Hong Kong Exchanges and Clearing Ltd - Morningstar, Inc

CORPORATE INFORMATION

02 Ch ina Merchan t s D iCha in (As i a ) L im i t ed A n n u a l R e p o r t 2 0 0 3

DIRECTORS

Executive Directors:

Fan Di (Chairman)

Li Xinggui

Wu Shiyue

Zhu Xiaojun

Zheng Yingsheng

Non-executive Directors:

Robert Fung Hing Piu

Wang Shizhen

Barry J Buttifant*

Iain F Bruce*

* Independent Non-executive Directors

SOLICITORS

Johnny K. K. Leung & Co.

PRINCIPAL BANKERS

Industrial and Commercial Bank of China

(Asia) Limited

Shenzhen Commercial Bank

COMPANY SECRETARY

Kwok Yam Sheung

AUDITORS

Deloitte Touche Tohmatsu

AUTHORISED REPRESENTATIVES

Fan Di

Kwok Yam Sheung

Registered office:

Clarendon House

2 Church Street

Hamilton HM 11

Bermuda

Principal office:

Units 3207-08, 32/F.

West Tower, Shun Tak Centre

168-200 Connaught Road Central

Hong Kong

BERMUDA RESIDENT REPRESENTATIVE

John C.R. Collis

BERMUDA PRINCIPAL SHARE

REGISTRAR AND TRANSFER OFFICE

Codan Services Limited

2 Church Street

Hamilton HM 11

Bermuda

HONG KONG BRANCH SHAREREGISTRAR AND TRANSFER OFFICE

Tengis Limited

G/F, Bank of East Asia Harbour View Centre

56 Gloucester Road, Wanchai

Hong Kong

WEBSITE AND OTHER INFORMATION

For more information on the Company, please find

us on the World-Wide-Web at www.dichainasia.com

To access the Company on Bloomberg, please type

“632 HK”

A n n u a l R e p o r t 2 0 0 3 Ch ina Merchan t s D iCha in (As i a ) L im i t ed 03

FINANCIAL HIGHLIGHTS

2003 2002Note HK$’000 HK$’000

Turnover 36,337 62,811

Operating profit (loss) 10,182 (104,066)

Operating profit (loss) after interest and tax 6,030 (114,667)Net profit (loss) attributable to shareholders 13,453 (129,292)

Earnings (loss) per share

Basic 0.39 cent (7.0 cents)Diluted 0.34 cent (7.0 cents)

Average shareholders’ equity 77,551 112,555

Average capital employed 113,553 138,420

At 31 March

Total indebtedness 1 77,103 74,091Shareholders’ equity 106,335 48,766

Capital employed 2 162,939 64,167

RatioReturn (loss) on average capital employed (%) 3 5% -83%

Return (loss) on average equity (%) 4 17% -115%Total debt to total capital (%) 5 41% 57%

Notes:

1. Total indebtedness = total bank borrowings

2. Capital employed = shareholders’ funds + minority interests + non-current liabilities

3. Return on average capital employed = operating profit tax after tax and interest / average capital employed

4. Return on average equity = net profit attributable to shareholders / average shareholders’ equity

5. Total debt to total capital = debt/(shareholders’ funds + minority interest + debt)

CHAIRMAN’S STATEMENT


The new Management successfully turned the Group results from an operating

loss of HK$104 million for fiscal 2002 to an operating profit of HK$10 million for

fiscal 2003. Similarly the earnings attributable to shareholders, were turned from

a net loss of HK$129 million in fiscal 2002 to a net profit of HK$13 million in the

current year.

The past year has been a watershed for China Merchants DiChain (Asia) Limited

(the “Company”). In August 2002, Farsight Holdings Ltd (“FHL”) and DiChain

Holdings Limited (“DHL”), the flagship Information Technology (“IT”) company

of China Merchants Group (“CMG”), injected HK$54 million of new capital into

the Company and became the controlling shareholder. The capital injection by DHL not only significantly

strengthened the Company’s financial position but also facilitated the new controlling shareholder and new

Management to alter the fundamental core business strategy of the Company to concentrate upon the high-

growth area of IT services. During the course of this transition, the Company under it’s new management is

building upon its fundamental expertise with the objective of enhancing the long-term shareholder value.

Despite the challenges for the People’s Republic of China (the “PRC”) and also the IT industry in the past year,

we have successfully restructured the Board and introduced seasoned management to the Company. With our

commitment and focus on our new corporate strategy and long-term objectives, we have already managed to

stabilize and enhance the Company’s existing operations and are transitioning smoothly to the new business

model.

BUSINESS OUTLOOK

Looking forward, the Company is ideally positioned to become one of the leading logistics platform operators in

the PRC. Our Company’s strengths include:

Strong IT expertise from parent

DHL, rated one of the top logistics-IT companies by IDC, currently offers a variety of IT solutions to more than

300 corporations and State-owned Enterprises in the PRC. The Company will build upon the IT knowledge-base

of DHL through various joint-venture arrangements in the future.

Unique shareholder background

The major shareholder of DHL is red-chip conglomerate CMG. CMG is widely recognized for its solid reputation,

and financial credibility for its sound industrial expertise; extensive business network; and strong financial

foundation. Being the flagship IT company of CMG, our controlling shareholder, DHL is in a privileged position

to establish joint venture businesses with local government agencies which will be enormously beneficial to the

Company.



Seasoned management team

Our management team is comprised of experienced professionals and experts in logistics, operations, IT, financing

and strategic planning which experience has been gained in both the PRC and overseas.

BUSINESS STRATEGIES

With a professional and efficient management team, our business strategies revolve around the following key

areas:

Restructure existing businesses and improve financial position

We plan to dispose of the non-core businesses, retained as a legacy from Dransfield Holdings, in a controlled

manner in order to gain maximum benefit, and within a reasonably early time frame. We will also further

manage our costs through streamlining operations and headcount. Our longer-term financial objective is to

generate adequate internal cash-flow to sustain our growth objectives.

Strengthen core business in IT services

Building upon our parent’s technological know-how, we prepare to develop an IT services operations platform

for the provision of Global Position System (“GPS”) services in the PRC. According to the State Planning Council

of the PRC, it is estimated that the GPS technology in the PRC will develop into an RMB10 billion market with a

focus on proprietary GPS products and backbone enterprises.

Create new business model for logistics operating platform business

We have quite quickly successfully improved the performance of our existing assets in the logistics area, such as

the Futian bonded warehouse, by significantly improving its utilization up to 70% presently. We plan to develop

a logistics park investment operation platform which should become a new growth driver for the Company.

Develop business by cooperation, mergers and acquisitions

The multiple applications of our IT services platform can best be illustrated by the business model of the mobile

phone operators in the PRC. In the beginning, all operators were merely sellers of mobile phones, but then they

offered value-added services as competition increased. It is important for our Company to capture market share

as fast as possible by installing more GPS installations in automobiles. The Company can then leverage the

captive market share to provide value-added services through our IT services platform.

To achieve this goal, we plan to acquire top GPS manufacturers and leading software platform providers in the

PRC, and to strategically join together with one of the largest mainland automakers and establish more operations

platforms through joint ventures with the provincial governments.



Consolidate internal and external resources to produce synergies

We plan to consolidate our internal technological know-how and external financial flexibility, through international

capital markets. When our own business platform becomes successfully established, we will be able to attract

the necessary further resources for business development and to maximize our investment returns.

OUR FUTURE

Looking back on the financial year 2002/03, we have made solid progress in a challenging environment by

building upon the franchise and know-how of our parent company. The seamless execution by our professional

management team has helped stabilise the operations and work towards the introduction of exciting new

business growth areas.

Looking ahead, the PRC’s government policy favours the development of proprietary IT services and logistics

platforms. With the strong support from our parent Company coupled to our dedicated management team, we

will embark on a fast-track for growth and profitability. The management of the Company strongly believes that

we will increase shareholder value as we deliver on our business strategies in the coming years.

Fan Di

Chairman

Hong Kong, 21 July 2003


PROFILES OF DIRECTORS AND SENIOR MANAGEMENT

PROFILES OF DIRECTORS

Executive Directors

Dr. Fan Di (Chairman)

Aged 47, is currently the Chairman and President of the Company. Dr. Fan is responsible for overseeing the

strategic development of the Group. He previously worked for China Merchants Group as an Executive Director

and Chief Financial Officer and has substantial experience in financial management and business management.

He holds a Ph.D. in Business Administration from the Southern University of California, USA.

Mr. Li Xinggui

Aged 54, is responsible for overseeing the logistics business of the Group. Before joining the Group, Mr. Li

worked for ST Anda Logistics Co. Ltd. (from April 1996 to May 2000), a joint venture formed in 1995 between

SembCorp Industries and China Merchants Holdings Company Limited, one of the pioneer third-party logistics

companies in the PRC, as deputy manager and general manager from April 1996 to May 2000, and worked for

Shenzhen PKU High-Tech Co. Ltd. (from 1994 to 1995), a listed company on the Shenzhen Stock Exchange as

deputy general manager. He has more than seven years of experience in the logistics operation and the

management industry. He received a Bachelor degree from Sichuan University, the PRC.

Mr. Wu Shiyue

Aged 31, is currently the Senior Vice President of the Company. Mr. Wu is responsible for overseeing the

finance activities of the Group. Before joining the Company, he worked for China Merchants Holdings Company

Limited (from August 1999 to November 2000) as the person in charge of the Treasury Division of the Finance

Department and worked for DiChain Holdings Limited as the person in charge of its Finance Department. He

holds a Bachelor degree from The Central University of Finance, Beijing.

Mr. Zhu Xiaojun

Aged 35, is the Vice President of the Company. He has extensive experience in the fields of business development,

marketing, and finance with companies based in the United States. Mr. Zhu served as a financial analyst for U.S.

Media Corporation, a financial controller and ERP/business consultant for Fourth Shift Corporation in Asia and in

the United States. Mr. Zhu also served as a vice president of operations at Harrington Signal Corporation in the

United States, responsible for strategic planning, corporate finance, information technology and supply chain

management. He is currently in charge of corporate strategic marketing, business development, and investment

financing of the Group. Mr. Zhu holds a Bachelor Degree in Business Administration from Shenzhen University,

the PRC and an MBA degree from Regent University, the USA.



Mr. Zheng Yingsheng

Aged 42, has had over twenty years’ working experience in logistics management and transportation operations.

He had worked for several sizeable and reputable transportation and logistics companies at senior management

level being respectively in charge of land transportation, ocean cargo forwarding, warehouse management, fleet

management and container terminal operations, etc. He is particularly experienced in transportation and logistics

work flow and systems designs and management. He was the Senior Vice President of DiChain Systems Limited

from May 2000 to March 2003. Mr. Zheng holds a Bachelor of Economics degree in Marine Economics from

School of Economics & Management, Shanghai Maritime University and a Diploma in Business Administration

from Zhejiang University, the PRC.

Non-executive Directors

Dr. Robert Fung Hing Piu

Aged 67, has been a director of Dransfield Holdings Limited since 1987. Dr. Fung holds degrees from the

Harvard University in the USA and McGill University in Canada. He is the founding chairman of Hong Kong

Committee of UNICEF and member of the Rotary Club of Hong Kong.

Mr. Wang Shizhen

Aged 70, was formerly the President and Executive Vice Chairman of China Merchants Bank. Mr. Wang is a

holder of a Ph.D. Degree in Business Administration from Southern California University, the USA. Mr. Wang has

extensive experience in management of corporations such as China Merchants (Hong Kong) Company Limited

and China Merchants Bank.

Independent Non-executive Directors

Mr. Iain F Bruce

Aged 62, joined KPMG Hong Kong in 1964 was its senior partner from 1991 to 1996. He has been a member of

the Securities and Futures Appeal Panel, Hong Kong since 1994. He also serves on the boards of several publicly

listed companies in Hong Kong and overseas.

Mr. Barry J Buttifant

Aged 58, is the Adviser to the Board of Directors of Wo Kee Hong (Holdings) Limited and also an independent

non-executive director of Daiwa Associate Holdings Limited, Giordano International Limited and MediaNation

Inc. Prior to joining Wo Kee Hong (Holdings) Limited, he was the Managing Director of IDT International Limited

for over eight years and worked for Sime Darby Hong Kong Limited and Polly Peck Group for more than 11

years in the capacity of Finance Director and Managing Director. Mr. Buttifant is a fellow member of the

Association of Chartered Certified Accountants and the Hong Kong Society of Accountants. He is also a fellow

member of the Chartered Management Institute, the Hong Kong Management Association and the Hong Kong

Institute of Directors.



PROFILES OF SENIOR MANAGEMENT

Company Secretary

Mr. Kwok Yam Sheung

Aged 56, is the Company Secretary. He is a fellow member of the Institute of Chartered Secretaries and

Administrators in the UK and a fellow member of the Hong Kong Institute of Company Secretaries. He has

worked for public listed companies for more than twenty years as company secretary and also has extensive

experience in the property industry.

