Company Subsdiary:

• Stockmartnet Ltd (100%): Operation of trading engine
• Stockmartnet Technology Ltd (100%): Operation of financial portal
• Stockmartnet Domain Names LTd (100%): Holding of domain names
• Stockmartnet Finance Ltd (100%): Margin Financing and Underwriting Placing
• Stockmartnet Capital Ltd (100%): Investment adviser
• Stockmartnet Processing Services Ltd (100%): Back office services

The Group is seeking to position itself as a provider of services to the Hong Kong securities industry on a B2B basis. It does not solicit business directly from retail users of the securities markets and its business model is not intended to compete with Stock Exchange Participants for B2C business.

The core services offered and to be offered by the Group include (a) SMNonline, the electronic trading engine; (b) stockmartnet.com, the financial portal; (c) underwriting and placement; (d) margin loan financing; and (e) back office support services. The Group currently offers SMNonline, the electronic trading engine, to which seven Users had subscribed as at the Latest Practicable Date and stockmartnet.com, the financial portal to the Users.

The Group was formed initially as an alliance among the Initial Management Shareholders and the Founding CN Holders, being medium and small brokers, for the global financial services market where investments in technology, economies of scale and alliances are important to success.

SMNonline is the securities trading platform operated by the Group that is available over the Internet and the Group's Intranet. The Group's Intranet operates through IBM with the counter parties being the Users. SMNonline includes a variety of online functions and services that allow Users and investors to place trade orders for securities transactions and to view account balances, positions, transaction status and trading history in-house through the Group's intranet or through the Internet.

The Directors believe that, with 177 Stock Exchange Participants as Shareholders, who together have over 240,000 accounts in aggregate, the Group can benefit from economies of scale to assist Securities Market Participants in coping with AMS/3, multi-market, multi-currency, multi-product and multi-language trading through the use of a common technology platform.

The Group can also assist Securities Market Participants to develop a web presence, and provide in-house and Internet trading and back office systems through an application services platform. At present it focuses its efforts on Stock Exchange Participants but in due course the Directors will consider making its services available to any properly licensed Securities Market Participant.

The Directors believe that the Group has the following competitive advantages:

• The Group's shareholder base, which includes both the Initial Management Shareholders and the Founding CN Holders, each of whom has a professional interest and/or small financial interests in the success of the Group, makes it unique in the Hong Kong financial services market and provides it with a strong base of potential clients.

• The Group has an experienced and highly qualified independent management team. The executive Directors have in-depth knowledge and expertise in the information technology and financial services industry.

• The Group has formed strategic alliances with reputable technology partner to obtain access to new technology and know-how so as to enhance its services.

• The Company's shareholder base and the Group's services offered integrate the interests of Shareholders and Users with those of the Group. Feedback from the Initial Management Shareholders and the Founding CN Holders, in addition to other Users, will enable the Group to launch the right products and services at the right time.

• No Founding CN Holders or other person has committed to use any of the Group's services except for the seven Founding CN Holders at present using SMNonline. Investors should not assume that the Group would be able to attract Users.

• The primary target market of the group, small and medium-sized Stock Exchange Participants is likely to shrink in the foreseeable future as the industry consolidates and minimum commissions are abolished. Which will not necessarily include the firms, comprised in the Group's commensurately smaller nominal client base.

• If the Group's revenues are insufficient to cover its expenses it may have to pay those expenses out of capital. If the Group cannot pay IBM under the seven-year Server Hosting Services Agreement and IBM declines to re-negotiate its terms, that agreement may be terminated..

It is the objective of the Group to be a unique financial service provider for the securities industry utilizing a B2B model and providing a comprehensive range of financial services.

For future development, the Group will concentrate on:

• enhancing and expanding the services of its financial portal and trading platform to meet the increasingly sophisticated needs of the market;

• actively pursuing strategic alliances with reputable and reliable technology providers, Internet content providers and major banking groups in order to improve the depth and quality of service; and

• extending SMNonline to link up with back office electronic support services.

The net proceeds from the Placing, after deducting the related expenses, are estimated to amount to approximately HK$82 million (based on the offer price HK$0.38 per share). The Group at present intends to apply the net proceeds as follows: