structure from the level at which we were operating in previous years, layingthe ground for sustainable growth in today’s challenging business environment.

Having formed our financial services joint venture, SBI E2-Capital Limited (“SBI E2-Capital”),with Softbank Investment International (Strategic) Limited (“Softbank Strategic”) last year, aswell as integrated our management consulting, marketing and technology services under the“one-stop” professional services unit, ebizal (“the ebizal business”) subsequently acquired bySoftbank Strategic in exchange for, as part payment, the entire Dyestuffs operation of SoftbankStrategic, the Group has entered its new financial year positioned as an investment holdingcompany focusing on the industrial sector augmented by our ongoing interest in financialservices and property activities.

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Following the formation of SBI E2-Capital, its results has been equity accounted for by theGroup. Accordingly, our revenue for the six months period ended 30 June 2002 of HK$85 million(2001: HK$121 million) has excluded the revenue of SBI E2-Capital. This revenue, togetherwith realised net investment gain of HK$10.7 million and provision for investment in securitiesof HK$4 million respectively, resulted in an operating loss of HK$6 million for the periodcompared to an operating profit of HK$52.6 million for the same period last year. An overallnet loss of HK$0.4 million for the period ended 30 June 2002 (2001: HK$33 million profit)demonstrates the resilience of the Group in this acknowledged difficult market.

Notwithstanding the loss for the period, due to effective cash management, consolidatedshareholders’ funds increased by 1%, standing at HK$999 million at 30 June 2002, comparedwith HK$993 million at 31 December 2001. Gearing stood at 17% at 30 June 2002, comparedwith 20% at the end of 2001, and the Group’s asset backing remained strong with net tangibleassets per share of HK$0.85 at 30 June 2002 (HK$0.85 at 31 December 2001).

Going forward, all of our business units will continue to be assessed on the merits of theirachievable financial and fiscal independence and we will continue with our Group-wide practiceof optimising staff and operating resources and of leveraging business acumen across ourvarious divisions so as to enhance the Group’s E2VA.

In this regard, the Group has implemented a comprehensive “top-down” investment and costrationalisation programme with a view to disposing of assets which do not generate optimumeconomic value as well as tailoring the product and service delivery and support structure tomeet operating requirements. As a result of these measures, inflows from investing activitiesincreased by HK$34 million to HK$6.9 million (30 June 2001: outflow of HK$27.1 million) andnet cash outflows from operating activities were reduced by HK$70.9 million to HK$43.8 million(30 June 2001: outflow of HK$114.7 million).

To protect and further enhance shareholder value, we will continue to exercise a strategic andprudent approach to allocating capital to individual business units, whilst retaining a highlevel of financial liquidity to ensure strong financial flexibility at Group holding companylevel. In appreciation of the continued support from our shareholders, the Group has declaredan interim dividend of 0.25 HK cent (2001: 1 HK cent).

SBI E2-Capital

HK/China

In April 2002, the Group’s financial services’ joint venture, SBI E2-Capital reorganized its GreaterChina business by the appointment of a Chief Executive Officer of SBI E2-Capital ChinaHoldings Limited (“SBI E2-Capital China”) and placing its operations in Hong Kong and thePeoples’ Republic of China under SBI E2-Capital China with the objective of integration of SBIE2-Capital Group’s resources to keep the group in tune with market conditions and economictrends and to maximize business results.

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In the first half of 2002, stock market volume in Hong Kong shrank by more than 20% with anaverage daily turnover to HK$7.6 billion. Against a net profit of HK$4.4 million in the precedingperiod of 2001, the brokerage division sustained an operating loss of HK$5.1 million duringthe period under review. The management had foreseen the difficult operating environmentin the beginning of this year and had implemented a series of cost control measures to reducethe operating expenses and to streamline the on-line trading business. The effect of the costrationalization measures would be more apparent in the third to fourth quarter of this year.

Regarding margin financing business, the management of SBI E2-Capital took a prudentapproach in granting credit to clients and thus the consistent poor market performance andhigh bankruptcy in Hong Kong did not expose our brokerage and margin financing arm, SBIE2-Capital Securities Limited, to any significant credit risk throughout the period. As well,there was no significant provision made for bad and doubtful debts.

The Group’s investment banking activities as undertaken by SBI E2-Capital (HK) Limited,performed satisfactorily in the first half of 2002 and recorded a profit before taxation of HK$4million (2001: HK$12.6 million) even though the market was not yet recovered during theperiod with revenue stood at HK$10.6 million compared with HK$25.6 million for the sameperiod last year. During the period under review, the division successfully secured the role ofco-sponsor and co-lead manager in the listing of Linmark Group Limited and MediaNationInc. respectively. SBI E2-Capital (HK) Limited also emerged as the leading player in the equitycapital market for small and medium enterprises during the period under review.

With the receipt in December 2001, from the China Securities Regulatory Commission of alicense to act as a brokerage house of B Shares market and as a lead manager in the issue of BShares in the PRC, the Group has been making progress in processing mandates from the PRCand regional clients and business so as to carry out fund raising exercises, focusing mainly onlistings on The Stock Exchange of Hong Kong.

Research

During the period, our research team continued to publish research reports on companies,sectors and other special topics periodically with the aim to assist investors to realize superiorreturns and its research coverage from that of technology companies to include media, telecom,industrial and consumer companies, covering in particular those that are operating in GreaterChina, and this has led to an increase in the volume of research commentary delivered duringthe period under review. By the end of 2001, SBI E2-Capital was ranked as the second bestlocal house in Hong Kong by The Asset 2001 Broker Poll and the fourth most improved Chinaresearch by Asiamoney 2001 Broker Poll.

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Singapore

The Singapore division, SBI E2-Capital Pte Ltd (“SBI Pte”) has continued to perform well asan innovative corporate finance house in Singapore, unlinked to any existing brokerage houseor commercial bank, and it has lead-managed five out of a total of eleven IPOs in Singapore’scapital markets in the first half of 2002. Subsequent to the period ended 30th June 2002, SBIPte was the leading house in terms of lead-managing the current slew of new shares issues,securing mandates for four out of ten IPOs that have been launched in July 2002, on both theSingapore Main Board and SESDAQ Exchanges.

Following the receipt of the Dealer ’s License from the Monetary Authority of Singapore(“MAS”) in December 2001, a fellow subsidiary of SBI Pte has submitted an application tothe MAS as a dealer and to submit an application to the Singapore Exchange as a non-clearingmember so as to further complement its range of services.

During the period from January to August 2002, SBI E2-Capital was ranked No. 1 among thetop 5 lead managers for Hong Kong and Singapore Small and Medium Enterprises (“SME’)IPOs.

