<PAGE>

                     U.S. SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 20-F

              ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934
                    For the fiscal year ended March 31, 2003

                        Commission file number 000-21919

                            DF CHINA TECHNOLOGY INC.
                  ---------------------------------------------
                 (PREVIOUSLY DRANSFIELD CHINA PAPER CORPORATION)
             -----------------------------------------------------
             (Exact name of Registrant as specified in its charter)

                     Territory of the British Virgin Islands
                 -----------------------------------------------
                 (Jurisdiction of incorporation or organization)

                Units 3207-08, 32/F., West Tower, Shun Tak Centre
                         168-200 Connaught Road Central
                                Hong Kong, China
                    (Address of principal executive offices)

Securities registered or to be registered pursuant to Section 12(g) of the Act.

                           Common Stock, no par value
                           --------------------------
                                (Title of Class)

Securities for which there is a reporting obligation pursuant to Section 15(d)
of the Act.

                           Common Stock, no par value
                           --------------------------
                                (Title of Class)

         Indicate the number of outstanding shares of each of the issuer's
classes of capital or common stock as of the close of the period covered by the
annual report.

                        Common Stock - 19,915,292 Shares
                        --------------------------------

         Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.

                      Yes [X]                   No [ ]

         Indicate by check mark which financial statement item the registrant
has elected to follow.

                      Item 17 [ ]               Item 18 [X]

                                       1

<PAGE>

                                TABLE OF CONTENTS

<TABLE>
<S>                                                                                         <C>
Item 1.    Identity of Directors, Senior Management and Advisers                                   3
Item 2.    Offer Statistics and Expected Timetable                                                 3
Item 3.    Key Information                                                                         3
Item 4.    Information on the Company                                                              8
Item 5.    Operating and Financial Review and Prospects                                           14
Item 6.    Directors, Senior Management and Employees                                             22
Item 7.    Major Shareholders and Related Party Transactions                                      28
Item 8.    Financial Information                                                                  29
Item 9.    The Offer and Listing                                                                  30
Item 10.   Additional Information                                                                 31
Item 11.   Quantitative and Qualitative Disclosures About Market Risk                             33
Item 12.   Description of Securities Other than Equity Securities                                 34
Item 13.   Defaults, Dividend Arrearages and Delinquencies                                        34
Item 14.   Material Modifications to the Rights of Security Holders and Use of Proceeds           34
Item 15.   Not applicable                                                                         34
Item 16.   (Reserved)                                                                             35
Item 17.   Financial Statements                                                                   35
Item 18.   Financial Statements and Exhibits                                                      35
Item 19.   Exhibits                                                                               62

SIGNATURE                                                                                         65

CERTIFICATIONS                                                                              Exhibits
</TABLE>

                                       2

<PAGE>

                                     PART I

ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORS

         Not applicable.

ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE

         Not applicable.

ITEM 3. KEY INFORMATION

         SELECTED FINANCIAL DATA.

         The following selected financial data for the five years ended March
31, 2003, are derived from the audited consolidated financial statements of our
company. The data should be read in conjunction with the consolidated financial
statements and the related notes, which are included elsewhere in this annual
report.

<TABLE>
<CAPTION>
                                                                Years ended March 31,
                                        -----------------------------------------------------------------
                                          1999      2000      2001      2002         2003         2003
                                        HK$'000   HK$'000   HK$'000    HK$'000    HK$'000(1)   US$'000(1)
                                        -------   -------   --------   --------   ----------   ----------
<S>                                     <C>       <C>       <C>        <C>        <C>          <C>
Income Statement Data:

Net Sales(2)                             4,812     1,502      9,343      6,598       5,488          703

Income (loss) before interest and
  income taxes and minority             (8,843)   (7,009)   (88,242)   (18,068)   (101,674)     (13,034)
  interests

Interest income/(expenses),
  net(2)                                  (254)       41          -          -           -            -

Provision for income taxes                   9         -          -          -           -            -

Net loss(2)                             (9,088)   (6,968)   (88,242)   (18,068)   (101,674)     (13,034)

Basic and diluted net loss per share     (0.58)    (0.43)     (4.57)     (0.91)      (5.11)       (0.65)
</TABLE>

                                       3

<PAGE>

<TABLE>
<CAPTION>
                                                           As at March 31,
                             ---------------------------------------------------------------------------
                                1999         2000         2001         2002         2003         2003
                               HK'000      HK$'000      HK$'000      HK$'000     HK$'000(1)   US$'000(1)
                                                       ----------   ----------   ----------   ----------
<S>                          <C>          <C>          <C>          <C>          <C>          <C>
Balance Sheet Data:

Fixed assets(3)                 186,642      200,909      143,332      133,549       33,747        4,326

Total assets(3)                 208,338      224,983      150,745      135,246       34,893        4,475

Long term liabilities(4)         58,359       14,350            -            -            -            -

Common Stock                    153,584      225,001      241,920      241,920      241,920       31,019

Equity                          145,460      206,698      139,610      121,542       19,868        2,551

No. of common stock issued   15,585,000   18,165,007   19,915,292   19,915,292   19,915,292   19,915,292
</TABLE>

-------------------------

(1)      The translation from Hong Kong dollars into U.S. dollars for the 2003
         data is at US$1.00 equals HK$7.8, the conversion rate prevailing on
         March 31, 2003.

(2)      For a discussion of the reasons for the significant changes in certain
         selected financial data between fiscal years 2001, 2002 and 2003, see
         below, "Operating and Financial Review and Prospects " and the
         subsections thereof as follows: for "Net Sales" in the table above, see
         "Sales" below; for "Interest income/(expenses), net" above, see
         "Interest Expense, net" below; and for "Net income" above, see "Net
         loss" below.

(3)      In fiscal 2003 total assets decreased to US$4.5million due primarily to
         a US$12.5million provision against our fixed assets for the potential
         decline in value of all the machinery and equipment at the two plants
         in Xinhui and Huaxi and those idle machinery at the plant in Conghua,
         following the decisions made by the new management to dispose of all
         such assets in the near future. Total assets decreased to US$17.3
         million in fiscal 2002. This was primarily due to a US$1.0 million
         provision against our fixed assets which was the result of surveys
         conducted by professional surveyors and a US$589,000 write off on
         equity of our investment in Tianjin 3D.

         RISK FACTORS.

         An investment in the securities described hereby is speculative in
nature and involves a high degree of risk. In addition to the other information
contained in this Annual Report, prospective investors should carefully consider
the following risk factors before purchasing the securities described hereby.

         1.       WE HAVE AN UNSEASONED PUBLIC MARKET.

                                       4

<PAGE>

                  Trading volume and prices in DF China Technology's Common
Stock (Nasdaq: DFCT) have been volatile. No assurance is given that recent or
current trading prices will reflect the prices the Common Stock will trade at in
the future.

         2.       NEW MANAGEMENT HAS ABANDONED OUR EARLIER BUSINESS PLAN AND HAS
NOT YET ADOPTED A NEW BUSINESS PLAN.

                  There has been a change of management of our company. The
former management of our company endeavored to effectuate an ambitious plan to
create a vertically integrated paper manufacturer and distributor of paper
products. Due to the lack of a considerable part of the capital required for
this business expansion, the planned expansion was abandoned after the current
management made a thorough review of the plan. The plan was affected by many
factors not under our control, such as political and economic decisions made by
the Chinese government and economic developments affecting the paper
manufacturing industry throughout the world. The planned expansion is complex in
conception. Its parts are interdependent.

                  We have no prior experience in paper manufacturing. Our new
management discovered that our paper-making equipment in Jiangyin and Xinhui,
China was not operable and was in very poor condition. Our new management has no
confidence that the equipment can be re-used, and even if the equipment can be
re-used, huge expenses to re-activate it will be incurred. Together with our
lack of funds to complete the planned paper mills expansion, our management
decided to abandon the planned business expansion.

                  We have not yet formulated a new business plan. Management is
considering many alternatives. Until a new business plan is adopted, our
shareholders cannot know what future lies ahead for our company.

         3.       WE MAY NOT BE ABLE TO CONTINUE AS A GOING CONCERN.

                  We have been unable to achieve profitable operations. Our
capital is insufficient to allow us to complete our two paper mills under
constructions. We have incurred significant accumulated losses and negative cash
flows from operations. We have not been able to borrow from banks for working
capital for our only remaining operation in Conghua, Guangzhou, Guangdong
province. In July, 2003, our new management entered into a loan agreement with
an affiliate, DiChain Holdings Limited, to borrow HK$5 million for short term
corporate and operation expenses.

         4.       VOLATILITY IN THE PRICE OF PULP AFFECTS THE PROFITS OF OUR
COMPANY.

                  The profitability of our paper making operations is severely
affected by the price of pulp used in the manufacture of paper. The price of
pulp has been most unstable. Even though conservative inventory practices may be
followed, some raw materials must be purchased in advance to assure a continued
supply. Our profitability is affected quarter to quarter by the volatility of
pulp prices.

                                       5

<PAGE>

         5.       NUMEROUS POLITICAL CONSIDERATIONS CAN AFFECT OUR OPERATIONS.

                  Our business may be adversely affected by political, economic
and social uncertainties in China. A change in policies by the Chinese
government could adversely affect our interests by, among other things, changes
in laws, regulations, or the interpretation thereof, confiscatory taxation,
restrictions on currency conversion, imports and sources of suppliers, or the
expropriation of private enterprises. Although the Chinese government has been
pursuing economic reform policies for more than 20 years, no assurance can be
given that the Chinese government will continue to pursue such policies or that
such policies may not be significantly altered, especially in the event of a
change in leadership, social or political disruption or unforeseen circumstances
affecting China's political, economic and social life.

         6.       NUMEROUS ECONOMIC CONSIDERATIONS AFFECT OUR COMPANY.

                  Shareholders or investors residing in the United States should
be aware that the economy of China differs significantly from the United States
economy in such respects as structure, level of development, gross national
product, growth rate, capital reinvestment, resource allocation and
self-sufficiency, rate of inflation and balance of payments position, among
others. Since the early 1950s, the economy of China has been a planned economy
subject to five-year and annual plans adopted by central authorities which set
forth production goals. Only recently has the Chinese government encouraged
substantial private economic activity. The Chinese economy has experienced
significant growth in the past ten years, but such growth has been uneven among
various sectors of the economy. There can be no guarantee that the government's
pursuit of economic reforms will be consistent or effective. Action by the
central government of China could have a significant adverse effect on economic
conditions in China. Further, much of the economic activity is export driven
and, therefore, affected by developments in the economies of China's principal
trading partners.

         7.       THE RELIABILITY OF OUR LEGAL SYSTEM IS QUESTIONABLE.

                  In December 1982, the National People's Congress of China
amended the Constitution of China to authorize foreign investment and to
guarantee the "lawful rights and interests" of foreign investors in China.
Despite the subsequent activity and progress in developing the legal system,
China does not have a comprehensive system of laws. Enforcement of existing laws
may be uncertain and sporadic and implementation and interpretation thereof
inconsistent. The Chinese judiciary is relatively inexperienced in enforcing the
laws that exist, leading to a higher than usual degree of uncertainty as to the
outcome of any litigation. Even where adequate law exists in China, it may be
impossible to obtain swift and equitable enforcement of such law or to obtain
enforcement of a judgment by a court of another jurisdiction.

                  While Chinese law expressly protects the status and rights of
Sino-foreign joint venture enterprises, including their right to use land during
the term of their respective joint venture contracts, the state reserves the
right, in extreme and exceptional circumstances, to terminate the joint venture
and provide compensation therefor. In such an event, a joint venture's right to
use land would terminate and all plant and facilities would revert to the state
in exchange for just compensation.

                                       6

<PAGE>

         8.       THE CHINESE GOVERNMENT EXERCISES CONTROL OF CURRENCY
CONVERSIONS AND EXCHANGE RATES.

                  We receive revenues from our limited paper converting
activities in the PRC in Renminbi, which is a currency not freely convertible
into foreign exchange. However, we require foreign currency to fund a portion of
our operations. In addition, revenues will need to be converted into United
States dollars, Hong Kong dollars and other currencies in the amounts needed for
us to discharge obligations denominated in foreign currency.

                  The PRC Government imposes control over its foreign currency
reserves in part through direct regulation of the conversion of Renminbi into
foreign exchange and through restrictions on foreign imports.

                  In general, domestic enterprises operating in the PRC must
price and sell their goods and services in the PRC in Renminbi and are also
required, with certain exceptions, to sell all their foreign exchange revenues
to designated foreign exchange banks in the PRC. In addition, domestic
enterprises must provide satisfactory evidence of their need for foreign
currency before converting Renminbi to foreign currency through designated
foreign exchange banks. However, according to regulations that took effect on
July 1, 1996, foreign investment enterprises may be able to access foreign
exchange from both designated foreign exchange banks and swap centers, provided
that such foreign exchange will be used for current account transactions.

                  Prior to January 1, 1994, there was significant volatility in
the exchange rate of Renminbi to U.S. dollars. Although the Renminbi to U.S.
dollar exchange rate has been relatively stable since January 1, 1994 and the
PRC Government has stated its intention to intervene in the future to support
the value of the Renminbi, there can be no assurance that exchange will not
again become volatile or that the Renminbi will not devalue significantly
against the U.S. dollar. Exchange rate fluctuations may adversely affect our
financial performance and ability to meet our obligations because of our current
and future foreign currency denominated liabilities and may materially adversely
affect the value, translated into U.S. dollars, of our net fixed assets,
earnings and any declared dividends.

                  The current restrictions and uncertainties, relating to the
currency conversion system in the PRC, give rise to risks affecting our ability
to obtain adequate foreign exchange at acceptable rates to meet our foreign
exchange needs.

         9.       WE ARE EXPOSED TO POSSIBLE ENVIRONMENTAL LIABILITIES.

                  We are subject to PRC national and local environmental
protection regulations that currently impose fees for the discharge of waste
substances, require the payment of fines for pollution, and provide for the
closure by the PRC Government of any facility that fails to comply with orders
requiring it to cease or improve upon certain activities causing environmental
damage. Due to the nature of our business, we produce significant amounts of
waste water and solid waste materials during the course of our production. We
have established environmental protection systems to treat such waste materials
and to safeguard against accidents. We believe our environmental protection
facilities and systems are adequate for us to comply with the existing national,
provincial, and local environmental protection regulations. However, there can
be no

                                       7

<PAGE>

assurance that the PRC national, provincial, or local authorities will not
impose additional or more stringent regulations which would require additional
expenditure on environmental matters or changes in our processes or systems.

         10.      THE PAYMENT OF DIVIDENDS IS NOT LIKELY.

                  For the foreseeable future it is anticipated that any earnings
which may be generated from our operations will be used to finance the growth of
the company, and cash dividends will not be paid to holders of the Common Stock.

         11.      WE ARE EXPOSED TO THE IMPACT OF INFLATION.

                  Although we have not attempted to calculate the effect of
inflation, management does not believe inflation has had a material effect on
our results of operations. Material increases in costs and expenses,
particularly packaging, raw material and labor costs, in the future, could have
a significant impact on the Company's operating results to the extent that the
effect of such increases cannot be transferred to its customers.

         FORWARD-LOOKING INFORMATION.

         The Private Securities Litigation Reform Act of 1995 provides a "safe
harbor" for certain forward-looking statements made in our disclosures to the
public. There is certain information contained herein, in our press releases and
in oral statements made by authorized officers of the company which are
forward-looking statements, as defined by such Act. When used herein, in our
press releases and in such oral statements, the words "estimate," "project,"
"anticipate," "expect," "intend," "believe," "plans," and similar expressions
are intended to identify forward-looking statements.

ITEM 4. INFORMATION ON THE COMPANY

         HISTORY AND DEVELOPMENT OF THE COMPANY

         Our legal and commercial name is DF China Technology, Inc. We were
incorporated on June 24, 1996 as an International Business Company pursuant to
the International Business Companies Act of the British Virgin Islands. We were
originally named Dransfield China Paper Corporation. On March 28, 2000 we
changed our name to DF China Technology Inc. The registered agent in the British
Virgin Islands is HWR Services Limited, P.O.Box 71, Craigmuir Chambers, Road
Town, Tortola, British Virgin Islands.

         Our principal place of business is Taiping Industrial Zone, Conghua,
Guangzhou, Guangdong province, China, but we do maintain a representative office
offshore at Units 3207-08, 32/F., West Tower, Shun Tak Centre, 168-200 Connaught
Road, Central, Hong Kong, China. Our telephone number is 852-2255-0688. Our
agent in the U.S. is Thomas J. Kenan, 201 Robert S. Kerr Ave., Suite 1000,
Oklahoma City, Oklahoma 73102.

         Dransfield Holdings Limited ("Dransfield Holdings"), a Bermuda company,
was a major

                                       8

<PAGE>

shareholder in our company. Dransfield Holdings was listed on the Hong Kong
Stock Exchange from April 1993 until August 26, 2002 when it became a wholly
owned subsidiary of China Merchant Dichain (Asia) Limited, which took over the
listing on the Hong Kong Stock Exchange.

         During fiscal 2002, our former management started to work with bigger
mills that do not have as modern converting equipment that we have. We arranged
for contract-packing assignment on behalf of these mills and also purchased
better quality jumbo rolls from them. This arrangement enabled us to test our
capacity, gain knowledge of the market and what our competitors were doing while
at the same time to find another source of supply of jumbo rolls. In addition,
we have also identified other medium size mills that lack the converting ability
and distribution network. As a result, it gives us an opportunity to have our
required jumbo rolls contract-produced by these mills at reasonable terms. The
Company has begun to take delivery from these added sources on a test basis.

