<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, 2004

                        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)

                              14066 CATALINA STREET
                          SAN LEANDRO, CALIFORNIA 94577
                          -----------------------------
                    (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 - 47,620,712 SHARES (AS OF MARCH 31, 2004)
             -------------------------------------------------------

         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]


<PAGE>

                                TABLE OF CONTENTS

<Table>
<Caption>
                                                                                                               PAGE
                                                                                                               ----
<S>                                                                                                            <C>

PART I..........................................................................................................1

         Item 1.           Identity of Directors, Senior Management and Advisors................................1

         Item 2.           Offer Statistics and Expected Timetable..............................................1

         Item 3.           Key Information......................................................................1

         Item 4.           Information on the Company...........................................................8

         Item 5.           Operating and Financial Review and Prospects........................................21

         Item 6.           Directors, Senior Management and Employees..........................................32

         Item 7.           Major Shareholders and Related Party Transactions...................................38

         Item 8.           Financial Information...............................................................39

         Item 9.           The Offer and Listing...............................................................40

         Item 10.          Additional Information..............................................................41

         Item 11.          Quantitative and Qualitative Disclosures About Market Risk..........................44

         Item 12.          Description of Securities Other Than Equity Securities..............................44

PART II........................................................................................................45

         Item 13.          Defaults, Dividend Arrearages and Delinquencies.....................................45

         Item 14.          Material Modifications to the Rights of Security Holders and Use of Proceeds........45

         Item 15.          Controls and Procedures.............................................................45

         Item 16.          [Reserved]..........................................................................45

         Item 16A.         Audit Committee Financial Expert....................................................45

         Item 16B.         Code of Ethics......................................................................46

         Item 16C.         Principal Accounting Fees and Services..............................................46

         Item 16D.         Exemptions from the Listing Standard for Audit Committees...........................47

         Item 16E.         Purchases of Equity Securities by the Issuer and Affiliated Purchasers..............47

PART III.......................................................................................................47

         Item 17.          Financial Statements................................................................47

         Item 18.          Financial Statements................................................................47

         Item 19.          Exhibits............................................................................74
</Table>


                                        i
<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, 2004, 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,
                                            -------------------------------------------------------------------------------------
                                               2000           2001           2002           2003           2004           2004
                                             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                                        1,502          9,343          6,598          5,488          4,131            530
Income (loss) before interest and
   income taxes and minority
   interests                                    (7,009)       (88,242)       (18,068)      (101,674)       (34,844)        (4,467)
Interest income/(expenses), net                     41             --             --             --             (3)          (0.4)
Net loss                                        (6,968)       (88,242)       (18,068)      (101,674)       (34,847)        (4,467)
Basic and diluted net loss per
   share                                         (0.43)         (4.57)         (0.91)         (5.11)         (1.31)         (0.17)
</Table>


<PAGE>

<Table>
<Caption>
                                                                              As of March 31,
                                            -------------------------------------------------------------------------------------
                                               2000           2001           2002           2003           2004           2004
                                             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                                   200,909        143,332        133,549         33,747             15              2
Total assets                                   224,983        150,745        135,246         34,893         36,776          4,716
Long term liabilities                           14,350             --             --             --             --             --
Common Stock                                   225,001        241,920        241,920        241,920        286,748         36,763
Equity                                         206,698        139,610        121,542         19,868         29,849          3,827
No. of common stock issued                  18,165,007     19,915,292     19,915,292     19,915,292     47,620,712     47,620,712
</Table>

----------

   (1)   The translation from Hong Kong dollars into U.S. dollars for the 2004
         data is at US$1.00 equals HK$7.8, the conversion rate prevailing on
         March 31, 2004.

         RISK FACTORS

         THE FOLLOWING MATTERS, AMONG OTHERS, MAY HAVE A MATERIAL ADVERSE EFFECT
ON OUR BUSINESS, FINANCIAL CONDITION, LIQUIDITY, RESULTS OF OPERATIONS OR
PROSPECTS, FINANCIAL OR OTHERWISE. REFERENCE TO THIS CAUTIONARY STATEMENT IN THE
CONTEXT OF A FORWARD-LOOKING STATEMENT OR STATEMENTS SHALL BE DEEMED TO BE A
STATEMENT THAT ANY ONE OR MORE OF THE FOLLOWING FACTORS MAY CAUSE ACTUAL RESULTS
TO DIFFER MATERIALLY FROM THOSE IN SUCH FORWARD-LOOKING STATEMENT OR STATEMENTS.

RISKS RELATED TO OUR BUSINESS

WE HAVE A LIMITED OPERATING HISTORY.

         We believe that a majority of our revenues will come from our
subsidiary, DICHAIN Software. DICHAIN Software was founded and commenced
operations in December 3, 2001. DICHAIN Software's operating history may be
insufficient for you to evaluate our business and future prospects.

