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Purchase Agreements Mobile Phones

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					                                      RISK FACTORS


        Potential investors should carefully consider all of the information set out in this
  prospectus and, in particular, should consider the following risks and special considerations
  associated with an investment in the Company before making any investment decision in
  relation to the Company.

        An investment in the Placing Shares involves a high degree of risk and is speculative.
  You should carefully consider, together with all of the other information included in this
  prospectus, the following factors before purchasing any of the Placing Shares. Additional
  risks and uncertainties not presently known to the Company or that the Company currently
  deems immaterial could also harm the business, financial condition and operating results
  of the Company.



RISKS RELATING TO THE GROUP

Sustainability of profit

      Although the Group achieved a significant growth in earnings from a loss attributable to
shareholders of approximately HK$19.9 million for the year ended 31st December, 1998 to a
profit attributable to shareholders of approximately HK$51.4 million and HK$64.8 million for
the year ended 31st December, 1999 and the six months ended 30th June, 2000 respectively,
there can be no assurance that such a high rate of growth in the Group’s earnings will continue
in the future. The Group’s earnings will be subject to the following risk factors in relation to its
existing business of mobile phone distribution on which the Group’s profitability heavily relies,
as well as its newly diversified business of e-pay Terminals, e-commerce and WAP solution
services. In addition, the Group’s earnings may also be affected by decreasing selling prices
and profit margins, and the relatively short life cycles of mobile phones and related accessories
distributed and sold by the Group. The product life cycle of a mobile phone is relatively short,
approximately one year on average as estimated by the Directors, and the selling price of a
mobile phone generally decreases from the time when it is first launched to the market until the
end of its product life cycle.

Reliance on principal suppliers

     The Group relies on a small number of leading international mobile phone suppliers. For
each of the two years ended 31st December, 1999 and the six months ended 30th June, 2000,
the top f ive suppliers of the Group in aggregate supplied approximately 55.4%, 75.9% and
84.4% respectively of the Group’s total purchases of mobile phones. The largest supplier of the
Group, which is an independent third party not connected with the Company, the Directors,
chief executive or substantial shareholders of the Company or any of their associates,
accounted for approximately 24.4%, 36.1% and 43.1% respectively of the Group’s total




                                              – 30 –
                                    RISK FACTORS


purchases for each of the two years ended 31st December, 1999 and the six months ended 30th
June, 2000. For each of the two years ended 31st December, 1999 and the six months ended
30th June, 2000, Grace Global accounted for approximately 3.0%, 15.9% and 0.6% and United
Straits accounted for approximately 0.3%, 3.0% and 16.1% of the Group’s total purchase for
each of the respective periods. Save for Grace Global and United Straits disclosed herein, none
of the Directors, their respective associates (as defined in the GEM Listing Rules) or any
shareholders of the Company (who or which to the knowledge of the Directors own more than
5% of the issued share capital of the Company) has any interest in any of the Group’s five
largest suppliers. The Group’s operations and profitability depends on the continuation of the
distribution arrangements with those suppliers and the timely and adequate supply of popular
models on commercially viable terms. As such, the Group’s operations and profitability could
be adversely affected should any or all of the those suppliers terminate the distribution
agreements with the Group, or should the Group be unable to obtain adequate supplies of
certain models which are in high demand in a timely manner or on commercial terms
acceptable to the Group, or should there be significant increases in the cost of mobile phones
imposed by the suppliers.

Reliance on upcoming brands of mobile phones


      It is the Group’s strategy to focus on distributing upcoming brands of mobile phones,
including but not limited to Siemens, Samsung and Kyocera. The Directors believe that it is
prof itable to carry these brands since there are less competition and fewer non-exclusive
distribution contracts relating to them which will ensure more stable price and profit margins
for the Group. For each of the two years ended 31st December, 1999 and the six months ended
30th June, 2000, turnover from sales of these upcoming brands of mobile phones accounted for
approximately 3.0%, 74.6% and 89.7% respectively of the Group’s total turnover for each of
the respective periods. If competition intensifies or more non-exclusive contracts are granted
by the manufacturers of those upcoming brands currently carried by Group and the Group is
unable to obtain distribution rights of other brands of mobile phones with comparable profit
margin, the Group’s profit margin may diminish.

