A description of the business nature and progress of these projects can be found under "Your Investment Portfolio" after this Statement.

Notwithstanding the use of fundamental judgements in investment decisions, it is inevitable that certain projects may not perform as planned. Through their close supervision of each project's progress, your executive team continuously assesses the status and prospect of all the investments, and where appropriate they may recommend a viable early exit on any project. The exit may either bring a modest profit or result in a loss that is contained, as cash drain can be halted in a timely manner. On the other hand, when approached for an early exit on certain more promising projects, your executive team will also endeavour to optimize your company's potential return from such opportunities.


Market

Most of your company's investee projects are based in Hong Kong, with a target market in Greater China (Mainland China, Taiwan, Hong Kong and the Macau Special Administrative Region). While the economic growth in this whole region has been impressive by world standards, the business climate in Mainland China has recently become particularly favourable due to breakthrough talks confirming its entry to the World Trade Organization, and the Beijing Olympics in 2008. A buoyant investment and consumer market is expected in the years to come.

Although our long term view of the Greater China market remains positive, your Directors are aware of the difficulties in the worldwide capital markets faced by any IT-related companies, good or bad. General market sentiments may also fluctuate and be adversely affected as a result of recent political and military incidents. Therefore, it will be vitally important that both your company and its investee projects are able to survive and grow in a relatively unfavourable global market atmosphere.


The Future

Your Directors and the executive team will continue to manage the progress of your company's investee projects, optimizing their potential return to you both at the project level and from a portfolio perspective. The latter will imply, where appropriate, the restructuring or early exit on certain components of the portfolio, and the addition of new investment projects, to pave the way for enhanced performance in the future.


Peter So

Chairman

 

Your investment portfolio

Cybermax Network Technology Limited ("Cybermax")

Cybermax operates websites displaying recruitment advertising for part-time, temporary and second jobs, and owns the domain name "Part-time.com". This is a fast growing market in Greater China, with escalating demand from both employers and jobseekers.

Following a major promotional campaign created by the leading international advertising agency, Ogilvy and Mather, during the Period, Part-time.com has successfully built a high profile in the Hong Kong recruitment advertising market. As at the end of August, 2001, it had over 160,000 registered jobseekers and over 11,000 registered recruiters. According to the latest reports available from NetValue, an independent Internet usage research authority, Part-time.com has been Hong Kong's top traffic recruitment advertising website for 3 consecutive months.

Cybermax is now planning for expansion to Japan, Mainland China, Taiwan and Macau.


UFO Solutions Limited ("UFO Solutions")

UFO Solutions is engaged in the business of developing and providing software solutions to assist stock brokers and financial institutions in the trading, fund management and custodianship of Hong Kong and overseas securities.

During the Period, UFO Solutions began discussions with CFN Hongkong Limited ("CFN HK"), a company engaged in providing online real time financial information and online trading systems to financial institutions principally in Asia, regarding possible merger of the operations of UFO Solutions and CFN HK in order to amalgamate their respective expertise in IT development and market networking. Valuations on both operations were based on their respective audited net asset values without premium. The merger was approved by the Securities and Futures Commission of Hong Kong ("SFC") on 10 September, 2001, and is expected to be completed by the relevant parties before 9 October, 2001. Subsequent to the completion, UFO Solutions will own approximately 47.78% of CFN HK, and your company's beneficial interest in CFN HK will be approximately 23.82%.

Existing and prospective shareholders of CFN HK, including UFO Solutions, have also entered into a conditional agreement with iAsia Technology Limited ("iAsia"), a company listed on the Growth Enterprise Market of the Hong Kong Stock Exchange (the "HK Stock Exchange"), for iAsia to acquire 35% of CFN HK at a total consideration of HK$22,050,000 (approximately GBP1,940,000) in the form of iAsia shares. iAsia is engaged in the provision of comprehensive real time online trading and related systems to securities brokers and other financial institutions in the Pan-Asian region. It is currently recognized as one of the leaders and occupies a significant share in this market sector. The transaction is pending approval by the SFC and HK Stock Exchange. When completed, it is planned that those iAsia shares receivable by UFO Solutions will be distributed directly to your company according to its shareholding proportion in UFO Solutions. As a result, your company is expected to hold approximately 1.53% of the enlarged share capital of iAsia, in addition to the remaining interest in UFO Solutions. Your Directors believe that the addition of iAsia to CFN HK's shareholder base will greatly strengthen the latter's credibility and acceptance in the relevant markets, thus speeding up its product development and marketing activities and ultimately benefiting UFO Solutions.


Topsky Corporation Limited

Subsequent to our investment, the company's name was changed to innoVision Holding Limited ("innoVision") in order to strengthen its product branding.

innoVision will market a new form of light-box capable of displaying multiple advertising poster visuals with a pleasant "dissolve" effect based on a patented technology. Future IT related enhancements are also being planned for the product. The light-box will be introduced as a new standard of outdoor advertising medium in Mainland China, followed by Hong Kong, Taiwan and other Asian countries.

innoVision has already established a sales office in Guangzhou in southern China. Initial talks with media owners are in progress. A production plant for mass production of the light boxes is also being set up in Guangzhou, and production is expected to commence in November, 2001.


Net Fun Limited ("Net Fun")

Net Fun provides interactive entertainment and education services with contents tailor-made to the language and culture of children and teenagers in the Greater China region. Subsequent to the successful launch of its first 3D game in early 2001, Net Fun is planning to introduce two more new online CD games before the end of 2001. Distribution plans of these new games will cover Hong Kong, Mainland China and Taiwan.