KEY EMPLOYEES ARE ESSENTIAL TO BUILDING OUR CUSTOMER RELATIONSHIPS AND OUR
BUSINESS.

         We are highly dependent on key employees. Dr. Fan Di, our Chairman and
Chief Executive Officer and Aaron Zhu Xiaojun, our Chief Financial Officer, are
essential to our ability to establish and maintain relationships with our
customers. Competition in our industry for executive-level personnel is strong
and we can make no assurance that we will be able to hire, motivate and retain
highly effective executive employees.

OUR OPERATIONS COULD BE CURTAILED IF WE ARE UNABLE TO OBTAIN REQUIRED ADDITIONAL
FINANCING.

         As of March 31, 2004, we had approximately HK$16,343,000 (US$2,095,000)
in cash and cash equivalents. In the future, we may need to raise additional
funds through public or private financing, which may include the sale of equity
securities. The issuance of these equity securities could result in



                                       2
<PAGE>

dilution to our shareholders. If we are unable to raise capital when needed, our
business growth strategy may slow, which could severely limit our ability to
generate revenue.

THE ESTABLISHMENT AND EXPANSION OF INTERNATIONAL OPERATIONS REQUIRES SIGNIFICANT
MANAGEMENT ATTENTION.

         All of our current, as well as most of our anticipated future revenues,
are or are expected to be derived from Asia. Our operations are subject to
risks, including the following, which, if not planned and managed properly,
could materially adversely affect our business, financial condition and
operating results:

         o        Legal uncertainties or unanticipated changes regarding
                  regulatory requirements, liability, export and import
                  restrictions, tariffs and other trade barriers;

         o        Longer customer payment cycles and greater difficulties in
                  collecting accounts receivable;

         o        Uncertainties of laws and enforcement relating to the
                  protection of intellectual property;

         o        Seasonal reductions in business activity for our
                  technology-related products; and

         o        Potentially uncertain or adverse tax consequences.

WE MAY NOT BE COMPETITIVE AND INCREASED COMPETITION COULD SERIOUSLY HARM OUR
BUSINESS.

         Many of our competitors have one or more of the following advantages
over us:

         o        Longer operating history;

         o        Greater financial, technical, marketing, sales and other
                  resources;

         o        Greater profitability in their operations;

         o        Superior product functionality in certain areas;

         o        Greater name recognition;

         o        A broader range of products to offer;

         o        Better software performance; or

         o        A larger installed base of customers.

Current and potential competitors have established, or may establish,
cooperative relationships among themselves or with third parties to enhance
their products, which may result in increased competition. As a result of these
and other factors, we may be unable to compete successfully with our existing or
new competitors.



                                       3
<PAGE>

OUR INABILITY TO LIST OUR COMMON STOCK ON THE NASDAQ SMALL CAP MARKET MAY MAKE
OUR COMMON STOCK MORE DIFFICULT TO TRADE, HARM OUR BUSINESS REPUTATION AND
ADVERSELY AFFECT OUR ABILITY TO RAISE FUNDS IN THE CAPITAL MARKETS.

         The de-listing of our common stock from The NASDAQ Small Cap Market may
have made our common stock more difficult to trade, may have harmed our general
business reputation and may have impaired our ability to raise funds in the
capital markets, which could have a material adverse effect on our business,
results of operations and financial condition. We may not be able to satisfy
NASDAQ's initial listing requirements to be eligible to re-apply for listing on
the NASDAQ National Market.

OUR MAJOR SHAREHOLDERS HAVE SIGNIFICANT INFLUENCE OVER SHAREHOLDER VOTES.

         As of September 30, 2004, four of our major shareholders beneficially
owned approximately 88% of the total voting power of our company, approximately
56% of which is beneficially owned by DiChain Systems Limited, approximately 14%
of which is beneficially owned by Farsight Holdings Limited, approximately 11%
of which is beneficially owned by Squadram Limited, and approximately 7.5% of
which is beneficially owned by Earnest Investments Services Limited.
Accordingly, these major shareholders have significant influence in determining
the composition of our Board of Directors and other significant matters
requiring shareholder approval, including amendments to our memorandum or
articles of association, a substantial sale of assets, a merger or similar
corporate transaction or a non-negotiated takeover attempt. Such concentration
of ownership may discourage a potential acquirer from making an offer to buy us
that other shareholders might find favorable, which in turn could adversely
affect the market price of our common stock.

RISKS ASSOCIATED WITH DOING BUSINESS IN GREATER CHINA

THERE ARE SUBSTANTIAL RISKS ASSOCIATED WITH DOING BUSINESS IN GREATER CHINA, AS
SET FORTH IN THE FOLLOWING RISK FACTORS.