Reliance on short-term distribution agreements

     The Group’s distribution business relies heavily on distribution agreements with mobile
phone manufacturers for the supply of mobile phones. As at the Latest Practicable Date, the
Group maintained five distribution agreements and six distribution certificates with six mobile
phone manufacturers. These agreements/certificates are for a term of one year to two years
with some of them providing for an automatic right of renewal for one further year. The
expiration date for these agreements will be from 23rd December, 2000 to 31st December,
2002. If all or any of these mobile phone manufacturers do not renew the distribution
agreements/certificates with the Group upon expiration of the existing ones, the Group’s future
operations or profitability could be adversely affected.



                                            – 31 –
                                     RISK FACTORS


Reliance on guarantees of banking facilities by connected persons and an independent
third party

      The Group’s purchases of mobile phones from mobile phone suppliers depend largely on
the availability of banking facilities on terms which are commercially acceptable to the Group.
As at 31st October, 2000, the Group’s banking facilities of approximately HK$91.8 million
were guaranteed by certain directors of the Company and its subsidiaries, connected persons
(as def ined in the GEM Listing Rules) and an independent third party (collectively the
“Guarantors”). Two relevant banks have agreed in principle that guarantees for banking
facilities of approximately HK$27.2 million provided by Mr. Ng Kok Hong and Ms. Tan Sook
Kiang will be released and replaced by guarantees to be given by the Company following the
listing of its Shares on GEM. In addition, the Company is in the process of releasing
guarantees, pledges and charges by the Guarantors in exchange for corporate guarantees
provided by the Company for banking facilities of approximately HK$64.6 million and the
Directors undertake to procure the process to be completed within three months after the listing
of the Shares on GEM. If the Company fails to obtain such release of guarantees and any or all
of the Guarantors refuses to continue to provide such guarantees and the Group fails to renew
its banking facilities on terms which are commercially acceptable to the Group, the operations
and financial conditions of the Group may be adversely be affected.

Reliance on price rebates

      The mobile phone distribution industry is characterised by rapid change in technology and
frequent introduction of new models, as a result, the selling price of mobile phones in general
declines substantially over their product life cycles of approximately one year. If the decline in
selling price is faster than the expected trend, the Group usually negotiates with one of its
major suppliers for price rebates, which represent certain discounts to purchase cost at which
the Group purchased mobile phones previously. These price rebates, which the Directors
believe are common practices in the mobile phone distribution industry, do not form part of the
original distribution agreement and are either agreed separately with the supplier upon issuance
of the relevant purchase orders by the Group or granted subsequently at the discretion of the
supplier on a case-by-case basis. For the six months ended 30th June, 2000, price rebates
received by the Group which were agreed with the supplier upon issuance of purchase orders
by the Group amounted to approximately HK$11.8 million, whereas price rebates granted to
the Group at the sole discretion of the supplier amounted to HK$21.2 million and HK$19.4
million for the year ended 31st December, 1999 and the six months ended 30th June, 2000
respectively. No rebate had been granted to the Group for the year ended 31st December 1998.
Should there be any unexpected sharp decline in the selling prices of mobile phones and the
supplier refuses to grant the above price rebates to the Group or grants such price rebates in
smaller amounts in the future, the Group’s profit margin may diminish.




                                             – 32 –
                                     RISK FACTORS


Purchase commitments

      The Directors believe that it is common in the mobile phone distribution industry to
include clauses in the mobile phone distribution agreements requiring the mobile phone
distributor to commit certain purchase of mobile phones from the mobile phone manufacturer
over a certain period of time in order to maintain stable sale and purchase patterns between the
manufacturers and distributors. As at the Latest Practicable Date, three out of the eleven
distribution agreements/certificates of the Group contain clauses which require the Group to
purchase a minimum volume of mobile phones from the relevant manufacturers over a certain
period of time at prices and/or volumes to be agreed between the Group and the relevant
manufacturers from time to time taking into consideration of the latest and expected future
market conditions. Should the Group be unable to meet its purchase commitments in the future
or should the Group be unable to sell those mobile phones purchased under the above purchase
commitments at commercially reasonable gross margins, the Group’s relationship with its
suppliers or its operations and prof itability may be adversely affected. For each of the two
years ended 31st December, 1999 and the six months ended 30th June, 2000, the Group was
able to meet all its purchase commitments.

Competition among distributors of mobile phones

      Given the large potential growth in the mobile telecommunications industry in the Asia
Pacific Region, there is at present fierce competition among the distributors of mobile phones.
As at the Latest Practicable Date, nine out of eleven of the Group’s distribution agreements/
certificates with suppliers were on a non-exclusive basis and the Group will have to compete
with other non-exclusive distributors for the same models of mobile phones in terms of more
competitive pricing, more effective promotion programmes and better after-sales services. The
Directors estimate that, apart from those non-exclusive models of which the Group is the only
distributor the relevant mobile phone manufacturer is selling to, there are approximately one to
four non-exclusive distributors for the each of the same models of mobile phone the Group
distributes in each of the countries the Group operates. For each of the two years ended 31st
December, 1999 and the six months ended 30th June, 2000, turnover from sales of mobile
phones under non-exclusive distribution agreements and arrangements represented approximately
31.5%, 60.6% and 64.4% respectively of the Group’s turnover. Should any or all of the Group’s
suppliers proceed to grant additional non-exclusive distribution rights to other distributors who
may sell the same models of mobile phones distributed by the Group and the Group is unable to
maintain its competitive advantages without prejudice to its prof it margin, the Group’s sales
and net profit could be adversely affected.

Increase in unauthorised distributors

      The Group’s mobile phone distribution business faces competitions from unauthorised
distributors in those markets which the Group conducts its business through importing mobile
phones illegally and/or by illegal excessive internal sales. If mobile phones continue to be
imported illegally and being offered for sale in those markets which the Group conducts its

                                             – 33 –
                                     RISK FACTORS


business and there is limited enforcement by the relevant government to prevent such illegal
channel of distribution of mobile phones, the Group’s profitability may be adversely affected.

Reliance on major customers

      For each of the two years ended 31st December, 1999 and the six months ended 30th June,
2000, the f ive largest customers of the Group accounted for approximately 70.0%, 66.3% and
72.7% respectively of the total sales for the corresponding period. During the same period,
sales to the largest customer of the Group, which is an independent third party not connected
with the Company, the Directors, the chief executive or substantial shareholders of the
Company or any of their associates, accounted for approximately 28.8%, 31.0% and 22.4%
respectively of the total sales for the corresponding period. Amongst them, United Straits
accounted for approximately 4.1% and 0.7% of the Group’s sales for each of the two years
ended 31st December, 1999. Save for United Straits disclosed herein, none of the Directors,
their respective associates (as defined in the GEM Listing Rules) or any shareholders of the
Company (who or which to the knowledge of the Directors own more than 5% of the issued
share capital of the Company) has any interest in any of the Group’s five largest customers. It is
possible that these customers may purchase mobile phones from other distributors. There can
be no assurance that these customers will continue to purchase mobile phones from the Group
in the future.

      Further, as at 31st October, 2000, the Group recorded an amount of HK$118,450,000 due
from a customer, namely Ding Yi, which represents approximately 38.0% of the adjusted net
tangible asset value of the Group (as calculated in the subsection headed “Adjusted net tangible
assets” under the section headed “Financial information” to this prospectus). Please also refer
to the paragraph headed “Advances to an entity as disclosed under rules 17.15 and 17.17 of the
GEM Listing Rules” under “Financial information” in this prospectus. Should the Group fail to
collect the amount due from Ding Yi, in whole or in part, the Group’s future result will be
adversely affected.

Reliance on several key personnel

     The Group depends, to a large extent, on the continued services of several key executive
personnel. If any or all of these key executives leave the Group, it may not be possible for the
Group to promptly recruit suitable candidates to replace them or at all. In such circumstances,
the business of the Group could be adversely affected.

     The Group will also need to recruit further personnel with relevant experience as its
business grows and diversifies but there can be no assurance that those personnel it employs in
the future will be integrated into its management and operation or make contribution to its
business. Competition for personnel in the telecommunications and Internet industries in
particular, is intense. If the Group is unable to recruit and/or retain suitable personnel, the
growth of the Group may be materially and adversely affected.


                                             – 34 –
                                     RISK FACTORS


Reliance on the Secondary Market and Shanghai Xin Development

     The Group’s distribution and sales of mobile phones in the PRC accounted for
approximately 0.5%, 31.1% and 22.4% respectively of the Group’s total turnover for each of
the two years ended 31st December, 1999 and the six months ended 30th June, 2000
respectively. Currently, the Group’s operations in the PRC are conducted through FT-SHG, a
wholly foreign-owned enterprise in the Waigaoqiao Zone.