Finance/Operations

Mr. Tong Wan Sze

Aged 35, is the Financial Controller of the Group. He has over 11 years of experience in finance and accounting

field. Prior to joining the Group in October 2002, He has worked for an international accounting firm, a

multinational IT company and a large domestic IT company in PRC. Mr. Tong holds a Master of Business

Administration degree from the University of Strathclyde in UK. He is a fellow of the Association of Chartered

Certified Accountants and an associate of the Hong Kong Society of Accountants.

Mr. Pang Kwong Wah

Aged 58, is the Vice President of the Company. He was formerly the Executive Director and the Acting Chief

Executive Officer of Dransfield Holdings Limited. He has extensive experience in finance, administration, business

development and corporate restructure. He holds an MBA degree from the University of Southern California,

U.S.A.

Mr. Zhou Li Yang

Aged 44, is the Assistant Vice President of the Company. He has over eight years working experience in

investment banking and project investment in Hong Kong, and over ten years working experience in commerce

and government sectors in China. He served as investment manager for Tianjin Development Holdings Limited

from May 2000 to August 2001. He also served as assistant manager for Ka Wah Capital Limited from February

1995 to October 1999. Mr. Zhou holds a Bachelor degree in Physics from Central-South University, PRC and a

Master degree in Business/Finance from University of Baltimore, USA.

Logistics

Mr. Zhang Wai

Aged 44, is the General Manager of Victorison Logistic Service (Shenzhen) Co. Limited. Mr. Zhang has extensive

experience in administration and has worked for the China Merchants Group companies for a number of years.

Before joining Victorison Logistic Service (Shenzhen) Co. Limited, he has been the administrative controller of

Shenzhen City Hotel. Mr. Zhang holds a bachelor degree in Water Carriage Management from Shanghai Maritime

Transportation University in the PRC.

MANAGEMENT DISCUSSION AND ANALYSIS


INTRODUCTION

The Board of Directors of the Company presents the first annual results of the Group for the year ended 31

March 2003 following the listing of the Company’s shares on the Stock Exchange of Hong Kong Limited on 28

August 2002.

By way of the Scheme of Arrangement (the “Scheme”) which became effective on 26 August 2002, the

shareholders of Dransfield Holdings Limited (“Dransfield”) received the shares of the Company, credited as fully-

paid up and ranking pari passu with all the shares of the Company then in issue, on the basis of one share of

the Company for every one share of Dransfield. Dransfield then became the wholly owned subsidiary of the

Company and its listing status on The Stock Exchange of Hong Kong Limited was withdrawn on 27 August

2002. The shares of the Company were listed on the main board of The Stock Exchange of Hong Kong Limited

on 28 August 2002.

BUSINESS REVIEW

We are in the process of discontinuing operations that are either loss-making and with negative cash flow or are

non-core business operations to the Company’s future business plans, being the legacy of residual businesses

from Dransfield. Whilst we are arranging for these disposals, we continue to manage our costs through

streamlining operations and headcount.

Performance of operating divisions

Bonded warehouse

The 100%-owned bonded warehouse located at Futian, China, contributed a substantial increase to the Group’s

revenue during the year. With improved efficiency and a recognized reputation, it has gained several new multi-

national corporate clients.

Home appliances sales

This operation is comparatively small scale. The contribution is not significant and the business will be disposed

of.

Food & beverage

As disclosed in the 2002 annual report of Dransfield, in April 2002, the Group disposed of the Redruth brewery

operation in the UK and the disposal showed a gain of HK$9 million for the year.

The vending machines business has operated at a loss, though not significant, and was sold after the year end

to an independent third party on 4 July 2003, with net cash inflow to the Group.

The Management has therefore now successfully disposed of all the food and beverage operations of the Group.



Shenyang & Yixing

These two operations turned into self-sustaining units. With a change of management and stringent cost control

in the past year, these two operations have improved their revenues and cash flow significantly and have

become self-sustaining.

Significant investments and acquisitions

Shanxi Transportation Industry Company (“STIC”)

The Company entered into a joint venture agreement on 20 January 2003 with STIC, a company incorporated in

the People’s Republic of China, and DiChain Holdings Limited (“DiChain Holdings”) for the intelligent

transportation platform development and operation, based on the technologies of Geographical Information

Systems, Global Positioning Systems and Wireless (“GPS”). The Company undertook to subscribe RMB1.3 million,

representing 13% of the total registered capital of the joint venture.

DF China Technology Inc (“DFCT”)

At 31 March 2003, the company owned 19.76% in DFCT, a Nasdaq listed corporation. On 11 June 2003, after

the year end by conversion of the debts which DFCT owed to the Group, the Group increased its shareholdings

to 30% of the issued share capital of DFCT. The completed equity for debt conversion shows a gain on write-

back of the substantial provision made on the debts in the previous year. Management is in the process of

realizing part of the existing holdings, to take advantage of the increased share price, given the prevailing

market boom for technology stocks listed in the USA.

Business development

We have been negotiating with various partners on a number of projects relative to the core business of the

company. GPS, a worldwide radio-navigation system provided by a constellation of 24-satellites and their

ground stations and the linking of GPS with a software platform which provides for a transportation and

logistics system, is one of the key growth areas and core business of the company going forward. Management

believes that GPS represents significant potential for future profitability. By way of background, the State policy

of the People’s Republic of China (the “PRC”) will require all vehicles transporting dangerous goods, such as

chemicals and petroleum, to install GPS monitoring equipment. Furthermore, the PRC will also require all inter-

provincial buses to install GPS navigation systems. As these policies become statutory requirements, it will boost

demand for GPS systems products and will be positive for GPS services providers such as our company is now

positioned to provide, and a large user base will create economies of scale and ensure increased and stable

recurrent income streams.



RESULTS

Profit for the year

The new Management successfully turned the Group results from an operating loss of HK$104 million for fiscal

2002 to an operating profit of HK$10 million for fiscal 2003. Similarly the earnings attributable to shareholders,

were turned from a net loss of HK$129 million in fiscal 2002 to a net profit of HK$13 million in the current

year.

Return on average Capital Employed for the year was 5% as compared to a Loss on Capital Employed of 83%

for fiscal 2002. Return on average Equity for the year is 17% as compared to a Loss on Equity of 115% for fiscal

2002. Since new management only took over the businesses in August 2002, both ratios for the year were

adversely affected by the poor performance prior to the takeover.

Operating revenue

Dransfield disposed of the UK brewery production business in April 2002 and two other investment properties

during fiscal 2002. After adjusting for the income derived from such assets sold, adjusted consolidated operating

revenues for fiscal 2002 amounted to HK$33 million. In fiscal 2003, operating revenues rose 10% to HK$36

million.

By segment, operating revenues for the Edible oil operation increased 47% to HK$22 million (2002: $15 million)

whilst the Logistics operation increased 75% to HK$7 million (2002: HK$2 million). After taking over Dransfield

in August 2002, the management better utilised the resources of these two businesses and a significant increase

in revenue was recorded. The utilisation level of the Futian bonded warehouse rose from only 15% in fiscal

2002 to over 40% in fiscal 2003. In view of this significant improvement, which is further improving in fiscal

2004, an independent appraiser revalued the assets showing increase in value by HK$27 million, and therefore

these two segments reported operating gains.

The electronic household appliances distribution recorded, an operating gain in fiscal 2003 compared to an

operating loss in fiscal 2002.

Expenses

Operating expenses (selling and administrative expenses)

After deducting the operating expenses of the disposed businesses as previously mentioned, the adjusted

consolidated operating expenses for fiscal 2002 amounted to HK$29 million. After excluding the adjustment of

expenses relative to prior years, operating expenses for fiscal 2003 amounted to HK$29 million. The management

will continue to closely control costs of core businesses.



Finance expenses

In fiscal 2003, interest on bank borrowings was reduced by 61% to HK$4 million (2002: HK$11 million) due to

the repayment of bank borrowings from funds injected from the new shareholders. The Group also arranged for

bank re-financing to repay all remaining old loans. Because of the strong reputation of the China Merchants

Group and sound business potential of the newly reorganized Company, the Group was able to obtain new

bank loans at much lower interest rates and on favourable terms, including no repayment of a substantial part

of the principal within the initial two-year period which helped alleviate any short-term cash flow pressure.

Other expenses

In fiscal 2002, Dransfield reported a significant loss on asset value impairment and on disposal of assets and

including an unrealized loss on investments in DFCT which totaled HK$92 million. As most of the non-core

assets have been disposed of, no material loss attributable to the remaining assets was reported in fiscal 2003.

On the contrary, major assets recorded significant revaluation gains due to improved performance.

Dividend

The Directors do not recommend the payment of a dividend for the year (2002: Nil).

FINANCIAL POSITION

Assets

Total assets of the Group at the close of fiscal 2003 amounted to HK$213 million (2002: HK$197 million), an

increase of 8%, or HK$16 million. The increase was mainly due to the increase of bank balances by HK$29

million to HK$36 million. This increase was partially offset by the settlement of the amount due from minority

shareholders and the elimination of high inventories of the disposed brewery plant in UK. As a consequence of

the disposal there were lower provisions for bad debts and obsolete stocks for the year.

Liabilities

Total liabilities of the Group amounted to HK$100 million (2002: HK$140 million), a reduction of 29%, or

HK$40 million in the year. Total current liabilities reduced significantly by HK$83 million to HK$50 million (2002:

HK$133 million) due to the disposal of the UK brewery production business; settlement of trade and other

creditors; and re-financing of bank borrowings maturing over one year. Short and long-term debts rose by HK$3

million to HK$77 million (2002: HK$74 million) for working capital; repaying old bank loans; and financing

future acquisitions.

The quick ratio of 1.2 times (2002: 0.3 times) – being current assets minus stock over current liabilities – shows

that the Group’s liquidity position is healthy. Debt to Equity capital for the year is 41% as compared to 57% at

the close of fiscal 2002.



LIQUIDITY AND FINANCIAL RESOURCES

On completion of the Scheme, proceeds of approximately HK$54 million were raised as the subscription to the

issued share capital of the Company from the Subscribers, out of which approximately HK$26 million was

applied to repay part of the bank loans with the Bank of East Asia, Ltd and the remainder was applied as

general working capital for the Group. The cash flow of the Group has been substantially improved as a result

of the subscription on completion of the Scheme.

Other than the subscription monies, the Group generally finances its operations from internally generated cash

flows and bank facilities granted by its principal bankers in the PRC.

Cash flows

Cash and cash equivalents at the end of the year amounted to HK$36 million (2002: HK$7 million), an increase

of HK$29 million over the previous year.

Net cash used in operating activities amounted to HK$28 million (2002: generated HK$13 million), mainly used

for settlement of debts owed by Dransfield and financing the poor performing businesses prior to the take-over

by the new management in August 2002. Management has since taken measures to minimize cash outflows

from the existing operations. By eliminating loss-making operations and acquiring profitable business ventures,

the Management expects that net cash inflows will be generated from operating activities in the coming years.

Cash outflows in the operating activities and repayment of the old bank loan of HK$52 million were financed by

repayment of loans from a minority shareholder; the new bank loans of HK$56 million; capital injection by the

new shareholders; and funds raised, from the exercise of share options of Dransfield before the takeover. As a

result, net cash generated from investing and financing activities was HK$7 million (2002: generated HK$45

million) and HK$51 million (2002: used HK$65 million) respectively.

CONTINGENT LIABILITY

The Group had no material contingent liabilities at 31 March 2003.

EMPLOYEES

At 31 March 2003, the group had a total 96 employees, 73 of whom were employed in the Chinese mainland

and 23 were employed in Hong Kong. The Group provides competitive remuneration packages to employees

commensurate with the level and market trend of pay in the business sector in which the Group operates,

including insurance and medical cover, mandatory provident fund schemes and share option schemes. Other

employee benefits include meal and traveling allowances and discretionary bonuses.



NEW SHARE OPTION SCHEME

The share option scheme of Dransfield was cancelled on 26 August 2002 upon completion of the Scheme.

The Company adopted a new share option scheme on 21 June 2002, which enables the Company to grant share

options to eligible persons as an incentive or reward for their contribution to the Group. The terms of the new

share option scheme fully comply with the provisions of Chapter 17 of the Listing Rules. No share options had

been granted under the new option scheme during the year under review.

DIRECTORS

With effect from 26 March 2003, Mr. Gordon Chen Gang resigned as an Executive Director of the Company.

Mr. Zhu Xiaojun and Mr. Zheng Yingsheng were appointed as Executive Directors of the Company on 27 March

2003.