         Our operations and assets in greater China are subject to significant
political and economic uncertainties. Changes in laws and regulations, or their
interpretation, or the imposition of confiscatory taxation, restrictions on
currency conversion, imports and sources of supply, devaluations of currency or
the nationalization or other expropriation of private enterprises could have a
material adverse effect on our business, results of operations and financial
condition. Under its current leadership, the Chinese government has been
pursuing economic reform policies that encourage private economic activity and
greater economic decentralization. There is no assurance, however, that the
Chinese government will continue to pursue these policies, or that it will not
significantly alter these policies from time to time without notice.

WE MAY HAVE LIMITED LEGAL RECOURSE UNDER CHINESE LAW IF DISPUTES ARISE UNDER OUR
CONTRACTS WITH THIRD PARTIES.

         The Chinese government has enacted some laws and regulations dealing
with matters such as corporate organization and governance, foreign investment,
commerce, taxation and trade. However, their experience in implementing,
interpreting and enforcing these laws and regulations is limited, and our
ability to enforce commercial claims or to resolve commercial disputes is
unpredictable. Due to our current business operations, we may be subject to the
implementations, interpretations and enforcement of China's laws by its courts
or governmental agencies in connection with our contracts with third parties.
The resolution of any such matters may be subject to the exercise of
considerable discretion by agencies of the Chinese government, and forces
unrelated to the legal merits of a particular matter or dispute may



                                       4
<PAGE>

influence their determination. Any rights we may have to specific performance,
or to seek an injunction under Chinese law, in either of these cases, are
severely limited, and without a means of recourse by virtue of the Chinese legal
system, we may be unable to prevent these situations from occurring. The
occurrence of any such events could have a material adverse effect on our
business, financial condition and results of operations.

RISKS RELATED TO OUR TECHNOLOGY AND EQUIPMENT

WE MUST RESPOND QUICKLY AND EFFECTIVELY TO NEW TECHNOLOGICAL DEVELOPMENTS.

         Our business is highly dependent on our computer and software systems.
Our failure to maintain the superiority of our technological capabilities or to
respond effectively to technological changes could adversely effect our
business, results of operations or financial condition. Our future success also
depends on our ability to enhance existing services and introduce new services
or products to respond to changing technological developments. If we are unable
to successfully develop and bring to market new services or products in a timely
manner, our competitors' technologies or services may render our products or
services noncompetitive or obsolete.

IF WE ARE UNABLE TO DEVELOP ACCEPTABLE PRODUCTS AND GENERATE DEMAND FOR SUCH
PRODUCTS, ADDITIONAL SERIOUS HARM COULD RESULT TO OUR BUSINESS.

         We have invested significant resources in developing and marketing our
products and services. The demand for, and market acceptance of, our products
and services are subject to a high level of uncertainty. Our products and
services are often considered complex and may involve a new approach to the
conduct of business by our customers. As a result, intensive marketing and sales
efforts may be necessary to educate prospective customers regarding the uses and
benefits of these products and services in order to generate demand. The market
for our products and services may never develop as we intend, competitors may
develop superior products and services or we may fail to develop acceptable
solutions to address new market conditions. Any one of these events could have a
material adverse effect on our business, results of operations and financial
condition.

OUR SOFTWARE PRODUCTS ARE INTENDED TO WORK WITHIN COMPLEX BUSINESS PROCESSES. AS
SUCH, IMPLEMENTATION OR UPGRADES OF OUR PRODUCTS CAN BE DIFFICULT,
TIME-CONSUMING AND EXPENSIVE, AND CUSTOMERS MAY BE UNABLE TO IMPLEMENT OR
UPGRADE OUR PRODUCTS SUCCESSFULLY OR OTHERWISE ACHIEVE THE BENEFITS ATTRIBUTABLE
TO OUR PRODUCTS. THIS MAY RESULT IN CUSTOMER DISSATISFACTION, HARM TO OUR
REPUTATION AND CAUSE NON-PAYMENT ISSUES.

         Our products typically must integrate with the many existing computer
systems and software programs of our customers. This can be complex,
time-consuming and expensive, and may cause delays in the deployment of our
products. As a result, some customers may have difficulty or be unable to
implement our products successfully or otherwise achieve the benefits
attributable to our products. Delayed or ineffective implementation or upgrades
of our software and services may limit our sales opportunities, result in
customer dissatisfaction and harm to our reputation, or cause non-payment
issues.

OUR SOFTWARE MAY CONTAIN ERRORS WHICH COULD RESULT IN THE LOSS OF CUSTOMERS AND
REPUTATION, ADVERSE PUBLICITY, LOSS OF REVENUES, DELAYS IN MARKET ACCEPTANCE,
DIVERSION OF DEVELOPMENT RESOURCES AND CLAIMS AGAINST US BY CUSTOMERS.