      Within the Waigaoqiao Zone, all trading activities are regulated by the relevant PRC laws
and regulations governing the conduct of business within the Waigaoqiao Zone and other such
free trade zones. On 17th July, 1997, the PRC authorities issued a Notice Relating to the Policy
Concerning Free Trade Zone            !"#$%&'()*+, #!-./(01
         ! which stated that trading activities conducted between enterprises within the free
trade zones (including the Waigaoqiao Zone) and local enterprises outside the free trade zones
will be treated as foreign trading activities and can only be carried out with enterprises
possessing the requisite licence to conduct import and export activities.

     Currently, in consideration of the payment for the custom duty clearance and import/
export clearance services, all trading activities between FT-SHG and its master dealer, which is
an independent third party, outside the Waigaoqiao Zone are conducted through Shanghai Xin
Development, which possesses the requisite import and export licence to provide such services.
FT-SHG also joined the Secondary Market as a member. In consideration of the payment of an
annual fee and a management fee in accordance with the volume of the transactions, FT-SHG
shall be entitled to preferential treatment for conducting distribution activities within the
Secondary Market. As such, the Group’s operations in the PRC rely on the continued
membership with the Secondary Market and the custom duty clearance and import and export
clearance services provided by Shanghai Xin Development. If FT-SHG fails to renew its
membership with the Secondary Market and/or the custom duty and import/export clearance
arrangement with Shanghai Xin Development terminates and FT-SHG fails to appoint another
agent with the requisite licence, the Group’s operations and profitability may be adversely
affected.

Preferential tax treatment on FT-SHG

     As the Group conducts its distribution and sale of mobile phones in the PRC through FT-
SHG, the assessable prof its generated from FT-SHG may be subject to the PRC enterprise
income tax. According to Article 42 of the Regulation of Shanghai Waigaoqiao Free Trade
Zone, FT-SHG enjoyed a preferential PRC enterprise income tax rate of 15%. The continuity of
such preferential tax treatment in the future may be affected by the prevailing Regulation of
Shanghai Waigaoqiao Free Trade Zone of Shanghai Pudong New Area from time and time.
Therefore, if there is any change to the above preferential tax arrangement, the Group’s net
profit may be adversely affected.




                                             – 35 –
                                      RISK FACTORS


Dividends

     The Group did not declare any dividend for the year ended 31st December, 1999 while
dividends of HK$3.0 million were declared for the year ended 31st December, 1998. Special
dividends of HK$30.0 million, financed by internal resources, were declared by FT-HK on 2nd
October, 2000 and payment was made to its then shareholders in November, 2000. The
Directors do not intend to distribute any further dividend before the listing of the Shares on
GEM. However, the payment of the above dividends should not be used as a reference for the
Company’s future dividend policy. Further details on the dividend policy of the Company are
set out in the paragraph headed “Dividends and working capital” under the section headed
“Financial information”.

Failure to achieve business objectives

      The business objectives of the Group as set out in the section headed “Statement of
business objectives” of this prospectus have been formulated by the Group based on various
assumptions set out in that section. Those assumptions are inherently subjective and may be
varied due to changing factors, both internally and externally. Such changes may result in any
or all of the business objectives of the Group not being achieved within the scheduled time, or
at all.

Failure to achieve profitability from newly diversified business

     Although profit was generated from the Group’s mobile phone distribution and trading
business for the year ended 31st December, 1999 and the six months ended 30th June, 2000,
there can be no assurance that the Group’s business plans of setting up e-commerce platform,
e-pay Terminals, CyberOutlets and WAP solution business could be profitable, particularly in
view of its possible substantial investments in such areas.

     The Group’s overall profitability in the future may fluctuate significantly depending on
the development and enhancement of the e-commerce platform, the on-going demand for WAP
solution services and the commercial viability of CyberOutlets and e-pay Terminals which the
Group currently plans to establish. As the Group has no past history of such new operations,
there is no past operating performance or financial results against which investors could assess
and/or compare for future performance.

     The Directors intend to expand the Group’s operations significantly through, among other
things, the increase in staff and capital investments and the establishment of overseas offices. If
such expenses increase or are not followed by increased revenues, the Group’s financial results
could be adversely affected.