Top 5 Lead Managers for Hong Kong and Singapore SME IPOs

Rank Name Total Amount Raised (HK$m)

1 SBI E2-Capital 753.52 DBS 742.63 Core Pacific-Yamaichi 641.94 Cazenove 582.75 Guotai Junan 386.1

Source: www.hkex.com.hk/www.ses.com.sgAll HK & Singapore IPOs below HK$ 1 billion 2002 YTD

(as at 30 Aug, 2002) - equal apportionment basis

Other countries

Besides a strategic investment in the US-based vFinance, Inc. (Nasdaq OTCBB: VFIN), a fullylicensed broker dealer, in December 2001, SBI E2-Capital (USA) Limited (“SBI USA”) continuedto explore opportunities to expand the Group’s regional and global service capabilities anddistribution network in anticipation of the need to provide greater breadth and depth of servicesto our global clients.

Online Primary Offerings

The Group’s subsidiary, OpenIBN Technology Holdings Limited (“OpenIBN Tech”), whichlaunched Asia’s first electronic share placement platform operator in November 2000, continuedto grow its business steadily during the period and expanded its broker network geographicallyduring the year to include, the USA and Europe, thereby providing the Group’s clients withseveral new global distribution avenues. Indeed, throughout the period, a significant numberof professional and institutional investors actively participated online in the primary offeringtransactions that the Group was involved in.

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In June 2001, OpenIBN Technology Group announced the acquisition from Crosby Limited,previously techpacific Capital Limited, an Asian venture capital company listed in Hong Kong,of a 70% interest in GlobalOffering.com Limited, an online marketing company for primaryofferings, with an objective to host IPO/Primary Offering presentation online by applying thelatest webcasting technology. OpenIBN Tech has been renamed as OpenOffering TechnologyLimited (“OpenOffering”) early this year, to promote the opening up of the primary offeringmarkets for global investors.

Since the merger and throughout the second half of 2001 and first half of 2002, OpenOfferingsuccessfully conducted many notable primary offering transactions, for example MediaNation(US$57m) and Linmark (US$34m) IPOs, Arcontech (US$16m) Equity Placement, and SoftbankInvestment (US$20m) Convertible Notes in Hong Kong where OpenOffering played asignificant role in the transaction. In Singapore this year, OpenOffering have participated inboth the PNE Mircron (US$7.6m) and Citiraya (US$20m) IPOs, signifying its expansion intoSoutheast Asian offerings. Moreover, OpenOffering took part in more than 15 other EquityCapital Markets fund-raising exercise such as Zhejiang Glass, Capinfo, and Sino Stride duringthe period under review.

Going forward, OpenOffering will continue to strengthen its distribution network in both theUSA and Europe particularly London and Paris so as to reach a wider range of brokers andinvestors in the European continent. In addition, its business focus will also expand into primaryofferings in the PRC and Taiwan.

Consulting, Marketing and Technology Services

The disposal of the ebizal business to Softbank Strategic as part of a strategic businessrealignment by both Softbank Strategic and the Group was completed in January 2002.

Life Sciences Advisory

Driven by a shared interest to develop biochip technology and accelerate screening of newdrugs, E2-Capital’s Life Sciences Advisory Group (formally known as e2 BioTech AdvisoryGroup Limited) invested HK$5 million (a 6.5% interest) in ChipScreen BioScience Limited,with six other pharmaceutical, investment and technology companies based in the PRC, HongKong and Singapore. Patented ChipScreen technology developed by the Biochip ResearchInstitute at Beijing’s renowned TsingHua University, coupled with experienced pharmaceuticalscientists from the US, have resulted in a unique drug discovery platform, second to none inthe PRC. Four chemical entities have been identified in disease areas of high market potentialand not yet fully catered for, including screening of Traditional Chinese Medicine (TCM).

Continued progress was recorded in the investment in the Biotechnology arena, which theGroup has a US$1 million convertible notes in World Pioneer Limited, a Hong Kong basedcompany which carries out commercialization as well as manufacturing and marketing ofgeneric pharmaceuticals in the PRC and Hong Kong. This company is currently expanding itsproduct range and is in the process of forming strategic alliances with regional players torapidly expand its business activities. The Group believes that there is tremendous potentialfor this industry and expects to see returns on its existing investments.

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Industrial

The Group’s industrial business, operated through Cheung Wah Ho Dyestuffs CompanyLimited and Lancerwide Company Limited acquired from Softbank Strategic in January 2002,has made progress despite the depressed market. The business of Winbox Company Limited(“Winbox”), which is an associated company of the Group, remained stable and profitable.With the completion of the relocation of the Winbox factory in the PRC, its production capacityhas increased substantially. Winbox is also building its distribution channels in Europe toprovide direct services to customers through its new associated company in France, whichwas acquired at the end of 2001. Both companies are expected to contribute to future groupperformance.

Property

Goodwill Properties Limited (“GPL”), the Group’s property division, was active in the firsthalf of 2002, both in Hong Kong and the PRC.

The sales at Vision Court, the Group’s residential development at Prince Edward Road West inKowloon Tong since its completion in the second half of the previous financial year continuedto be satisfactory, with over 90% of the floor area sold as at 30 June 2002 while demand for theremaining units has been encouraging.

The residential development at Fairview Park Boulevard in Yuen Long, consisting of 30luxurious villas with GFA 6,000m2, is 50% completed at 30 June 2002 and is targeted forcompletion in early 2003. The pre-sale of 1-3 Po Shan Road in Midlevels, a luxurious residentialdevelopment jointly developed with Sun Hung Kai Properties, is scheduled to commence laterthis year. Both projects together are expected to contribute a total of HK$147 million cashinflow to the Group.

The development of Tianma Project in Shanghai, comprising 200 luxurious villas, a 27-holegolf course and a country club, was in good progress. The Group achieved a remarkable resultin the pre-sale of villas. As the PRC property market is very active, the sales have grown rapidly.

GPL is developing other property and environment related projects, such as a centralizeddrinking water filtration system. This system has been installed in some popular developmentsin Guangdong province, and it will be extended to other major cities. This business is expectedto contribute towards the group’s performance in the second half of this year and we expect toprocure 10,000 households in 2003 with further increase in revenue.

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Liquidity and Financial Resources

As at 30 June 2002, the Group’s cash and other short-term listed investments totalled HK$95million (31 December 2001: HK$131 million). This pool of liquid assets and marketable securitieswell exceeded the Group’s total short-term borrowings from banks and financial institutionsof HK$76 million (31 December 2001: HK$75 million).

Of the total bank borrowings of HK$121 million, approximately 94% are loans secured byproperties under development located in Hong Kong, 4% are working capital loans securedby bank deposits, while the remaining are loans secured by mortgage loans receivable. Ofthese borrowings, HK$76 million is repayable within 1 year of which HK$65 million of thefacilities will be renewed to coincide with the project development schedule, while theremaining HK$11 million will be repaid this year in line with the repayment schedule, withthe balance of HK$45 million repayable within 2 to 5 years.

The Group actively managed its financial resources during the period, resulting in furtherimprovement in the gearing ratio, from 20% at 31 December 2001 to 17% at 30 June 2002,calculated on the basis of the Group’s total debts over shareholders’ fund, and showingsignificant improvement when compared to the gearing ratio of 27% as at 30 June 2001.

With cash and marketable securities on hand as well as available banking facilities, the Group’sliquidity position remains strong and the Group has sufficient financial resources to satisfy itscommitments and working capital requirements.

Capital Structure of the Group

Substantially all the transactions of the Group are denominated in Hong Kong Dollars and theGroup maintains its cash balances mainly in Hong Kong Dollars.

The Group’s borrowings are principally denominated in Hong Kong Dollars and on a floatingrate basis. As the tenure of a substantial amount of our borrowings is matched against thedevelopment period of the projects in progress, the Group has limited exposure to interest ratefluctuations.

Changes in the Composition of the Group during the Interim Period

On 18 December 2001, the Company entered into a sale and purchase agreement with SoftbankStrategic in relation to the disposal of the Group’s entire equity interest in ebizal InvestmentsLimited (subsequently renamed as ebizal (Holdings) Limited), an indirect wholly-ownedsubsidiary of the Company, for a total consideration of approximately HK$68.1 million. Thetotal consideration was satisfied as to (i) approximately HK$51.9 million by way of disposal ofSoftbank Strategic to the Group of its entire equity interests in Cheung Wah Ho DyestuffsCompany Limited, Full Success Investments Limited, Lancerwide Company Limited and LuckyHappy Development Limited (the “Softbank Companies”), all of which are wholly-ownedsubsidiaries of Softbank Strategic, and the assignment of Softbank Strategic to the Group ofthe loans by Softbank Strategic to Softbank Companies, the aggregate of which amounted toapproximately HK$62.7 million; and (ii) a sum of approximately HK$16.2 million in cash. Thetransaction was completed on 24 January 2002.

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Number and Remuneration of Employees, Remuneration Policies, Bonusand Share Option Schemes and Training Schemes

As at 30 June 2002, the Group, including Directors and its subsidiaries but excluding associates,employed a total of 43 full-time employees. The Group operates different remuneration schemesfor client service staff and for client support and general staff. Client service personnel areremunerated on the basis of on-target-earning packages comprising salary and/or commission.Client support and general support staff are offered year-end discretionary bonuses subject toindividual performance and/or the business result of the company. Employees’ cost (excludingdirectors’ emoluments) amounted to approximately HK$8.6 million for the period. The Groupensures that the remuneration paid to its employees is competitive and employees are rewardedwithin the general framework of the Group’s salary and bonus system. The Company has ashare option scheme under which the Directors may, at their discretion, invite employees ofthe Company and its subsidiaries, including full time executive Directors, to take up optionsto subscribe for shares, which in aggregate, may not exceed 10% of the issued share capital ofthe Company from time to time. Details of the share option scheme are mentioned in the sectionheaded “Share Option Scheme”.

Details of the Charges on Group Assets

Properties under development with an aggregate value of approximately HK$352 million andbank deposits of HK$5 million have been pledged to secure the general banking facilities grantedto the Group of HK$119 million.

In addition, a loan of HK$2.3 million was secured by the mortgage loans receivable of asubsidiary amounting to approximately HK$3.3 million.

Contingent Liabilities

Corporate guarantees proportionate to the Group’s interest, were given to financial institutionsfor working capital facilities of associated companies and investee companies in addition tocollaterals given by these companies. The aggregate amount of such facilities utilised by thesecompanies at 30 June 2002 amounted to HK$41 million.

In addition, the Company provided a guarantee to the MAS in respect of the obligations andliabilities of an indirect associated company of the Company, SBI E2-Capital Pte Ltd,proportionate to the Company’s interest. As at 30 June 2002, the shareholders’ fund and totalliabilities of SBI Pte were HK$18,681,000 and HK$5,935,000 respectively.

Exposure to Fluctuations in Exchange Rates and Related Hedges

The Group’s borrowings are primarily denominated in Hong Kong Dollars. The Group has nosignificant exposure to foreign exchange fluctuations.

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In Summary

The Directors considered the performance of the Group satisfactory in the first half of 2002under current challenging economic and market conditions. The Group will continue to exercisecaution and prudence in its business undertakings and at the same time, will continue to lookto strengthening its presence in both developed markets such as the USA and Japan andemerging markets such as the PRC, across a selective range of business within the industrialsector.

PURCHASE, SALE OR REDEMPTION OF THE COMPANY’S LISTEDSECURITIES

During the period, the Company repurchased a total of 636,000 shares through the StockExchange, all of which have been duly cancelled as follows:

No. of shares Price per share TotalMonth of repurchase repurchased Highest Lowest consideration

HK$ HK$ HK$

April 636,000 0.31 0.31 197,160

The Directors considered that as the Company’s shares were trading at a significant discountto its net asset value per share, the repurchase would increase its net asset value per share.

None of the Company’s subsidiaries purchased, sold or redeemed any of the Company’s sharesduring the period.

DIRECTORS’ INTERESTS IN EQUITY OR DEBT SECURITIES

At 30 June 2002, the interests of the Directors and chief executive in the shares and options ofthe Company and its Associated Corporations (within the meaning of the Securities (Disclosureof Interests) Ordinance (“SDI Ordinance”)), as recorded in the register maintained by theCompany under Section 29 of the SDI Ordinance or as notified to the Company were as follows:

The Company

Number of sharesof the Company held

Personal CorporateName of directors interests interests

Fung Ka Pun 7,380,850 302,889,957 (note 1)Wong Sin Just — 298,100,000 (note 2)

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Notes:

(1) Mr. Fung Ka Pun has beneficial interests in Bo Hing Limited and Goodwill International (Holdings)Limited (“Goodwill International”), which were interested in 5,320,866 shares and 297,569,091 sharesrespectively in the Company as at 30 June 2002. Goodwill International is a substantial shareholder ofthe Company and its shareholding in the Company is set out in the section headed “SubstantialShareholders”.

(2) Mr. Wong Sin Just has beneficial interests in e2-Capital Inc., which was interested in 298,100,000 sharesin the Company as at 30 June 2002. e2-Capital Inc. is a substantial shareholder of the Company and itsshareholding in the Company is set out in the section headed “Substantial Shareholders”.

SHARE OPTION SCHEME

Under the share option scheme (the “Scheme”) approved by the shareholders at a SpecialGeneral Meeting of the Company held on 15 December 1992 (“Adoption Date”), the Directorsmay, at their discretion, invite any full time employees or Directors of the Company or any ofits subsidiaries, as incentive to take up options to subscribe for shares which in aggregate, maynot exceed 10% of the issued share capital of the Company from time to time.

As at 30 June 2002, the total number of shares available for issue under the Scheme are 42,519,000shares, representing approximately 3.7% of the total issued share capital thereof.

No option shall be granted to any full time employee or Director of the Company or any of itssubsidiaries if the number of shares the subject of such option when added to the number ofshares which may be subscribed by him/her under any outstanding options granted to him/her and the number of shares already issue to him/her under options previously granted wouldexceed 25% of the maximum number of shares available for subscription under the terms ofthe Scheme at the relevant time.

An offer of the grant of an option shall be made to a full time employee or Director of theCompany or any of its subsidiaries by letter in such form as the Director may from time to timedetermine requiring him/her to undertake to hold the option on the terms on which it is to begranted and to be bound by the provisions of the Scheme and shall remain open for acceptanceby him/her for a period of 28 days from the date of offer.