         On 30 April 2003, certain major shareholders of our company removed Mr.
Horace Yao Yee Cheong as a director and Chairman of the Company, Ms Cheung Kam
Wa as a director and the Chief Executive Officer and Mr. Kenneth Mak Kar Shun as
a director of the Company. In their place, Dr. Fan Di, Mr. Aaron Zhu Xiaojun,
Mr. Kwok Yam Sheung, Dr. Robert Fung Hing Piu and Dr. Godwin Wong were appointed
as directors of the company and Dr. Fan Di was also appointed the Chairman and
Chief Executive Officer of the Company. Since then, the Company has been
operated under the new board of directors.

         Our new board of directors has devoted its time and efforts to
appraising the value of our assets and the merits of the business plan under
which we have operated for the past several years. The directors have determined
that it is not feasible to continue to pursue the earlier objective of building
an integrated paper manufacturer with four principal paper plants. Further, most
of the used paper manufacturing equipment we purchased in the late 1990s has not
weathered well and appears to be beyond economic salvation. Our directors have
largely written off our paper manufacturing equipment, have abandoned all paper
pursuits other than the limited one of converting jumbo paper rolls into a few
paper hygiene products, and have not yet settled on a new business plan for the
company.

         BUSINESS OVERVIEW

         Our principal business is conversion of jumbo tissue rolls into
consumer-grade hygienic tissue products and marketing these products.

         In December 1999, we began producing our own DF brand of paper products
at our converting facility at Conghua, in the city of Guangzhou, Guangdong
Province, Southern China. This was a major step in our plan to grow into a
vertically integrated hygienic paper manufacturer and distributor serving some
of China's most densely populated and fastest growing areas, as well as Hong
Kong.

         To date, the converting facility has experienced difficulty in locating
consistent supplies

                                       9

<PAGE>

of domestic jumbo tissue rolls that meet the quality and cost criteria for our
intended markets. Quality imports are available, but high prices and import
duties make quality imported tissue cost-prohibitive.

         Given the continued weakness of global equity markets and inability to
raise the necessary funds to complete our own paper mills and provide sufficient
working capital, we are reliant on inconsistent quality tissue from local mills
at highly cyclical prices. This has prevented us from scaling our operations
according to our original plans and has hurt margins.

         Our current focus is to turn our Conghua operations profitable.

         In the meantime, we will continue to supplement domestically sourced
jumbo tissue rolls with imported paper in order to serve export markets. In
fiscal 2000, we began marketing our products overseas and began to meet with
encouraging success in Macau, Hong Kong and Taiwan. Expanding sales coverage
rapidly does have its risks. Having stretched our sales and marketing team, we
were exposed to collection problems resulting in bad debts in fiscals 2001 to
2002. Our distribution network has since been restructured to limit our exposure
to credit risk.

THE PAPER INDUSTRY IN CHINA

         China currently has more than 700 businesses producing tissue paper,
most of which are small mills with a daily output of 1 to 5 metric tons. Most
use cylinder and fourdrinier paper machines with paper widths of 1,092mm to
1,760mm and slow speeds of 60m to 120m per minute only. Raw materials are
primarily low quality and include mixed waste paper pulp, white paper trimmings,
rice and wheat straw pulp, bagasse pulp, tail pulp of paper mills, waste cotton
pulp and others. Only a few paper machines are imported and only a few
Chinese-made cylinder and fourdrinier machines use imported wood pulp to produce
higher-grade tissue paper.

         As the standard of living continues to improve in China, hygienic paper
consumption is naturally moving towards better grade raw materials that produce
higher quality finished products and that are more environmentally friendly. In
2000, an estimated 35.7 million metric tons of paper and paperboard were
produced in China, of which approximately 2.7 million metric tons were hygienic
tissue paper.

         Although overall hygienic paper consumption in China is only a fraction
of that in the West, consumption grew an average 15.7% annually, from 680,000
metric tons in 1990 to 2.7 million metric tons in 2000. Likewise, even though
China's annual per capita tissue consumption increased from 0.6kg to 2.15kg, it
is still less than 10% of what people in the United States consume (exceeds 20kg
per person).

         While China still lags behind developed countries in hygienic paper
consumption, the volume and variety of products consumed are growing each year.
Tissue products currently available in China include folded handkerchiefs,
facials, napkins, bathroom tissues, kitchen and other paper towels, and moist
tissues. Western packaged facial tissues, handkerchiefs, napkins and bathroom
tissues are now sold in supermarkets in major cities.

                                       10
<PAGE>

         As an indication of China's progression towards using higher quality
hygienic paper products, we could look at the evolution of the types of paper
products consumed in China. From 1988 to 1992, toilet paper accounted for more
than 95% of all tissue paper sold in China. With the subsequent increase in per
capita income, toilet paper accounted for only approximately 70% while tissues
accounted for 30% (9% napkins, 13% facial, and 8% balance in paper
handkerchiefs) in 2001, according to an industry survey.

         We believe that most hygienic tissue paper mills in China are
under-financed, poorly managed and produce low-grade products, covering over 65%
of the mass market.

         PRINCIPAL MARKETS

         We compete in the following markets, with regard to each of which we
had total revenues for each of the last three financial years as follows:

<TABLE>
<CAPTION>
                                                In 000s of U.S. Dollars
                                             ----------------------------
                                     Year Ended        Year Ended        Year Ended
         Country                            3-31-01           3-31-02      3-31-03
-------------------------------------------------------------------------------------
<S>                                  <C>               <C>               <C>
Hong Kong and Macau                         US$237            US$149        US$307
Other part of the PRC                       US$625            US$471        US$396
Other part of Asia                          US$336            US$226        US$  0
</TABLE>

         SEASONALITY

         We experience no seasonality in our sales.

         MARKETING CHANNELS

         In fiscal 2002, we marketed our products both through distributors and
through our direct sales team. Selling through distributors and regular salesmen
exposed us to credit collection problems, which resulted in a HK$60,000
(US$7,600) total bad debt expense for that year. Since then, we decided to scale
back to a smaller and more experienced sales management team, which has
significantly reduced such problems. During the current year ended March 31,
2003, only HK$48,000 (US$6,000) of bad debt expenses were recorded due to
tightening our credit terms. Going forward, we shall recruit more sales managers
to handle sales and marketing for major customers. And for smaller chains and
shops, we will identify state-owned distributors that have established
distribution networks and sufficient working capital.

PATENTS, COPYRIGHTS AND INTELLECTUAL PROPERTY.

         We hold no patents, copyrights or intellectual property other than
trademarks established for our new paper products for the consumer market. We
are not aware of any patents, trademarks, licenses, franchises and concessions
that would affect our business and production described herein.

                                       11
<PAGE>

THE COMPETITION

         Our main competitors in China include:

-        Scott Shanghai (now owned by Kimberly Clark). Estimated output: 14,000
         metric tons per annum.

-        Taiwan Long Chen (now owned by Procter & Gamble) located in Suzhou,
         Jiangsu Province. Estimated output: approximately 14,000 metric tons
         per annum.

-        Taiwan Yuen Foong Yu located in Kunshan, Jiangsu Province. Estimated
         output: approximately 15,000 metric tons per annum.

-        Guangdong Vinda Paper Co. Ltd., the largest and most influential local
         paper mill, located in Xinhui, Guangdong Province. Estimated expanded
         capacity: approximately 30,000 metric tons per annum.

-        Asia Pulp & Paper Co. Ltd. has a factory in Jiangsu Province that
         produces jumbo rolls and a converting facility in Guangdong Province.
         Estimated maximum capacity of the paper making facility: 120,000 metric
         tons per annum. (The factory is currently producing approximately
         96,000 tons per annum of which approximately 50% is sold as jumbo rolls
         to converters.)

-        Fujian Hengan Holding Co. Ltd. in Changde, Hunan Province, now produces
         tissue paper to meet its requirements for production of diapers as well
         as paper. Estimated capacity: approximately 30,000 metric tons per
         annum. The company announced last year that it is planning to add
         another 30,000 metric tons of annual capacity at an estimated cost of
         US$24 million

-        Guangxi Sugar Cane Group Limited has ordered two modern paper machines
         with a speed of 1,500 meters per second and began production in 2003,
         respectively

         Given the above-described capacities together with our estimated
capacity, we believe that the demand for top quality products for both domestic
and on-premise (tourist) consumption will be temporarily met until the next
round of economic growth in China.

         GOVERNMENT REGULATIONS

         Our business suffers no material effects from government regulations
other than environmental controls, with which we are in full compliance. See
"Environmental Controls" below.

         ORGANIZATIONAL STRUCTURE

         A list of DF China Technology's significant subsidiaries is set forth
below:

                                       12
<PAGE>

<TABLE>
<CAPTION>
                                                     Country of
Name of subsidiary                                  incorporation        Proportion of ownership
------------------                                  -------------        -----------------------
<S>                                                 <C>                  <C>
Dransfield Paper (Hong Kong) Trading                  Hong Kong                 100%
   Limited
Guangzhou Dransfield Paper Ltd                        The PRC                   100%
Guangdong Dransfield Paper Ltd                        The PRC                   100%
Jiangsu Dransfield Paper Co Ltd                       The PRC                   100%
</TABLE>

         PROPERTY, PLANT AND EQUIPMENT

         PAPER MILLS

         We have land use rights to 16,011 square meters in a development zone
in Conghua, Guangzhou, PRC, on which we have constructed a paper converting
plant and warehouse, a conference center, and a 52-room guesthouse. The recycled
pulp production and paper making facilities are planned for a tract of
approximately 35,000 square meters in Xinhui, near Guangzhou, near other tissue
and industrial-grade paper manufacturers, on a major river with ready access to
road and river transportation and an abundant supply of electricity.

         Our new management has determined that it will not be possible to raise
the funds required to complete our two paper mills, either from investors or
through merging with an existing paper mill in China. Our current priority is to
turn profitable by focusing on our Conghua limited paper-converting operation.

         The condition of our existing equipment is very poor according to the
report of a professional assessment company. The equipment at our Jiangyin plant
and Xinhui plant has been exposed in open areas and became rusty and aged.

         Our management invited expert assets evaluators to assess the
conditions and usability of the equipment located at Jiangyin and Xinhui and
Conghua, the PRC. The results of the assessment and evaluation indicate that it
would be a high risk to invest more capital to put the equipment into functional
mode. Except for a small portion of the machinery and equipment in Conghua, this
facility is still in use for the businesses of converting jumbo tissue rolls
into consumer-grade hygienic tissue products. The remaining machinery and
equipment in Conghua, Jiangyin and Xinhui is idle. Our new management is taking
steps to dispose of the idle machinery and equipment.

VENUE OF SALES.

         In line with the current strategy to focus on turning our Conghua
converting operations

                                       13
<PAGE>

profitable, we are focusing our marketing efforts to China and limiting our
exposure in Hong Kong to tenders by the government, major distributors and other
major institutions that provide more stable margins and reliable payment.

ACQUISITIONS.

         Our former management had been engaged in discussions and negotiations
with potential merger candidates, but was not been able to reach any substantial
agreement.

OFFICE FACILITIES.

         Our headquarters are located in our Conghua converting facilities, and
we maintain an overseas representative office in Hong Kong.

ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS

         The following discussion and analysis should be read in conjunction
with the financial statements and the accompanying notes thereto and is
qualified entirely by the foregoing and by other more detailed financial
information appearing elsewhere see "Financial Statements." All dollar amounts
are in U.S. dollars unless otherwise noted.

OVERVIEW.

         Certain vertical integration activities (see "Outlook" below) are
reflected in the statements of operation and cash flows for the fiscal years
ended March 31, 2001, 2002 and 2003.

         During fiscal 2003 and prior to 30 April 2003, we focused our efforts
on improving operating margins at our paper converting operation in Conghua,
Guangzhou. However, faced with inadequate working capital, we were unable to
increase volume to achieve critical mass to turn the entire operation
profitable. Further, due to our inability to raise the capital needed to
complete our earlier-planned integrated paper manufacturing company, we made
provision against - that is, reduced the book value of - our fixed assets for
the potential decline in value of our unfinished paper mills. Impairment loss of
HK$97.8 million (US$12.5 million), HK$7.9 million (US$1.0 million) and HK$48.1
million (US$6.2 million) were recorded in the fiscal year 2003, 2002 and 2001
respectively.

         Our new management has examined the business activities of the company
and has evaluated the risks that we face. The major findings are:

         (i)      We lack sufficient working capital to continue the
                  jumbo-tissue-rolls-for-paper converters and the consumer-grade
                  hygienic tissue products business;

         (ii)     It is unlikely that the paper mills in Jiangyin and Xinhui
                  can be completed due to (a) a lack of sufficient funding and
                  (b) the equipment machines imported for the market-recycled
                  pulp for the paper industry had been idle for years and
                  therefore were in poor condition and the Group would be
                  required to incur a material amount of further expenses to
                  re-activate the machines.

         (iii)    The paper making market in China is highly competitive.


                                       14
<PAGE>
 As a result, our new management decided to abandon completion of the two
above-named paper mills and concentrate on our paper converting operation in
Conghua, Guangzhou. Our new management reassessed the carrying amounts of our
tangible assets to determine whether there is any indication that those assets
have suffered an impairment loss. If an asset's recoverable amount is less than
the carrying amount, the asset's book value will be reduced to its fair value
and an impairment loss is expensed.

         On the basis of advice from our professional valuers, we recognized an
HK$97.8 million (US$12.5 million) impairment of property, plant and equipment
for the year ended March 31, 2003.

         The following is a summary of the impairment loss of property, plant
and equipment by category for the fiscal years ended March 31, 2001, 2002 and
2003(in thousands):

<TABLE>
<CAPTION>
                                                 Leasehold land                   Machinery
Paper Manufacturing                               and buildings                 and equipment
                                           --------------------------     -----------------------
                                           US$'000         HK$'000        US$'000         HK$'000
<S>                                        <C>              <C>           <C>             <C>
       2001                                 1,776           13,854          6,171          48,136
       2002                                     -                -          1,018           7,939
       2003                                     -                -         12,537          97,792
</TABLE>

         Moreover, as published in the 2002 annual report, our affiliate,
Tianjin 3D, which is engaged in the production and distribution of
three-dimensional visual products, has not achieved the profitability target
established upon its acquisition. Management determined that the anticipated
reduction in revenue as a result of change in market conditions would not be
temporary. Accordingly, the former management recognized an HK$3.26 million
(US$418,000) and HK$4.59 million (US$588,000) impairment during the years ended
March 31, 2001 and 2002, respectively, primarily due to the reduction in
revenues as compared with the affiliate's profitability projections. And,
primarily due to our inability to assess the future profitability of the
affiliate, we made full provisions against our investment in the affiliate at
March 31, 2002.

RESULTS OF OPERATIONS.

         The following table presents, as a percentage of sales, certain
selected consolidated financial data for each of the three years in the period
ended March 31, 2003:

<TABLE>
<CAPTION>
Year ended March 31                          2001           2002          2003
                                              %              %             %
<S>                                         <C>            <C>          <C>
Sales                                          100            100            100
Cost of sales                               (129.8)         (82.4)         (75.4)
                                            ------------------------------------
Gross Margin                                 (29.8)          17.6           24.6
                                            ------------------------------------
Selling, general and                        (152.4)        (103.0)        (117.0)
administrative expenses
</TABLE>

                                       15
<PAGE>

<TABLE>
<S>                                         <C>            <C>          <C>
Other incomes and expenses, net             (762.2)        (188.3)      (1,760.3)
                                            ------------------------------------
                                            (914.6)        (291.3)      (1,877.3)
                                            ------------------------------------

Net loss                                    (944.4)        (273.7)      (1,852.7)
                                            ------------------------------------
</TABLE>

SALES.

         DFCT's turnover in fiscal 2003 was HK$5.5 million (US$703,000) compared
with HK$6.6 million (US$846,000 million) in fiscal 2002. The decrease in
turnover was due to the Company's decision to exit from trading packaging grade
papers and the reduction in sales due to limited working capital. Turnover in
fiscal 2001 was HK$9.3 million (US$1,198,000). The turnover decrease in fiscal
2002 was due to the sales decrease of our own manufactured hygienic paper
products.

GROSS MARGIN.

         The Company achieved a positive gross margin of HK$1.3 million
(US$173,000) in fiscal year 2003, as a result of focusing on paper manufacturing
business of higher gross profit margin. Gross profit for the fiscal 2002 was
HK$1.16 million (US$147,000) versus gross loss of HK$2.79 million (US$357,000)
in fiscal 2001 attributable to the focus of sales of higher margin products and
improved purchasing gained from previous experience.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES.

         Selling, general and administrative expenses for fiscal 2003 were
HK$5.2 million (US$667,000) while they were HK$6.8 million (US$0.87 million) and
HK$14.24 million (US$1.8 million) in fiscal 2002 and fiscal 2001 respectively.
The decrease in selling, general and administrative expenses in fiscal 2003 was
due to tighter expense controls and overhead reduction. The decrease in expenses
in fiscal 2002 was also due to the tight control on marketing expenses.

INTEREST EXPENSE, NET.

         There was no interest income in fiscal 2003, 2002 and 2001. The company
currently has no interest bearing liabilities.

NET LOSS

         Net loss from ordinary activities attributable to shareholders was
HK$101.7 million (US$

                                       16
<PAGE>

13.0 million) in fiscal 2003 compared to HK$18.1 million (US$2.3 million) and
HK$88.2 million (US$11.3 million ) in fiscal 2002 and 2001 respectively.


                                       17
<PAGE>


BALANCE SHEET ITEMS

         Significant changes to several balance sheet items occurred from fiscal
years 2002 to 2003 and were:

-        a decrease in fixed assets from HK$133.5 million (US$17 million) to
         HK$33.7 million (US$4.3 million) reflecting the HK$97.8 million
         (US$12.5 million) provision against fixed assets.

-        a decrease in shareholders' equity from HK$121.5 million (US$15.6
         million) to HK$19.9 million (US$2.6 million) reflecting the provision
         against fixed assets and a small operating loss of HK$3.8 million
         (US$500,000).