                                              – 36 –
                                      RISK FACTORS


Failure to implement successfully the Group’s e-pay Terminals business plan

     The success of the Group’s e-pay Terminals business plan will depend on, among other
things:

     •    obtaining the relevant licence(s) and/or approval(s) for the operation of such e-pay
          Terminals in relevant countries in which the Group plans to operate the e-pay
          Terminals business (including but not limited to the PRC, Hong Kong, Singapore, the
          Philippines, Taiwan, Korea and Japan);

     •    major network operators in the Asia Pacific Region adopting those terminals to be
          developed by the Group as a channel of payment for their airtime prepayment
          schemes;

     •    the Group’s ability to develop these terminals at a commercially acceptable cost;

     •    the Group’s ability to install these terminals at convenient retail locations;

     •    the popularity of stand-alone terminals as a channel for payment of mobile airtime
          prepayment schemes and other prepayment services.

     If any or all of the above factors could not be achieved, the Group may not be able to
implement the e-pay Terminals business plan successfully or the expected commission revenue
generated by the Group from operating those e-pay Terminals may not be sufficient to cover the
cost of developing them, and the Group’s business and profitability may be adversely affected.

Failure to achieve market recognition of the Group’s corporate website

      In view of the increasing number of websites offering information about the
telecommunications industry and related products, the Directors recognise the increasing
importance of establishing and maintaining the trade names “First Telecom”, “First Mobile”,
“FirstNet.Com”, “letstalkmobile” and “e-pay” in order to attract and expand the audience of the
Group’s websites, and those websites which the Group provides technological support to.
Promotion and enhancement of the trade names “First Telecom”, “First Mobile”, “FirstNet.Com”,
“letstalkmobile” and “e-pay” will depend largely on the Group’s success in:

     •    providing high quality products and services;

     •    providing updated information on the telecommunications industry and related
          products; and

     •    designing and launching effective marketing campaigns.




                                              – 37 –
                                     RISK FACTORS


     If the Group fails to achieve any or all of these strategies, the Group’s websites and those
websites which the Group provides technological support may fail to attract a critical mass of
the public and the potential to expand the Group’s customer base through the Internet may be
adversely affected.

Network infrastructure open to interruptions by computer viruses or hackers

     The Group’s network infrastructure may be vulnerable to computer viruses, hackers or
other disruptive problems caused by inappropriate use of their website or portal or the Internet
by cyber hackers who could potentially jeopardize the security of confidential information
stored in the computer systems of the Group. Such inappropriate use may include these cyber
hackers attempting to gain unauthorised access to information or unlawful entry into a website,
commonly referred to as “hacking” which is known to cause huge losses and disruption. In
addition, where there is transmission of confidential or proprietary information in e-commerce
or mobile commerce transactions, such computer viruses or hackers could damage the Group’s
operations and its reputation or open the Group to a series of possible litigious actions.
Currently, the Group does not have any insurance covering potential disruptions caused by such
problems. Inability to alleviate problems caused by such events could have a material adverse
effect on the business and operations of the Group.

Year 2000 problems

     As at the Latest Practicable Date, the Group has not experienced any material year 2000
problems caused by the failure of the computer hardware or software used in its operations.
However, there can be no assurance that the Group’s computer systems will continue to
function properly, as there may be problems which have yet to become apparent. Unanticipated
year 2000 problems may disrupt the Group’s operations and additional costs may be incurred
by the Group in rectifying such problems.

RISKS RELATING TO THE MOBILE TELECOMMUNICATIONS INDUSTRY

Changes in technology and product models

     The mobile telecommunications industry is characterised by rapid technological change.
Market research shows that the product life cycle of mobile phones tends to be short, with an
average product life of one year. In order to remain competitive, mobile phones manufacturers
have to develop new technologies and new models of mobile phones continuously. Should the
Company’s major suppliers fail to continue to develop new technologies and deliver new,
innovative and marketable models of mobile phones, the business and profitability of the
Group could be adversely affected.

Continued price cutting on mobile phones

     In December 1999, a Hong Kong based telecommunications industry forum issued a
position paper explaining that the average tariff per user for network operators has declined


                                             – 38 –
                                     RISK FACTORS


over time due to two factors: price cutting in competitive markets and growth in the number of
subscribers. Consumers will now expect comparatively cheaper mobile phones and lower
marginal airtime charges. The downward trend of mobile phone prices may adversely affect the
Group’s profitability.