STRATEGIES AND PROSPECTS

Looking ahead, we plan to restructure our existing businesses and further control our costs so as to maximize

operational efficiency cost effectively and to roll out GPS services in the PRC, which is estimated to be growing

into an RMB10 billion market, for proprietary GPS products and backbone enterprises. In light of the fast

expanding logistics industry in the PRC, we will seek to further improve the utilization of our Futian bonded

warehouse. We will also look for possible cooperation, mergers and acquisitions in the Mainland when appropriate

opportunities arise. With the continued commitment of the management and our staff, the Board of Directors is

confident that the Company is on the way to improving returns for our shareholders.

NOTICE OF ANNUAL GENERAL MEETING


NOTICE IS HEREBY GIVEN that the Annual General Meeting of China Merchants DiChain (Asia) Limited (the

“Company”) will be held at Bowen Room, Level 7, Conrad Hong Kong, Pacific Place, 88 Queensway, Hong Kong

on Monday, 25 August 2003 at 11: 00 a.m. for the following purposes:

1. To receive and consider the audited consolidated financial statements and the reports of the directors

and auditors for the year ended 31 March 2003.

2. To re-elect the retiring directors and to authorize the board of directors to fix the directors’ remuneration.

3. To re-appoint auditors and to authorize the board of directors to fix their remuneration.

4. As special business, to consider and, if thought fit, pass, with or without amendments, the following

resolution as an ordinary resolution of the Company:

“THAT:

(A) subject to paragraph 4(C) below, the exercise by the directors of the Company (the “Directors”)

during the Relevant Period (as hereinafter defined) of all the powers of the Company to allot, issue

and deal with unissued shares in the capital of the Company and to make or grant offers,

agreements and options (including warrants, bonds and debentures convertible into shares of the

Company) which might require the exercise of such power be and is hereby generally and

unconditionally approved;

(B) the approval in paragraph 4(A) above shall authorize the Directors during the Relevant Period to

make or grant offers, agreements and options (including warrants, bonds and debentures convertible

into shares of the Company) which would or might require the exercise of such powers after the

end of the Relevant Periods;

(C) the aggregate nominal amount of share capital allotted or agreed conditionally or unconditionally

to be allotted (whether pursuant to an option or otherwise) by the Directors pursuant to the

approval in paragraph 4(A) and (B) above, otherwise than pursuant to (i) a Rights Issue (as hereinafter

defined); (ii) an issue of shares under any options granted under the share option scheme adopted

by the Company; (iii) an issue of shares upon the exercise of subscription rights attached to the

warrants which might be issued by the Company; (iv) an issue of shares in lieu of the whole or part

of a dividend pursuant to any scrip dividend scheme or similar arrangement in accordance with the

bye-laws of the Company; and (v) any adjustment, after the date of grant or issue of any options,

rights to subscribe or other securities referred to in (ii) and (iii) above, in the price at which shares

in the Company shall be subscribed, and/or in the number of shares in the Company which shall



be subscribed, on exercise of relevant rights under such options, warrants or other securities, such

adjustment being made in accordance with, or as contemplated by, the terms of such options,

rights to subscribe or other securities, shall not exceed 20% of the aggregate nominal amount of

the share capital of the Company in issue as at the time of passing this resolution; and

(D) for the purpose of this Resolution:

“Relevant Period” means the period from the time of the passing of this resolution until whichever

is the earliest of:

(i) the conclusion of the next annual general meeting of the Company;

(ii) the expiration of the period within which the next annual general of the Company is

required by the Memorandum of Association and Bye-laws of the Company or any applicable

laws of Bermuda to be held; and

(iii) the revocation or variation of the authority given under this resolution by an ordinary

resolution of the shareholders of the Company in general meeting.

“Rights Issue” means an offer of Shares open for a period fixed by the Directors to holders of the

Shares on the register of members on a fixed record date in proportion to their then holdings of

such shares (subject to such exclusion or other arrangements as the directors of the Company may

deem necessary or expedient in relation to fractional entitlements or having regard to any restrictions

or obligations under the laws of any relevant jurisdiction, or the requirements of any recognized

regulatory body or any stock exchange).”



“THAT:

(A) subject to paragraph 5(C) below, the exercise by the directors of the Company (the “Directors”)

during the Relevant Period (as hereinafter defined) of all the powers of the Company to purchase

issued shares in the capital of the Company on The Stock Exchange of Hong Kong Limited (the

“Stock Exchange”) or on any other stock exchange on which the shares of the Company may be

listed and recognized by The Securities and Futures Commission of Hong Kong and the Stock

Exchange for this purpose, and that the exercise by the Directors of all powers of the Company to

purchase such securities are subject to and in accordance with all applicable laws and/or the Rules

Governing the Listing of Securities on the Stock Exchange or any other stock exchange from time

to time be and is hereby generally and unconditionally approved;



(B) the approval in paragraph 5(A) shall be in addition to any other authorization given to the Directors

and shall authorize the Directors on behalf of the Company during the Relevant Period to procure

the Company to purchase its shares at a price determined by the Directors;

(C) the aggregate nominal amount of share capital of the Company purchased or agreed conditionally

or unconditionally to be purchased by the Company pursuant to the approval in paragraph 5(A)

during the Relevant Period shall not exceed 10% of the aggregate nominal amount of the issued

share capital of the Company as at the time of passing of this resolution; and

(D) for the purpose of this resolution:

“Relevant Period” means the period from the time of the passing of this resolution until whichever

is the earliest of:

(i) the conclusion of the next annual general meeting of the Company;

(ii) the expiration of the period within which the next annual general meeting of the Company

is required by the Memorandum of Association and Bye-laws of the Company or any

applicable laws of Bermuda to be held; and

(iii) the revocation or variation of the authority given under this resolution by ordinary resolution

of the shareholders of the Company in general meeting.”



“THAT conditional upon the passing of the ordinary resolution numbered 4 and 5 in the notice convening

this meeting, the aggregate nominal amount of the shares in the capital of the Company which are

purchased by the Company pursuant to and in accordance with the said resolution number 5 shall be

added to the aggregate nominal amount of the share capital of the Company that may be allotted or

agreed conditionally or unconditionally to be allotted by the directors of the Company pursuant to and in

accordance with the resolution numbered 4 set out in this notice of meeting.”

By Order of the Board

Kwok Yam Sheung

Company Secretary




Notes:

1. The register of members of the Company will be closed from 20 August 2003 to 22 August 2003, both days inclusive,

during which period no transfer of shares will be effected. All transfers accompanied by the relevant share certificates

must be lodged with the Company’s branch share registrar and transfer office, Tengis Limited at G/F, Bank of East

Asia Harbour View Centre, 56 Gloucester Road, Wanchai, Hong Kong for registration not later than 4:00 p.m. on 19th

August 2003.

2. Any member of the Company entitled to attend and vote at a meeting of the Company shall be entitled to appoint

another person (who must be an individual) as his proxy to attend and vote instead of him. On a poll votes may be

given either personally or be proxy. A proxy need not be a member of the Company. A member may appoint more

than one proxy to attend in his stead.

3. The enclosed form of proxy and (if required by the Directors) the power of attorney or other authority (if any), under

which it is signed, or a notarially certified copy of such power or authority shall be deposited at the Company’s branch

share registrar and transfer office, Tengis Limited at G/F, Bank of East Asia Harbour View Centre, 56 Gloucester Road,

Wanchai, Hong Kong not less than forty-eight hours before the time appointed for holding the above meeting or

adjourned meeting at which the person named in the enclosed form of proxy proposes to vote, or, in the case of a

poll taken subsequently to the date of the above meeting or adjourned meeting, not less than forty eight hours before

the time appointed for the taking of the poll, and in default the enclosed form of proxy shall not be treated as valid

provided always that the chairman of the meeting any at his discretion direct that an instrument of proxy shall be

deemed to have been duly deposited upon receipt of telex or cable or facsimile confirmation from the appointor that

the instrument of proxy duly signed is in the course of transmission to the Company. Delivery of any instrument of

proxy shall not preclude a member from attending and voting in person at the meeting or poll concerned and, in such

event, the instrument of proxy shall be deemed to be revoked.

4. Where there are joint registered holders of any share, any one of such persons may vote at any meeting, either

personally or by proxy, in respect of such share as if he were solely entitled thereto; but if more than one of such joint

holders be present at any meeting personally or by proxy, then one of the said persons so present being the most, or

as the case may be, the more senior shall alone be entitled to vote in respect of the relevant joint holding and, for this

purpose, seniority shall be determined by reference to the order in which the names of the joint holders stand on the

register in respect of the relevant joint holding.

5. The enclosed form of proxy must be signed by the appointor or by his attorney authorized in writing or, if the

appointor is a corporation, either under its seal or under the hand of an officer, attorney or other person duly

authorized to sign the same.

DIRECTORS’ REPORT


The directors present their first report and the audited financial statements of the Company for the period from

5 March 2002 (date of incorporation) to 31 March 2003 and of the Group for the year ended 31 March 2003.

GROUP REORGANISATION

The Company was incorporated as an exempted company with limited liability in Bermuda under the Companies

Act 1981 of Bermuda. Pursuant to a scheme of arrangement sanctioned by the Supreme Court of Bermuda

which became effective on 26 August 2002, the Company issued its shares to the shareholders of Dransfield

Holdings Limited (“Dransfield”), the then ultimate holding company of the Group, in exchange for the entire

issued share capital of Dransfield. Dransfield then became a wholly owned subsidiary of the Company which

became the holding company of the companies now comprising the Group (the “Group Reorganisation”).

Dealings in the Company’s shares on The Stock Exchange of Hong Kong Limited (the “Stock Exchange”)

commenced on 28 August 2002 whilst the listing status of Dransfield was withdrawn on 27 August 2002.

Details of the Group Reorganisation were set out in a circular issued by Dransfield dated 28 June 2002.

PRINCIPAL ACTIVITIES

The Company is an investment holding company. The activities of its principal subsidiaries are set out in note 37

to the financial statements.

RESULTS AND APPROPRIATIONS

The results of the Group for the year ended 31 March 2003 are set out in the consolidated income statement on

page 26.

The directors do not recommend the payment of a dividend for the period.

INVESTMENT PROPERTIES AND PROPERTY, PLANT AND EQUIPMENT

The directors of the Company reviewed the carrying value of certain of the Group’s property, plant and

equipment at 31 March 2003. The revaluation resulted in a surplus over book values amounting to HK$26,840,000,

which has been credited directly to the income statement to reverse the impairment losses recognised in prior

years.

The investment properties of the Group were revalued on 31 March 2003 by an independent firm of professional

property valuers on an open market value basis, and the resulting surplus on revaluation of these properties

amounting to HK$105,000 has been credited directly to the income statement to reverse the deficit recognised

in prior years.

Details of the movements during the year in the investment properties and property, plant and equipment of the

Group are set out in notes 12 and 13 to the financial statements, respectively.


DIRECTORS’ REPORT

SHARE CAPITAL AND WARRANTS

Details of movements during the period in the share capital and outstanding warrants of the Company are set

out in notes 24 and 25 to the financial statements, respectively.

DIRECTORS

The directors of the Company during the period and up to the date of this report were:

Executive directors:

Fan Di (appointed on 25 March 2002)

Li Xinggui (appointed on 26 August 2002)

Wu Shiyue (appointed on 26 August 2002)

Zheng Yingsheung (appointed on 27 March 2003)

Zhu Xiaojun (appointed on 27 March 2003)

Gordon Chen Gang (appointed on 25 March 2002 and

resigned on 17 March 2003)

Non-executive directors:

Wang Shizhen (appointed on 26 August 2002)

Robert Fung Hing Piu (appointed on 26 August 2002 as an executive director

and redesignated as a non-executive director

on 25 October 2002)

Independent non-executive directors:

Iain Ferguson Bruce (appointed on 26 August 2002)

Barry John Buttifant (appointed on 26 August 2002)

In accordance with clause 86(2) of the Company’s Bye-Laws, all remaining directors will retire at the forthcoming

annual general meeting and, being eligible, offer themselves for re-election.

Each of Gordon Chen Gang and Wu Shiyue has entered into a service agreement with the Company for an

initial period of one year commencing 28 August 2002, and each of Fan Di and Zhu Xiaojun has entered into a

service agreement with the Company for an initial period of one year commencing 1 April 2003, which will

continue thereafter until terminated by either party by three months’ prior written notice. Gordon Chen Gang

resigned as director of the Company on 17 March 2003 and his service agreement was terminated simultaneously.

The term of office of each non-executive director and independent non-executive director is the period up to his

retirement by rotation in accordance with the Company’s Bye-Laws.

None of the directors proposed for re-election at the forthcoming annual general meeting has a service contract

which is not determinable by the Group within one year without payment of compensation (other than statutory

compensation).