         Significant changes to several balance sheet items occurred from fiscal
years 2001 to 2002 and

                                       18
<PAGE>

were:

-        a decrease in fixed assets from HK$143.3 million (US$18.4 million) to
         HK$133.5 million (US$17 million) reflecting the HK$ 7.94 million (US$
         1.02 million) provision against fixed assets.

-        a decrease in shareholders' equity from HK$139.6 million (US$17.9
         million) to HK$121.5 million (US$ 15.6 million) reflecting the
         provision against fixed assets and write off of our investment in an
         affiliate of HK$4.6 million (US$588,000) in addition to a small
         operating loss of HK$5.5 million (US$710,000).

LIQUIDITY AND CAPITAL RESOURCES.

         We had negative cash flows from operations of HK$787,000 (US$101,000),
HK$1.2 million (US$158,000), and HK$11.7 million (US$1.5 million) respectively
in fiscal years 2003, 2002 and 2001. The 2003 and 2002 net cash outflows were
both due to the operating losses incurred for the paper mill in Conghua. The
2001 negative performance was due to high operating loss in paper manufacturing
business and substantial marketing expenses incurred.

         Net cash outflow from investing activities was HK$3,000 (US$384) in
fiscal 2003 while net cash inflow was HK$256,000 (US$33,000) in 2002. Cash flow
outlay for fixed asset investments was insignificant in fiscal 2003 and 2002.
Our fixed asset investments in our paper mills reduced cash flows by HK$3.7
million (US$476,000) in FY 2001. Proceeds from disposal of fixed assets were
HK$0 and HK$361,000 (US$46,000) for fiscal years 2003 and 2002 respectively.

         Net cash inflow from financing activities was HK$730,000 (US$94,000)
and HK$802,000 (US103,000) in fiscal 2003 and 2002 respectively. Both were
arisen from the increase in amount due to an affiliate which provided services
to the Group.

         To the extent that pending litigation or unasserted claims could affect
our liquidity and capital resources, see "Item 18. Financial Statements - Notes
to Financial Statements - Note 12 - Commitments and Contingencies -
Contingencies - Pending Litigation, Unasserted Claims and Other Legal Matters."

         Our auditors expressed their concern about the Group's ability to
continue as a going concern because of the accumulated losses and negative cash
flows, see "Report of Independent Auditors"

RESEARCH AND DEVELOPMENT.

         We have not incurred any significant research and development expenses.

CONVERSIONS OF DEBT TO EQUITY

         Of the earlier advances from Dransfield Holdings Limited to complete
Paper Mills Nos. 1 and 2, US$5 million were converted into common stock of the
company in May 1997 at US$5 a share. US$4.2 million were converted into common
stock of the company in September 1997 at

                                       19
<PAGE>

US$4.25 per share, US$4.5 million were converted into common stock of the
company in March 1998 at US$4.50 per share, US$147,000 were converted into
common stock of the company in November 1999 at US$7 per share and US$5.8
million were converted into common stock of the company in February 2000 at
US$3.51 per share. On June 11, 2003, the management converted accumulated
advances from Dransfield Holdings totaling HK$5.745 million into common stock of
the Company resulting an issuance of approximately 3.2 million shares of common
stock of the Company. On September 30, 2003, 104,219 shares of common stock were
issued to certain ex-employees of the Company as full and final settlement of
the arrears of salaries brought forward from previous years.

NEW STANDARDS TO BE IMPLEMENTED

         On May 15, 2003, the FASB issued SFAS No. 150, "Accounting for Certain
Financial Instruments with Characteristics of both Liabilities and Equity" (SFAS
150). SFAS 150 changes the accounting for certain financial instruments that,
under previous guidance, could be classified as equity or "mezzanine" equity, by
now requiring those instruments to be classified as liabilities (or assets in
some circumstances) in the statement of financial position. Further, SFAS 150
requires disclosure regarding the terms of those instruments and settlement
alternatives. SFAS 150 affects an entity's classification of the following
freestanding instruments: mandatory redeemable instruments, financial
instruments to repurchase an entity's own equity instruments and financial
instruments embodying obligations that the issuer must or could choose to settle
by issuing a variable number of its shares or other equity instruments based
solely on (a) a fixed monetary amount known at inception or (b) something other
than changes in its own equity instruments. SFAS 150 is effective for periods
beginning after June 15, 2003. The Group's adoption of this interpretation is
not expected to have an effect on its consolidated financial statements.

         In January 2003, the FASB issued FASB Interpretation No. 46,
"Consolidation of Variable Interest Entities" (FIN 46). FIN 46 explains how to
identify variable interest entities and how an enterprise assesses its interest
in a variable interest entity to decide whether to consolidate that entity. This
Interpretation requires existing unconsolidated variable interest entities to be
consolidated by their primary beneficiaries if the entities do not effectively
disperse risks among parties involved. FIN 46 is effective immediately for
variable interest entities created after January 31, 2003, and to variable
interest entities in which an enterprise obtains an interest after that date.
Management does not expect the adoption of this Interpretation to have a
material impact on the Company's financial position or results of operation.

         In December 2002, the FASB issued SFAS No. 148, "Accounting for
Stock-Based Compensation, Transition and Disclosure, an amendment of FASB
Statement No. 123" (SFAS 148). This Statement provides alternative methods of
transition for an entity that voluntarily changes to the fair value based method
of accounting for stock based compensation. It also amends the disclosure
provisions of SFAS 123 to require prominent disclosure about the effects on
reported net income of an entity's accounting policy decisions with respect to
stock-based employee compensation. Further, SFAS 148 amends Accounting
Principles Board Opinion No. 28, Interim Financial Reporting, to require
disclosure about those effects in interim financial information. SFAS 148 is
effective for our financial statements beginning April 1, 2002. The Company has
not determined whether it will voluntarily change to the fair value based method
of accounting for stock-based compensation.

         In November 2002, the FASB issued FASB Interpretation No. 45,
"Guarantor's Accounting and

                                       20
<PAGE>

Disclosure Requirements for Guarantees, Including Indirect Guarantees of
Indebtedness of Others" (FIN 45). FIN 45 requires a guarantor to recognize, at
the inception of a qualified guarantee, a liability for fair value of the
obligation undertaken in issuing the guarantee. FIN 45 is effective on a
prospective basis for qualified guarantees issued or modified after December 31,
2002. Management does not expect the adoption of this Interpretation to have a
material impact on the Company's financial position or results of operations.

OUTLOOK.

         The statements contained in this outlook are based on current
expectations. These statements are forward looking, and actual results may vary
materially.

         During the past 5 years, the paper making industry has become very
competitive in China. Many foreign and domestic players have entered the
marketplace with the latest technology, new equipment and sources of capital.
With the larger industry production scale, the paper manufacturing process
becomes more and more efficient. Companies with old equipment and small
production scales are not nearly as competitive as the new ones. Most of the
equipment DFCT purchased is second hand with at least 20 years of history. The
equipment also came from various factories around the world, including U.S,
Japan, and Europe. Therefore, it is almost impossible to assemble them together
into fully functional production lines. Even if the equipment went into
production, the operation efficiency would not be nearly at the same level as
the new ones.

         Because there were more paper mills that went into production during
the past five years and the import tariff of raw materials has dropped
significantly, the margins of paper products have decreased as the market became
more competitive. The previous assumption of investment return is no longer
valid. In addition, the Chinese government has tightened environmental
protection regulations. The cost of pollution cleaning operations and recycles
also increased during the past few years, making the average operation margin
even smaller.

         The condition of our existing equipment is very poor according to the
report of a professional assessment company. The equipment at Jiangyin plant and
Xinhui plant has been exposed in open areas and became rusty and aged.

         Our management invited expert assets evaluators to assess the
conditions and usability of the equipment located at Jiangyin and Xinhui and
Conghua, the PRC. The results of the assessment and evaluation indicate that it
would be a high risk to invest more capital to put the equipment into functional
mode. Except for a small portion of the machinery and equipment in Conghua, this
facility is still in use for the businesses of jumbo tissue rolls for paper
converters and consumer-grade hygienic tissue products. The remaining machinery
and equipment in Conghua, Jiangyin and Xinhui is idle. Our new management is
taking steps to dispose of the idle machinery and equipment.

                                       21
<PAGE>

         The assessor's report indicated a significantly low value of our
existing property, plant and equipment of HK$ 33.7 million (US$4.3 million) on
the assumption that most of the existing machinery and equipment will be
disposed of in the short forseeable future.

         We are running out of cash, as the financial statements of 2003
indicate. Without outside funding sources, we cannot support either corporate
expenses or production cash flow. Our total consolidated debt is HK$15.0 million
(US$1.9 million). Our only operational plant in Conghua can barely sustain its
own cash flow. The Company does not believe that additional funding for future
expansion is available.

         We entered into an agreement with a major shareholder, Dransfield
Holdings, in June 2003 to convert HK$5.745 million of debts of the Company owing
to Dransfield into equity of 3,201,513 shares of DFCT common stock to reduce the
debt burden. In July 2003, the Company entered into a loan agreement with
DiChain Holdings Limited, to borrow HK$5 million for short term corporate and
operation expenses. We believe that the loan of HK$5 million is sufficient for
our current limited operations during the balance of our fiscal year.

         Based on the situation describe above, our management has decided not
to continue our paper pulps (raw paper) making business. Other than our
continued operation of our facility in Conghua to make packaged tissue paper, we
will not invest further in paper mill equipment and operations. The former
management's planned paper mill business expansion has stopped completely.

         Our Management will continue to seek new business direction for our
company. However, the outcome of extensive searching will not guarantee success,
and we cannot guarantee the success of any new business direction.

ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES.

         DIRECTORS AND SENIOR MANAGEMENT

         Effective April 30, 2003, Mr. Horace YAO Yee Cheong, Miss CHEUNG Kam Wa
and Mr. Kenneth MAK Kar Shun were removed as directors of the Company. Also,
effective April 30, 2003, Mr. Horace YAO Yee Cheong was removed as the Chairman,
and Miss CHEUNG Kam Wa was removed as the Chief Executive Officer of the
Company.

         Effective April 30, 2003, Dr. Fan Di, was appointed as the executive
director, Chairman and Chief Executive Officer of the Company. In addition,
effective April 30, 2003, Dr. Robert FUNG Hing Piu, Mr. Aaron ZHU Xiaojun and
Mr. KWOK Yam Sheung were appointed as executive directors of the company, and
Dr. Godwin Wong was appointed as a non-executive director and a member of the
audit committee of the company.

         Set forth below are the names, and terms of office of each of the
directors, executive officers and significant employees of the company and a
description of the business experience of each.

                                       22
<PAGE>

<TABLE>
<CAPTION>
                                                         Office
                                                          Held               Term of
         Person                     Office               Since               Office(1)
         ------                    --------             --------             ------
<S>                                <C>                  <C>                  <C>
Dr. Fan Di                         Chairman             Apr 2003                *

Thomas J. KENAN                    Director             Mar 1997                *

Kurt W. Krause                     Director             Apr 1997                *

Professor Li Chang                 Director             Aug 2000                *

Zhu Xiaojun                        Director             Apr 2003                *

Kwok Yam Sheung                    Director             Apr 2003                *

Dr. Robert Fung Hing Piu           Director             Apr 2003                *

Dr. Godwin Wong                    Director             Apr 2003                *
</TABLE>

* Until the next annual general meeting

(1)      A director is subject to earlier removal, with or without cause, by the
         shareholders and with cause by the other directors. Officers are
         subject to earlier removal, with or without cause, by the directors.


EXECUTIVE DIRECTORS

Dr. FAN Di

         Dr. Fan is currently the Chairman and Chief Executive Officer of China
Merchants DiChain (Asia) Limited, a company listed on the Stock Exchange of Hong
Kong, Limited. Dr. Fan is responsible for overseeing the strategic development
of DF China Technology Inc. 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, U.S.A.

Dr. Robert FUNG Hing Piu

         Dr. Fung is a non-executive director of China Merchants DiChain (Asia)
Limited, a company listed on the Stock Exchange of Hong Kong, Limited. Dr. Fung
holds degrees from Harvard University in the United States and McGill University
in Canada. He is the founding chairman of Hong Kong Committee of UNICEF and a
member of the Rotary Club of Hong

                                       23
<PAGE>

Kong.

Mr. Aaron ZHU Xiaojun

         Mr. Zhu 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. LI Chang

         Professor Li is a founder and the CEO of Tianjin 3D Lad and Tianjin 3D
Image Technique Co., Ltd. He has been involved in research and development of 3D
imaging technology for over 18 years. He holds 52 patents and has received
numerous international awards for his inventions. He is the Director of Ph.D.
Post Graduate Studies at the Civil Aviation University of China, Vice Chairman
of National Inventors Association and National Specialist of Engineering and
Technology. In 1998, he received inventor's Gold Medal from the Chief Executive
of Hong Kong Special Administrative Region.

Mr. KWOK Yam Sheung

         Mr. Kwok is the Company Secretary of China Merchants DiChain (Asia)
Limited, a company listed on the Stock Exchange of Hong Kong Limited. He is a
fellow member of the Institute of Chartered Secretaries and Administrators in
the United Kingdom and a fellow member of the Hong Kong Institute of Company
Secretaries. He has worked for a number of public listed companies as company
secretaries and also has extensive experience in the property industry.

NON-EXECUTIVE DIRECTORS

THOMAS J. KENAN.

         Mr. Kenan has 39 years experience as a practicing attorney in the
United States, primarily in securities, corporation, and business reorganization
law. He holds a master's of comparative laws degree from New York University.

KURT W. KRAUSE.

         Mr. Krause is a founder and the president of Beverage Marketing
Company, Inc., a US-based company specializing in the food and beverage
industry. He has more than 30 years of experience in the industry, having been
national sales manager of Pabst Brewing Company and a

                                       24
<PAGE>
consultant to leading German breweries and American and Canadian spring water
companies. He holds a BA degree from the University of Nebraska.

DR. GODWIN WONG.

         Professor Wong has been on the faculty of the Haas School of Business
at the University of California, Berkeley for the past seventeen years. He
performs research and teaches doctoral, master's and baccalaureate programs and
executive training courses in the areas of Entrepreneurship, Information
Technology Management (IT/MIS), Strategic Planning, International Business
Negotiation, and Multicultural Management. He has been a management consultant
and specialist/strategist to various organizations including banks,
corporations, government agencies, other consulting firms and private business
enterprises. He has assisted multinational companies in the conduct and
negotiation of businesses with China and Asia, especially in mergers and
acquisitions. He has been involved in the turnaround and the purchase and sale
of troubled financial institutions. He has also served on the boards of
directors of several California banks and several high tech ventures in Silicon
Valley. He has headed his own management companies in real estate, consulting,
trading, and investment management. Dr. Wong obtained his Bachelor's degree from
the University of Wisconsin, his Master's degree from U.C.L.A., and Master's and
Doctorate from Harvard University.

COMPENSATION

         The directors and officers of our company received from it and its
subsidiaries an aggregate of HK$614,249 in compensation in the last fiscal year
for their services in all capacities. There are no present plans, arrangements,
or understandings concerning any change in compensation for them. Our company
has no pension, retirement or similar benefits for directors and officers
pursuant to a plan contributed to by our company.

BOARD PRACTICES

         We have an executive committee, audit committee and a compensation
committee. The members of each are set forth below:

         Executive Committee: Messrs. Fan Di, Aaron Zhu Xiaojun and Kwok Yam
Sheung who are executive board members.

         Audit Committee: Messrs. Thomas Kenan, Kurt Krause and Godwin Wong.
Messrs. Kenan, Krause and Wong are independent board members.

         Compensation Committee: Dr. Godwin Wong and Dr. Fan Di.

         The Executive Committee meets as and when necessary and the other two
committees each meet once annually.

                                       25
<PAGE>

         The Executive Committee is authorized during any interim period between
meetings of the full Board of Directors, to act for and in lieu of the full
Board of Directors and to approve of any transaction requiring Board approval.

         The Audit Committee selects and engages, on our behalf, the independent
public accountants to audit our annual financial statements, and will review and
approve the planned scope of our annual audit. In addition, the Audit Committee
will have to review the terms of proposed transactions with related parties in
accordance with the terms of our Articles of Association. The Audit Committee
operates compliant with the rules and regulations of the Nasdaq National Market.

         The Compensation Committee establishes remuneration levels for our
officers, performs such functions as provided under employee benefit programs
and administers the 2002 Stock Option Plan.

EMPLOYEES

         We employed 62 persons on March 31, 2001, 59 persons on March 31, 2002
and 60 persons on March 31, 2003. We have no relationships with labor unions. We
employ no significant number of temporary employees.

SHARE OWNERSHIP

         The following tables set forth, with regard to our directors and senior
management, the number of shares of common stock in the company each owns
directly or beneficially as of September 30, 2003, the percentage of the shares
outstanding such ownerships represent, and any options granted to them on the
company's shares:

<TABLE>
<CAPTION>
         Name                                                                                Percentage of
        Shares                             Position                  No. of Shares            Outstanding
        ------                             --------                  -------------           -------------
<S>                                 <C>                              <C>                     <C>
Dr. Fan Di                          Chairman &                                 0                     0
                                    Chief Executive Officer

Aaron Zhu Xiaojun                   Executive Director                         0                     0

Kwok Yam Sheung                     Executive Director                         0                     0

Prof. LI Chang                      Executive director                 1,269,400                  5.12%

Thomas J KENAN                      Non-executive director                 1,103*                    *

Kurt W. KRAUSE                      Non-Executive director                     0                     0

Dr. Robert Fung Hing Piu            Executive Director                         0                     0

Dr. Godwin Wong                     Non-Executive director                     0                     0
</TABLE>

                                       26
<PAGE>

*    Less than one percent

OPTIONS TO PURCHASE SHARES OF COMMON STOCK GRANTED AND HELD BY DIRECTORS AND
SENIOR MANAGEMENT (1)

<TABLE>
<CAPTION>
                                         No. of              Exercise
        Name                          Options Held            Price                 Expiration Date
        ----                          ------------            -----                 ---------------
<S>                                   <C>                    <C>                    <C>
Dr. Fan Di                                    0                     -                            -

Aaron Zhu Xiaojun                             0                     -                            -

Kwok Yam Sheung                               0                     -                            -

Prof. LI Chang                                0                     -                            -

Thomas J KENAN                           50,000              US$0.286                 May 16, 2012

Kurt W. KRAUSE                           30,000              US$0.286                 May 16, 2012

Dr. Robert Fung Hing Piu                      0                     -                            -

Dr. Godwin Wong                          30,000               US$0.23                July 17, 2013
</TABLE>

Note (1). At the annual meeting held on July 18, 2003, a new option scheme
namely 2002 Stock Option Plan which will expire in July 2013 was approved and
adopted to replace the former scheme which expired in April 2003.