The subscription price for the shares in respect of which options are granted shall be the higherof the nominal value or not more than 20% below the average closing price of the shares quotedon The Stock Exchange of Hong Kong (“Stock Exchange”) for five trading days immediatelypreceding the date of grant of the option. The options granted may be exercised at any timeduring the period of not exceeding 10 years commencing on the date upon which the option isdeemed to be granted and accepted and expiring on the last date of the period of 10 yearscommencing on the Adoption Date.

The life of the Scheme is 10 years commencing on the Adoption date and will end on 14December 2002.

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Details of share options outstanding as at 30 June 2002 which have been granted under theScheme are as follows:

Number of share optionsLapsed

Date of Exercise Held at during Held atName of directors grant price 1.1.2002 the year 30.06.2002

HK$

Fung Ka Pun 17.3.1997 1.77 6,375,000 — 6,375,000Choi Hon Hing (Note 1) 17.3.1997 1.77 1,500,000 — 1,500,000

23.4.1998 0.80 2,000,000 — 2,000,000 (Note 2)29.4.2000 0.79 4,000,000 — 4,000,000 (Note 3)

Continuous Contract 17.3.1997 1.77 1,724,000 — 1,724,000Employees 23.4.1998 0.80 2,000,000 (2,000,000) —

6.3.2000 1.20 3,050,000 (1,500,000) 1,550,000 (Note 4)29.4.2000 0.79 9,000,000 (4,000,000) 5,000,000 (Note 6)3.6.2000 0.79 2,120,000 — 2,120,000 (Note 8)15.8.2000 0.79 6,500,000 (6,500,000) —

Others 1.8.1997 2.68 750,000 (750,000) —6.3.2000 1.20 750,000 — 750,000 (Note 4)13.4.2000 1.03 4,000,000 — 4,000,000 (Note 5)29.4.2000 0.79 7,000,000 — 7,000,000 (Note 7)6.5.2000 0.85 — — —3.6.2000 0.79 2,000,000 (2,000,000) —15.8.2000 0.79 250,000 (250,000) —1.9.2000 0.79 6,500,000 — 6,500,000 (Note 9)

59,519,000 (17,000,000) 42,519,000

Subject to certain conditions of the Scheme, the outstanding options can be exercised at anytime up to 14 December 2002 subject to the following notes 2-9.

Notes:

1. Madam Choi Hon Hing is the spouse of Mr. Fung Ka Pun and is also a director of Crebox Limited(“Crebox”), an indirect wholly-owned subsidiary of the Company.

2. Share options granted shall be exercisable only in accordance with the following terms:

(i) up to a maximum of 30% of the share options granted shall be exercisable on or after 1 April1999;

(ii) up to a maximum of 60% of the share options granted shall be exercisable on or after 1 April2000; and

(iii) the full amount of the share options granted shall be exercisable on or after 1 April 2001.

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3. Share options granted shall be exercisable only in accordance with the following terms:

(i) up to a maximum of 660,000 of the share options granted shall be exercisable after 16 October2000;

(ii) up to a maximum of 1,320,000 of the share options granted shall be exercisable after 16 April2001;

(iii) up to a maximum of 1,980,000 of the share options granted shall be exercisable after 16 October2001;

(iv) up to a maximum of 2,640,000 of the share options granted shall be exercisable after 16 April2002;

(v) up to a maximum of 3,330,000 of the share options granted shall be exercisable after 16 October2002; and

(vi) the full amount of the share options granted shall be exercisable after 6 December 2002.

4. Options granted shall be exercisable only in accordance with the following terms:

(i) up to a maximum of 30% of the options granted shall be exercisable on or after 1 February 2001;and

(ii) the full amount of the options granted shall be exercisable on or after 1 February 2002.


(i) up to a maximum of 660,000 of the options granted shall be exercisable after 16 October 2000;

(ii) up to a maximum of 660,000 of the options granted plus the balance on 16 October 2000 shall beexercisable after 16 April 2001;

(iii) up to a maximum of 660,000 of the options granted plus the balance on 16 April 2001 shall beexercisable after 16 October 2001;

(iv) up to a maximum of 660,000 of the options granted plus the balance on 16 October 2001 shall beexercisable after 16 April 2002;

(v) up to a maximum of 660,000 of the options granted plus the balance on 16 April 2002 shall beexercisable after 16 October 2002; and

(vi) up to a maximum of 700,000 of the options granted plus the balance on 16 October 2002 shall beexercisable after 6 December 2002.

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(i) up to a maximum of 1,484,000 of the options granted shall be exercisable after 16 October 2000;

(ii) up to a maximum of 2,968,000 of the options granted shall be exercisable after 16 April 2001;

(iii) up to a maximum of 4,452,000 of the options granted shall be exercisable after 16 October 2001;

(iv) up to a maximum of 5,936,000 of the options granted shall be exercisable after 16 April 2002;

(v) up to a maximum of 7,420,000 of the options granted shall be exercisable after 16 October 2002; and

(vi) the full amount of the options granted shall be exercisable after 6 December 2002.


(i) up to a maximum of 1,154,000 of the options granted shall be exercisable after 16 October 2000;

(ii) up to a maximum of 2,308,000 of the options granted shall be exercisable after 16 April 2001;

(iii) up to a maximum of 3,462,000 of the options granted shall be exercisable after 16 October 2001;

(iv) up to a maximum of 4,616,000 of the options granted shall be exercisable after 16 April 2002;

(v) up to a maximum of 5,770,000 of the options granted shall be exercisable after 16 October 2002;and



(i) up to a maximum of 344,000 of the options granted shall be exercisable after 30 November 2000;

(ii) up to a maximum of 688,000 of the options granted shall be exercisable after 30 May 2001;

(iii) up to a maximum of 1,032,000 of the options granted shall be exercisable after 30 November2001;

(iv) up to a maximum of 1,376,000 of the options granted shall be exercisable after 30 May 2002;

(v) up to a maximum of 1,720,000 of the options granted shall be exercisable after 30 November2002; and



(i) up to a maximum of 1,100,000 of the options granted shall be exercisable after 1 March 2001;

(ii) up to a maximum of 2,200,000 of the options granted shall be exercisable after 1 September2001;

(iii) up to a maximum of 3,300,000 of the options granted shall be exercisable after 1 March 2002;

(iv) up to a maximum of 4,400,000 of the options granted shall be exercisable after 1 September2002; and

(v) the full amount of the options granted shall be exercisable after 6 December 2002.

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Other than as disclosed above, at no time during the period was the Company or any of itsAssociated Corporations a party to any arrangement to enable the Directors of the Companyto acquire benefits by means of the acquisition of shares in, or debentures of, the Company orany other body corporate and none of the Directors or their spouses or children under 18 yearsof age was granted any right to subscribe for any shares in, or debentures of, the Company orany of its Associated Corporations.