DIRECTORS’ REPORT


DIRECTORS’ INTERESTS IN SECURITIES

At 31 March 2003, the interests of the directors and their associates in the share capital of the Company and its

associated corporations within the meaning of the Hong Kong Securities (Disclosure of Interests) Ordinance (the

“SDI Ordinance”), as recorded in the register maintained by the Company pursuant to section 29 of the SDI

Ordinance or as otherwise notified to the Company and to the Stock Exchange pursuant to the Model Code

(“Model Code”) for Securities Transactions by Directors of Listed Companies in the Rules Governing the Listing

of Securities on the Stock Exchange (“Listing Rules”) referred to therein were as follows:

Number of shares

Personal Corporate Other Total

Name of director interests interests interests interests

Fan Di (Note 1) – 2,682,515,000 – 2,682,515,000

Robert Fung Hing Piu (Note 2) 78,325,437 – 63,604,530 141,929,967

Notes:

1. 182,515,000 shares in the issued share capital of the Company are held by Farsight Holdings Limited (“Farsight”) and

2,500,000,000 shares are held by DiChain Holdings Limited (formerly known as DiChain System Limited) (“DiChain

Holdings”). Fan Di is beneficially interested in the voting shares of Farsight and is deemed to be interested in more

than one-third of the voting shares of DiChain Holdings and Fan Di is therefore deemed to have an interest in these

shares of the Company.

2. Robert Fung Hing Piu directly holds 78,325,437 shares in the Company. A charitable foundation, namely Sir Kenneth

Fung Ping Fan Foundation Trust I, on 15 January 2003 acquired the interest of 63,604,530 shares in the Company and

Robert Fung Hing Piu is one of the trustees of the foundation.

Save as disclosed above, none of the directors nor their associates had any interests in any securities of the

Company or any of its associated corporations, within the meaning of the SDI Ordinance or as otherwise

notified to the Company and the Stock Exchange pursuant to the Model Code.

ARRANGEMENTS TO PURCHASE SHARES OR DEBENTURES

Details of the share option schemes of the Company and Dransfield Holdings Limited, the Company’s subsidiary,

in which the directors of the Company are entitled to participate, are set out in note 34 to the financial

statements.

Save as disclosed above, at no time during the period was the Company, any of its holding company, fellow

subsidiaries or subsidiaries a party to any arrangements to enable the directors of the Company to acquire

benefits by means of the acquisition of shares in, or debentures of, the Company or any other body corporate,

and none of the directors, their spouses or children under the age of 18, had any right to subscribe for the

securities of the Company or had exercised any such right during the period.


DIRECTORS’ REPORT

DIRECTORS’ INTERESTS IN CONTRACTS OF SIGNIFICANCE

No contracts of significance to which the Company or any of its subsidiaries was a party and in which a director

of the Company had a material interest, whether directly or indirectly, subsisted at the end of the period or at

any time during the period.

SUBSTANTIAL SHAREHOLDERS

At 31 March 2003, the register of substantial shareholders maintained under Section 16(1) of the SDI Ordinance

showed that, other than the interests disclosed above in respect of certain directors, the following shareholders

had an interest of 10% or more in the share capital of the Company:

Approximate

percentage of

Name Number of shares held shareholding

Farsight (Note) 2,682,515,000 59.13%

DiChain Holdings 2,500,000,000 55.11%

Note: Farsight is interested in more than one-third of the voting shares of DiChain Holdings and is deemed by the SDI

Ordinance to be interested in the 2,500,000,000 shares in the issued share capital of the Company beneficially owned

by DiChain Holdings.

Other than as disclosed above, the Company has not been notified of any other interests representing 10% or

more of the Company’s issued share capital at 31 March 2003.

PRE-EMPTIVE RIGHTS

There are no provisions for pre-emptive rights, under the Company’s Bye-Laws or the laws of Bermuda, which

would oblige the Company to offer new shares on a pro-rata basis to existing shareholders.

PURCHASE, SALE OR REDEMPTION OF THE COMPANY’S LISTED SECURITIES

During the period, there was no purchase, sale or redemption of the shares in the Company by the Company or

any of its subsidiaries.

MAJOR CUSTOMERS AND SUPPLIERS

During the year, the aggregate sales attributable to the Group’s five largest customers and the aggregate

purchases attributable to the Group’s five largest suppliers were less than 30% of the total turnover and

purchases of the Group for the year.

DIRECTORS’ REPORT


CORPORATE GOVERNANCE

The Company has complied in the period between its listing date and 31 March 2003 with the Code of Best

Practice as set out in Appendix 14 of the Listing Rules.

AUDITORS

Messrs. Deloitte Touche Tohmatsu were appointed as auditors of the Company at the time of its incorporation

on 5 March 2002. A resolution will be submitted to the forthcoming annual general meeting of the Company to

re-appoint Messrs. Deloitte Touche Tohmatsu as auditors.

On behalf of the Board

Fan Di

CHAIRMAN

21 July 2003


AUDITORS’ REPORT

TO THE SHAREHOLDERS OF CHINA MERCHANTS DICHAIN (ASIA) LIMITED

(incorporated in Bermuda with limited liability)

We have audited the financial statements on pages 26 to 74 which have been prepared in accordance with

accounting principles generally accepted in Hong Kong.

RESPECTIVE RESPONSIBILITIES OF DIRECTORS AND AUDITORSThe Company’s directors are responsible for the preparation of financial statements which give a true and fair

view. In preparing financial statements which give a true and fair view it is fundamental that appropriateaccounting policies are selected and applied consistently.

It is our responsibility to form an independent opinion, based on our audit, on those statements and to report

our opinion to you.

BASIS OF OPINIONWe conducted our audit in accordance with Statements of Auditing Standards issued by the Hong Kong Society

of Accountants. An audit includes examination, on a test basis, of evidence relevant to the amounts anddisclosures in the financial statements. It also includes an assessment of the significant estimates and judgments

made by the directors in the preparation of the financial statements, and of whether the accounting policies are

appropriate to the circumstances of the Company and of the Group, consistently applied and adequatelydisclosed.

We planned and performed our audit so as to obtain all the information and explanations which we considered

necessary in order to provide us with sufficient evidence to give reasonable assurance as to whether thefinancial statements are free from material misstatement. In forming our opinion we also evaluated the overall

adequacy of the presentation of information in the financial statements. We believe that our audit provides areasonable basis for our opinion.

OPINION

In our opinion the financial statements give a true and fair view of the state of affairs of the Company and ofthe Group as at 31 March 2003 and of the profit and cash flows of the Group for the year then ended and have

been properly prepared in accordance with the disclosure requirements of the Hong Kong Companies Ordinance.

Deloitte Touche TohmatsuCertified Public Accountant


CONSOLIDATED INCOME STATEMENT


For the year ended 31 March 2003

2003 2002

Note HK$’000 HK$’000

Turnover 5 36,337 62,811

Cost of sales (35,364) (53,705)

Gross profit 973 9,106

Bank interest income 141 13

Other operating income 1,853 1,375

Selling expenses (2,368) (2,501)

Administrative expenses (29,899) (29,875)

Impairment loss reversed (recognised) in respect of

property, plant and equipment 13 26,840 (35,954)

Write back or waiver of other payables 9,297 –

Write back of allowances for doubtful debts 3,081 –

Unrealised gain (loss) on investments in securities 359 (20,208)

Loss on disposal of investment properties – (12,823)

Revaluation increase on investment properties 105 –

Loss on disposal of property, plant and equipment (125) (5,555)

Allowance for amount due from an investee (75) (7,644)

Profit (loss) from operations 7 10,182 (104,066)

Interest on bank borrowings wholly repayable within

five years (4,152) (10,601)

Finance lease charges (5) –

Gain on disposal of interest in a subsidiary – 839

Gain on disposal of discontinuing operation 8 8,877 –

Loss on disposal of interest in an associate – (10,143)

Share of results of an associate – (464)

Share of results of a jointly controlled entity (2,509) (4,815)

Profits (loss) before taxation 12,393 (129,250)

Taxation 10 – (131)

Profit (loss) before minority interest 12,393 (129,381)

Minority interests 1,060 89

Net profit (loss) for the year 13,453 (129,292)

Earnings (loss) per share 11

Basic 0.39 cent (7.0 cents)

Diluted 0.34 cent N/A


CONSOLIDATED BALANCE SHEETAs 31 March 2003

2003 2002Note HK$’000 HK$’000

Non-current assetsInvestment properties 12 3,327 2,900Property, plant and equipment 13 146,642 143,543Interest in a jointly controlled entity 15 1,146 3,388Loan to a minority shareholder of a subsidiary 16 – 7,630

151,115 157,461

Current assetsInventories 17 2,576 7,284Trade and other receivables 18 15,828 11,521Amount due from a minority shareholder of a subsidiary – 7,581Investments in securities 19 6,753 6,394Bank balances and cash 36,439 6,658

61,596 39,438

Current liabilitiesTrade and other payables 20 16,323 46,649Amount due to a jointly controlled entity 15 716 –Amounts due to related companies 21 2,315 6,069Amounts due to directors 21 – 3,114Amounts due to minority shareholders of a subsidiary 21 1,868 1,868Taxation payable 988 941Obligations under a finance lease – due within

one year 22 78 –Bank borrowings – due within one year 23 27,484 74,091

49,772 132,732

Net current assets (liabilities) 11,824 (93,294)

Total assets less current liabilities 162,939 64,167

Non-current liabilitiesAmount due to ultimate holding company 21 71 –Loan from a minority shareholder of a subsidiary 16 – 7,630Bank borrowings - due over one year 23 49,619 –Obligations under a finance lease – due after

one year 22 203 –

49,893 7,630

113,046 56,537

CONSOLIDATED BALANCE SHEET


As 31 March 2003

2003 2002Note HK$’000 HK$’000

Capital and reservesShare capital 24 45,365 183,065

Reserves 26 60,970 (134,299)

106,335 48,766

Minority interests 6,711 7,771

113,046 56,537

The financial statements on pages 26 to 74 were approved and authorised for issue by the Board of Directors on

21 July 2003 and are signed on its behalf by:

Fan Di Wu Shiyue

Director Director


BALANCE SHEETAs 31 March 2003

2003Note HK$’000

Non-current assets

Property, plant and equipment 13 406

Interests in subsidiaries 14 79,966

80,372

Current assets

Other receivables 1,141

Amount due from a jointly controlled entity of the Group 15 208

Bank balances and cash 1,039

2,388

Current liability

Other payables 30

Net current assets 2,358

Total assets less current liabilities 82,730

Non-current liabilities

Amounts due to subsidiaries 14 24,053

Amount due to ultimate holding company 21 71

24,124

58,606

Capital and reserves

Share capital 24 45,365

Reserves 26 13,241

58,606

Fan Di Wu Shiyue

Director Director

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY



Share Share Capital Goodwill Revaluation Translation Accumulated

capital premium reserve reserve reserve reserve losses Total

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

(note 26)

At 1 April 2001 182,515 214,157 19,931 11,989 1,835 5,987 (260,071) 176,343

Exchange differences arising

on the translation of financial

statements of overseas operations

and net gain not recognised in the

consolidated income statement – – – – – 1,067 – 1,067

Exercise of share options pursuant

to share option scheme of

Dransfield Holdings Limited 550 – – – – – – 550

Share of reserve of a jointly

controlled entity – – – – – 98 – 98

Release upon disposal – – – – (1,835) – 1,835 –

Net loss for the year – – – – – – (129,292) (129,292)

At 31 March 2002 183,065 214,157 19,931 11,989 – 7,152 (387,528) 48,766

Exchange differences arising

on the translation of financial

statements of overseas operations – – – – – (1,173) – (1,173)

Share of reserve of a jointly

controlled entity – – – – – 11 – 11

Net loss not recognised in the

consolidated income statement – – – – – (1,162) – (1,162)

Exercise of share options pursuant

to share option scheme of

Dransfield Holdings Limited 2,340 1,148 – – – – – 3,488

Share capital eliminated on the

Group Reorganisation (185,405) (215,305 ) 400,710 – – – – –

Initial share capital of the Company 100 – – – – – – 100

Issue of shares pursuant to the

Group Reorganisation 18,540 – (18,540) – – – – –


Subscription 26,725 26,725 – – – – – 53,450

Release upon disposal – – – (11,268) – (492) – (11,760 )

Net profit for the year – – – – – – 13,453 13,453

At 31 March 2003 45,365 26,725 402,101 721 – 5,498 (374,075) 106,335


CONSOLIDATED CASH FLOW STATEMENTFor the year ended 31 March 2003

2003 2002Note HK$’000 HK$’000

OPERATING ACTIVITIESProfit (loss) before taxation 12,393 (129,250)Adjustments for:

Interest income (141) (13)Interest and finance lease charges 4,157 10,601Share of results of an associate – 464Share of results of a jointly controlled entity 2,509 4,815Gain on disposal of a discontinuing operation (8,877) –Gain on disposal of interest in a subsidiary – (839)Loss on disposal of interest in an associate – 10,143Depreciation and amortisation of property, plant

and equipment 11,154 13,193Impairment loss (reversed) recognised in respect of

property, plant and equipment (26,840) 35,954Write back of other payables (9,297) –Write back of allowance for doubtful debt (3,081) –Revaluation increase on investment properties (105) –Allowance for amount due from an investee 75 7,644Unrealised (gain) loss on investments in securities (359) 20,208Loss on disposal of property, plant and equipment 125 5,555Loss on disposal of investment properties – 12,823Exchange differences – (1,361)

Operating cash flow before movements in working capital (18,287) (10,063)Decrease in inventories 1,761 5,284(Increase) decrease in trade and other receivables (3,115) 6,632(Decrease) increase in trade and other payables (8,613) 13,354Increase in amount due from an investee (75) (2,701)

Net cash (used in) generated from operations (28,329) 12,506Interest received 141 13Taxation refunded 47 790

NET CASH (USED IN) GENERATED FROMOPERATING ACTIVITIES (28,141) 13,309

INVESTING ACTIVITIESRepayment from (advance to) a minority shareholder 7,581 (6,635)Proceeds from disposal of property, plant and equipment 2,913 6,514Purchase of property, plant and equipment (2,837) (6,323)Net cash outflow on disposal of subsidiaries 28 (304) (14,992)Decrease in pledged bank deposits – 8,799Proceeds from disposal of interest in an associate – 3,198Proceeds from disposal of investment properties – 55,177

NET CASH GENERATED FROM INVESTINGACTIVITIES 7,353 45,738

CONSOLIDATED CASH FLOW STATEMENT



2003 2002HK$’000 HK$’000

FINANCING ACTIVITIESNet proceeds from issue of shares 57,038 550New bank loans raised 56,130 –Advance from a jointly controlled entity 716 –Advance from ultimate holding company 71 –Repayment of bank loans (52,268) (57,800)Interest and finance lease charges paid (4,157) (10,601)(Repayment to) advance from related companies (3,754) 564(Repayment to) advance from directors (3,114) 2,721Repayment of obligations under a finance lease (33) –

NET CASH GENERATED FROM (USED IN)FINANCING ACTIVITIES 50,629 (64,566)

INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 29,841 (5,519)

CASH AND CASH EQUIVALENTS AT BEGINNINGOF THE YEAR 6,658 12,159

EFFECT OF FOREIGN EXCHANGE RATE CHANGES (60) 18

CASH AND CASH EQUIVALENTS AT END OF THE YEAR,representing bank balances and cash 36,439 6,658


NOTES TO THE FINANCIAL STATEMENTSFor the year ended 31 March 2003

1. GENERAL

The Company is an exempted company incorporated in Bermuda with limited liability and its shares are

listed on The Stock Exchange of Hong Kong Limited (the “Stock Exchange”). Its ultimate holding company

is DiChain Holdings Limited (“DiChain Holdings”), a limited company incorporated in Hong Kong.

The principal activity of the Company is investment holding and the activities of its principal subsidiaries

are set out in note 37.

2. GROUP REORGANISATION

The Company was incorporated as an exempted company with limited liability in Bermuda under the

Companies Act 1981 of Bermuda. Pursuant to a scheme of arrangement (the “Scheme”) sanctioned by

the Supreme Court of Bermuda which became effective on 26 August 2002, the Company issued its

shares to the shareholders of Dransfield Holdings Limited (“Dransfield”), the then ultimate holding company

of the Group, in exchange for the entire issued share capital of Dransfield. Dransfield then became a

wholly owned subsidiary of the Company, which became the holding company of the companies now

comprising the Group (the “Group Reorganisation”).

Dealings in the Company’s shares on the Stock Exchange commenced on 28 August 2002 whilst the

listing status of Dransfield was withdrawn on 27 August 2002. Details of the Group Reorganisation were

set out in a circular issued by Dransfield dated 28 June 2002.

The Group resulting from the Group Reorganisation is regarded as a continuing entity. Accordingly, the

financial statements of the Group have been prepared using the principles of merger accounting in

accordance with Statement of Standard Accounting Practice (“SSAP”) 27 “Accounting for Group

Reconstructions” issued by the Hong Kong Society of Accountants.

The comparative balance sheet of the Company at 31 March 2002 has not been presented as the

Company did not have any assets or liabilities at that date.

3. ADOPTION OF NEW AND REVISED STATEMENTS OF STANDARD ACCOUNTINGPRACTICE

In the current year, the Group has adopted, for the first time, a number of new and revised SSAPs issued

by the Hong Kong Society of Accountants, which has resulted in the adoption of the following new and

revised accounting policies. The adoption of these new and revised SSAPs has resulted in a change in the

format of presentation of the cash flow statement and the inclusion of a statement of changes in equity.

The adoption of the following new and revised standards has had no material effect on the results for the

current or prior accounting years. Accordingly, no prior year adjustment has been required.

NOTES TO THE FINANCIAL STATEMENTS



3. ADOPTION OF NEW AND REVISED STATEMENTS OF STANDARD ACCOUNTINGPRACTICE (Continued)

Foreign currencies

The revisions to SSAP 11 “Foreign Currency Translation” have eliminated the choice of translating the

income statements of overseas subsidiaries at the closing rate for the year, the policy previously followed

by the Group. They are now required to be translated at an average rate. This change in accounting

policy has not had any material effect on the results for the current or prior accounting years.

Cash flow statements

In the current year, the Group has adopted SSAP 15 (Revised) “Cash Flow Statements”. Under SSAP 15

(Revised), cash flows are classified under three headings - operating, investing and financing, rather than

the previous five headings. Interest received, which was previously presented under a separate heading, is

classified as an operating activity and interest paid was classified as a financing activity. Cash flows

arising from taxes on income are classified as operating activities, unless they can be separately identified

with investing or financing activities. Cash flows of overseas subsidiaries have been re-translated at the

rates prevailing at the dates of the cash flows rather than the rate of exchange ruling on the balance

sheet date. The adoption of this revised SSAP has resulted in the change of format of presentation but

has had no material effect on the results for the current or prior accounting years.

Discontinuing operations

SSAP 33 “Discontinuing Operations” is concerned with the presentation of financial information regarding

discontinuing operations and replaces the requirements previously included in SSAP 2 “Net Profit or Loss

for the Period, Fundamental Errors and Changes in Accounting Polices”. Under SSAP 33, financial statement

amounts relating to the discontinuing operations are disclosed separately from the point at which either a

binding sale agreement is entered into or a detailed plan for the discontinuance is announced. The

adoption of SSAP 33 has resulted in the identification of the Group’s brewery production and distribution

business as a discontinuing operation in the current year, details of which are disclosed in note 8.

Employee benefits

In the current year, the Group has adopted SSAP 34 “Employee Benefits”, which introduces measurement

rules for employee benefits, including retirement benefit plans. Because the Group participates only in

defined contribution retirement benefit schemes, the adoption of SSAP 34 has not had any material

impact on the financial statements.



4. SIGNIFICANT ACCOUNTING POLICIES

The financial statements have been prepared under the historical cost convention, as modified for the

revaluation of investments in securities and investment properties, and 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 consolidated financial statements incorporate the effects of the Group Reorganisation which has

been accounted for by using merger accounting.

The results of subsidiaries and associates acquired or disposed of during the year are included in the

consolidated income statement from the effective date of acquisition or up to the effective date of

disposal, as appropriate.

All significant inter-company transactions and balances within the Group are eliminated on consolidation.

Goodwill

Goodwill arising on consolidation represents the excess of the cost of acquisition over the Group’s

interest in the fair value of the identifiable assets and liabilities of a subsidiary or jointly controlled entity

at the date of acquisition.

Goodwill arising on acquisition prior to 1 April 2001 continues to be held in reserves, and will be charged

to the income statement at the time of disposal of the relevant subsidiary or jointly controlled entity or at

such time as the goodwill is determined to be impaired.

Goodwill arising on acquisition after 1 April 2001 is capitalised and amortised on a straight-line basis over

its useful economic life. Goodwill arising on the acquisition of a jointly controlled entity is included within

the carrying amount of the jointly controlled entity. Goodwill arising on the acquisition of subsidiaries is

presented separately in the balance sheet.

On disposal of a subsidiary or jointly controlled entity, the attributable amount of unamortised goodwill

and goodwill previously eliminated against reserves is included in the determination of the profit or loss

on disposal.




4. SIGNIFICANT ACCOUNTING POLICIES (Continued)

Investments in subsidiaries

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

impairment loss.

Interest in a jointly controlled entity

Joint venture arrangement which involves the establishment of a separate entity in which each venturer

has an interest is referred to as a jointly controlled entity.

The Group’s interest in a jointly controlled entity is included in the consolidated balance sheet at the

Group’s share of the net assets of the jointly controlled entity less any identified impairment loss. The

Group’s share of the post-acquisition results of a jointly controlled entity is included in the consolidated

income statement.

Revenue recognition

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

Service income is recognised when services are rendered.

Rental income, including rental invoiced in advance from properties under operating leases, is recognised

on a straight line basis over the terms of the relevant lease.

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

rate applicable.

Investment properties

Investment properties are completed properties which are held for their investment potential, any rental

income being negotiated at arm’s length.

Investment properties are stated at their open market value. Any revaluation increase or decrease arising

on the revaluation of investment properties is credited or charged to the investment property revaluation

reserve unless the balance on this reserve is insufficient to cover a revaluation decrease, in which case the

excess of the revaluation decrease over the balance on the investment property revaluation reserve is

charged to the income statement. Where a decrease has previously been charged to the income statement

and a revaluation increase subsequently arises, this increase is credited to the income statement to the

extent of the decrease previously charged.




Investment properties (Continued)

On the disposal of an investment property, the balance on the investment property revaluation reserve

attributable to that property is transferred to the income statement.

No depreciation is provided on investment properties except where the unexpired term of the relevant

lease is twenty years or less.

Property, plant and equipment

Property, plant and equipment are stated at cost less depreciation, amortisation and accumulated

impairment loss.

Depreciation and amortisation are provided to write off the cost of items of property, plant and equipment

over their estimated useful lives and after taking into account their estimated residual value, using the

straight line method, at the following rates per annum:

Freehold land Nil

Land and buildings held in the Over the terms of the land use rights

People’s Republic of China (“PRC”)

Leasehold improvements Over the shorter of the term of the lease, land use

rights or 5 years

Brewery plant and machinery 2 – 10%

Other plant and machinery 5 – 20%

Equipment 15 – 20%

Furniture, fixtures and office equipment 20 – 25%

Motor vehicles 25 – 33%

Assets held under finance leases are depreciated over their expected useful lives on the same basis as

assets owned by the Group or, where shorter, the terms of the respective leases.

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.





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, such 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.

Investments in securities

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

Investments other than held-to-maturity debt securities are classified as investment securities and other

investments.

Investment securities, which are securities held for an identified long-term strategic purpose, are measured

at subsequent reporting dates at cost, as reduced by any impairment loss that is other than temporary.

Other investments are measured at fair value, with unrealised gains and losses included in net profit or

loss for the year.

Inventories

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

first-out method.

Foreign currencies

Transactions in currencies other than Hong Kong dollars are translated at the rates of exchange prevailing

on the dates of the transactions. Monetary assets and liabilities denominated in currencies other than

Hong Kong dollars are re-translated into Hong Kong dollars at the rates prevailing on the balance sheet

date. Profits and losses arising on exchange are dealt with in the income statement.




Foreign currencies (Continued)

On consolidation, the assets and liabilities of the Group’s overseas operations, which are denominated in

currencies other than the Hong Kong dollar are translated into Hong Kong dollars at the 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. Such translation differences are recognised as income or as an expense in the

year in which the operation is disposed of.

Taxation

The charge for taxation is based on the results for the year after adjusted for items which are non-

assessable or disallowed. Timing differences arise from the recognition, for tax purposes, of certain items

of income and expense in a different accounting period from that in which they are recognised in the

financial statements. The tax effect of timing differences, computed using the liability method, is recognised

as deferred taxation in the financial statements to the extent that it is probable that a liability or an asset

will crystallise in the foreseeable future.

Leases

Leases are classified as finance leases when the terms of the lease transfer substantially all the risks and

rewards of ownership of the assets concerned to the Group. Assets held under finance leases are

capitalised at their fair values at the date of acquisition. The corresponding liability to the lessor, net of

interest charges, is included in the balance sheet as a finance lease obligation. Finance costs, which

represent the difference between the total leasing commitments and the fair value of the assets acquired,

are charged to the income statement over the period of the relevant lease so as to produce a constant

periodic rate of charge on the remaining balance of the obligations for each accounting period.

All other leases are classified as operating leases and the annual rentals are charged to the income

statement on a straight line basis over the relevant lease term.

Retirement benefit schemes

Payments to state-managed retirement benefit schemes and the Mandatory Provident Fund Scheme are

charged as an expense as they fall due.