     -   On May 17, 2002, the Board granted options pursuant to the 2002 Stock
         Option Plan, amounting to 542,000 shares at US$0.286 per share to
         directors, management and staff. 270,000 shares of these options have
         been issued and the rest were not yet been issued and have not vested.

     -   On June 11, 2003, options amounting to 1,710,000 shares were granted
         and issued at US$0.23 per share pursuant to the 2002 Stock Option Plan,
         to certain directors and staff members and 1,680,000 shares were
         exercised on 1 August 2003, and accordingly these shares were issued.

     -   On August 28 and 29, 2003, Dr. Fan Di, Mr. Aaron Zhu and Mr. Kwok Yam
         Sheung, directors of the Company, sold all their shareholdings to non
         US persons who are not related to the Company, its directors or
         affiliates.

     -   On September 30, 2003, employees and ex-employees of the Company
         exercised share options amounting to 45,000 shares.

                                       27
<PAGE>

ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

         To the extent that the following information is known to the company or
can be ascertained from public filings, the following sets forth information as
of September 30, 2003 with regard to the company's major shareholders - that is,
persons that are the beneficial owners of five percent or more of our common
stock:

<TABLE>
<CAPTION>
                                                No. of                Percentage of
         Name                                   Shares             Outstanding Shares
         ----                                   ------             ------------------
<S>                                            <C>                 <C>
China Merchant Dichain (Asia) Limited          5,204,838                 20.86%

Grandom Asia Trading Limited                   2,582,458                 10.04%

Li Chang                                       1,269,400                  5.12%
</TABLE>

         During the last three years, the following significant percentage
changes in shares held by major shareholders occurred:

         At March 31, 1999, Dransfield Holdings Limited, a Cayman Islands
company listed on the Hong Kong Stock Exchange Limited, since August 26, 2002
has become a wholly owned subsidiary of China Merchant Dichain (Asia) Limited,
which is now listed on the Hong Kong Stock Exchange Limited, held an effective
shareholding of 95.8%. During the year ended March 31, 2000, Dransfield Holdings
Limited, through a distribution in specie of DF China Technology ("DFCT")
shares, reduced its shareholding to 78.4%. In June 2000, through a second
distribution in specie of DFCT shares, its shareholding in DFCT were reduced to
32.2%. A subsequent sale of new shares by DFCT in September 2000 diluted
Dransfield Holdings Limited's effective interest in DFCT to approximately 29.7%.
In late 2001, Dransfield Holdings Limited sold a further 9.9% interest in DFCT
to a party in Tianjin, China introduced by Mr. Li Chang, a director of the
Company, and reduced its shareholding to approximately 19.7%. Dransfield
Holdings Limited is now a 100% controlled subsidiary of China Merchant Dichain
(Asia) Limited, which has announced that it shall focus its core business in
logistics and will seek to divest its non-core businesses. During the year,
Dransfield Holdings Limited had disposed of some of its shareholdings in the
company and acquired additional shares by conversion of debts of the company
owing to Dransfield. It owned 5,204,838 shares at September 30, 2003.

         During the fiscal year 2002, DHL became the wholly-owned subsidiary of
China Merchants Dichain (Asia) Limited ("CMDA"), which replaced DHL to list on
the main board of The Stock Exchange of Hong Kong Limited.

         Grandom Asia Trading Limited was a substantial shareholder of
Dransfield Holdings Limited as above described. It received approximately
2,58,458 shares in DFCT through the two distributions in species by Dransfield
Holdings Limited as above described as of March 31, 2001. There was no movement
of its shareholdings during the year ended March 31, 2003, and at September 30,
2003 its shareholdings represents approximately 10.04% of the issued shares of
the company.

         Mr. Li Chang's shareholdings at September 30, 2003 was 1,269,400
shares, which is approximately 4.12 % of the outstanding issued share capital of
the Company. Mr. Li was the founder and principal controlling shareholder of
Tianjin 3D Image Technique Company Limited (TJ3D). On August 8, 2000, we entered
into an agreement with Mr. Li Chang to acquire

                                       28
<PAGE>
approximately a 26% equity interest in TJ3D at a consideration of 1,560,000
shares of our common stock. These shares were subsequently issued to Mr. Li
Chang and an associate. Mr. Li has held the shares issued to him in his name as
above described.

         The major shareholders have no different voting rights than other
shareholders.

         Of the 24,946,024 outstanding shares of Common Stock at September 30,
2003, 14,485,800 shares are held in 40 States of the United States by
approximately 1,017 record holders and 10,311,005 shares are held in Hong Kong
by approximately 410 shareholders, one of whom, Dransfield Holdings Limited, a
Bermuda corporation and now a subsidiary of China Merchant Dichain (Asia)
Limited ("CMDA"). CMDA is a Bermuda company incorporated in March 2002. Pursuant
to a Scheme of Arrangement, Dransfield Holdings Limited became the wholly-owned
subsidiary of CMDA. As a result , the listing status of Dransfield Holdings
Limited with the Stock Exchange of Hong Kong was withdrawn on 26 August 2002 and
the entire issued shares of CMDA were listed on the Stock Exchange of Hong Kong
on 28 August 2002.

         The company is not directly or indirectly owned or controlled by
another corporation, by any foreign government or by any other natural or legal
person, other than as set forth in the table above with regard to the
shareholdings of major shareholders.

         There are no known arrangements, known to the company, the operation of
which may at a subsequent date result in a change of control of the company.

         RELATED PARTY TRANSACTIONS

         The major related party transactions are described in further detail
below. Management believes that the methods used in allocating costs are
reasonable.

<TABLE>
<CAPTION>
                                                                YEAR ENDED MARCH 31,
                                               --------------------------------------------------------
                                                  2001            2002          2003           2003
                                               -----------     -----------   ------------   -----------
                                                 HK$'000        HK$'000       HK$'000        US$'000
<S>                                            <C>             <C>           <C>            <C>
Storage and delivery charges (Note (a))            401            362           726             93
</TABLE>

     Notes:

     (a)    Storage, delivery charges and management fee

            Storage, delivery services are provided to the Group by Dransfield
      Services Limited which is a subsidiary of DHL. According to the
      management, these transactions were carried out at the terms determined
      and agreed by the relevant parties.

ITEM 8. FINANCIAL INFORMATION

         The information required by this section is included in "Item 18.
Financial Statements" in

                                       29
<PAGE>

this annual report.

         We are involved in certain litigation and are exposed to some
unasserted claims. For a discussion of these matters, see "Item 18. Financial
Statements - Notes to Financial Statements - Note 12 - Commitments and
Contingencies - Contingencies - Pending Litigation, Unasserted Claims and Other
Legal Matters."

ITEM 9. THE OFFER AND LISTING

         The following sets forth information regarding the market price history
of our common stock during the last five financial years.

<TABLE>
<CAPTION>
Financial Year             High               Low
-------------------------------------------------
<S>                       <C>                <C>
1999                      $ 2.875            $0.03
2000                      $12.000            $0.44
2001                      $ 4.375            $0.34
2002                      $ 0.625            $0.14
2003                      $   0.4            $0.08
</TABLE>

         The following sets forth information regarding the quarterly market
price history of our common stock during the last two financial years.

<TABLE>
<CAPTION>
Calendar Quarter            High             Low
--------------------------------------------------
<S>                       <C>              <C>
2001, 2nd Quarter         $ 0.6250         $0.2600
2001, 3rd Quarter         $ 0.3600         $0.1400
2001, 4th Quarter         $ 0.4100         $0.1500
2002, 1st Quarter         $ 0.2800         $0.1800
2002, 2nd Quarter         $ 0.3400         $0.2000
2002, 3rd Quarter         $   0.27         $  0.12
2002, 4th Quarter         $    0.4         $  0.09
2003, 1st Quarter         $   0.29         $  0.08
2003, 2nd Quarter         $   2.04         $  0.13
2003, 3rd Quarter         $   2.29         $   0.6
</TABLE>

The following sets forth information regarding the monthly market price history
of our common stock during the most recent six months.

<TABLE>
<CAPTION>
Month                    High               Low
------------------------------------------------
<S>                     <C>                <C>
2003:
  April                 $ 0.28             $ 0.15
  May                   $ 0.48             $ 0.13
  June                  $ 2.04             $ 0.23
  July                  $ 2.29             $  0.6
</TABLE>

                                       30
<PAGE>

<TABLE>
<S>                     <C>              <C>
August                  $1.28            $0.68
September               $1.26            $ 0.7
</TABLE>

         MARKETS

         All of the above market price information is given with respect to the
market price in the United States. The stock does not trade in Hong Kong or
elsewhere on any organized market. Our common stock is listed on the Nasdaq
Small Cap Stock Market.

ITEM 10. MEMORANDUM AND ARTICLES OF ASSOCIATION

         Our registry number in the Territory of the British Virgin Islands is
No. 189457. Our objects and purposes are set forth in paragraph 4 of our
Memorandum of Association and are stated to be "to engage in any act or activity
that is not prohibited under any law for the time being in force in the British
Virgin Islands."

         There are no provisions in our bylaws (our Articles of Association)
that limit a director's power to vote on a matter in which he is materially
interested, to vote compensation to himself or any other director n the absence
of an independent quorum, or to vote on matters regarding borrowings by the
company. There are no retirement age requirements, and there are no shareholding
requirements to qualify as a director.

         The rights, preferences and restrictions on each class of authorized
stock are described in the company's amendment No. 2 to Form F-1 earlier filed
with the Commission (Commission File No. 333-11641) and are incorporated herein
by reference to such Form F-1.

         In order to change the rights of holders of any class of stock, the
Memorandum of Association must be amended by a majority vote of the stock
holders and of the holders of any class of stock whose rights are changed;
provided, however, that a two-thirds vote is required of the holders of our
Series A Convertible Preferred Stock to change any of their rights. There are no
shares outstanding of our Series A Convertible Preferred Stock.

         Annual or special meetings of the shareholders are called by the
directors at any time or place of their choosing and must be called upon the
written request of shareholders holding ten percent or more of the outstanding
shares of the company. At least seven days notice of a shareholders meeting must
be given. A shareholder may be represented at a meeting by a proxy who may speak
and vote on behalf of the shareholder.

         There are no limitations on the rights to own securities in the company
or the rights of non-residents or foreign shareholders to hold or exercise
voting rights on the securities imposed by foreign law or constituent documents
of the company.

         There are no provisions in our charter or bylaws that would have an
effect on delaying, deferring or preventing a change in control of the company
and that would operate only with respect to a merger, acquisition or corporate
restructuring involving the company or any of its subsidiaries.

                                       31

<PAGE>

         There are no by-law provisions governing an ownership threshold above
which shareholder ownership must be disclosed.

         With regard to the foregoing matters, the law in the British Virgin
Islands is not significantly different than that in the United States.

         There are no conditions in our memorandum and articles of association
governing changes in our capital that are more stringent than is required by
law.

         Set forth below is a summary of each material contract, other than
contracts entered into in the ordinary course of business, to which our company
or any of our subsidiaries is a party, for the two years commencing October 15,
2000, including dates, parties, general nature of the contracts, terms and
conditions, and amount of consideration passing to or from the company or a
subsidiary.

         None

         EXCHANGE CONTROLS

         Our business is conducted in and from Hong Kong and the People's
Republic of China ("the PRC") in Hong Kong dollars and the PRC Renminbi.
Periodic reports made to U.S. shareholders are expressed in U.S. dollars using
the then-current exchange rates.

         The PRC Government imposes foreign currency control in part through
direct regulation of the conversion of Renminbi into foreign exchange and
through foreign trade restrictions. The conversion of the Renminbi into U.S.
dollars must be based on the People's Bank of China ("PBOC") Rate. The PBOC Rate
is set based on the previous day's PRC interbank foreign exchange market rate
and with reference to current exchange rates on the world financial markets. In
line with the unification of the two exchange rates, the Renminbi was revalued
at HK$1.00=RMB1.12 and US$1.00=RMB8.70 on January 3, 1994. Since revaluation,
the exchange rate has fluctuated between a range of US$1.00 = RMB8.30 and
US$1.00 = RMB8.70.

         The Hong Kong dollar is freely convertible into the U.S. dollar. Since
October 17, 1983, the Hong Kong dollar has been linked to the U.S. dollar at
HK$7.80 to US$1.00. The central element in the arrangements for the link is an
agreement between the Hong Kong government and the three Hong Kong banknote
issuing banks, HSBC, Standard Chartered Bank and the Bank of China. Under the
agreement, certificates of indebtedness, which are issued by the Hong Kong
Government Exchange Fund to the banknote issuing bank to be held as cover for
their banknote issues, are issued and redeemed only against payment in U.S.
dollars, at the fixed exchange rate of US$1.00 = HK$7.80. When the bank notes
are withdrawn from circulation, the banknote issuing banks surrender the
certificates of indebtedness to the Hong Kong Government Exchange Fund and are
paid the equivalent of U.S. dollars at the fixed rate. Exchange rates between
the Hong Kong dollar and other currencies are influenced by the linked rate
between the U.S. dollar and the Hong Kong dollar.

                                       32

<PAGE>

         The market exchange rate of the Hong Kong dollar against the U.S.
dollar continues to be determined by the forces of supply and demand in the
foreign exchange market. However, against the background of the fixed rate
system which applies to the issue of Hong Kong currency in the form of bank
notes, as described above, the market exchange rate has not deviated
significantly from HK$7.80 to US$1.00. See "Selected Financial Data" below. The
Hong Kong government has stated its intention to maintain the link at that rate.
The Hong Kong government has stated that is has no intention of imposing
exchange controls in Hong Kong and that the Hong Kong dollar will remain freely
convertible into other currencies (including the U.S. dollar). The PRC and the
United Kingdom agreed in 1984 pursuant to the Joint Declaration of the
Government of the United Kingdom of Great Britain and Northern Ireland and the
Government of the People's Republic of China on the Question of Hong Kong ("the
Joint Declaration") that, after Hong Kong became a special administrative region
of the PRC (the "SAR") on July 1, 1997, the Hong Kong dollar will continue to
circulate and remain freely convertible. However, no assurance can be given that
the SAR government will maintain the link at HK$7.80 to US$1.00, if at all.

         TAXATION

         There are no British Virgin Islands ("BVI") governmental laws, decrees
or regulations affecting the remittance of dividends or other payments to
nonresident holders of our company's securities. U.S. holders of our securities
are subject to no taxes or withholding provisions under existing BVI laws and
regulations. By reason of the fact that we conduct no business within the BVI,
there are no applicable reciprocal tax treaties between the BVI and the U.S.
that would affect the preceding statement that there are no BVI taxes, including
withholding provisions, to which U.S. security holders are subject under
existing laws and regulations of the BVI.

         DOCUMENTS ON DISPLAY

         The constituent documents concerning our company may be inspected in
the offices of our U.S. agent for service of process, Thomas J. Kenan, 210
Robert S. Kerr Ave., Suite 1000, Oklahoma City, Oklahoma 73102 or in our Hong
Kong offices at the address on the cover of this report.

ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

         We do not deal in market risk sensitive instruments such as derivative
financial instruments such as futures, forwards, swaps, and options, and
derivative commodity instruments.

         The only market risk we are exposed to is foreign currency risk. We
trade in Renminbi, U.S. dollars and Hong Kong dollars. Both Renminbi and Hong
Kong dollars are effectively pegged to the U.S. dollar at, respectively,
approximately 8.32 and HK$7.8 to US$1. The table and narrative below describe
how we intend to manage foreign currency risk.

         Chinese paper mills that import a substantial portion of raw materials,
notably wood fiber, are subject to foreign exchange risk in the event of a
decline in the Renminbi versus the U.S. dollar. Because wood fiber is traded on
the world market in U.S. dollars, a devaluation of the local currency would
raise costs, which would normally be passed on to customers. We will

                                       33

<PAGE>

set prices in U.S. dollar equivalents for our market-recycled pulp, thereby
protecting our revenues against exchange rate fluctuations. Export sales will
further help us manage foreign currency risk by matching foreign currency
expenses with foreign currency revenues. To that end, our experienced marketing
staff will focus on extending our sales efforts in neighboring Southeast Asian
countries.

         There is no ready market in the PRC for our company to enter into
forward exchange rate swaps or other instruments designed to mitigate foreign
currency risks. However, by establishing prices in U.S. dollar equivalents, by
building export sales, and by reducing the amount of raw material costs we pay
in U.S. dollars relative to our competitors, we will be protecting ourselves
against foreign currency risk, thereby improving our competitiveness and
margins.

ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES.

         Not applicable.

                                    PART TWO

ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES

         There has been no material payment default of principal, interest, a
sinking or purchase fund installment, or any other material default not cured
within 30 days, with respect to any indebtedness of the company or any of its
significant subsidiaries exceeding five percent of the total assets of the
company and its consolidated subsidiaries.

ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF
PROCEEDS.

         Not applicable.

ITEM 15. CONTROLS AND PROCEDURES

         Within the 90-day period prior to the filing of this report, an
evaluation of the effectiveness of our disclosure controls and procedures was
carried out under the supervision and with the participation of our management,
including our Chief Executive Officer, or CEO, and our Chief Financial Officer,
or CFO.