DIRECTORS’ RIGHTS TO ACQUIRE SHARES OR DEBENTURES

Other than as disclosed above, at no time during the period was the Company or any of itssubsidiaries a party to any arrangement to enable the Directors of the Company to acquirebenefits by means of the acquisition of shares in, or debentures of, the Company or any otherbody corporate.

SUBSTANTIAL SHAREHOLDERS

The register of substantial shareholders maintained under section 16(1) of the SDI Ordinanceshows that as at 30 June 2002, the Company had been notified of the following substantialshareholders’ interests, being 10% or more of the Company’s issued share capital:

Name of shareholder Number of ordinary shares

Goodwill International 297,569,091e2-Capital Inc. 298,100,000

Other than as disclosed above, the Company had not been notified of any other interestsrepresenting 10% or more of the issued capital of the Company as at 30 June 2002.

COMPLIANCE WITH THE CODE OF BEST PRACTICE OF THELISTING RULES

None of the Directors of the Company is aware of any information which would indicate thatthe Group is not, or was not, in compliance with the Code of Best Practice as set out in Appendix14 of the Listing Rules of The Stock Exchange of Hong Kong Limited at any time during the sixmonths ended 30 June 2002.

AUDIT COMMITTEE

The Audit Committee has reviewed with management the accounting principles and practicesadopted by the Group and discussed internal controls and financial reporting matters includinga review of the unaudited interim financial statements for the six months ended 30 June 2002with the Directors.

16

CONDENSED CONSOLIDATED PROFIT AND LOSS ACCOUNTFOR THE SIX MONTHS ENDED 30 JUNE 2002

Unaudited6 months ended 30 June

Note 2002 2001

HK$’000 HK$’000

Turnover 2 85,039 121,296

Cost of sales (73,683) (46,743)

Gross profit 11,356 74,553

Other revenues 71 2,096

Net investment gain 3 6,580 73,168

Distribution costs (156) (1,640)

General and administrative expenses (23,830) (95,601)

Operating (loss)/profit 4 (5,979) 52,576

Finance costs (274) (1,839)

Share of profits/(losses) of associates 8,236 (9,938)

Profit before taxation 1,983 40,799

Taxation 5 (1,781) (2,787)

Profit after taxation 202 38,012

Minority interests (624) (4,832)

(Loss)/profit attributable to shareholders (422) 33,180

Dividends 6 2,862 11,456

Basic (loss)/earnings per share 7 HK cents (0.04) HK cents 2.89

17

CONDENSED CONSOLIDATED BALANCE SHEETAS AT 30 JUNE 2002 AND 31 DECEMBER 2001

Unaudited Audited30 June 31 December

Note 2002 2001

HK$’000 HK$’000

Non-current assetsIntangible assets 23,061 23,415Fixed assets 45,964 10,955Properties under development 352,037 340,286Investments in Flourmill Businesses 8,675 8,675Interests in associated companies 8 109,192 103,603Investments in securities 198,933 220,089Loans receivable from investee companies 191,052 221,995Mortgage loans receivable

- due after one year 19,519 18,461Other loans receivable - due after one year 1,224 —Other non-current assets 2,242 2,242

951,899 949,721

Current assetsProperties for sale 27,970 72,518Inventories 8,636 4,200Trade and other receivables 10 95,744 44,936Investments in securities 6,187 8,116Mortgage loans receivable - current portion 110 104Bank balances and cash 11 88,430 122,399

227,077 252,273

Current liabilitiesTrade and other payables 12 25,471 53,227Taxation payable 4,553 4,289Dividend payable 6(a) 2,864 —Current portion of long-term liabilities 13 71,148 74,575Bank borrowings - secured 4,830 —Bank overdrafts - unsecured — 456

108,866 132,547

Net current assets 118,211 119,726

Total assets less current liabilities 1,070,110 1,069,447

18

CONDENSED CONSOLIDATED BALANCE SHEETAS AT 30 JUNE 2002 AND 31 DECEMBER 2001

Unaudited Audited30 June 31 December

Note 2002 2001

HK$’000 HK$’000

Share capital and reservesShare capital 14 893,013 893,509Reserves 102,667 96,154Final dividend 6(a) — 2,864Interim dividend 6(b) 2,862 —

Shareholders’ funds 998,542 992,527

Minority interests 6,695 8,913

Non- current liabilitiesLong-term liabilities 13 44,807 47,941Loan from a minority shareholder

of a subsidiary 20,066 20,066

64,873 68,007

1,070,110 1,069,447

19

CONDENSED CONSOLIDATED CASH FLOW STATEMENTFOR THE SIX MONTHS ENDED 30 JUNE 2002

Unaudited6 months ended 30 June

2002 2001

HK$’000 HK$’000

Net cash outflow from operating activities (43,755) (114,693)

Net cash inflow/(outflow) from investing activities 6,858 (27,183)

Net cash (outflow)/inflow from financing (1,929) 25,340

Decrease in cash and cash equivalents (38,826) (116,536)Cash and cash equivalents at 1 January 121,943 281,133

Cash and cash equivalents at 30 June 83,117 164,597

Analysis of balances of cash and cash equivalents:Bank balances and cash 83,117 165,283Bank overdrafts — (686)

83,117 164,597

20

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITYFOR THE SIX MONTHS ENDED 30 JUNE 2002

Unaudited(Goodwill)/

Share Share Contributed Other capital Accumulatedcapital premium surplus reserve reserve losses Total

HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000

At 1 January 2002 893,509 — 219,943 2,933 (9,499 ) (114,359 ) 992,527Repurchase of shares (496 ) — — 298 — — (198 )Goodwill realised on

disposal of subsidiaries — — — — 9,499 — 9,499Loss for the period — — — — — (422 ) (422 )2001 final dividend declared — — (2,864 ) — — — (2,864 )

Shareholders’ funds at30 June 2002 893,013 — 217,079 3,231 — (114,781 ) 998,542

2002 interim dividend declared — — (2,862 ) — — — (2,862 )

At 30 June 2002 893,013 — 214,217 3,231 — (114,781 ) 995,680

Unaudited(Goodwill)/

Share Share Contributed Other capital Accumulatedcapital premium surplus reserve reserve losses Total

HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000

At 1 January 2001 894,289 770,293 33,771 1,298 (47,016 ) (699,130 ) 953,5052000 final dividend paid — — (22,930 ) — — — (22,930 )Effect of adopting SSAP 30

on impairment of goodwillin period prior to year 2001 — — — — (57,923 ) 57,923 —

Goodwill realised on disposalof subsidiaries — — — — 73,810 — 73,810

Profit for the period — — — — — 33,180 33,180

Shareholders’ funds at30 June 2001 894,289 770,293 10,841 1,298 (31,129 ) (608,027 ) 1,037,565

2001 interim dividend declared — — — — — (11,456 ) (11,456 )

At 30 June 2001 894,289 770,293 10,841 1,298 (31,129 ) (619,483 ) 1,026,109

21

NOTES TO UNAUDITED CONDENSED INTERIM FINANCIAL STATEMENTS

1. Basis of preparation and accounting policies

These unaudited consolidated condensed interim financial statements are prepared in accordance withHong Kong Statement of Standard Accounting Practice (“SSAP”) 25, Interim Financial Reporting, issuedby the Hong Kong Society of Accountants.