Health risks associated with the use of mobile phones

     Certain reports in the media have suggested that the emission of electromagnetic fields
from mobile phones may be detrimental to health. Although the findings are inconclusive, the
reporting of such actual or perceived health hazard has aroused public concern over the use of
mobile phones which may affect the demand for mobile phones and thus may adversely affect
the Group’s business.

Impact of the PRC’s accession to the WTO

     Currently, the import of mobile phones into the PRC is subject to an import duty of 12%
or 20%. The Directors believe that, following the PRC’s accession to the WTO, the PRC’s
telecommunications market will further open up and the import duty of mobile phones will
gradually be reduced. The Directors believe that this will make it easier for mobile phones to
be imported to the PRC thereby increasing competition among mobile phone distributors in the
PRC, which may have an adverse effect on the profitability of the Group.

RISKS RELATING TO THE INTERNET AND E-COMMERCE INDUSTRY

Competitive industry

      The use of e-commerce in business community is relatively new and is subject to rapid
development and changes. The Group’s competitors may better position themselves to compete
in this market as it matures. Any of the Group’s present or future competitors may provide
products and services that provide signif icant performance, price, creativity or other
advantages over those offered by the Group. There can be no assurance that the Group will be
able to compete successfully against its current or future competitors.

Rapid changes in technology

      The Internet and e-commerce industries are characterised by rapid technological changes,
changing market conditions and customer demands that could render the Group’s e-commerce
platform, e-pay Terminals, CyberOutlets and WAP solution services obsolete. The Group’s
future success will substantially depend on its ability to enhance its existing services, develop
new services and technologies and respond to technological advances in a timely and cost-
effective manner. There can be no assurance that the Group will be successful in developing
and using new technologies to meet emerging industry standards and customer requirements. If
the Group’s e-commerce platform, e-pay Terminals, CyberOutlets and WAP solution business
fail to achieve market acceptance, the profitability of the Group could be adversely affected.

                                             – 39 –
                                     RISK FACTORS


Uncertainties in regulations and legislation

      The Internet industry is developing rapidly. In most jurisdictions, the applicability of
existing laws to the Internet is uncertain, and the new legislative and regulatory proposals
applicable to the Internet are still being developed. The adoption of such laws and regulations
may have an adverse impact on the Internet industry as a whole and hence the Group’s business
and operations. There can be no assurance that any state or country will not introduce
legislation or regulations in the future in relation to these issues in such a way that would have
a material adverse effect on the Group’s operations and financial position.

      In Hong Kong, the Electronic Transactions Ordinance which came into effect on 7th April,
2000 seeks to address some of the concerns over security, verif ication of identity and legal
status of documents over electronic transactions and provide for matters arising from and
related to the use of electronic transactions for commercial and other purposes. However, there
can be no assurance that there will not be other additional legislation providing for stricter
requirements and measures which governs electronic transactions in the future.

RISKS RELATING TO POLITICAL, ECONOMIC AND LEGAL REGIMES

Volatility of the economic climate in the Asia Pacific Region

      Since mid-1997, many countries in the Asia Pacific Region have experienced significant
economic downturns and decline in value of their currencies. As a result of the regional
economic crisis, governments imposed strict economic policies, including raising interest rates
and restriction on remittance of foreign currencies, to defend their weakening currencies,
which caused an enduring adverse effect on the region’s economy. Although recently the
region’s economy has begun to stabilise and is showing signs of recovery, the estimated GDP
growth and investors’ confidence for the region are still lower than that before the economic
crisis.

Malaysia

     The Malaysian government has exercised and continues to exercise significant influence
over many aspects of the Malaysian economy e.g. tentative forced mergers between network
operators in the telecommunications industry and interest rate determination. Any material
change in the social, political or economic policy in Malaysia could have a material adverse
effect on the Group’s business, financial condition and prospects.

The PRC

     The PRC has been a planned economy since 1949 where a majority of its economic
activities are planned and state-owned enterprises accounted for a substantial portion of the
country’s economic activities. Since 1978, the PRC government has been introducing a series
of political and economic reform programmes and long term plans aiming to further open up

                                             – 40 –
                                     RISK FACTORS


and stimulate growth of the PRC economy. As a result of these programmes and plans, the PRC
economy has experienced signif icant growth in the past decade but such growth has been
uneven across geographic and economic sectors. There can be no assurance that the rate of
such growth will not decrease and that any slowdown will not have a negative effect on the
Group’s and its partner companies’ business. There has also been speculation that the PRC
government may devalue Renminbi. If Renminbi is devalued, the Group’s financial condition
may be adversely affected. In addition, the Group’s operations and prof itability could be
adversely affected by changes in the PRC political, economic and social conditions and by
changes in macroeconomic policies of the PRC government such as measures to control
inflation and to regulate economic expansion.

      The telecommunications industry is heavily regulated by the PRC government. Currently,
the PRC regulations restrict foreign investments in the operation of telecommunications
networks and provision of telecommunications services in the PRC. In addition, the import of
telecommunications equipment in the PRC are also subject to government regulations and
approval. Any material regulatory change in the telecommunications industry may have a
significant impact on the Group’s business. In addition, two new regulations, namely the PRC
Telecommunications Regulation            ! " # $ % & ' ( )*         and the Internet Information
Services Administration Provision          ! " # $ % & ' ( )*          were promulgated by the
State Council of the PRC on 25th September, 2000. The two new regulations aim to strengthen
the legislation and administration of, among other things, the telecommunications industry that
will apply to the Internet businesses in the PRC. As at the Latest Practicable Date, the
Directors are uncertain of the impact of these new legislation on the PRC telecommunications
industry and any material adverse change in these legislation could have a material adverse
effect on the operations and prof itability of the Group’s existing business and its newly
diversified businesses as set out in the section headed “Statement of business objectives” of
this prospectus.

     It is also reported that although the PRC Government has entered into agreements with
certain governments to gradually open up the Internet sector to foreign investment upon its
accession to the WTO, there is no assurance that this liberalisation will actually take place. In
addition, there is no assurance that issuance of additional detailed regulations intended to open
up the Internet sector to foreign investment would actually work to increase the level of foreign
ownership currently permitted in certain types of Internet-related businesses in the PRC.

Hong Kong

     Hong Kong is a special administrative region of the PRC with its own government and
legislature which enjoys a fairly high degree of autonomy under the principle of “one country,
two systems”. There is no assurance that Hong Kong will continue to enjoy its current level of
autonomy and any reduction in the degree of autonomy could have a material adverse effect on
the Group’s operations. Any material adverse change in the social, political or economic
systems in Hong Kong could have a material adverse effect on the Group’s business, financial
condition and prospects.

                                             – 41 –
                                     RISK FACTORS


Changes in currency exchange rates

      Currently, the Group’s business is operated in various jurisdictions which generate
revenues, expenses and liabilities in currencies other than Hong Kong dollars. As a result, the
Group’s business and operations may be adversely affected if it is unable to timely obtain
suff icient foreign currencies at acceptable rates to meet its foreign currencies needs. The
following table analyses the denomination of foreign currencies of the Group’s purchases and
sales for each of the two years ended 31st December, 1999 and the six months ended 30th June,
2000 respectively:

                                          Purchases                             Sales
                                                      Six months                        Six months
                                                           ended                             ended
                                        Year ended           30th          Year ended          30th
                                    31st December,          June,      31st December,         June,
                                  1998        1999           2000    1998        1999          2000
                                    %           %              %       %           %             %

     Hong Kong dollar               1.8           –          0.5      85.0       44.5         58.7
     Renminbi                         –        34.7         22.6         –       31.0         22.4
     Ringgits                       1.1         1.8          0.1       5.0       15.8         10.4
     Deutsche Marks                16.2        12.9         24.0       0.9        2.2          3.2
     Sterling Pound                27.5        18.6         11.5       8.6        5.8          2.6
     United States dollars          7.8        17.7         28.9       0.3          –          2.5
     Others                        45.6        14.3         12.4       0.2        0.7          0.2

                                  100.0       100.0        100.0     100.0      100.0        100.0


      In the PRC, RMB is not freely convertible to foreign currency. Foreign investment
enterprises are allowed to convert RMB to foreign currency in its foreign currency accounts or
by banks authorised to conduct foreign exchange transactions, for repatriation and distribution
of its profit or dividends overseas. However, the conversion of RMB to foreign currency in
respect of capital account items (including direct investment, loan, guarantee investment) is
still under control. In Malaysia, the repatriation of prof its of the Malaysian subsidiaries
through the declaration and payment of dividend is not subject to any levy but approval from
Bank Negara Malaysia, which is in the form of established procedures adhered to by banks
processing the remittance of the said funds, must be obtained for the repatriation. The Directors
are not aware of any other regulation or law which would limit the Group to meet its foreign
currencies requirements arising from its trading activities. The Group has not entered into
agreements or purchased instruments to hedge the Group’s exchange rate risks although the
Group may do so in the future.