         Based on that evaluation, our CEO and CFO concluded that we maintain
disclosure controls and procedures that are effective in providing reasonable
assurance that information required to be disclosed in our reports under the
Securities Exchange Act of 1934 is recorded, processed, summarized and reported
within the time periods specified in the Commission's rules and forms, and that
such information is accumulated and communicated to our management, including
our CEO and its CFO, as appropriate, to allow timely decisions regarding
required disclosure. Our management necessarily applied its judgment in
assessing the costs and benefits

                                       34

<PAGE>

of such control and procedures, which, by their nature, can provide only
reasonable assurance regarding management's control objectives. There have been
no significant changes in our internal controls or in other factors that could
significantly affect these controls subsequent to the evaluation date.

ITEM 16.

RESERVED

ITEM 17. FINANCIAL STATEMENTS

         The information required by this section is included in Item 18 of this
annual report.

ITEM 18. FINANCIAL STATEMENTS

                                       35

<PAGE>

                         REPORT OF INDEPENDENT AUDITORS

To the Stockholders and Board of Directors of
DF China Technology Inc.
(Incorporated in the British Virgin Islands with limited liability)

         We have audited the accompanying consolidated balance sheets of DF
China Technology Inc. and subsidiaries (hereinafter referred to as the "Group")
as of March 31, 2002 and 2003 and the related consolidated statements of
operations, cash flows and stockholders' equity for each of the two years then
ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

         We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

         In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
the Group as of March 31, 2002 and 2003, and the consolidated results of its
operations and cash flows for each of the two years in the period ended March
31, 2003, in conformity with accounting principles generally accepted in the
United States.

         The accompanying financial statements have been prepared assuming the
Group will continue as a going concern. As more fully described in Note 1 to the
financial statements, the Group has incurred an operating loss for the year and
cumulative losses from inception and has a working capital deficiency. These
conditions raise substantial doubt about the Group's ability to continue as a
going concern. The financial statements do not include any adjustments to
reflect the possible future effects on the recoverability and classification of
assets or on the amounts and classification of liabilities that may result from
the outcome of this uncertainty.

/s/ BDO McCabe Lo & Co

BDO MCCABE LO & CO
Certified Public Accountants

Hong Kong, October 15, 2003

                                       36

<PAGE>

                  REPORT OF ERNST & YOUNG, INDEPENDENT AUDITORS

To the Stockholders and Board of Directors of
DF China Technology Inc.
(Incorporated in the British Virgin Islands with limited liability)

         We have audited the accompanying consolidated balance sheet of DF China
Technology Inc. and subsidiaries (hereinafter referred to as the "Group") as of
March 31, 2001 and, the related statements of operations, cash flows and changes
in stockholders' equity each of the two years in the period ended March 31,
2001. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

         We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

         In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
the Group as of March 31, 2001 and the consolidated results of operations, its
cash flows for each of the two years in the period ended March 31, 2001, in
conformity with accounting principles generally accepted in the United States of
America.

         The accompanying financial statements have been prepared assuming the
Group will continue as a going concern. As more fully described in Note 1 to the
financial statements, the Group has incurred recurring operating losses and has
a working capital deficiency. These conditions raise substantial doubt about the
Group's ability to continue as a going concern. Management's plans in regard to
these matters are described in Note 1. The financial statements do not include
any adjustments to reflect the possible future effects on the recoverability and
classification of assets or on the amounts and classification of liabilities
that may result from the outcome of this uncertainty.

/s/ Ernst & Young

ERNST & YOUNG
Certified Public Accountants

Hong Kong, September 5, 2001

                                       37

<PAGE>

                    DF CHINA TECHNOLOGY INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS

               (Amounts in thousands, unless otherwise stated and
                   except number of shares and per share data)

<TABLE>
<CAPTION>
                                                                                             MARCH 31,
                                                                                ---------------------------------------
                                                                                  2002             2003          2003
                                                                                --------         -------        -------
                                                                                  HK$              HK$            US$
<S>                                                                             <C>              <C>            <C>
ASSETS

Current assets
    Cash and cash equivalents                                                        116              56              8
    Accounts receivable, net of allowance for
       doubtful debts of HK$645 in 2002 and HK$693 in 2003 (Note 6)                  893             785            101
    Inventories, net (Note 7)                                                        398             174             22
    Prepayments and other receivables                                                280             121             16
    Tax recoverable                                                                    9               9              1
                                                                                --------         -------        -------
Total current assets                                                               1,696           1,145            148
Property, plant and equipment, net (Note 8)                                      133,549          33,747          4,326
Interest in an affiliate (Note 9)                                                      1               1              1
                                                                                --------         -------        -------
Total assets                                                                     135,246          34,893          4,475
                                                                                ========         =======        =======

LIABILITIES AND OWNER'S EQUITY

Current liabilities
    Accounts payable                                                               1,110             972            124
    Accrued liabilities                                                            3,467           4,563            583
    Construction payable                                                           3,183           2,816            362
    Accrued rental payable                                                           199             199             25
    Due to affiliates (Note 11)                                                    5,745           6,475            830
                                                                                --------         -------        -------
Total current liabilities                                                         13,704          15,025          1,924
                                                                                --------         -------        -------
Commitments and contingencies (Note 12)

Stockholders' equity
    Common stock, no par value,
       40,000,000 shares authorized;
       19,915,292 issued (2002: 19,915,292)                                      241,920         241,920         31,019
Contributed surplus                                                                4,677           4,677            600
Accumulated deficit                                                             (125,055)       (226,729)       (29,068)
                                                                                --------         -------        -------
                                                                                 121,542          19,868          2,551
                                                                                --------         -------        -------
Total liabilities and stockholders' equity                                       135,246          34,893          4,475
                                                                                ========         =======        =======
</TABLE>

       See accompanying notes to these consolidated financial statements.

                                       38

<PAGE>

                    DF CHINA TECHNOLOGY INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS

       (Amounts in thousands, except number of shares and per share data)

<TABLE>
<CAPTION>
                                                                                  YEARS ENDED MARCH, 31
                                                                  ----------------------------------------------------
                                                                   2001             2002          2003           2003
                                                                  -------         -------       -------        -------
                                                                    HK$             HK$           HK$            US$
<S>                                                               <C>              <C>           <C>              <C>
Net sales
    Paper merchanting                                               1,849           1,165           142             18
    Paper manufacturing                                             7,494           5,433         5,346            685
                                                                  -------         -------       -------        -------
                                                                    9,343           6,598         5,488            703

Cost of sales
    Paper merchanting                                              (1,801)         (1,083)         (114)           (14)
    Paper manufacturing                                           (10,329)         (4,355)       (4,025)          (516)
                                                                  -------         -------       -------        -------
                                                                  (12,130)         (5,438)       (4,139)          (530)
                                                                  -------         -------       -------        -------

Gross profit (loss)                                                (2,787)          1,160         1,349            173

Selling general and administrative expenses (Note 3)
- third parties                                                   (13,840)         (6,439)       (4,483)          (574)
- related parties (Note 13)                                          (401)           (362)         (726)           (93)
                                                                  -------         -------       -------        -------
                                                                  (14,241)         (6,801)       (5,209)          (667)

Other income, net                                                     100             166            26              3
Foreign exchange losses, net                                          (56)              -             -              -
Provision for doubtful debts                                         (585)            (60)          (48)            (6)
Bad debt expenses directly written off                               (342)              -             -              -
Equity in loss of an affiliate (Note 9)                            (8,341)         (4,594)            -              -
Impairment losses of property, plant and
  equipment (Note 10)                                             (61,990)         (7,939)      (97,792)       (12,537)
                                                                  -------         -------       -------        -------

                                                                  (71,214)        (12,427)      (97,814)       (12,540)
                                                                  -------         -------       -------        -------

Net loss                                                          (88,242)        (18,068)     (101,674)       (13,034)
                                                                  =======         =======      ========        =======

Basic and diluted net loss per share                                (4.57)          (0.91)        (5.11)         (0.65)
                                                                  =======         =======      ========        =======
</TABLE>

       See accompanying notes to these consolidated financial statements.

                                       39

<PAGE>

                    DF CHINA TECHNOLOGY INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS

       (Amounts in thousands, except number of shares and per share data)

<TABLE>
<CAPTION>
                                                                                   YEAR ENDED MARCH, 31
                                                                  -----------------------------------------------------
                                                                    2001           2002          2003            2003
                                                                  -------         -------      --------         -------
                                                                    HK$             HK$          HK$              US$
<S>                                                               <C>             <C>          <C>              <C>
Cash flows from operating activities
  Net loss                                                        (88,242)        (18,068)     (101,674)        (13,034)
 Adjustments to reconcile income to net cash provided by
  operating activities
    Equity in loss of an affiliate                                  8,341           4,594             -               -
    Depreciation                                                    2,473           1,588         1,987             255
    Impairment losses of property, plant and equipment             61,990           7,939        97,792          12,537
    Loss on disposal of property, plant and equipment                   -               -            26               3
    Stock option compensation expenses                                400               -             -               -
    Provision for doubtful debts (doubtful debts written
      back)                                                           585              60            48               6
    Provision (written back) for inventory obsolescence               173              (3)            -               -
 Changes in working capital
    Accounts receivable                                            (1,007)           (490)           60               7
    Inventories                                                       800             779           224              29
    Prepayments and other receivables                                 644             413           159              20
    Tax recoverable                                                  (108)            191             -               -
    Accounts payable                                                  793             252          (138)            (17)
    Accrued liabilities                                               828           1,348         1,086             139
    Construction payable                                                -             604          (357)            (46)
    Accrued rental payable                                            636            (437)            -               -
                                                                  -------         -------      --------         -------
Net cash used by operating activities                             (11,694)         (1,230)         (787)           (101)
                                                                  -------         -------      --------         -------
Cash flows from investing activities
    Acquisition of property, plant and equipment                   (3,716)           (105)           (3)             (1)
    Payment of deposit for purchase of property, plant
      and equipment                                                     -               -             -               -
    Proceeds from disposal of property, plant and
      equipment                                                     1,709             361             -               -
                                                                  -------         -------      --------         -------
Net cash provided (used) by investing activities                   (2,007)            256            (3)             (1)
                                                                  -------         -------      --------         -------

Cash flows from financing activities
    New issue of common stock                                       3,501               -             -               -
    Due to affiliate                                                4,943             802           730              94
    Proceeds from subscription receivable                           3,835               -             -               -
                                                                  -------         -------      --------         -------
Net cash provided in financing activities                          12,279             802           730              94
                                                                  -------         -------      --------         -------

Net decrease in cash and cash equivalents                          (1,422)           (172)          (60)             (8)
Cash and cash equivalents, at beginning of year                     1,710             288           116              16
                                                                  -------         -------      --------         -------
Cash and cash equivalents, at end of year                             288             116            56               8
                                                                  =======         =======      ========         =======
</TABLE>

       See accompanying notes to these consolidated financial statements.

                                       40
<PAGE>

                    DF CHINA TECHNOLOGY INC. AND SUBSIDIARIES
           CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

       (Amounts in thousands, except number of shares and per share data)

<TABLE>
<CAPTION>
                                                                        UNPAID
                                                        COMMON       SUBSCRIPTION      CONTRIBUTED       ACCUMULATED
                                                         STOCK        RECEIVABLE         SURPLUS           DEFICIT
                                                      ------------  ----------------  --------------   ----------------
                                                          HK$             HK$              HK$               HK$
<S>                                                   <C>           <C>               <C>              <C>
Balance at March 31, 2000                                225,001          (3,835)            4,277            (18,745)

New issue of 180,000 shares of common stock at
  US$2.5 each to third party                               3,501               -                 -                  -

New issue of 1,560,000 shares of common stock at
  US$1.063 each for acquisition of equity
  interests in an affiliate                               12,936               -                 -                  -

New issue of 11,211 shares of common stock at
  US$5.5 each for construction costs incurred                482               -                 -                  -

Stock compensation expenses
  (Note 19)                                                    -               -               400                  -

Net loss                                                       -               -                 -            (88,242)

Settlement through current account with
  shareholder                                                  -           3,835                 -                  -

                                                      ----------    ------------      ------------     --------------
Balance at March 31, 2001                                241,920              -             4,677           (106,987)
                                                      ----------    ------------      ------------     --------------

Net loss                                                       -              -                  -            (18,068)
                                                      ----------    ------------      ------------     --------------

Balance at March 31, 2002                                241,920              -              4,677           (125,055)

Net loss                                                       -              -                  -           (101,674)
                                                      ----------    ------------      ------------     --------------

Balance at March 31, 2003                                241,920                             4,677           (226,729)
                                                      ==========    ============      ============     ==============
</TABLE>

       See accompanying notes to these consolidated financial statements.

                                       41

<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except number of shares and per share data)

NOTE 1 - ORGANIZATION AND BASIS OF PRESENTATION

         ORGANIZATION

         DF China Technology Inc., (the "Company") was incorporated in the
British Virgin Islands on June 24, 1996. Prior to June 30, 2000, Dransfield
Holdings Limited ("DHL"), a company incorporated in the Cayman Islands and the
shares of which are listed for trading on the main board of The Stock Exchange
of Hong Kong Limited, was the holding company of the Group. On June 30, 2000,
8,325,700 shares of the Company were distributed in specie by DHL to its
stockholders. During fiscal year 2002, DHL sold 1,973,600 shares which reduced
its equity interest in the Company from 29.67% to 19.76%. On June 11, 2003, DHL
increased its equity interest to 30.87% by converting of the debts owed to them
to 3,201,513 shares. Subsequent to the year-end, DHL reduced its equity interest
to 20.86% by disposing of 1,932,075 shares to the public.

         During the fiscal year 2002, DHL became the wholly-owned subsidiary of
China Merchants Dichain (Asia) Limited ("CMDA"), which replaced DHL to list on
the main board of The Stock Exchange of Hong Kong Limited.

         The Company and its subsidiaries (hereinafter referred to as the
"Group") are principally engaged in two industry segments of paper merchanting
and paper manufacturing. Paper merchanting is being operated in Hong Kong, Macau
and other parts of the People's Republic of China ("PRC"). The manufacturing of
hygienic paper is being operated in the PRC. Intercompany balances and
transactions have been eliminated on consolidation.

         Going Concern Risk Factors

         The Group incurred a net loss of HK$101,674 (US$13,034) for the year
ended March 31, 2003, incurred cumulative losses from inception to March 31,
2003, aggregating HK$226,729 (US$29,068), reported negative cash flows from
operations for the year ended March 31, 2003, of HK$787 (US$101) and had a
deficiency in working capital of HK$13,880 (US$1,776) as at that date.

         Over the past few years, the former management of the Group was looking
for different ways to complete the paper mills in Jiangsu and Xinhui, the PRC
and to focus their efforts on improving operating margins at the converting
operation in Conghua, the PRC. However, faced with inadequate funds, the Group
was unable to complete the two paper mills and also unable to increase volume to
achieve critical mass to turn the entire operation profitable. The Group is not
able to borrow from banks for working capital for the operation in Conghua, the
PRC.

         In July, 2003, the Group entered into a loan agreement with an
affiliate, DiChain Holdings Limited ("Dichain"), the stockholder of CMDA, to
borrow HK$5 million for short term corporate and operation expenses. The short
term loan is unsecured, interest-bearing at 5% per annum and is repayable on
July 31, 2004. The financial statements have been prepared on a going concern
basis, the validity of which depends on the ongoing financial support of Dichain
and the ability of the Group to generate profits on its operations. The
financial statements do not include any adjustments that would result from a
failure to obtain such support from Dichain and in case the Group is unable to
generate future profits.

                                       42

<PAGE>

         BASIS OF PRESENTATION

         The consolidated financial statements were prepared in accordance with
accounting principles generally accepted in the United States of America ("U.S.
GAAP").

         The financial statements have been prepared in Hong Kong dollars
("HK$"). For presentation and convenience of the reader purposes, the financial
statements have been translated into United States dollars ("US$") using the
approximated rate of exchange prevailing on March 31, 2003 which was US$1 =
HK$7.8. No representation is made that Hong Kong dollar amounts could have been,
or could be, converted into United States dollars at that rate or any other
certain rate on March 31, 2003.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

         Principles of Consolidation

         The consolidated financial statements include the accounts of the
Company and its greater-than-50%-owned subsidiaries. Investments in affiliates
in which the Company owns 20% to 50% and does not have a controlling interest
are accounted for using the equity method. Investments in companies owned less
than 20% are carried at cost. All significant intercompany accounts and
transactions have been eliminated on consolidation.

         Use of Estimates

The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenue and expenses during the reporting period. These
estimates include, among others, allowances for doubtful accounts, net
realizable values on long-lived assets and deferred tax assets, certain accrued
expense accounts and revenue recognition. Actual results could differ from those
estimates.

         Cash and Cash Equivalents

         The Group considers all highly liquid investments with a maturity of
three months or less when purchased to be cash equivalents. None of the Group's
cash is restricted as to withdrawal or use.

         Allowance for Doubtful Accounts

         We record an allowance for doubtful accounts based on specifically
identified amounts that we believe to be uncollectible. We have a limited number
of customers with individually large amounts due at any given balance sheet
date. Any unanticipated change in one of those customer's credit worthiness or
other matters affecting the collectibility of amounts due from such customers,
could have a material affect on our results of operations in the period in which
such changes or events occur. After all attempts to collect a receivable have
failed, the receivable is written off against the allowance.

                                       43

<PAGE>
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED

         Property, Plant and Equipment

         Property, plant and equipment are stated at cost less accumulated
depreciation. Depreciation is computed using the straight-line method over the
assets' estimated economic useful life. The principal annual rates used are as
follows:

<TABLE>
<S>                                                <C>
Land and buildings held in the PRC                 Over the period of the land use rights
Buildings                                          4%
Leasehold improvements                             20% or over the lease terms, which ever is shorter
Machinery and equipment                            5%
Motor vehicles                                     20 - 25%
Furniture, fixtures and office equipment           20%
</TABLE>

         Impairment of Long-Lived Assets

         The Group periodically evaluates the carrying value of long-lived
assets to be held and used when events and circumstances warrant such a review.
The carrying value of a long-lived asset is considered impaired when the
anticipated undiscounted cash flow from such asset is separately identifiable
and is less than its carrying value. In that event, a loss is recognized based
on the amount by which the carrying value exceeds the fair market value of the
long-lived asset. Fair market value is determined primarily using the
anticipated cash flows discounted at a rate commensurate with the risk involved.
Losses on long-lived assets to be disposed of are determined in a similar
manner, except that fair market values are reduced for the cost to dispose.

         Interest in An Affiliate

         The Group's investments in an affiliate for which its ownership exceeds
20%, but which are not majority-owned or controlled, are accounted for using the
equity method.

         Inventories

         Inventories comprising raw materials held for production and goods held
for resale, are stated at lower of cost, on a first-in, first-out basis, or
market value.

         Income Taxes

         Income taxes, if any, are accounted for under Statement of Financial
Accounting Standards, No. 109, "Accounting for income taxes", which requires the
use of the liability method of accounting for income taxes. The liability method
measures deferred income taxes by applying enacted statutory rates in effect at
the balance sheet date to the differences between the tax bases of assets and
liabilities and their reported amounts in the financial statements.

         Foreign Currency Translation

         Foreign currency transactions are translated into Hong Kong dollars at
the applicable rates of exchange ruling at the transaction dates. Monetary
assets and liabilities denominated in foreign currencies at the balance sheet
date are translated into Hong Kong dollars at the applicable rates of exchange
ruling at that date. Exchange differences are accounted for in the statements of
operations.

                                       44

<PAGE>

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED

         Operating Leases

         Leases where substantially all the rewards and risks of ownership of
assets remain with the leasing company are accounted for as operating leases.
Rentals applicable to such operating leases are charged to income on the
straight-line basis over the lease terms.

         Revenue Recognition

         Revenue from sales of goods is recognized on delivery to and upon
acceptance by customers, when collectibility of the sales price is reasonably
assured.

         Advertising Expenses

         Advertising expenses are charged to the statements of operations when
incurred.

         Employee Stock Plans

         The Group has elected to follow Accounting Principles Board Opinion No.
25 "Accounting for Stock Issued to Employees" ("APB 25") and related
interpretations in accounting for its employee stock options. Under APB 25, the
excess of fair market value of the underlying stock on the date of grant over
the exercise price of employee stock options is expensed and is credited to
contributed surplus.

         Pro-forma information regarding net income and earnings per share is
required by Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation" ("SFAS 123") and has been determined as if the Group
had accounted for its stock options under the fair value method of that
statement. The weighted-average fair value of options granted during 2003
estimated on the date of grant using a Black-Scholes option pricing model was
US$0.19. The fair value for these options was estimated at the respective dates
of grant using the following weighted-average assumptions for the respective
dates of grant:

<TABLE>
<CAPTION>
                                                 OPTIONS GRANTED IN
                                            2001                   2003
<S>                                                           <C>
Risk-free interest rate                    5.59%                   2.5%
Dividend yield                              Nil                    Nil
Volatility factor of
  the expected market price of
  the common stock                        295.21%                  100%
Weighted-average expect life             2.34 years            9.125 years
</TABLE>

                                       45

<PAGE>

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED

         Employee Stock Plans - continued

         The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options which have no vesting restrictions
and are fully transferable. In addition, option valuation models require the
input of highly subjective assumptions including the expected stock price
volatility. Because the Company's employee stock options have characteristics
significantly different from those of trade options, and because changes in
these subjective input assumptions can materially affect the affect the fair
value estimate, in management's opinion, the existing models do not provide a
reliable single measure of the fair value of its employee stock options.

         At March 31, 2003, the company has two stock-based employee
compensation plans, which are described more fully in Note 18. The company
accounts for those plans under the recognition and measurement principles of APB
Opinion No. 25, Accounting for Stock Issued to Employees, and related
Interpretations. No stock-based employee compensation cost is reflected in net
income, as all options granted under this plan had an exercise price equal to
the market value of the underlying common stock on the date of grant. The
following table illustrates the effect on net income and earnings per share if
the company had applied the fair value recognition provisions of FASB Statement
No. 123, Accounting for Stock-Based Compensation, to stock-based employee
compensation.

<TABLE>
<CAPTION>
                                                         2001            2002           2003           2003
                                                      ------------   ------------   ------------   -----------
                                                          HK$            HK$            HK$            US$
<S>                                                   <C>            <C>            <C>            <C>
Net loss, as reported                                      88,242         18,068        101,674         13,034
Add: total stock-based employee compensation
expense determined under the fair value based
method for all awards, net of related tax effects           5,763          3,167            251             32
                                                      -----------    -----------    -----------    -----------
Pro forma net loss                                        94,005          21,235        101,925         13,066
                                                      ===========    ===========    ===========    ===========

Basic and diluted net loss per share
- As reported                                                4.57           0.91           5.11           0.65
- Pro forma                                                  4.87           1.07           5.12           0.66
                                                      -----------    -----------    -----------    -----------
</TABLE>

                                       46

<PAGE>

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED

         Effect of Recently Issued Accounting Standards

         On May 15, 2003, the FASB issued SFAS No. 150, "Accounting for Certain
Financial Instruments with Characteristics of both Liabilities and Equity" (SFAS
150). SFAS 150 changes the accounting for certain financial instruments that,
under previous guidance, could be classified as equity or "mezzanine" equity, by
now requiring those instruments to be classified as liabilities (or assets in
some circumstances) in the statement of financial position. Further, SFAS 150
requires disclosure regarding the terms of those instruments and settlement
alternatives. SFAS 150 affects an entity's classification of the following
freestanding instruments: mandatory redeemable instruments, financial
instruments to repurchase an entity's own equity instruments and financial
instruments embodying obligations that the issuer must or could choose to settle
by issuing a variable number of its shares or other equity instruments based
solely on (a) a fixed monetary amount known at inception or (b) something other
than changes in its own equity instruments. SFAS 150 is effective for periods
beginning after June 15, 2003. The Group's adoption of this interpretation is
not expected to have an effect on its consolidated financial statements.

                   In January 2003, the FASB issued FASB Interpretation No. 46,
"Consolidation of Variable Interest Entities" (FIN 46). FIN 46 explains how to
identify variable interest entities and how an enterprise assesses its interest
in a variable interest entity to decide whether to consolidate that entity. This
Interpretation requires existing unconsolidated variable interest entities to be
consolidated by their primary beneficiaries if the entities do not effectively
disperse risks among parties involved. FIN 46 is effective immediately for
variable interest entities created after January 31, 2003, and to variable
interest entities in which an enterprise obtains an interest after that date.
Management does not expect the adoption of this Interpretation to have a
material impact on the Company's financial position or results of operation.

         In December 2002, the FASB issued SFAS No. 148, "Accounting for
Stock-Based Compensation, Transition and Disclosure, an amendment of FASB
Statement No. 123" (SFAS 148). This Statement provides alternative methods of
transition for an entity that voluntarily changes to the fair value based method
of accounting for stock based compensation. It also amends the disclosure
provisions of SFAS 123 to require prominent disclosure about the effects on
reported net income of an entity's accounting policy decisions with respect to
stock-based employee compensation. Further, SFAS 148 amends Accounting
Principles Board Opinion No. 28, Interim Financial Reporting, to require
disclosure about those effects in interim financial information. SFAS 148 is
effective for our financial statements beginning April 1, 2002. The Company has
not determined whether it will voluntarily change to the fair value based method
of accounting for stock-based compensation.

         In November 2002, the FASB issued FASB Interpretation No. 45,
"Guarantor's Accounting and Disclosure Requirements for Guarantees, Including
Indirect Guarantees of Indebtedness of Others" (FIN 45). FIN 45 requires a
guarantor to recognize, at the inception of a qualified guarantee, a liability
for fair value of the obligation undertaken in issuing the guarantee. FIN 45 is
effective on a prospective basis for qualified guarantees issued or modified
after December 31, 2002. Management does not expect the adoption of this
Interpretation to have a material impact on the Company's financial position or
results of operations.

                                       47

<PAGE>

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED

Basic and Diluted Net Loss Per Share

         Basic net loss per share is computed using the weighted average number
of common shares outstanding during the periods. Diluted net loss per share is
computed using the weighted average number of common and potentially dilutive
common shares during the periods, except those that are anti-dilutive.

         The basic net loss per share for the years ended March 31, 2001, 2002
and 2003 were computed by dividing net loss applicable to common stock by the
weighted average number of 19,294,816, 19,915,292 and 19,915,292 shares of
common stock, respectively.

         The amount of diluted net loss per share for each of the years ended
March 31, 2001, 2002 and 2003 are the same as those of basic net loss per share,
as the Company's stock options outstanding during each of these years had
anti-dilutive effect on the basic net loss per share. The outstanding stock
options which had anti-dilutive effect on the basis net loss per share are
799,500, 605,000 and 875,000 for each of the years ended March 31, 2001,
2002 and 2003, respectively.

<TABLE>
<CAPTION>
                                                                                    YEAR ENDED MARCH 31,
                                                                     ------------------------------------------------
                                                                        2001               2002              2003
                                                                     -----------       ------------      ------------
                                                                          HK$               HK$               HK$
<S>                                                                  <C>               <C>               <C>
Numerator for basic and diluted loss per share:
  Net loss                                                               (88,242)           (18,068)         (101,674)
                                                                     ===========       ============        ==========

Denominator for basic and diluted loss per share:
  Weighted average number of shares                                   19,294,816         19,915,292        19,915,292
                                                                     ===========       ============        ==========

Basic and diluted loss per share                                            4.57               0.91              5.11
                                                                     ===========       ============        ==========
</TABLE>

NOTE 3 - SUPPLEMENTARY INCOME STATEMENT INFORMATION

<TABLE>
<CAPTION>
                                                                                YEAR ENDED MARCH 31,
                                                                ----------------------------------------------------
                                                                    2001           2002         2003          2003
                                                                -----------     ---------     ---------    ---------
                                                                    HK$            HK$           HK$          US$
<S>                                                             <C>             <C>           <C>          <C>
Selling, general and administrative expenses
  Depreciation                                                          978         1,588        1,848           237
  Advertising expenses                                                   10             -            -             -
  Operating lease rentals                                               667             -            -             -
  Research expenses                                                   1,583             -            -             -
                                                                ============    =========     ========     =========
</TABLE>

                                       48

<PAGE>

NOTE 4 - SUPPLEMENTAL CASH FLOW INFORMATION

<TABLE>
<CAPTION>
                                                                                YEAR ENDED MARCH 31,
                                                               -------------------------------------------------------
                                                                  2001             2002          2003           2003
                                                               -----------      ----------    -----------    ---------
                                                                   HK$              HK$           HK$           US$
<S>                                                            <C>              <C>           <C>            <C>
Cash paid during the year for
Interest                                                                 1               -             -             -
Income taxes                                                             -               -             -             -
                                                               ===========      ==========    ==========     =========

Non cash investing and financing activities
  Issuance of common stock for construction costs incurred
    during the year                                                    482               -             -             -
  Issuance of common stock for acquisition of equity
    interests in an affiliate                                       12,936               -             -             -
                                                               ===========      ==========    ==========     =========
</TABLE>

NOTE 5 - INCOME TAXES

         The Company was incorporated in the British Virgin Islands and, under
current law of the British Virgin Islands, is not subject to tax on income or on
capital gains.

         Grandom Dransfield (International) and Company Limited ("GDI") and
Dransfield Paper (HK) Trading Limited ("DPT"), wholly-owned subsidiaries of the
Group, were incorporated in Hong Kong and under the current Hong Kong tax law,
any income arising in and deriving from business carried on in Hong Kong is
subject to Hong Kong tax. No tax is charged on dividends received and capital
gains earned.

         Guangzhou Dransfield Paper Limited, an co-operative joint venture
formed in the PRC in which the Group has 100% interest, and Jiangsu Dransfield
Paper Co. Ltd. ("JSDP") and Guangdong Dransfield Paper Limited,
wholly-foreign-owned enterprises formed in the PRC in which the Group has 100%
interest (2002: 100% and 2001: 100% effective interest for JSDP), are subject to
PRC income taxes at the applicable tax rate of 33% for Sino-foreign joint
venture enterprises. Each of these three joint ventures are eligible for full
exemption from joint venture income tax for the first two years starting from
its first profitable year of operations followed by a 50% deduction from the
third to fifty year. Under the Income Tax Law applicable to Sino-foreign joint
ventures, no PRC income tax was levied on the above companies as they have
either not yet commenced operation as at March 31, 2002 or did not generate
assessable profits for each of the three years ended March 31, 2003.

                                       49

<PAGE>

NOTE 5 - INCOME TAXES - CONTINUED

         Total income tax expense differs from the amount computed by applying
applicable statutory income tax rate of 16% (2002 and 2001: 16%) to income
before taxes as follows:

<TABLE>
<CAPTION>
                                                                                YEAR ENDED MARCH 31,
                                                               -------------------------------------------------------
                                                                  2001             2002          2003           2003
                                                               -----------      ----------   -----------    ----------
                                                                    HK$             HK$           HK$           US$
<S>                                                            <C>              <C>          <C>            <C>
Computed expected income tax benefit                                14,119           2,891        16,268         2,085
Non-deductible losses of the Company and subsidiaries              (13,612)         (2,677)      (16,103)       (2,064)
Valuation allowance                                                   (507)           (214)         (165)          (21)
                                                               -----------     -----------   -----------    ----------

Tax credit for the year                                                  -               -             -             -
                                                               ===========     ===========   ===========    ==========

Deferred tax asset is comprised the following:

Tax losses carried forward                                           1,981           2,195         2,360           302
Valuation allowance                                                 (1,981)         (2,195)       (2,360)         (302)
                                                               -----------     -----------   -----------    ----------

                                                                         -               -             -             -
                                                               ===========     ===========   ===========    ==========
</TABLE>

         Due to its history of losses, the Group does not believe that
sufficient objective, positive evidence currently exists to conclude that
recoverability of its net deferred tax assets is more likely than not.
Consequently, the Group has provided a valuation allowance covering 100% of its
net deferred tax assets.

         As at March 31, 2003, the Group has Hong Kong net operating loss carry
forward of approximately HK$14,747 (US$1,890) (2002: HK$13,718 (US$1,758) 2001:
HK$12,379 (US$1,587)). Currently, the net operating loss can be carried forward
indefinitely.

NOTE 6 - ACCOUNTS RECEIVABLE, NET

<TABLE>
<CAPTION>
                                                                                              MARCH 31,
                                                                                --------------------------------------
                                                                                  2002          2003            2003
                                                                                ----------    ----------      --------
                                                                                   HK$           HK$            US$
<S>                                                                             <C>           <C>             <C>
Accounts receivable - trade                                                          1,538         1,478           190
Less: Allowance for doubtful debts                                                    (645)         (693)          (89)
                                                                                ----------    ----------      --------

Accounts receivable, net                                                               893           785           101
                                                                                ==========    ==========      ========

Movement of allowance for doubtful debts
  Balance as at April 1                                                                585           645            83
  Provided during the year                                                              60            48             6
                                                                                ----------    ----------      --------

  Balance as at March 31                                                               645           693            89
                                                                                ==========    ==========      ========
</TABLE>

                                       50
<PAGE>

NOTE 7 - INVENTORIES, NET

<TABLE>
<CAPTION>
                                                                   MARCH 31,
                                                      ----------------------------------------
                                                        2002           2003             2003
                                                      -------        -------           -------
                                                        HK$            HK$               US$
<S>                                                   <C>            <C>               <C>
Raw materials                                           1,194          1,148             147
Finished goods                                            495            317              40
Less: Allowance for obsolescence and
         net realizable value                          (1,291)        (1,291)           (165)
                                                       ------         ------             ---

Inventories, net                                          398            174              22
                                                       ======         ======             ====

Movement of allowance for obsolescence and
    net realizable value
       Balance as at April 1                            1,294          1,291             165
       Provided (written back) during the year             (3)             -               -
                                                       ------         ------             ---

       Balance as at March 31                           1,291          1,291             165
                                                       ======         ======             ===
</TABLE>

NOTE 8 - PROPERTY, PLANT AND EQUIPMENT

<TABLE>
<CAPTION>
                                                                   MARCH 31,
                                                      --------------------------------------
                                                        2002           2003           2003
                                                      -------        -------         -------
                                                        HK$            HK$             US$
<S>                                                   <C>            <C>             <C>
Land and buildings                                     17,000         17,000           2,179
Leasehold improvements                                     92             92              12
Machinery and equipment                               115,685         16,600           2,128
Motor vehicles                                            524            524              67
Furniture, fixtures and office equipment                3,503          3,507             450
                                                      -------         ------           -----
                                                      136,804         37,723           4,836
Less: Accumulated depreciation                         (3,256)        (3,976)           (510)
                                                      -------         ------           -----

                                                      133,549         33,747           4,326
                                                      =======         ======           =====
</TABLE>

         The Group's land and buildings are located in the PRC and held under
land use rights of 50 years from 1993 and 1997 for its land and buildings in
Conghua and Xinhui, Guangzhou Province, the PRC, respectively.

         No depreciation was provided on the land and buildings and machinery
and equipment which were under construction at March 31, 2003. The construction
mainly relates to the Group's paper mills in Xinhui, Guangzhou Province and in
Huaxi, Jiangsu Province, the PRC and which have been suspended for several
years. According to the former management, the estimated cost to complete the
construction will be around HK$87.4 million (US$11.2 million).