In summer 2001, Net Fun hosted an online quiz contest for all secondary school and university students in Hong Kong. Although unplanned for, the quiz was able to benefit from the market climax created by the popular TV show, "The Millionaire", during the same period. As a result, a significant database of prospects, business partners and media connections was built for future marketing of Net Fun's products.

A major shareholder of Net Fun is a subsidiary of Cheung Kong (Holdings) Limited ("Cheung Kong") which has diversified interests in property, telecommunications, port operations, retail and IT related business. It is planned that by the end of 2001 the online edutainment services of Net Fun will be offered to a significant number of housing estates developed and managed by Cheung Kong.


CFN (UK) Limited ("CFN UK")

CFN UK plans to become a provider of value added services, specializing in Asian securities, to small to medium sized brokers and financial institutions in the UK. It is currently applying for the required licensing from the Securities and Futures Authority of the United Kingdom. During the Period, your company's interest in CFN UK was increased to 44% after a shareholding restructuring in the project, which also brought in other shareholders including CFN HK and the management team of CFN UK. The restructuring was expected to enhance the project's effectiveness in business development.

In August, 2001, your company entered into a conditional sales agreement with iAsia to facilitate a further shareholding restructuring in CFN UK. The transaction is subject to approval by the HK Stock Exchange. When completed, your company will continue to beneficially own 44% of CFN UK but, as a result of this transaction, will additionally hold approximately 1.43% of the enlarged share capital of iAsia. Although the transaction is expected to bring a profit to your company, your Directors will also recommend a write-down on the value of our current investment in CFN UK.


ecAgent.com Limited ("ecAgent")

ecAgent planned to provide virtual office services to insurance sales agents in Greater China. During the Period, business development of the project initially proceeded as planned, but several external and internal factors triggered a review on its future strategy. These factors included :-

- the emergence of a similar service provider in Mainland China;
- a rapid decrease in the number of insurance agents in Hong Kong;
- the departure of the project's CEO.

In September, 2001, the shareholders of ecAgent concluded that the project's long term prospect based on its original business model might become doubtful, and agreed to terminate the project. Your company has now acquired total ownership of ecAgent and its residual cash of approximately HK$12 million (approximately GBP1,043,000), which will be used for your company's working capital and future investments.

A maximum loss of HK$1.5 million (approximately GBP130,000) is expected to be realized by your company as a result of terminating ecAgent.


P & S International Limited ("P & S International")

P & S International is involved in the development of total system solutions, including semiconductor chips, for facilitating the bi-directional communications connectivity between appliances and equipment with embedded microcontroller units and the Internet. Such connectivity will enable remote control and monitoring of home appliances, business, industrial and medical equipment.

While the major shareholder of P & S International is based in Wuhan in central China, its business development is mainly coordinated from its operating office in Phoenix, Arizona. It has filed applications for several U.S. patents, aiming at establishing an industry standard that is hitherto exclusive in the global market.

The product methodology of P & S International was formally launched in the Embedded Systems Conference Boston 2001 Exhibition held in Boston, Massachusetts in September, 2001. Its management team is now actively following up on customer enquiries generated from the launch, and exploring other partnership opportunities with internationally recognized institutions in the relevant industrial sector.


iBASE Holdings Limited ("iBASE")

iBASE provides IT and e-commerce solutions to companies in Greater China, with particular strength in multi-lingual web-based email systems and technologies associated with domain names in Asian characters. Its business growth during the Period was only limited as its management team's efforts were concentrated in the development of software products that would only be ready for market by the 4th quarter of 2001.

iBASE also owns and operates Goal4u.com, a soccer-related website targeting soccer fans in Hong Kong and Mainland China. During the Period, Goal4u.com was not able to generate any significant revenue but its operating costs have also been reduced. The website is now exploring strategic alliances which may prepare it to capitalize on a soccer heatwave expected from the World Cup 2002 in Japan and South Korea.
   

Consolidated profit and loss account 

INDEPENDENT REVIEW REPORT

Introduction

We have been instructed by the company to review the financial information for the six months ended 30 June 2001 set out on pages 9 to 12, and we have read the other information contained in the interim report for any apparent misstatements or material inconsistencies with the financial information.

Directors' responsibilities

The interim report, including the financial information contained therein, is the responsibility of, and has been approved by the directors.  The Listing Rules of the Financial Services Authority require that the accounting policies and presentation applied to the interim figures should be consistent with those applied in preparing the annual accounts except where changes, and the reason for them, are disclosed.

Review work performed

We conducted our review in accordance with guidance contained in Bulletin 1999/4 issued by the Auditing Practices Board.  A review consists principally of making enquiries of management and applying analytical procedures to the financial information and underlying financial data, and based thereon, assessing whether the accounting policies and presentation have been consistently applied unless otherwise disclosed.  A review excludes audit procedures such as tests of controls and verification of assets, liabilities and transactions.  It is substantially less in scope than an audit performed in accordance with Auditing Standards and therefore provides a lower level of assurance than an audit.  Accordingly we do not express an audit opinion on the financial information.

Review conclusion

On the basis of our review we are not aware of any material modifications that should be made to the financial information as presented for the period ended 30th June 2001.


PRIDIE BREWSTER

Carolyn House
29-31 Greville Street
London
EC1N 8RB