5. TURNOVER

Turnover represents the net amounts received and receivable for goods sold and services provided by the

Group to outside customers, less returns and allowances, and rental income for the year, and is analysed

as follows:

2003 2002HK$’000 HK$’000

Continuing operations

Sales of goods 29,128 27,608

Logistics and other services 6,972 5,103

Rental income 237 6,452

36,337 39,163

Discontinuing operations

Sales of brewery products – 23,648

36,337 62,811

6. BUSINESS AND GEOGRAPHICAL SEGMENTS

Business segments

For management purposes, the Group is currently organised into five (2002: six) operating divisions.

These divisions are the basis on which the Group reports its primary segment information.

Principal activities are as follows:

Electronic household appliances – distribution of electronic household appliances

Edible oil – production and distribution of edible oil

Food and beverage – trading of food and beverage products

Logistics – provision of logistics and related services

Property investment – property investment in Hong Kong and the PRC

In prior years, the Group was also engaged in the production of brewery products. That operation was

discontinued from 12 April 2002 upon the disposal of the Group’s entire interest in Redruth Brewery

(1742) Limited (“Redruth”), details of which are set out in note 8.



6. BUSINESS AND GEOGRAPHICAL SEGMENTS (Continued)

Business segments (Continued)

Segment information about these businesses is presented below:



Electronic

household Edible Food and Property

appliances oil beverage Logistics investment Others Elimination Consolidated


REVENUE

External sales 4,777 21,588 2,763 6,936 237 36 – 36,337

Inter-segment sales 119 – 79 1,518 – 1,418 (3,134) –

Total revenue 4,896 21,588 2,842 8,454 237 1,454 (3,134) 36,337

RESULT

Segment result 329 8,699 (5,885) 13,977 1,507 1,148 (2,209) 17,566

Unallocated corporate

expenses (7,384)

Profit from operations 10,182

Finance costs (4,157)

Gain on disposal of

discontinuing operation 8,877

Share of results of a jointly

controlled entity (2,509)

Profit before taxation 12,393

Taxation –

Profit before minority interests 12,393

Inter-segment sales are charged at prevailing market rates.






As at 31 March 2003


Electronic Food

household Edible and Propertyappliances oil beverage Logistics investment Others Consolidated

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

ASSETSSegment assets 1,230 32,497 1,290 161,825 2,305 2,001 201,148

Investments in securities 6,753Interest in a jointly

controlled entity 1,146Unallocated corporate assets 3,664

Consolidated total assets 212,711

LIABILITIESSegment liabilities 403 1,577 353 2,937 46 1,748 7,064

Taxation payable 1,071Obligations under

a finance lease 281Bank borrowings 77,103

Unallocated

corporate liabilities 14,146

Consolidated total liabilities 99,665

Other Information:

Capital additions – 1,925 327 74 – 825 3,151

Depreciation and amortisation 23 1,956 5,170 3,351 – 654 11,154Reversal of impairment

loss recognised – (9,730) – (17,078) – (32) (26,840)






Discontinuing

Continuing operations operation

Electronic

household Edible Food and Property Brewery

appliances oil beverage Logistics investment Others production Elimination Consolidated

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

REVENUE

External sales 7,214 14,561 5,833 3,906 6,452 1,197 23,648 – 62,811

Inter-segment sales – – – 869 – – 848 (1,717) –

Total revenue 7,214 14,561 5,833 4,775 6,452 1,197 24,496 (1,717) 62,811

RESULT

Segment result (21) (4,503) (1,118) (11,560) (17,133) (27,839) (28,753) – (90,927)

Unallocated corporate

expenses (13,139)

Loss from operations (104,066)

Finance costs (10,601)

Gain on disposal/dilution

of interest in a subsidiary 839

Loss on disposal/dilution

of interest in an associate (10,143)

Share of results of a jointly

controlled entity (4,815)

Share of results of an associate (464)

Loss before taxation (129,250)

Taxation (131)

Loss before minority interests (129,381)

Inter-segment sales are charged at prevailing market rates.






As at 31 March 2002

Discontinuing

Continuing operations operation

Electronic

household Edible Food and Property Brewery

appliances oil beverage Logistics investment Others production Consolidated


ASSETS

Segment assets 934 37,540 3,555 116,710 2,900 9,385 14,984 186,008

Investments in securities 6,394

Interest in a jointly controlled

entity 3,388

Unallocated corporate assets 1,109

Consolidated total assets 196,899

LIABILITIES

Segment liabilities 116 13,723 2,832 6,694 1,727 7,820 12,417 45,329

Taxation payable 941

Bank borrowings 74,091

Unallocated corporate liabilities 20,001

Consolidated total liabilities 140,362

Other Information:

Capital additions – 6,260 46 6 – – 11 6,323

Depreciation and amortisation 37 7,591 21 3,885 127 832 700 13,193

Impairment loss recognised – – – 8,607 – – 27,347 35,954




Geographical segments

The Group’s operations are principally located in Hong Kong and the PRC. The Group’s administrative

function is carried out in Hong Kong and the PRC and the manufacturing activities are carried out in the

PRC.

The following table provides an analysis of the Group’s sales by geographical market, irrespective of the

origin of the goods:

Sales revenue by Contribution to

geographical market operating results

2003 2002 2003 2002

HK$’000 HK$’000 HK$’000 HK$’000

Hong Kong 4,776 15,474 (12,631) (45,612)

PRC 31,561 23,689 30,197 (16,562)

Europe (discontinuing operation) – 23,648 – (28,753)

36,337 62,811 17,566 (90,927)

Unallocated corporate expenses (7,384) (13,139)

Profit (loss) from operations 10,182 (104,066)





The following is an analysis of the carrying amount of segment assets, and additions to property, plant

and equipment, analysed by the geographical area in which the assets are located:

Carrying Additions to

amount of property, plant

segment assets and equipment

2003 2002 2003 2002

HK$’000 HK$’000 HK$’000 HK$’000

Hong Kong 17,386 23,861 185 46

PRC 195,325 158,054 2,966 6,266

Europe – 14,984 – 11

212,711 196,899 3,151 6,323

7. PROFIT (LOSS) FROM OPERATIONS

2003 2002HK$’000 HK$’000

Profit (loss) from operations has been arrived at after charging:

Staff costs 7,423 8,030

Staff retirement scheme contributions 259 327

Total staff costs, including directors’ emoluments 7,682 8,357

Auditors’ remuneration:

Current year 750 800

Underprovision in previous year – 143

Depreciation and amortisation 11,154 13,193



8. DISCONTINUING OPERATION

During the year, the Group disposed of its entire interest in a subsidiary, Redruth for a cash consideration

of HK$1 (the “Disposal”). Redruth was principally engaged in the production and distribution of brewery

products in the United Kingdom with its major customers located in Europe. The Disposal was effected

for the purpose of debt reduction of the Group. Further details of the Disposal were also set out in a

circular issued by Dransfield dated 31 May 2002.

The Disposal was completed on 12 April 2002, when control of Redruth passed to the acquirer. No

operating results were available for the brewery production and distribution business for the period from

1 April 2002 to 12 April 2002, and, during the year, the brewery production and distribution business did

not contribute any cash flows in respect of the Group’s operating, investing and financing activities. In

2002, this contributed net cash outflow of HK$323,000 to the Group’s operations, paid HK$5,171,000 in

respect of investing activities and received HK$1,420,000 in respect of financing activities.

The carrying amounts of the assets and liabilities of the brewery production and distribution business at

the date of disposal, and 31 March 2002 and the gain arising from the disposal are disclosed in note 28.

The operating results of the brewery production and distribution business are disclosed in note 6.




9. DIRECTORS’ AND EMPLOYEES’ EMOLUMENTS

Directors’ emoluments

2003 2002HK$’000 HK$’000

Fees:

Executive directors – 25

Non-executive directors 33 –

Independent non-executive directors 48 32

81 57

Other emoluments:

Executive directors

– Salaries and other benefits 1,009 1,033

– Bonus 94 –

– Retirement benefit scheme contributions 12 29

1,115 1,062

Non-executive directors

– Salaries and other benefits – 721

1,196 1,840

The aggregate emoluments of each of the directors during both years were below HK$1,000,000.



9. DIRECTORS’ AND EMPLOYEES’ EMOLUMENTS (Continued)

Employees’ emoluments

During the year, the five highest paid individuals in the Group included one director (2002: five directors)

of the Company, details of whose emoluments are set out above. The emoluments of the remaining four

individuals were as follows:

HK$’000

Salaries and other benefits 2,523

Bonus 92

Retirement benefit scheme contributions 42

2,657

The aggregate emoluments of each of the highest paid individuals during the year were below

HK$1,000,000.

No emoluments were paid by the Group to the directors or the five highest paid individuals as an

inducement to join or upon joining the Group or as compensation for loss of office, and no director

waived any emoluments in both years.

10. TAXATION

2003 2002

HK$’000 HK$’000

The charge comprises:

Underprovision of Hong Kong Profits Tax in prior years – 431

Deferred taxation (note 27) – (300)

– 131

No provision for Hong Kong Profits Tax has been made in the financial statements as the Group incurred

a tax loss for both years.

Details of deferred taxation are set out in note 27.




11. EARNINGS (LOSS) PER SHARE

The calculation of the basic and diluted earnings (loss) per share is based on the following data:

2003 2002

HK$’000 HK$’000

Earnings (loss) for the purpose of calculating basic and

diluted earnings per share:

Net profit (loss) for the year 13,453 (129,292)

Weighted average number of shares for the purpose

of calculating basic earnings (loss) per share (in thousands) 3,460,237 1,854,050

Effect of dilutive potential shares (in thousands):

Warrants 477,141

Weighted average number of shares for the purpose

of calculating diluted earnings (loss) per share (in thousands) 3,937,378

The weighted average number of shares for the purpose of basic earnings (loss) per share was based on

the assumption that the Group Reorganisation had been completed at 1 April 2001.



12. INVESTMENT PROPERTIES

THE GROUP

Properties situated in

Hong Kong PRC Total

HK$’000 HK$’000 HK$’000

VALUATION

At 1 April 2002 700 2,200 2,900

Transfer from property, plant and equipment – 322 322

Revaluation increase – 105 105

At 31 March 2003 700 2,627 3,327

Investment properties situated in the PRC are held under long leases and were valued at their open

market values at 31 March 2003 by Shenzhen International Real Estate Consultant Co., Ltd., an independent

firm of qualified professional valuers. This valuation gave rise to a revaluation increase of HK$105,000

which has been credited to the income statement to reverse a deficit recognised in prior years.

The investment property situated in Hong Kong and held under a medium-term lease, with a carrying

value of HK$700,000, was under the possession of a bank during the year and had not been disposed of

at the balance sheet date. In the opinion of the directors, the investment property was carried at the net

realisable value, which approximated its open market value at the balance sheet date.




13. PROPERTY, PLANT AND EQUIPMENT

Leasehold Furniture,

land and Brewery Other fixtures

Freehold buildings Leasehold plant and plant and and office Motor

land in the PRC improvements machinery machinery Equipment equipment vehicles Total

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

THE GROUP

COST

At 1 April 2002 4,236 146,554 4,442 44,438 23,039 9,393 30,496 2,566 265,164

Exchange realignment – (1,885) (3 ) – (214) – (284) (8) (2,394)

Additions – – 627 – 833 208 166 1,317 3,151

Disposal of subsidiaries – – (281 ) (44,438) – – (810) (596) (46,125 )

Transfer to investment properties – (1,048) – – – – – – (1,048)

Reclassifications – (1,863) – – 433 – 30 1,400 –

Disposals (4,236) – – – (298) – (563) (811) (5,908)

At 31 March 2003 – 141,758 4,785 – 23,793 9,601 29,035 3,868 212,840

DEPRECIATION AND

AMORTISATION AND

IMPAIRMENT

At 1 April 2002 2,236 39,711 3,968 34,279 19,181 4,260 15,706 2,280 121,621

Exchange realignment – (216) (1 ) – (151) – (59) (4) (431)

Disposal of subsidiaries – – (281 ) (34,279) – – (810) (596) (35,966 )

Provided for the year – 2,519 461 – 1,431 5,138 1,178 427 11,154

Impairment loss (reversed)

recognised in the income statement – (16,954) – – (10,243) – 137 220 (26,840 )

Transfer to investment properties – (726) – – – – – – (726 )

Reclassifications – 56 – – (694) – (3) 641 –

Eliminated on disposals (2,236) – – – (7) – (130) (241) (2,614)

At 31 March 2003 – 24,390 4,147 – 9,517 9,398 16,019 2,727 66,198

NET BOOK VALUES

At 31 March 2003 – 117,368 638 – 14,276 203 13,016 1,141 146,642

At 31 March 2002 2,000 106,843 474 10,159 3,858 5,133 14,790 286 143,543



13. PROPERTY, PLANT AND EQUIPMENT (Continued)

Furniture,

fixtures and

Leasehold office

improvements equipment Total

HK$’000 HK$’000 HK$’000

THE COMPANY

COST

Acquisition during the period and

balance at 31 March 2003 454 128 582

DEPRECIATION

Provided for the period and balance

at 31 March 2003 158 18 176

NET BOOK VALUE

At 31 March 2003 296 110 406

The net book value of land and buildings held by the Group at the balance sheet date comprises:

2003 2002

HK$’000 HK$’000

Long lease land use rights held in the PRC – 210

Medium-term land use rights held in the PRC 117,368 106,633

Freehold land held in the United Kingdom – 2,000

117,368 108,843




13. PROPERTY, PLANT AND EQUIPMENT (Continued)

The directors of the Company reviewed the carrying value of the property, plant and equipment of the

Group at the balance sheet date and identified that:

(a) the recoverable amounts of the leasehold land and buildings situated in the PRC were higher than

their carrying amounts by reference to open market values or projected discount cash flows with a

discount rate of 8% per annum of the properties at 31 March 2003 in view of the improving

performance and the change in management of the Group.