         During the fiscal year 2002, all these assets were written down to
amounts supported by professional valuation prepared based on the market value
in place (see note 10 below). However, following the decisions made by the new
management to dispose of all the machinery and equipment at the two plants in
Xinhui and Huaxi and those idle machinery at the plant in Conghua, value of the
assets were reassessed based on the fair market value and further substantial

                                       51

<PAGE>

impairment losses were recognized.

NOTE 9 - INTEREST IN AN AFFILIATE

         On August 8, 2000, the Group entered into an agreement with a third
party whereby the Group agreed to acquire 26% equity interest in Tianjin 3D
Image Technique Company Limited ("TJ3D") for a consideration of 1,560,000 shares
of the Company's common stock valued at HK$12,936 (US$1,658) based upon the
closing price of the Company's common stock on August 8, 2000.

         TJ3D is engaged in production and distribution of three-dimensional
visual products, which were developed by Professor Li, an executive director of
the Company, and his team. Professor Li was appointed as a director of DFCT on
August 16, 2000 subsequent to the acquisition of TJ3D.

         The investment is accounted for using the equity method. The Group's
proportionate share of the affiliate's net loss in 2002 and 2001 amounted to
HK$1,332 (US$171) and HK$327 (US$42). The affiliate did not achieve the
profitability target established prior to acquisition by a significant margin.
Due to changes in market conditions, the former management believed that the
investment's impairment is other than temporary based on an analysis of
discounted cash flows. Accordingly, an impairment loss of HK$3,262 (US$418) and
HK$5,483 (US$703) was recorded in 2002 and 2001. The impairment loss and the
amortization of excess of carrying value over equity in net assets are recorded
in the statement of operations in equity in loss of affiliate.

NOTE 10 - IMPAIRMENT OF LONG-LIVED ASSETS

         During 2002, certain assets related to the Group's paper mills under
construction in Xinhui and Huaxi were written down by HK$7,939 (US$1,018)
based on the market value in place. During 2003, the following factors required
management to reassess the carrying value of those long-lived assets:

         (i)      The lack of sufficient working capital to continue the
jumbo-tissue-rolls-for-paper converters and the consumer-grade hygienic tissue
products business;
         (ii)     The unlikelihood that the paper mills in Jiangyin and Xinhui
can be completed due to (a) a lack of sufficient funding and (b) the equipment
machines imported for the market-recycled pulp for the paper industry had been
idle for years and therefore were in poor condition and the Group would be
required to incur a material amount of further expenses to re-activate the
machines.
         (iii)    The paper making market in China is highly competitive.

         As a result, management decided to formulate a plan to abandon
completion of the two paper mills and concentrate on the paper converting
operation in Conghua. Management reviewed the carrying amounts of all the assets
and, after taking advice from professional valuers, recognized an impairment
loss of HK$97,792 (US$12,537) for the year ended March 31, 2003 based on the
fair market values.

                                       52

<PAGE>

NOTE 10 - IMPAIRMENT OF LONG-LIVED ASSETS - CONTINUED

         The following is a summary of the impairment loss of property, plant
and machinery by category for each year:

<TABLE>
<CAPTION>
                                                       YEAR ENDED MARCH 31,
                                       ----------------------------------------------------
                                         2001            2002          2003           2003
                                       -------          -------      -------        -------
                                         HK$              HK$          HK$            US$
<S>                                    <C>              <C>          <C>            <C>
Paper manufacturing
- Leasehold land and buildings          13,854               -             -              -
- Machinery and equipment               48,136           7,939        97,792         12,537
                                        ------           -----        ------         ------

                                        61,990           7,939        97,792         12,537
                                        ======           =====        ======         ======
</TABLE>

NOTE 11 - DUE TO AFFILIATE

         The balance is due to DHL and represents amounts brought forward from
previous years for expenses paid by DHL on the Group's behalf. The balance is
unsecured, interest-free and has no fixed terms of repayment.

         On June 11, 2003, the Company issued a total of 3,201,513 shares at
US$0.23 each to DHL to settle partially the debts due to DHL up to a total of
HK$5,744.

NOTE 12 - COMMITMENTS AND CONTINGENCIES

         Capital Commitments

         As of March 31, 2003, the Group had outstanding capital commitments as
follows:

<TABLE>
<CAPTION>
                                                            MARCH 31,
                                       ----------------------------------------------------
                                         2001            2002          2003           2003
                                       -------          -------      -------        -------
                                         HK$              HK$          HK$            US$
<S>                                    <C>              <C>          <C>            <C>
Property, plant and equipment           40,407          40,407        40,407         5,180
                                        ======           =====        ======         =====
</TABLE>

         The capital commitments relate to mainly contracts signed for
construction of paper mills in Xinhui, Guangzhou Province of HK$31,419
(US$4,028) and capital contribution to invest in a subsidiary in Huaxi, Jiangsu
Province, the PRC of HK$8,988 (US$1,152). There was no significant change during
the year.

                                       53

<PAGE>

NOTE 12 - COMMITMENTS AND CONTINGENCIES - CONTINUED

         Contingencies


         The Group is subject to various claims from vendors and ex-employees
arising in the ordinary course of business. The Group records provisions for
losses when claims become probable and the amounts estimable. Although the
outcome of these legal matters cannot be determined, it is the opinion of
management that the final resolution of these matters is not probable to have a
material adverse effect on the Group's financial condition, operations or
liquidity. Set out below is a summary of the significant litigations and claims,
which are mainly brought forward from prior years:-

         Pending litigations

    1.       The Company's subsidiary, Jiangsu Dransfield Paper Co. Ltd ("JDP"),
             owed JiangYin Basic Construction Works Company Limited ("JBCW")
             outstanding construction contract price amounting to HK$690
             (US$88). In January 2000, the parties entered into a settlement
             agreement by which the unpaid sum was settled by the issuance of
             common stock of the Company. With the decline in stock price of the
             Company, in October 2001, JBCW applied to the People's Court in
             JiangYin demanding for the construction contract price of HK$690
             (US$88) and claiming that the settlement agreement is invalid. The
             Court accepted its application and seized certain machines and bank
             deposits of JDP as security. Judgement was made and the court
             ordered JDP to pay the outstanding sum of HK$690 (US$88). JDP is
             appealing to the People's Court in WuXi on disagreement with the
             judgement made by the People's Court in JiangYin. No provision was
             made as the Company considered that the amount had been settled by
             means of the issuance of common stock of the Company.

    2.       In the fiscal year 2002, WeiBao Company ("WeiBo") brought an action
             against Guangdong Dransfield Paper Ltd ("GDP"), a Company's
             subsidiary, in April 2001 claiming for rent in arrears and other
             damages of approximately HK$754 (US$97). The People's Court in
             XinHui made a judgement of which GDP was ordered to pay the arrear
             rent of HK$157 (US$20). WeiBo disagreed with the judgement and
             appealed to the Intermediate People's Court in JiangMen in
             September 2001 claiming for compensation of damages of approximate
             HK$754 (US$97). During the fiscal year 2002, the Intermediate
             People's Court ordered GDP to pay an additional amount of HK$118.
             Provision of HK$153 (US$20) was made accordingly in the financial
             statements.

    3.       In the fiscal year 2002, MeiSi Company ("MeiSi") had dispute over
             the termination of the lease contract by GDP. In April 2001, MeiSi
             brought an action to the Basic People's Court in HuiCheng for
             compensation of financial damages of approximate HK$283 (US$36).
             Certain machines have subsequently been seized as security. After
             the court trial, MeiSi expressed the intention to settle the
             dispute through negotiation outside the court. The lawyer in-charge
             of this case estimated that a total of HK$473 (US$60) is required.
             Full provision was made in the financial statements.

             Unasserted claims

    1.       In previous years, some construction works companies including Hua
             Wei Works Company and XinHuiShi Works Company are likely to bring
             legal actions against GDP claiming for payment of construction
             works carried out by them. The claims related are approximately
             HK$2,826 (US$362). GDP counter-claimed that these construction
             companies are in breach of contracts and asks for the set-off
             against the amount payable to them. The case is being set aside and
             was no further advancement during the year.

                                       54

<PAGE>

NOTE 12 - COMMITMENTS AND CONTINGENCIES - CONTINUED

    2.       In previous years, GDP imported raw materials to China on behalf of
             WeiBo which was to be processed and exported with exemption from
             custom duties. Due to the unsettled legal proceedings between GDP
             and WeiBo, the potential custom liability is not cleared. The
             XinHui Custom asked for payment of HK$386 (US$50) custom duties due
             in November 2001. Provision of HK$386 (US$50) has been made in the
             financial statements.

             Other legal matters

    1.       In the fiscal year 2002, XinHuiShi SanJiang Construction Works
             Company claimed Guangdong Dransfield Paper Co Ltd ("GDP") for
             settlement of the unpaid construction contract price of HK$1,218
             (US$156). In April 2002, a judgement was made by the People's Court
             in XinHui ordering GDP to settle the sum. A settlement agreement
             was made in June 2002 but the Company failed to comply. Another
             settlement agreement was reached in August 2002 by which GDP agreed
             to pay HK$28 (US$4) per month from August 2002 to December 2002 and
             HK$66 (US$8) per month from January 2003 until the full balance of
             HK$1,218 (US$156) is settled. However, GDP ceased to pay them
             during the year because of the insufficient working capital. Full
             provision was made in the financial statements.

NOTE 13 - RELATED PARTY TRANSACTIONS AND ARRANGEMENTS

         The major related party transactions are described in further detail
below. Management believes that the methods used in allocating costs are
reasonable.

<TABLE>
<CAPTION>
                                                      YEAR ENDED MARCH 31,
                                          -------------------------------------------------
                                           2001            2002          2003         2003
                                          -------         -------      -------      -------
                                            HK$             HK$          HK$          US$
<S>                                       <C>             <C>          <C>          <C>
Storage and delivery charges (Note (a))    401              362          726           93
                                           ===              ===          ===           ==
</TABLE>

         Notes:

         (a)      Storage and delivery charges

                  Storage and delivery services are provided to the Group by
         Dransfield Services Limited which is a subsidiary of DHL. According to
         the management, these transactions were carried out at the terms
         determined and agreed by the relevant parties.

NOTE 14 - FINANCIAL INSTRUMENTS

         The carrying amount of the Group's cash and cash equivalents
approximate their fair value because of the short maturity of those instruments.
The carrying amounts of the Group's borrowing approximate their fair value based
on the borrowing rates currently available for borrowings with similar terms and
average maturities, except for the loans from related parties, which, due to
their nature, the fair value was not determinable.

         The carrying amount reported in the balance sheet for accounts
receivable and accounts payable

                                       55

<PAGE>

approximate their fair value.

NOTE 15 - CONCENTRATION OF RISK

         Concentration of Credit Risk

         The Group's principal activities are manufacturing and distribution of
paper products. The Group has long standing relationships with most of its
customers. The Group performs ongoing credit evaluation of its customers'
financial conditions and, generally does not require collateral.

         The allowance for doubtful accounts that the Group maintains is based
upon the expected collectibility of all accounts receivable.

         Current Vulnerability due to certain concentrations

         Some of the Company's business is transacted in Renminbi ("RMB"), which
is not freely convertible into foreign currencies. On January 1, 1994, the PRC
government abolished the dual rate system and introduced a single rate of
exchange as quoted daily by the People's Bank of China. However, the unification
of the exchange rates does not imply convertibility of RMB into United States
dollars or other foreign currencies. All foreign exchange transactions continue
to take place either through the Bank of China or other banks authorized to buy
and sell foreign currencies at the exchange rates quoted by the Bank of China.
Approval of foreign currency payments by the Bank of China or other institutions
require submitting a payment application form together with suppliers' invoices,
shipping documents and signed contracts.

NOTE 16 - PENSION SCHEME

         Prior to December 1, 2000, the Group was a member of a defined
contribution pension scheme of DHL (the "Scheme"). All the full time permanent
staff in Hong Kong, after the completion of one year's service, were eligible to
join the Scheme. The participants contributed 5% of their basic monthly salaries
to the Scheme while the Group contributed 5% to 6.5% of the basic monthly
salaries of the participants depending on the number of years of employment of
individual participants and such contributions were charged to the statement of
operations as they became payable in accordance with the rules of the Scheme.
When an employee left the Scheme prior to his/her interest in the Group employer
contributions vested fully, the ongoing contributions payable by the Group could
be reduced by the relevant amount of forfeited contributions.

                                       56

<PAGE>

NOTE 16 - PENSION SCHEME - CONTINUED

         On December 1, 2000, all of the members of the existing Scheme were
transferred to a Mandatory Provident Fund (the "MPF Scheme"). All of the
underlying assets of the existing Scheme have been transferred to the MPF
Scheme. Contributions to the MPF are made based on rates applicable to the
respective employees' monthly salaries and are charged to the profit and loss
account as they become payable in accordance with government regulations. The
assets of the MPF Scheme are held separately from those of the Group in an
independently administered fund. The Group's employer contributions to the MPF
Scheme vest fully with the employees when contributed into the MPF Scheme.

         Employees in Mainland China are members of the Central Pension Scheme
operated by the PRC government. These subsidiaries are required to contribute a
certain percentage of their covered payroll to the Central Pension Scheme to
fund the benefits. The only obligation for the Group with respect to the Central
Pension Scheme is the associated required contributions under the Central
Pension Scheme, which are charged to the profit and loss account in the year to
which they related.

         Pension scheme expenses, net of forfeited contributions, were HK$52,
Nil and Nil for the years ended March 31, 2001, 2002 and 2003.

                                       57

<PAGE>

NOTE 17 - SEGMENT REPORTING AND CONCENTRATIONS OF MAJOR CUSTOMERS

         The Group evaluates performance and allocates resources based on profit
or loss from operations. The accounting polices of the reportable segments are
the same as those described in the summary of significant accounting policies.

         The Group's reportable segments are business units that offer different
products. The reportable segments are each managed separately because they
manufacture and/or distribute distinct products with different production
processes.

         The Group operates in two industry segments, paper merchanting and
paper manufacturing. Operations in paper merchanting include the buying and
selling of paper on a back-to-back basis.
<TABLE>
<CAPTION>
                                                        2001            2002          2003           2003
                                                       -------         -------       -------       -------
                                                         HK$             HK$           HK$           US$
<S>                                                    <C>             <C>          <C>            <C>
Net sales
  Paper merchanting                                      1,849           1,165           142            18
  Paper manufacturing                                    7,494           5,433         5,346           685
                                                       -------         -------      --------       -------
Total consolidated net sales                             9,343           6,598         5,488           703
                                                       =======         =======      ========       =======

Depreciation charge
  Paper merchanting                                          2               -             -             -
  Paper manufacturing                                    2,471           1,588         1,987           255
                                                       -------         -------      --------       -------
Total consolidated depreciation charge                   2,473           1,588         1,987           255
                                                       =======         =======      ========       =======

Profit/ (loss)
  Paper merchanting                                     (2,144)           (681)           28             4
  Paper manufacturing                                  (75,673)        (12,026)     (101,427)      (13,003)
                                                       -------         -------      --------       -------
Total segment loss                                     (77,817)        (12,707)     (101,399)      (12,999)

Reconciling items
  Corporate expenses                                    (2,084)           (767)         (275)          (35)
  Equity in loss of an affiliate                        (8,341)         (4,594)            -             -
                                                       -------         -------      --------       -------
Total consolidated loss before income taxes            (88,242)        (18,068)     (101,674)      (13,034)
                                                       =======         =======      ========       =======

Segment assets
  Paper merchanting                                        252              85             9             1
  Paper manufacturing                                  145,055         134,972        34,840         4,467
                                                       -------         -------      --------       -------
Total segment assets                                   145,307         135,057        34,849         4,468

Reconciling item
  Corporate assets                                         843             188            43             6
  Interest in an affiliate                               4,595               1             1             1
                                                       -------         -------      --------       -------
Total consolidated assets                              150,745         135,246        34,893         4,475
                                                       =======         =======      ========       =======

Expenditure for additions to property, plant and
  equipment
  Paper manufacturing                                    3,716             105             3             1
                                                       -------         -------      --------       -------
Total expenditure for additions                          3,716             105             3             1
                                                       =======          ======      ========       =======
</TABLE>

                                       58

<PAGE>

         Geographic information which is disclosed based on the destination of
the customers where goods are provided is set out below:

<TABLE>
<CAPTION>
                                                        2001            2002          2003           2003
                                                       -------         -------       -------        ------
                                                         HK$             HK$           HK$           US$
<S>                                                    <C>             <C>          <C>            <C>
Net sales
  Hong Kong and Macau                                    1,849           1,165         2,397           307
  Other parts of the PRC                                 4,878           3,667         3,091           396
  Other parts of Asia                                    2,616           1,766             -             -
                                                       -------         -------      --------       -------
Total consolidated net sales                             9,343           6,598         5,488           703
                                                       =======         =======      ========       =======

Depreciation charge
  Other parts of the PRC                                 2,473           1,588         1,987           255
                                                       -------         -------      --------       -------
Total consolidated depreciation charge                   2,473           1,588         1,987           255
                                                       =======         =======      ========       =======

Loss
  Hong Kong and Macau                                   (4,423)         (1,506)         (275)          (35)
  Other parts of the PRC                               (83,769)        (16,281)     (101,399)      (12,999)
  Other parts of Asia                                      (50)           (281)            -             -
                                                       -------         -------      --------       -------
Total consolidated loss before income taxes            (88,242)        (18,068)     (101,674)      (13,034)
                                                       =======         =======      ========       =======

Long-lived assets
  Other parts of PRC                                   147,062         133,549        33,747         4,326
                                                       -------         -------      --------       -------
Total long-lived assets                                147,062         133,549        33,747         4,326
                                                       =======         =======      ========       =======

Expenditure for additions to property, plant and
  equipment
  Other parts of the PRC                                 3,716             105             3             1
                                                       -------         -------      --------       -------
Total expenditure for additions                          3,716             105             3             1
                                                       =======         =======      ========       =======
</TABLE>

         There were no inter-segment sales for the three years ended March 31,
2003.