                                             – 42 –
                                     RISK FACTORS


RISKS RELATING TO THE PLACING

Forward-looking statements may not be accurate

      Included in this prospectus are various forward-looking statements which can be
identif ied by the use of forward looking terminology such as “may”, “will”, “expect”,
“anticipate”, “estimate”, “continue”, “believe” and other similar words. The Group and the
Directors have made forward-looking statements with respect to the following: the Group’s
mission to achieve such objectives; the importance and expected growth of the mobile
telecommunications industry, the e-commerce industry and the Internet technology; the pace of
change in the Internet marketplace. Such forward-looking statements involve known and
unknown risks, uncertainties and other factors which may cause the actual results, performance
or achievements of the Group, or industry results, to be materially different from any future
results, performance or achievements expressed or implied by such forward-looking statements.
Such forward-looking statements are based on numerous assumptions regarding the Group’s
present and future business strategies and the environment in which the Group will operate in
the future. Important factors that could cause the Group’s actual results, performance or
achievements to differ materially from those in the forward-looking statements include but are
not limited to those risk factors mentioned above. These forward-looking statements speak only
as of the Latest Practicable Date.

Reliability of statistics in prospectus

     Certain information in this prospectus relating to the telecommunications industry and the
Internet industry, such as statistics, mobile penetration rates, Internet usage and e-commerce
revenues in various jurisdictions, as well as statistics regarding consumer preferences, are
derived from various public and private publications. Such information has not been
independently verified by the Company and may not be accurate, complete or up-to-date. The
Company makes no representation as to the correctness or accuracy of such statements and,
accordingly, such information should not be unduly relied upon.

Liquidity and possible price volatility of the Shares

      Prior to the listing of the Shares on GEM, there has been no public market for any of the
Shares. The Offer Price may not be indicative of the price at which the Shares will trade
following the completion of the Placing. There can be no guarantee that an active trading
market for the Shares will develop, or, if it does develop, it will be sustained following the
completion of the Placing, or the market price of the Shares will not fluctuate significantly or
fall below the Offer Price.




                                             – 43 –
                                       RISK FACTORS


     The trading price of the Shares could also be subject to significant volatility in response
to among other factors:

     •    investor perceptions of the Group and the Group’s plans for the development of the
          mobile phone distribution and trading business e-commerce platforms, e-pay
          Terminals, CyberOutlets and WAP solution business;

     •    developments of the telecommunications industry, the e-commerce and the Internet
          industry in the Asia Pacific Region;

     •    variations in operating results of the Group;

     •    technological innovations;

     •    changes in pricing made by the Group, the Group’s competitors or providers of
          alternative products and services;

     •    changes in share prices of other companies in the similar industry;

     •    the depth and liquidity of the market for the Shares and the development of GEM as
          a stock market; and

     •    general economic and other factors.

Dilution of shareholders’ interest as a result of additional equity fund raising

     The Group may need to raise additional funds in the future to finance expansion of or new
developments relating to its existing operations or new acquisitions. If additional funds are
raised through the issuance of new equity or equity-linked securities of the Company other than
on a pro rata basis to existing shareholders, the percentage ownership of the shareholders of the
Company may be reduced, shareholders may experience subsequent dilution and/or such
securities may have rights, preferences and privileges senior to the Shares.

Dilution of shareholders’ interest as a result of the exercise of share options

     The Group has in place a Share Option Scheme and a Pre-Listing Share Option Plan under
which options in respect of 174,965,000 Shares have been granted under the Pre-Listing Share
Option Plan as set out in the section headed “Share Option Schemes” in Appendix V to this
prospectus.

      The full exercise of all options granted under the Share Option Scheme and the Pre-
Listing Share Option Plan would result in the issue of 525,000,000 Shares, representing 30% of
the issued share capital of the Company immediately following listing (and before the issue of
Shares pursuant to any exercise of the Over-allotment Option). This will result in a reduction in
the percentage ownership of the shareholders of the Company and may result in a dilution in
the assets and earnings per share of the Company.



                                             – 44 –

				
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