(b) the recoverable amounts of other plant and machinery were higher than their carrying amounts by

reference to depreciated replacement costs of the plant and machinery at 31 March 2003 in view

of the improving performance and the change in management of the Group.

(c) A reversal of impairment loss of HK$26,840,000 recognised in prior years was made in the income

statement.

The net book value of property, plant and equipment of the Group includes an amount of HK$329,000

(2002: nil) in respect of assets held under a finance lease.

14. INTERESTS IN SUBSIDIARIES

THE COMPANY

HK$’000

Unlisted shares, at cost 63,988

Amounts due from subsidiaries 69,575

133,563

Impairment loss recognised (53,597)

79,966

The carrying value of the unlisted shares is based on the directors’ estimate of the underlying net assets

of the subsidiaries attributable to the Group as at the date on which the Company became the holding

company of the Group under the Group Reorganisation and represents the cost of investment in unlisted

shares.



14. INTERESTS IN SUBSIDIARIES (Continued)

The directors have reviewed the carrying amounts of assets of the subsidiaries. In light of the current

market conditions and the existing operating plan, the directors have identified certain amounts due from

subsidiaries, with an aggregate carrying amount of HK$53,597,000, which are considered to have a

negligible recoverable amount as at the balance sheet date. Accordingly, the whole amount has been

recognised in the income statement as an impairment loss for the current period.

Details of the Company’s principal subsidiaries at 31 March 2003 are set out in note 37.

The amounts due from/to subsidiaries are unsecured, non-interest bearing and have no fixed terms of

repayment. In the opinion of the directors, the amounts are unlikely to be repaid within twelve months

from the balance sheet date and are therefore shown as non-current.

15. INTEREST IN A JOINTLY CONTROLLED ENTITY

THE GROUP

2003 2002

HK$’000 HK$’000

Share of net assets of a jointly controlled entity 1,146 3,644

Unrealised profit on disposal of property, plant and

equipment to a jointly controlled entity – (256)

1,146 3,388




15. INTEREST IN A JOINTLY CONTROLLED ENTITY (Continued)

Details of the Group’s jointly controlled entity at 31 March 2003 are as follows:

Proportion of

nominal value of

Form of registered capital

Name of jointly business Place of held by the

controlled entity structure establishment Company indirectly Principal activity

Wuxi Dransfield Corporate PRC 57% Manufacture of

Broadsino Beverage beverage

Co., Ltd. (“WDBB”) products

The Group is entitled to share 57% profit in WDBB and has 60% voting rights in the WDBB’s general

meeting. According to a shareholder agreement entered into between the Group and other shareholders,

all significant decisions in financial and operating policies are required to be determined and agreed

collectively by all shareholders, and WDBB is, therefore, subject to joint control by all the shareholders,

and is accounted for as a jointly controlled entity.

The amount due to the jointly controlled entity is unsecured, non-interest bearing and repayable on

demand.

16. LOAN TO (FROM) A MINORITY SHAREHOLDER OF A SUBSIDIARY

THE GROUP

During the year, the Group entered into an agreement with the minority shareholder of a subsidiary for

the settlement of a loan to the minority shareholder. Pursuant to the agreement, the minority shareholder

assigned to the Group its title and interest in the loan to a subsidiary of the Group together with its

beneficial interest in the share capital of the subsidiary as full and final settlement of the loan to the

minority shareholder (the “Settlement Arrangement”).

At 31 March 2002, the loan to a minority shareholder of a subsidiary was unsecured, bore compound

interest at a rate of 6% per annum and had no fixed terms of repayment. Pursuant to an agreement

signed by the Group and the minority shareholder of a subsidiary in prior years, the minority shareholder

re-invested the loan to a subsidiary of the Group, in which the minority shareholder has a 20% equity

interest, in the form of an interest free loan. The minority shareholder had undertaken to apply any

amount, including dividends, which may be distributed by the subsidiary to the minority shareholder to

repay, in full, the loan advanced by the Group.



16. LOAN TO (FROM) A MINORITY SHAREHOLDER OF A SUBSIDIARY (Continued)

The corresponding loan advanced from the minority shareholder to the subsidiary was classified as a loan

from a minority shareholder, the loan was unsecured and non-interest bearing. The loan was set off

against the loan to the minority shareholder during the year, pursuant to the Settlement Arrangement.

At 31 March 2003, the Group was entitled to interest income receivable of HK$2,513,000 (2002:

HK$2,322,000) derived from the loan to the minority shareholder, which has not been received and its

recovery being doubtful, accordingly, the revenue has not been recognised in the consolidated income

statement.

17. INVENTORIES

THE GROUP

2003 2002

HK$’000 HK$’000

Raw materials – 3,725

Work in progress – 180

Finished goods 2,576 3,379

2,576 7,284

Included above are inventories of HK$162,000 (2002: HK$2,018,000) which are carried at net realisable

value.




18. TRADE AND OTHER RECEIVABLES

The Group has defined credit terms with an average credit period of 90 days which are agreed with its

trade customers individually. The aged analysis of trade receivables at the balance sheet date is as

follows:

THE GROUP

2003 2002

HK$’000 HK$’000

Less than 3 months 3,561 6,346

3 to 6 months 2,836 30

6 to 12 months – 35

6,397 6,411

Other receivables 9,431 5,110

15,828 11,521

19. INVESTMENTS IN SECURITIES

THE GROUP

2003 2002

HK$’000 HK$’000

Other investments

Equity securities listed overseas 6,753 6,394

Market value of listed securities 6,753 8,597

During the year ended 31 March 2002, the Group entered into a conditional agreement to dispose of its

entire investments in securities to a third party. In the opinion of directors, the carrying value of the

investments in securities as at 31 March 2002 approximated its fair value at that date. However the

disposal agreement was cancelled during the current year and the investments in securities are stated at

market value at 31 March 2003.



20. TRADE AND OTHER PAYABLES

The aged analysis of trade payables at the balance sheet date is as follows:

THE GROUP

2003 2002

HK$’000 HK$’000

Less than 3 months 668 4,667

3 to 6 months 904 696

6 to 12 months 355 1,331

Over 1 year 509 2,908

2,436 9,602

Other payables 13,887 37,047

16,323 46,649

21. AMOUNTS DUE TO RELATED COMPANIES, DIRECTORS, MINORITYSHAREHOLDERS OF A SUBSIDIARY, ULTIMATE HOLDING COMPANY

The amounts are unsecured, interest-free and are repayable on demand, except for the amount due to

the ultimate holding company, which has agreed not to demand payment within one year from the

balance sheet date and this is therefore shown as non-current.




22. OBLIGATIONS UNDER A FINANCE LEASE

THE GROUP

Minimum Present value of

lease payments minimum lease payments

2003 2002 2003 2002

HK$’000 HK$’000 HK$’000 HK$’000

The maturity of obligations under a

finance lease is as follows:

Within one year 91 – 78 –

In the second to fifth year inclusive 235 – 203 –

326 – 281 –

Less: Future finance charges (45) – N/A N/A

Present value of lease obligations 281 – 281 –

Less: Amount due within one year

shown under current liabilities (78) –

203 –

The lease term is 3 years and the interest rate was fixed at the contract date. The lease is on a fixed

repayment basis and no arrangements have been entered into for contingent rental payments. The

Group’s obligations under the finance lease are secured by the lessor’s charge over the leased asset.



23. BANK BORROWINGS

THE GROUP

2003 2002

HK$’000 HK$’000

Secured 70,015 51,651

Unsecured 7,088 22,440

77,103 74,091

The maturity of the bank borrowings is as follows:

On demand or within one year 27,484 54,775

More than one year, but not exceeding two years 49,619 8,400

More than two year, but not exceeding five years – 10,916

77,103 74,091

Less: Amount due within one year shown under

current liabilities * (27,484) (74,091)

49,619 –

* At 31 March 2002, included in the amount was HK$19,316,000 which was originally due for repayment after

more than one year. As events of default had arisen under the loan agreement, the loan had become

repayable on demand and the relevant loan was fully repaid during the current year.

The secured bank loans were secured by certain leasehold land and buildings, investment properties and

plant and machinery of the Group (note 32).

At 31 March 2002, unsecured bank loans of HK$7,200,000 were guaranteed by minority shareholders of

a subsidiary.




24. SHARE CAPITAL

No. of shares Amount

Notes HK$’000

Shares of HK$0.01 each

Authorised:

On date of incorporation (a) 10,000,000 100

Increase in authorised share capital (b) 7,990,000,000 79,900

At 31 March 2003 8,000,000,000 80,000

Issued and fully paid:

Initial share capital on date of incorporation (a) 10,000,000 100

Issue of shares pursuant to the Group

Reorganisation (c)(i) 1,854,050,000 18,540

Issue of shares pursuant to the Subscription (c)(ii) 2,672,515,000 26,725

At 31 March 2003 4,536,565,000 45,365

The comparative amount shown in the consolidated balance sheet represents the issued share capital of

Dransfield, the former ultimate holding company of the Group, divided into 1,830,650,000 shares of

HK$0.10 each.

Details of changes in the authorised and issued share capital of the Company for the period from 5

March 2002 (date of incorporation) to 31 March 2003 are as follows:

(a) The Company was incorporated on 5 March 2002 with an authorised share capital of HK$100,000

divided into 10,000,000 shares of HK$0.01 each, all of which were allotted and issued at par on 5

March 2002.

(b) Pursuant to a written resolution of the sole shareholder of the Company passed on 21 June 2002,

the authorised share capital of the Company was increased by HK$79,900,000 by the creation of

an additional 7,990,000,000 shares of HK$0.01 each.



24. SHARE CAPITAL (Continued)

(c) Pursuant to written resolutions of the sole shareholder of the Company passed on 21 June 2002

and the Scheme sanctioned by the Supreme Court of Bermuda which became effective on 26

August 2002:

(i) the Company allotted and issued 1,854,050,000 new shares of HK$0.01 each credited as

fully paid in consideration for the acquisition of the entire issued share capital of Dransfield

in accordance with the Group Reorganisation; and

(ii) pursuant to a subscription agreement dated 8 January 2002, the Company issued

2,500,000,000 and 172,515,000 new shares of HK$0.01 each in the Company at HK$0.02

per share to DiChain Holdings and Farsight Holdings Limited, respectively (the “Subscription”).

The proceeds from the shares issued were used to discharge part of the Group’s outstanding

indebtedness and used as general working capital of the Group.

All the shares issued during the period ranked pari passu with the then existing shares in all respects.

25. WARRANTS

Pursuant to the Scheme which became effective on 26 August 2002, the Company issued 901,533,000

warrants and each warrant carries the right to subscribe in cash for one share in the Company, credited

as fully paid, at a subscription price of HK$0.023 each.

The warrants can be exercised at any time during the two years from the date of issue of the warrants up

to and including 25 August 2004. No warrants were exercised during the year. Exercise in full of such

warrants would result in the issue of 901,533,000 shares of HK$0.01 each.




26. RESERVES

Share Contributed Accumulated

premium surplus loss Total

HK$’000 HK$’000 HK$’000 HK$’000

THE COMPANY

Contributed surplus arising from

the Group Reorganisation – 45,348 – 45,348


Subscription 26,725 – – 26,725

Net loss for the period – – (58,832) (58,832)

At 31 March 2003 26,725 45,348 (58,832) 13,241

The contributed surplus of the Company represents the excess of the fair value of the shares of the

subsidiary acquired pursuant to the Group Reorganisation as set out in note 2, over the nominal value of

the Company’s shares issued in exchange thereof. Under the Companies Act 1981 of Bermuda, the

contributed surplus account of the Company is available for distribution. However, the Company cannot

declare or pay a dividend, or make a distribution out of contributed surplus, if:

(a) it is, or would after the payment be, unable to pay its liabilities as they become due; or

(b) the realisable value of its assets would thereby be less than the aggregate of its liabilities and its

issued share capital and share premium.

In the opinion of the directors, at the balance sheet date, the Company did not have any reserves

available for distribution to shareholders.

THE GROUP

The capital reserve of the Group represented the difference between the nominal value of the shares of

the subsidiaries acquired pursuant to the group reorganisations on 29 October 1992 and 26 August 2002

over the nominal value of the Company’s shares and Dransfield’s shares issued in exchange thereof

respectively.



27. DEFERRED TAXATION

The movements of deferred taxation of the Group during the year are as follows:

2003 2002

HK$’000 HK$’000

At beginning of the year – 300

Credit for the year (note 10) – (300)

At end of the year – –

At the balance sheet date, the major components of unprovided deferred taxation (assets) liabilities were

as follows:

THE GROUP THE COMPANY

2003 2002 2003

HK$’000 HK$’000 HK$’000

THE GROUP

Tax effect of timing differences attributable to:

Shortfall of tax allowances over depreciation

charged in the financial statements (612) (396) (35)

Tax losses (19,509) (9,361) (9,448)

(20,121) (9,757) (9,483)

Deferred taxation asset has not been recognised in the financial statements in respect of tax losses

available to offset future profits as it is not certain that the tax losses will be utilised in the foreseeable

future.




27. DEFERRED TAXATION (Continued)

The major component of unprovided deferred taxation (credit) charge not recognised for the year are as

follows:

THE GROUP

2003 2002

HK$’000 HK$’000

THE GROUP

Tax effect of timing differences attributable to:

Shortfall of tax allowances over depreciation

charged in the financial statements (216) (383)

Tax losses arising (10,148) (72)

General provision – (20)

Disposal of a subsidiary – 880

(10,364) 405



28. DISPOSAL OF A SUBSIDIARY

2003 2002

HK$’000 HK$’000

Net assets disposed of:

Property, plant and equipment 10,159 157

Inventories 2,947 –

Trade and other receivables 1,889 5,485

Bank balances and cash 304 16,222

Trade and other payables (12,416) (7,689)

Taxation payable – (6,905)

Minority interests – (6,879)

2,883 391

Goodwill reserve realised (11,268) –

Translation reserve realised (492) –

(8,877) 391

Gain on disposal of a discontinuing operation/subsidiary 8,877 839

Total consideration satisfied by cash – 1,230

Analysis of net outflow in respect of the disposal of a subsidiary:

Cash consideration received – 1,230

Bank balances and cash disposed of 304 (16,222)

304 14,992

As explained in note 8, the Group discontinued its brewery production and distribution business at the

time of disposal of Redruth. The net assets of the subsidiary disposed of during the current year represents

the net assets of Redruth at the date of disposal.

The subsidiary disposed of during both years did not have a significant impact on the Group’s turnover

and operating results for both years.




29. MAJOR NON-CASH TRANSACTIONS

During the year ended 31 March 2003, the Group entered into a finance lease arrangement in respect of

a motor vehicle with a total capital value at the inception of the lease of HK$314,000.

Proceeds on settlement of a loan to a minority shareholder of a subsidiary amounting to HK$7,630,000

were set off against a loan from a minority shareholder of a subsidiary and the consideration for the

acquisition of the remaining 20% of the issued share capital of a subsidiary, Dransfield Broadsino Food

and Beverage Limited by the Group from the minority shareholder. No goodwill arose as a result of the

acquisition of this additional interest.

During the year ended 31 March 2002, the proceeds receivable from the investor on placing of shares of

a subsidiary amounting to HK$480,000 was set off against amount due to that investor.

30. OPERATING LEASE ARRANGEMENTS

The Group as lessee

THE GROUP

2003 2002

HK$’000 HK$’000

Minimum lease payments paid under operating

leases in respect of premises during the year 1,003 511

At the balance sheet date, the Group had commitments for future minimum lease payments under non-

cancellable operating leases which fall due as follows:

2003 2002

HK$’000 HK$’000

Within one year 1,077 4

In the second to fifth year inclusive 222 –

1,299 4

Operating lease payments represent rentals payable by the Group for certain of its office premises and

warehouse. Leases are negotiated for an average term of two years and rentals are fixed over the lease

terms.



30. OPERATING LEASE ARRANGEMENTS (Continued)

The Group as lessor

Rental income earned during the year, net of negligible (2002: HK$538,000) outgoings, was approximately

HK$237,000 (2002: HK$5,914,000). There were no committed tenants at the balance sheet dates.

The Group and the Company had no outstanding commitments under non-cancellable operating leases at

the balance sheet date.

31. CAPITAL COMMITMENTS

THE GROUP THE COMPANY

2003 2002 2003

HK$’000 HK$’000 HK$’000

Capital expenditure contracted but not

provided for in the financial statements in

respect of

– acquisition of property, plant and equipment 24 – –

– investment projects 1,229 – 1,229

1,253 – 1,229

32. PLEDGE OF ASSETS

At 31 March 2003, certain of the Group’s investment properties, leasehold land and buildings, and plant

and equipment with an aggregate carrying value of HK$700,000 (2002: HK$700,000), HK$113,041,000

(2002: HK$100,000,000), HK$16,906,000 (2002: HK$29,309,000), respectively, were pledged to banks

to secure loan facilities granted to the Group.

At 31 March 2002, the Group’s interests in two wholly-owned subsidiaries, Good Value Holdings Limited

and Well Assessed Limited, were also pledged to a bank to secure loan facilities granted to the Group.

33. CONTINGENT LIABILITIES

At 31 March 2003, the Company had given guarantees of approximately HK$56,700,000 (2002:

HK$125,329,000) to a bank in respect of banking facilities granted to a subsidiary. The extent of such

facilities utilised by the subsidiary at 31 March 2003 amounted to approximately HK$56,130,000 (2002:

HK$57,291,000).




34. SHARE OPTIONS SCHEMES

(a) Share option scheme of the Company

Pursuant to a written resolution of the sole shareholder passed on 21 June 2002, the Company’s

share option scheme (the “CM DiChain Scheme”) was set up for the primary purpose of providing

incentives to directors and eligible employees, will expire on 20 June 2012. Under the CM DiChain

Scheme, the directors of the Company may grant options to eligible employees, including directors

of the Company and its subsidiaries, to subscribe for shares in Company.

The total number of shares in respect of which options may be granted under the CM DiChain

Scheme is not permitted to exceed 30% of the issued share capital of the Company from time to

time, without prior approval from shareholders of the Company. The number of shares in respect

of which options may be granted to any individual in any one year is not permitted to exceed 1%

of the Company’s issued share capital or with a value in excess of HK$5 million, otherwise it must

be approved by the shareholders of the Company.

Options granted must be taken up within 21 days from the date of grant, upon payment of HK$1

per option. Options may be exercised at any time from 12 months from the date of acceptance of

the offer to the tenth anniversary of the date of grant. The exercise price is determined by the

directors of the Company, and shall not be less than the higher of the closing price of the

Company’s shares on the date of grant, the average closing price of the shares for the five

business days immediately preceding the date of grant and the nominal value of the shares of the

Company.

There were no options granted under the CM DiChain Scheme during the year or outstanding at

31 March 2003.

(b) Share option scheme of Dransfield

Pursuant to Dransfield’s share option scheme (the “Dransfield Scheme”) adopted on 3 April 1993,

the directors and employees of that company may, at the discretion of Dransfield’s directors, be

granted options to subscribe for shares in Dransfield for the primary purpose of providing incentives

to directors and eligible employees. The Dransfield Scheme was cancelled on 26 August 2002.

Options granted must be taken up within 28 days from the date of grant, upon payment of HK$10

per option. Options may be exercised at any time from 12 months from the date of acceptance of

the offer to the third anniversary of the date of acceptance. The exercise price was determined by

the directors of Dransfield.



34. SHARE OPTIONS SCHEMES (Continued)

(b) Share option scheme of Dransfield (Continued)

The following table discloses the total entitlement of the employees (including directors) of the

Company under the Dransfield Scheme and movements in such holdings during the year:


Number of share options of Dransfield

Outstanding Exercised Lapsed Outstanding

Exercise Exercisable at during during atName of director price period 1.4.2002 year year 31.3.2003

Robert Fung Hing Piu 0.18 6.3.2002 to 2.4.2003 2,000,000 (2,000,000) – –

Employees 0.10 21.6.2000 to 2.4.2003 50,000 (50,000) – –

0.10 1.12.2001 to 2.4.2003 9,000,000 (9,000,000) – –

0.18 6.3.2002 to 2.4.2003 12,350,000 (12,350,000) – –

21,400,000 (21,400,000) – –

Total 23,400,000 (23,400,000) – –


Number of share options of Dransfield

Outstanding Exercised Lapsed Outstanding

Exercise Exercisable at during during at

Name of director price period 1.4.2002 year year 31.3.2003

Robert Fung Hing Piu 0.18 6.3.2002 to 2.4.2003 2,000,000 – – 2,000,000

Employees 0.10 21.6.2000 to 2.4.2003 2,050,000 – (2,000,000 ) 50,000

0.10 1.12.2001 to 2.4.2003 33,500,000 (5,500,000) (19,000,000 ) 9,000,000

0.18 6.3.2002 to 2.4.2003 12,350,000 – – 12,350,000

0.20 6.3.2001 to 5.3.2002 2,400,000 – (2,400,000 ) –

0.30 25.8.1999 to 24.8.2001 975,000 – (975,000 ) –

51,275,000 (5,500,000) (24,375,000 ) 21,400,000

Total 53,275,000 (5,500,000) (24,375,000 ) 23,400,000

The weighted average closing price of Dransfield’s shares immediately before the dates on whichthe options were exercised was HK$0.28 (2002: HK$0.14).




35. RETIREMENT BENEFITS SCHEMES

The Group operates a Mandatory Provident Fund Scheme for all qualifying employees in Hong Kong. The

assets of the scheme are held separately from those of the Group, in funds under the control of trustees.

The Group contributes 5% of relevant payroll costs to the scheme, which is matched by employees.

Employees of subsidiaries in the PRC are members of a state-managed retirement benefit scheme operated

by the relevant local government authorities in the PRC. The Group is required to contribute 8% to

23.5% of payroll costs to retirement benefits scheme to fund the benefits.

The only obligation of the Group with respect to the Mandatory Provident Fund Scheme and the retirement

benefit scheme is to make the specified contributions.

36. RELATED PARTY TRANSACTIONS

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

Name of related party Interested person(s) (Note) Nature of transaction 2003 2002

HK$’000 HK$’000

KPFF Holdings Limited Cyril Fung Hing Chiu Servicing income – 11

Group companies under Horace Yao Yee Cheong Logistics income – 362

an investee and Thomas John Kenan

Other than the above, at 31 March 2002, the Group also had a loan from a minority shareholder of

HK$7,630,000, details of which are disclosed in note 16. The loan invested by the minority shareholder

to the related subsidiary was made in the proportion of its interest in the subsidiary.

These transactions were carried out at terms determined and agreed by the relevant parties.

Note: They were former directors of Dransfield.



37. PARTICULARS OF PRINCIPAL SUBSIDIARIES

Details of the Company’s principal subsidiaries at 31 March 2003 are as follows:

Proportion of

Place of nominal value of Issued and

incorporation/ issued share capital/ fully paid

establishment/ registered capital share capital/

Name of subsidiary operation held by the Company registered capital Principal activities

Directly Indirectly

Dransfield Electrical Hong Kong – 100% HK$10,000 Trading of electronic

Appliances Limited household appliances

Dransfield Electronics Hong Kong – 100% HK$1,800,000 Distribution of

Limited electronic household

appliances

Dransfield Finance Hong Kong – 100% HK$2 Provision of financial

Limited services to group

companies

Dransfield Food and Hong Kong – 95% HK$10,000 Trading of food and

Beverage Limited beverage products

Dransfield Holdings Bermuda 100% – HK$100,000 Investment holdings

Limited

Dransfield Secretarial Hong Kong – 100% HK$10,000 Provision of secretarial

& Administrative and management

Services Limited services

Dransfield Services British Virgin – 100% US$1 Provision of logistics

Limited Islands/PRC services




37. PARTICULARS OF PRINCIPAL SUBSIDIARIES (Continued)

Proportion of

Place of nominal value of Issued and

incorporation/ issued share capital/ fully paid

establishment/ registered capital share capital/

Name of subsidiary operation held by the Company registered capital Principal activities

Directly Indirectly

Shenyang Dransfield PRC (note i) – 60% RMB60,000,000 Production and

Industrial Development distribution of edible

Ltd. oil

Victorison Logistics PRC (note ii) – 100% HK$35,000,000 Provision of logistics

Service (Shenzhen) services and property

Co., Ltd. and investment

holding

Notes:

i. Sino-foreign equity joint venture

ii. Wholly foreign-owned enterprise

None of the subsidiaries had issued any debt securities at the end of the year.

The above table lists the subsidiaries of the Company which, in the opinion of the directors, principally

affected the results for the year or formed a substantial portion of the net assets and liabilities of the

Group. To give details of other subsidiaries would, in the opinion of the directors, result in particulars of

excessive length.

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