         Major Customers

         There were no individual customers that accounted for more than 10% of
total sales for each of the two fiscal years ended March 31, 2001 and 2002.
For the fiscal year ended March 31, 2003, there were three customers whose sales
accounted for more than 10%. They are HK$1,499 (US$192 or 27%), HK$948 (US$122
or 17%) and HK$553 (US$71 or 10.1%) respectively.

                                       59

<PAGE>

NOTE 18 - COMMON STOCK OPTIONS

         On November 20, 1996, the then sole director of the Company adopted a
stock option plan (the "Plan 1") whereby nontransferable options could be
granted by the directors to employees and executive officers of the Company. The
options must be 4-year terms but are subject to earlier expiration on April 2,
2003 which is the last validity date of the Plan 1. All the options granted may
not be exercised during the first year of the grant. The exercise price for each
option shall be set by the directors but may not be less than 80% of the average
of closing prices of the Company's common stock during the five trading days
prior to the grant of the option. The total number of shares of common stock
which can be subject to the options at any time, both under the Plan and
otherwise, shall not exceed 10% of the number of shares of common stock than
outstanding. No person can be granted options which, if fully exercised, would
result in that person owning more than 25% of the outstanding shares of common
stock after such exercise.

         On May 15, 2002, the then board of directors of the Company adopted a
new stock option plan (the "Plan 2") whereby nontransferable options could be
granted by the directors to employees and executive officers of the Company.
Options granted under the Plan 2 will be exercisable for a period of up to 10
years commencing on the date of the grant.

         The per share exercise price for the Shares to be issued pursuant to
exercise of an Option shall be such price as is determined by the Option
Committee; provided, however, that as to an Incentive Option:

         a) granted to an Employee who, at the time of the grant of such
Incentive Stock Option is subject to the United States' Internal Revenue Code
and also owns stock representing more than 10% of the voting power of all
classes of stock of the Company or any Parent or Subsidiary, the per Share
exercise price shall be no less than 110% of the Fair Market Value per Share on
the date of grant.

         b) granted to any other Employee, the per Share exercise price shall be
no less than 100% of the Fair Market Value per Share on the date of grant.

         The status of the Company's stock options as of March 31 is summarized
below:

<TABLE>
<CAPTION>
                                                                     WEIGHTED
                                                NUMBER               AVERAGE
                                                  OF                 EXERCISE
                                                OPTIONS               PRICE
                                             ------------          ------------
<S>                                          <C>                   <C>
Outstanding at March 31, 2000                    883,150             US$3.64
Granted                                        1,825,500             US$1.36
Cancelled                                     (1,482,500)            US$3.95
Forfeited                                       (426,650)            US$1.87
                                               ---------

Outstanding at March 31, 2001                    799,500             US$0.82
Cancelled                                        (99,500)            US$0.82
Forfeited                                        (95,000)            US$0.82
                                               ---------

Outstanding at March 31, 2002                    605,000             US$0.82
Granted                                          270,000             US$0.28
Cancelled                                              -
                                               ---------

Outstanding at March 31, 2003                    875,000
                                               =========
</TABLE>

                                       60
<PAGE>

NOTE 18 - COMMON STOCK OPTIONS - CONTINUED

<TABLE>
<CAPTION>
                                                                                                  WEIGHTED
                                                                             NUMBER                AVERAGE
                                                                               OF                 EXERCISE
                                                                             OPTIONS                PRICE
                                                                             -------              --------
<S>                                                                          <C>                  <C>
Options exercisable at:

March 31, 2001                                                                     -                     -
March 31, 2002                                                               605,000               US$0.82
March 31, 2003                                                               605,000               US$0.82
                                                                             =======               =======

Weighted average fair value of options granted during the year ended
  March 31, 2001                                                                                   US$1.14
  March 31, 2002                                                                                         -
  March 31, 2003                                                                                   US$0.19
                                                                                                   =======
</TABLE>

         On June 20, 2000, the board of directors invited the grantees of share
options issued between January through May 2000 to surrender their share options
by June 30, 2000 in exchange for the same number of stock options at an exercise
price of US$1.75 per share, being the market closing price of the Company's
share on June 19, 2000. All stock options were surrendered and exchanged for new
stock options on June 30, 2000.

         On March 1, 2001, the board of directors invited the grantees of all
outstanding share options in exchange for the same number of share options at an
exercise price of US$0.82 per share.

         On May 17, 2002, the board of directors resolved to grant a total of
stock options under Plan 2 amounting to 270,000 shares at an exercise price of
US$0.28 per share, being the average market closing price of the Company's
share in the last five trading days of the grant, to management and staff.

         On April 2, 2003, all the stock options granted under Plan 1 and
remained as of March 31, 2003 had lapsed.

         A summary of information about the Company's stock options outstanding
at March 31, 2003 is as follows:

<TABLE>
<CAPTION>
                                                                   WEIGHTED
                                                                   AVERAGE            WEIGHTED
                           RANGE OF         NO. OF OPTIONS        REMAINING           AVERAGE
   EXERCISABLE             EXERCISE         OUTSTANDING AT       CONTRACTUAL          EXERCISE
     PERIOD                  PRICE          MARCH 31, 2003          LIFE               PRICE
   -----------             --------         --------------       -----------          --------
<S>                        <C>              <C>                  <C>                  <C>
March 2, 2002 to            US$0.82             605,000               nil              US$0.82
  April 2, 2003
April 1, 2003 to            US$0.28             270,000             9 years            US$0.28
  May 17, 2006
</TABLE>

                                       61

<PAGE>

NOTE 18 - COMMON STOCK OPTIONS - CONTINUED

         The Group applies Accounting Principle Board Opinion No. 25,
"Accounting for Stock Issued to Employees" in accounting for the Plan. The
compensation expense represents the difference between the option exercise price
and the fair market value of the Company's common stock at the respective dates
of grant and is recognized over the vesting period. Accordingly, compensation
expense of HK$400 (US$51) was recognized for the year ended March 31, 2001. No
compensation expense was recognized for the years ended March 31, 2002 and 2003
as the exercise prices of the outstanding options exceeded the fair market value
of the Company's shares as of March 31, 2002 and 2003.

NOTE 19 - CONTRIBUTED SURPLUS

         The amount represents a net compensation of HK$1,530 (US$196) from a
minority shareholder, which was accounted for as a capital transaction in 1998,
and accumulated stock compensation expense of HK$3,147 (US$403). The stock
compensation expense recognized for the three years ended March 31, 2001, 2002
and 2003 was HK$400 (US$51), HK$Nil and HK$Nil, respectively.

ITEM 19. EXHIBITS.

         The following exhibits are filed as a part of this annual report:

<TABLE>
<CAPTION>
Exhibit                                                                  Item
-------                                                                  ----
<S>                     <C>
1              -        Certificate of Merger issued on February 26, 1997, by the Registrar of Companies of the British Virgin
                        Islands, evidencing the merger between Dransfield China Paper Corporation (the Registrant), as the
                        surviving company, and Dransfield Paper Holdings Limited, as the discontinuing company.***

1(i)           -        Memorandum of Association of Dransfield China Paper Corporation.*

1(ii)          -        Restated and Amended Articles of Association of Dransfield China Paper Corporation.**

1(iii)         -        Certificate of Incorporation of March 28, 2000, that changed the name of the corporation from Dransfield
                        China Paper Corporation to DF China Technology Inc.+

4              -        1996 Share Option Scheme, as amended, adopted by Dransfield China Paper Corporation.****

4.1            -        Chinese-Foreign Equity Joint Venture - Jiang Ying Dransfield Paper Co., Ltd. - Articles of Association -
                        China Jiangsu Huaxi Holdings Company - Dransfield Broadsino Paper Holdings Co. Ltd.***
</TABLE>

                                       62

<PAGE>

<TABLE>
<S>                     <C>
4.2            -        Document of Conghua County Foreign Economic Relations & Trade Committee - No.(1993) 334 under characters
                        Cong Wai Jing Mao Yin - Official Reply regarding the Co-operative Venture - Dransfield Paper (Guangzhou)
                        Ltd.***

4.3            -        Document of Conghua City Foreign Economic Relations & Trade Committee - No.(1995) 018 under characters Cong
                        Wai Jing Mao Yin - Official Reply regarding the Second Supplementary Agreement of the Co-operative Venture
                        Contract for Dransfield Paper (Guangzhou) Ltd.***

4.4            -        Document of Conghua City Foreign Economic Relations & Trade Committee - No.(1995) 097 under characters Cong
                        Wai Jing Mao Yin - Official Reply regarding the Third Supplementary Agreement of the Co-operative Venture
                        Contract for Dransfield Paper (Guangzhou) Ltd.***

4.5            -        Document of Conghua City Foreign Economic Relations & Trade Committee - No.(1995) 131 under characters Cong
                        Wai Jing Mao Yin - Official Reply regarding the Fourth Supplementary Agreement of the Co-operative Venture
                        Contract for Dransfield Paper (Guangzhou) Ltd.***

4.6            -        Document of Conghua City Foreign Economic Relations & Trade Committee - No.(1995) 161 under characters Cong
                        Wai Jing Mao Yin - Official Reply regarding the Fifth Supplementary Agreement of the Co-operative Venture
                        Contract for Dransfield Paper (Guangzhou) Ltd.***

4.7            -        Document of Conghua City Foreign Economic Relations & Trade Committee - No.(1995) 178 under characters Cong
                        Wai Jing Mao Yin - Official Reply regarding the Sixth Supplementary Agreement of the Co-operative Venture
                        Contract for Dransfield Paper (Guangzhou) Ltd.***

4.8            -        Contract on Transfer of Land - Transferor: Xinhui City Sanjiang Town Industry Overall Company - Transferee:
                        Guangzhou Dransfield Paper Ltd.***

4.9            -        Agreement dated August 8, 2000 between DF China Technology Inc., jointly and severely with Dransfield Cyber
                        Inc. (Party A) and Tianjin 3D Lab., jointly and severely with Tianjin 3D Image Technique Co. Ltd., headed
                        by Professor Li Chang (Party B) relating to acquisition of 26% in Party B.*****
</TABLE>

                                       63

<PAGE>

<TABLE>
<S>                     <C>
4.10           -        Marketing Agreement dated August 8, 2000 between DF China Technology Inc., jointly and severely with
                        Dransfield Cyber Inc. (Party A) and Tianjin 3D Lab., jointly and severely with Tianjin 3D Image Technique
                        Co. Ltd., headed by Professor Li Chang (Party B) relating to worldwide marketing for Party B's technology
                        products.*****

8              -        List of all subsidiaries of the Registrant.+

10             -        Designation of Thomas J. Kenan as the authorized representative in the United States of Dransfield China
                        Paper Corporation.****

12             -        Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
                        302 of the Sarbanes-Oxley Act of 2002.

12.1           -        Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
                        302 of the Sarbanes-Oxley Act of 2002.

12.2           -        Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
                        906 of the Sarbanes-Oxley Act of 2002.

12.3           -        Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
                        906 of the Sarbanes-Oxley Act of 2002.

99             -        2002 Stock Option Plan++
</TABLE>

*        Previously filed with the Registrant's Form S-1 (SEC File No.
         333-11637);incorporated herein.

**       Previously filed with the Registrant's Amendment No. 1 to Form S-1
         (SEC File No. 333-11637); incorporated herein.

***      Previously filed with the Registrant's Form 6-K filed on March 7, 1997;
         incorporated herein.

****     Previously filed with the Registrant's Amendment No. 2 on Form F-1;
         incorporated herein.

*****    Previously filed with the Registrant's Form 20-F (SEC File No.
         000-21919); incorporated herein.

                                       64

<PAGE>

+        Previously filed with the Registrant's Form 20-F (SEC File No.
         000-21919) on October 15, 2002; incorporated herein.

++       Previously field with Registrant's Form 6-K (SEC File No. 000-21919) on
         July 22, 2003; incorporated herein.

                                   SIGNATURES

The registrant hereby certifies that it meets all of the requirements for filing
on Form 20-F and that it has duly caused and authorized the undersigned to sign
this annual report on its behalf.

                                            DF CHINA TECHNOLOGY INC.

                                            By /s/ Dr. Fan Di
                                              ---------------------------
                                                Dr. Fan Di, Chairman

Date:  October 15, 2003

                                       65

<PAGE>

                            DF CHINA TECHNOLOGY INC.

                          COMMISSION FILE NO. 000-21919

                         INDEX TO EXHIBITS TO FORM 20-F
                    FOR THE FISCAL YEAR ENDED MARCH 31, 2003

The following exhibits are filed as part of this Form 20-F:

<TABLE>
<CAPTION>
Exhibit                                                                  Item
-------                                                                  ----
<S>                     <C>
1              -        Certificate of Merger issued on February 26, 1997, by the Registrar of Companies of the British Virgin
                        Islands, evidencing the merger between Dransfield China Paper Corporation (the Registrant), as the
                        surviving company, and Dransfield Paper Holdings Limited, as the discontinuing company.***

1(i)           -        Memorandum of Association of Dransfield China Paper Corporation.*

1(ii)          -        Restated and Amended Articles of Association of Dransfield China Paper Corporation.**

1(iii)         -        Certificate of Incorporation of March 28, 2000, that changed the name of the corporation from Dransfield
                        China Paper Corporation to DF China Technology Inc.+

4              -        1996 Share Option Scheme, as amended, adopted by Dransfield China Paper Corporation.****

4.1            -        Chinese-Foreign Equity Joint Venture - Jiang Ying Dransfield Paper Co., Ltd. - Articles of Association -
                        China Jiangsu Huaxi Holdings Company - Dransfield Broadsino Paper Holdings Co. Ltd.***

4.2            -        Document of Conghua County Foreign Economic Relations & Trade Committee - No.(1993) 334 under characters
                        Cong Wai Jing Mao Yin - Official Reply regarding the Co-operative Venture - Dransfield Paper (Guangzhou)
                        Ltd.***

4.3            -        Document of Conghua City Foreign Economic Relations & Trade Committee - No.(1995) 018 under characters Cong
                        Wai Jing Mao Yin - Official Reply regarding the Second Supplementary Agreement of the Co-operative Venture
                        Contract for Dransfield Paper (Guangzhou) Ltd.***

4.4            -        Document of Conghua City Foreign Economic Relations & Trade
</TABLE>

                                       66

<PAGE>

<TABLE>
<S>                     <C>
                        Committee - No.(1995) 097 under characters Cong Wai Jing Mao Yin - Official Reply regarding the Third
                        Supplementary Agreement of the Co-operative Venture Contract for Dransfield Paper (Guangzhou) Ltd.***

4.5            -        Document of Conghua City Foreign Economic Relations & Trade Committee - No.(1995) 131 under characters Cong
                        Wai Jing Mao Yin - Official Reply regarding the Fourth Supplementary Agreement of the Co-operative Venture
                        Contract for Dransfield Paper (Guangzhou) Ltd.***

4.6            -        Document of Conghua City Foreign Economic Relations & Trade Committee - No.(1995) 161 under characters Cong
                        Wai Jing Mao Yin - Official Reply regarding the Fifth Supplementary Agreement of the Co-operative Venture
                        Contract for Dransfield Paper (Guangzhou) Ltd.***

4.7            -        Document of Conghua City Foreign Economic Relations & Trade Committee - No.(1995) 178 under characters Cong
                        Wai Jing Mao Yin - Official Reply regarding the Sixth Supplementary Agreement of the Co-operative Venture
                        Contract for Dransfield Paper (Guangzhou) Ltd.***

4.8            -        Contract on Transfer of Land - Transferor: Xinhui City Sanjiang Town Industry Overall Company - Transferee:
                        Guangzhou Dransfield Paper Ltd.***

4.9            -        Agreement dated August 8, 2000 between DF China Technology Inc., jointly and severely with Dransfield Cyber
                        Inc. (Party A) and Tianjin 3D Lab., jointly and severely with Tianjin 3D Image Technique Co. Ltd., headed
                        by Professor Li Chang (Party B) relating to acquisition of 26% in Party B.*****

4.10           -        Marketing Agreement dated August 8, 2000 between DF China Technology Inc., jointly and severely with
                        Dransfield Cyber Inc. (Party A) and Tianjin 3D Lab., jointly and severely with Tianjin 3D Image Technique
                        Co. Ltd., headed by Professor Li Chang (Party B) relating to worldwide marketing for Party B's technology
                        products.*****

8              -        List of all subsidiaries of the Registrant.+

10             -        Designation of Thomas J. Kenan as the authorized representative in the United States of Dransfield China
                        Paper Corporation.****
</TABLE>

                                       67

<PAGE>

<TABLE>
<S>                     <C>
12             -        Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
                        302 of the Sarbanes-Oxley Act of 2002.

12.1           -        Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
                        302 of the Sarbanes-Oxley Act of 2002.

12.2           -        Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
                        906 of the Sarbanes-Oxley Act of 2002.

12.3           -        Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
                        906 of the Sarbanes-Oxley Act of 2002.

99             -        2002 Stock Option Plan++
</TABLE>

*        Previously filed with the Registrant's Form S-1 (SEC File No.
         333-11637); incorporated herein.

**       Previously filed with the Registrant's Amendment No. 1 to Form S-1
         (SEC File No. 333-11637); incorporated herein.

***      Previously filed with the Registrant's Form 6-K filed on March 7, 1997;
         incorporated herein.

****     Previously filed with the Registrant's Amendment No. 2 on Form F-1;
         incorporated herein.

*****    Previously filed with the Registrant's Form 20-F (SEC File No.
         000-21919); incorporated herein.

+        Previously filed with the Registrant's Form 20-F (SEC File No.
         000-21919) on October 15, 2002; incorporated herein.

++       Previously field with Registrant's Form 6-K (SEC File No. 000-21919) on
         July 22, 2003; incorporated herein.

                                       68