These condensed interim financial statements should be read in conjunction with the 2001 annualfinancial statements.

The accounting policies and methods of computation used in the preparation of these condensed interimfinancial statements are consistent with those used in the annual financial statements for the yearended 31 December 2001 except that the Group has changed certain of its accounting policies followingits adoption of the following Statements of Standard Accounting Practice (“SSAP”s) issued by theHong Kong Society of Accountants which are effective for accounting periods commencing on or after1 January 2002:

SSAP 1 (revised) : Presentation of financial statementsSSAP 11 (revised) : Foreign currency translationSSAP 15 (revised) : Cash flow statementsSSAP 25 (revised) : Interim financial reportingSSAP 33 : Discontinuing operationsSSAP 34 : Employee benefits

The changes to the Group’s accounting policies and the effect of adopting these new policies is set outbelow:

(a) SSAP 11 (revised): Foreign currency translation

The balance sheet of subsidiaries and associated companies expressed in foreign currencies aretranslated at the rates of exchange ruling at the balance sheet date whilst the profit and loss istranslated at an average rate. Exchange differences are dealt with as a movement in reserves.

In prior periods, the profit and loss of foreign enterprises was translated at closing rate. This isa change in accounting policy, however, the translation of the profit and loss of foreign enterprisesin prior periods has not been restated as the effect of this change is not material to the currentand prior periods.

22

1. Basis of preparation and accounting policies (continued)

(b) SSAP 34: Employee benefits

(1) Employee leave entitlements

Employee entitlements to annual leave and long service leave are recognised when theyaccrue to employees. A provision is made for the estimated liability for annual leaveand long-service leave as a result of services rendered by employees up to the balancesheet date.

Employee entitlements to sick leave and maternity or paternity leave are not recogniseduntil the time of leave.

In prior periods, no provision was made for employee annual and long service leaveentitlements. This is a change in accounting policy, however, the provision for employeeannual and long service leave entitlements have not been restated as the effect of thischange is not material to the current and prior periods.

(2) Pension obligations

The Group contributes to a defined contribution retirement scheme which is availableto all full time employees. Contributions to the scheme by the Group and employees arecalculated as a percentage of employees’ basic salaries. The retirement benefit schemecost charged to the profit and loss account represents contributions payable by the Groupto the fund.

The Group’s contributions to the defined contribution retirement scheme are expensedas incurred and are not reduced by contributions forfeited by those employees wholeave the scheme prior to vesting fully in the contributions.

The assets of the scheme are held separately from those of the Group in an independentlyadministered fund.

(3) Equity compensation benefits

Share options are granted to full time employees or Directors of the Company or any ofits subsidiaries. When the options are exercised, the proceeds received net of anytransaction costs are credited to share capital (nominal value) and share premium.

23

2. Segment information

Primary reporting format -- business segments

The Group is organised into six main business segments:

• Broking services - securities broking and provision of margin financing, commodities, optionsand futures broking

• Industrial and Management operating services - manufacture of quality plastic and paper boxesfor luxury consumer goods, provision of asset management services and trading of dyestuffs

• Investment banking - provision of corporate finance services

• Direct investments - securities trading

• Property - property development and holding

• Consulting, Marketing and Technology services - provision of technology consulting anddevelopment services, public relations services

An analysis of the Group’s revenue and results for the period by business segments is as follows:

6 months ended 30 June 2002HK$’000

Industrial & Consulting,Management Marketing &

Broking operating Investment Direct Technologyservices services banking investments Property services Group

(note)

Revenues — 15,419 1,240 3,633 51,493 13,254 85,039

Segment results — (20 ) (1,725 ) (1,397 ) (2,995 ) 2,128 (4,009 )

Net investment gain 6,580General corporate expenses (8,550 )

Operating loss (5,979 )Finance costs — (17 ) — (173 ) (80 ) (4 ) (274 )Share of profits less losses

of associated companies (1,405 ) 5,640 3,794 — 207 — 8,236

Profit before taxation 1,983Taxation (1,781 )

Profit after taxation 202Minority interests (624 )

Loss attributable to shareholders (422 )

24

2. Segment information (continued)

Primary reporting format -- business segments

6 months ended 30 June 2001HK$’000

Industrial & Consulting,Management Marketing &

Broking operating Investment Direct Technologyservices services banking investments Property services Group

(note)

Revenues 26,124 32,222 17,961 2,405 254 42,330 121,296

Segment results (3,502 ) 7,269 5,802 4,719 (1,206 ) (20,861 ) (7,779 )

Net investment gain 73,168General corporate expenses (12,813 )

Operating profit 52,576Finance costs (654 ) (206 ) — (579 ) (202 ) (198 ) (1,839 )Share of losses less profits

of associated companies 2,161 — (12,216 ) 117 — — (9,938 )

Profit before taxation 40,799Taxation (2,787 )

Profit after taxation 38,012Minority interests (4,832 )

Profit attributable to shareholders 33,180

Note:

On 24 January 2002, the Group sold its entire equity interest in ebizal Investments Limited (subsequentlyrenamed as ebizal (Holdings) Limited) which engaged in the consulting, marketing & technologyservices segment. As such, the operation of the consulting, marketing & technology service wasdiscontinued in the current period. Net assets disposed of amounted to HK$58 million.

25

2. Segment information (continued)

Secondary reporting format - geographical segments

Turnover Operating (loss)/profit6 months ended 6 months ended

30 June 30 June2002 2001 2002 2001

HK$’000 HK$’000 HK$’000 HK$’000

The Peoples’ Republic ofChina including Hong Kong 85,039 86,271 (5,979) 51,680

Europe — 19,149 — 3,461North America — 3,264 — (1,393)South East Asia — 9,988 — (1,586)Japan and North Asia — — — —Others — 2,624 — 414

85,039 121,296 (5,979) 52,576

Sales are based on the country in which the customer is located.

3. Net investment gain

6 months ended30 June

2002 2001

HK$’000 HK$’000

Net gain on disposal of interests in subsidiaries 10,808 178,161Provision for investment in securities and associated companies (4,099) (104,993)Net realised loss on investment in securities (129) —

6,580 73,168

26

4. Operating (loss)/profit

Operating (loss)/profit is stated after charging the following:


2002 2001

HK$’000 HK$’000

DepreciationOwned fixed assets 2,614 3,334Leased fixed assets — 18

Amortisation of goodwill 793 —Staff costs

Wages and salaries 11,620 55,284Pension costs - defined contribution plans 237 2,054

Operating lease rentals in respect of land and buildings 2,944 3,058Loss on disposal of fixed assets 10 19

5. Taxation

Hong Kong profits tax has been provided at the rate of 16% (2001: 16%) on the estimated assessableprofit for the period.

The amount of taxation charged to the consolidated profit and loss account represents:


2002 2001

HK$’000 HK$’000

Hong Kong profits tax 211 2,414Share of taxation attributable to associated companies 1,570 373

1,781 2,787

27

6. Dividends


2002 2001

HK$’000 HK$’000

2002 Interim, declared on 19 September 2002,of 0.25 HK cent (2001: 1 HK cent) per ordinary share 2,862 11,456

(a) At a meeting held on 26 March 2002, the Directors proposed a final dividend of 0.25 HK centper ordinary share for the year ended 31 December 2001, which was paid on 15 July 2002 andhas been reflected as an appropriation of the contributed surplus for the six months ended 30June 2002.

(b) At a meeting held on 19 September 2002, the Directors declared an interim dividend of 0.25 HKcent per share for the year ending 31 December 2002. This dividend is not reflected as a dividendpayable in these condensed financial statements, but will be reflected as an appropriation of thecontributed surplus for the year ended 31 December 2002.

7. (Loss)/earnings per share

The calculation of basic (loss)/earnings per share is based on the Group’s loss attributable to shareholdersof HK$422,000 (2001: profit attributable to shareholders of HK$33,180,000).

The basic (loss)/earnings per share is based on the weighted average of 1,145,208,093 (2001: 1,146,524,336)ordinary shares in issue during the period. The exercise of options would have anti-dilutive effects onthe basic loss per share and accordingly no diluted loss per share for the period is presented.

8. Interests in associated companies

30 June 31 December2002 2001

HK$’000 HK$’000

Share of net assets 109,192 103,603

Amounts due from associated companies (note 10) 212 505Amounts due to associated companies (note 12) (172) (2,740)

40 (2,235)

28

8. Interests in associated companies (continued)

(a) Particulars of the Group’s principal associated companies as at 30 June 2002 are as follows:

Proportion of nominalvalue of issued

Place of ordinary share capitalincorporation/ held by the Group

Name of associate registration 2002 2001 Principal activity

SBI E2-Capital Cayman Islands 49% 49% Investment banking andLimited broking services

Boxmore Limited British Virgin Islands 38% 38% Industrial andmanagement operatingservices

(b) Amounts due from/to associated companies are unsecured, interest free and have no fixedterm of repayment.

(c) The equity interest in the SBI E2-Capital Group had been reduced from 100% to 49% on 2 April2001. Accordingly the results of the SBI E2-Capital Group have been equity accounted for incurrent period. The summary of financial information of the SBI E2-Capital Group for the periodended 30 June 2002 is as follows:

6 months ended30 June 2002

HK$’000

Consolidated profit and loss accountTurnover 58,172

Profit before taxation 4,874

30 June 2002

HK$’000

Consolidated balance sheetTotal assets 169,077Total liabilities 44,348

Total net assets 124,729

29

9. Capital expenditure

Assets andliabilitiesexcluding

Goodwill fixed assets Fixed assets

HK$’000 HK$’000 HK$’000

6 months ended 30 June 2002Opening net book amount 23,415 958,157 10,955Acquisition of subsidiaries (note 17) 439 13,359 38,137Disposals (note 18) — (47,622) (569)Depreciation/amortisation charge (793) — (2,614)Other movements — 5,623 55

Closing net book amount 23,061 929,517 45,964

10. Trade and other receivables


HK$’000 HK$’000

Due from:Associated companies 212 505

Trade receivables 47,905 22,282Other receivables, prepayments and deposits 47,627 22,149

95,744 44,936

The ageing analysis of trade receivables is as follows:

0-30 days 31-90 days > 90 days Total

HK’000 HK’000 HK’000 HK’000

Balance at 30 June 2002 25,791 20,234 1,880 47,905

Balance at 31 December 2001 13,742 7,743 797 22,282

The Group allows an average credit period of 30-90 days to trade debtors.

30

11. Bank balances and cash


HK$’000 HK$’000

The balance consists of:Own account 83,117 122,399Pledged bank deposit 5,313 —

88,430 122,399

12. Trade and other payables


HK$’000 HK$’000

Due to:An affiliated company 17 17Unconsolidated subsidiaries — 148Associated companies 172 2,740

Trade payables 7,802 26,340Other accounts payables and accruals 17,480 23,982

25,471 53,227

The ageing analysis of trade payables is as follows:

0-30 days 31-90 days > 90 days Total

HK’000 HK’000 HK’000 HK’000

Balance at 30 June 2002 2,145 3,828 1,829 7,802

Balance at 31 December 2001 20,850 4,969 521 26,340

31

13. Long term liabilities


HK$’000 HK$’000

Bank loansSecured 113,671 120,000

Other loansSecured 2,284 2,467

Obligation under finance leases — 49

115,955 122,516Current portion of long-term liabilities (71,148) (74,575)

44,807 47,941

Other loans and obligations under finance leases not wholly repayable within five years are repayableby instalments from 1 July 2002 to 30 November 2018. Interest is charged on the outstanding balancesat Hong Kong prime rate plus 1.5% p.a. (2001: Hong Kong Prime rate plus 1.5% p.a.).

At 30 June 2002, the Group’s bank loans (excluding finance lease liabilities) were repayable as follows:


HK$’000 HK$’000

The secured bank loans are repayable as follows:Within one year 71,071 74,450One to two years 24,900 24,900Two to five years 17,700 17,700Over five years — 2,950

113,671 120,000

32

14. Share capital

Ordinary sharesof US$0.10 each

No. of shares Nominal valueUS$’000

Authorised:At 1 January 2001 and 30 June 2002 2,000,000,000 200,000

Issued and fully paid:At 1 January 2001 1,146,524,336 114,653Repurchase of shares (1,000,000) (100)

At 31 December 2001 and 1 January 2002 1,145,524,336 114,553Repurchase of shares (636,000) (64)

At 30 June 2002 1,144,888,336 114,489


HK$’000 HK$’000

Shown in the accounts as 893,013 893,509

Share option scheme

Under the share option scheme (the “Scheme”) approved by the shareholders at a Special GeneralMeeting of the Company held on 15 December 1992, the Directors may, at their discretion, invite anyfull time employees or Directors of the Company or any of its subsidiaries, as incentive to take upoptions to subscribe for shares which, in aggregate, may not exceed 10% of the issued share capital ofthe Company from time to time.

At 30 June 2002, the total number of shares available for issue under the Scheme are 42,519,000 shares,representing approximately 3.7% of the total issued share capital thereof.

33

15. Contingent liabilities

(a) Corporate guarantees proportionate to the Group’s interest were given to financial institutionsfor working capital facilities of associated companies and investee companies in addition tocollaterals given by these companies. The aggregate amount of such facilities utilised by thesecompanies at 30 June 2002 were as follows:


HK$’000 HK$’000

Guarantees given to banks for loans to:Investee companies 38,637 11,598Associated companies 2,450 2,450

41,087 14,048

(b) The Group provided a guarantee (the “Guarantee”) to a bank for the purpose of the bankingfacilities of RMB50 million to an investee company.

At the same time, a specific indemnity was issued to the Group by the major shareholders tokeep the Group indemnified against all liabilities and losses in relation to or out of, or as a resultof the Group having issued the Guarantee. Shares of the investee company and other companiesof approximately USD 2.9 million and sale proceeds receivable from the sale of the propertiesunder development for sale of the investee company of approximately USD 11.9 million havebeen charged to the Group as securities for the Guarantee provided.

(c) In addition, as disclosed in note 19(e), the Group provided guarantees to the Monetary Authorityof Singapore in respect of the obligations and liabilities of an indirect associated company of theGroup, SBI E2-Capital Pte Ltd (“SBI Pte”). As at 30 June 2002, the shareholders’ fund and thetotal liabilities of SBI Pte were HK$18,681,000 and HK$5,935,000 respectively.

16. Commitments


HK$’000 HK$’000

Amounts of capital commitments relating toinvestment projects are as follows:Contracted but not provided for 13,000 —

34

17. Acquisition

The Group acquired 100% of the share capital of Cheung Wah Ho Dyestuffs Company Limited,Lancerwide Company Limited, Full Success Investments Limited and Lucky Happy DevelopmentLimited (the “Softbank Companies”) which are Hong Kong incorporated companies and engaged intrading of dyestuffs and property holding. The consideration of HK$51.9 million was satisfied by wayof the disposal of its entire equity interest in ebizal Investments Limited (note 18). The transactionswere completed on 24 January 2002. The fair value of the net identifiable assets of the companies at thedate of acquisition was HK$51.5 million. The acquired business contributed revenues of HK$17,033,000and operating profit of HK$692,000 to the Group for the period from 25 January 2002 to 30 June 2002.

The assets and liabilities arising from the acquisition are as follows:

HK$’000

Fixed assets 38,137Other assets less liabilities 13,359

Fair value of net assets 51,496Goodwill 439

Total purchase consideration 51,935

18. Discontinued operation

On 24 January 2002, the Group sold its entire equity interest in ebizal Investments Limited (subsequentlyrenamed as ebizal (Holdings) Limited) which engaged in the consulting, marketing and technologyservices segment.

The sales, results, cash flows and net assets of the consulting, marketing and technology services segmentwere as follows:

2002

HK$’000

Turnover 13,254Operating costs (11,126)

Operating profit 2,128Finance costs (4)

Profit before tax 2,124Tax —

Profit after tax 2,124Minority interest (20)

2,104

Cash outflow in respect of:Operating activities (3,850)

Total cash outflow (3,850)

35

18. Discontinued operation (continued)

2002

HK$’000

Fixed assets 569Investment in securities 46,800Current assets 29,279

Total assets 76,648Total liabilities (28,457)

Net assets 48,191

Goodwill realised 9,499

19. Related party transactions

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


2002 2001

HK$’000 HK$’000

Management fees from the SBI E2-Capital Group (note (a)) 5,184 3,395

Rental received from the SBI E2-Capital Group for shareof office space (note (b)) 1,390 891

Financial advisory fee paid to the SBI E2-Capital Group (note (c)) — 3,960

Interest income from the SBI E2-Capital Group (note (d)) — 573

(a) The Group performed certain administrative services for the SBI E2-Capital Group. Managementfees calculated on pre-agreed terms were charged to the SBI E2-Capital Group. The serviceagreement was terminated on 30 April 2002.

(b) The Group received rental from SBI E2-Capital Group for sharing of office space. In accordancewith an agreement entered into by both parties, rental was calculated based on the actual rentalpaid by the Group to the landlord and the office space taken up by the SBI E2-Capital Group.The service agreement was terminated on 30 April 2002.

(c) Upon completion of the disposal of 51% interest in SBI E2-Capital Limited, the Group paidadvisory fee to the SBI E2-Capital Group for advisory service provided at rates agreed inaccordance with an agreement entered into by both parties in January 2001.

(d) The Group received interest income at Hong Kong prime rate plus 1% per annum on the amountdue from the SBI E2-Capital Group.

36

19. Related party transactions (continued)

(e) Prior to the Group’s disposal of a 51% interest in SBI E2-Capital Limited to Softbank InvestmentInternational (Strategic) Limited (“Softbank Strategic”), the Company has given to the MonetaryAuthority of Singapore (“MAS”) a guarantee (the “E2-Capital Guarantee-IAL”), as requiredunder the MAS Investment Advisor Licence, pursuant to which the Company undertakes tomaintain SBI Pte in a sound financial position and pay and settle all obligations and liabilitiesof SBI Pte during the subsistence of the guarantee. In connection with the Group’s disposal of a51% interest in SBI E2-Capital Limited to Softbank Strategic on 2 April 2001, the Group andSoftbank Strategic have agreed between themselves that their respective responsibilities for theobligations and liabilities of SBI Pte should be determined by reference to their respectiveshareholdings in SBI E2-Capital Limited. Accordingly, the Group has agreed to indemnifySoftbank Strategic for 49% of any claim under a similar guarantee given to MAS by SoftbankStrategic and Softbank Strategic has agreed to indemnify the Group for 51% of any claim underthe E2-Capital Guarantee-IAL.

(f) On 18 December 2001, the Group entered into a sale and purchase agreement with SoftbankStrategic in relation to the disposal of the Group’s entire equity interest in ebizal InvestmentLimited (subsequently renamed as ebizal (Holdings) Limited), an indirect wholly-ownedsubsidiary of the Group, for a total consideration of approximately HK$68.1 million. The totalconsideration was satisfied as to (i) approximately HK$51.9 million by way of disposal ofSoftbank Strategic to the Group of its entire equity interests in Cheung Wah Ho DyestuffsCompany Limited, Full Success Investments Limited, Lancerwide Company Limited and LuckyHappy Development Limited (the “Softbank Companies”), all of which are wholly-ownedsubsidiaries of Softbank Strategic, and the assignment of Softbank Strategic to the Group ofloans by Softbank Companies, the aggregate of which amounted to approximately HK$62.7million; and (ii) a sum of approximately HK$16.2 million in cash. The transaction was completedon 24 January 2002.

20. Subsequent events

On 2 July 2002, the Group has agreed to sell 30% shareholding in Bright Advice Holdings Limited(“Bright Advice”) to Win Hero International Limited, a private company incorporated in Hong Kongfor a consideration of HK$980,000. The consideration is to be satisfied by cash. The transaction wascompleted on 5 August 2002 and the gain in respect of this disposal is approximately HK$679,000.

On 11 September 2002, Goodwill Properties (Holdings) Limited (“Goodwill Properties”), an indirectwholly owned subsidiary of the Company, entered into a Share Purchase Agreement with Elite WorldGroup Limited (“Elite World”) in relation to the disposal of Goodwill Properties’s 50.1% shareholdingin Right Venture Holdings Limited to Elite World for a cash consideration of HK$455,000. The estimatedgain in respect of this disposal is approximately HK$70,000.

On behalf of the BoardFung Ka Pun Wong Sin Just

Executive Co-Chairman Executive Co-Chairman

Hong Kong, 19 September 2002

Documents

CORPORATE INFORMATION€¦ · to contain its operating overheads amidst severe pressure on revenue margins and business volume to record a loss of HK$422,000 for the six month period