         Our software programs may contain errors or "bugs." Although we conduct
testing and quality assurance through a release management process, we may not
discover bugs until our customers install



                                       5
<PAGE>

and use a given product or until the volume of services that a product provides
increases. On occasion, we have experienced delays in the scheduled introduction
of new and enhanced products because of bugs. Errors could result in loss of
customers and reputation, adverse publicity, loss of revenues, delays in market
acceptance, diversion of development resources and claims against us by
customers.

BECAUSE OUR PRODUCTS COLLECT AND ANALYZE STORED CUSTOMER INFORMATION, CONCERNS
THAT OUR PRODUCTS DO NOT ADEQUATELY PROTECT THE PRIVACY OF CONSUMERS COULD
INHIBIT SALES OF OUR PRODUCTS.

         One of the features of our supply chain management software
applications is the ability to develop and maintain profiles of consumers for
use by businesses. Typically, these products capture profile information when
consumers, business customers and employees visit an Internet web-site and
volunteer information in response to survey questions concerning their
backgrounds, interests and preferences. Our products augment these profiles over
time by collecting usage data. Although our supply chain management products are
designed to operate with applications that protect user privacy, privacy
concerns nevertheless may cause visitors to resist providing the personal data
necessary to support this profiling capability. Any inability to adequately
address consumers' privacy concerns could have a material adverse affect on our
business, results of operation and financial condition.

IF WE FAIL TO ADEQUATELY PROTECT OUR INTELLECTUAL PROPERTY RIGHTS OR FACE A
CLAIM OF INTELLECTUAL PROPERTY INFRINGEMENT BY A THIRD PARTY, WE COULD LOSE OUR
INTELLECTUAL PROPERTY RIGHTS OR BE LIABLE FOR SIGNIFICANT DAMAGES.

         We rely primarily on a combination of copyright, trademark and trade
secret laws, confidentiality procedures and contractual provisions to protect
our proprietary rights. However, unauthorized parties may attempt to copy
aspects of our products or to obtain and use information that we regard as
proprietary. Policing unauthorized use of our products is difficult, and we
cannot be certain that the steps we have taken will prevent misappropriation of
our intellectual property. This is particularly true in China where the laws do
not protect proprietary rights to the same extent as the laws of the United
States and may not provide us with an effective remedy against piracy. The
misappropriation or duplication of our intellectual property could disrupt our
ongoing business, distract our management and employees, reduce our revenues and
increase our expenses. Any litigation to defend our intellectual property rights
could be time-consuming and costly.

         There has been a substantial amount of litigation in the software
industry regarding intellectual property rights. As a result, we may be subject
to claims of intellectual property infringement. Although we are not aware that
any of our products infringe upon the proprietary rights of third parties, third
parties may claim infringement by us with respect to current or future products.
Any infringement claims, with or without merit, could be time-consuming, result
in costly litigation or damages, cause product shipment delays or the loss or
deferral of sales, or require us to enter into royalty or licensing agreements.
If we enter into royalty or licensing agreements in settlement of any litigation
or claims, these agreements may not be on terms acceptable to us. Unfavorable
royalty and licensing agreements could have a material adverse effect on our
business, results of operations and financial condition.

WE ARE DEPENDENT ON THIRD-PARTY SOFTWARE THAT WE INCORPORATE INTO AND INCLUDE
WITH OUR PRODUCTS AND SOLUTIONS. IMPAIRED RELATIONS WITH THESE THIRD PARTIES,
DEFECTS IN THIRD-PARTY SOFTWARE OR THE INABILITY TO ENHANCE THEIR SOFTWARE OVER
TIME COULD HARM OUR BUSINESS.

         We incorporate and include third-party software into and with our
products and solutions. Additionally, we may incorporate and include additional
third-party software into and with our products and solutions in future product
offerings. The operation of our products could be impaired if errors occur



                                       6
<PAGE>

in the third-party software that we utilize. It may be more difficult for us to
correct any defects in third-party software because the development and
maintenance of the software is not within our control. Accordingly, our business
could be adversely affected in the event of any errors in this software. There
can be no assurance that these third parties will continue to make their
software available to us on acceptable terms, to invest the appropriate levels
of resources in their products and services to maintain and enhance the software
capabilities, or to remain in business.

         Further, it may be difficult for us to replace any third-party software
if a vendor seeks to terminate our license to the software or our ability to
license the software to customers. Any impairment in our relationship with these
third parties could have a material adverse effect on our business, results of
operations and financial condition.

WE MAY BECOME SUBJECT TO PRODUCT LIABILITY CLAIMS THAT COULD SERIOUSLY HARM OUR
BUSINESS.

         Our software products generally are used by our customers in mission
critical applications where component failures could cause significant damages.
To mitigate this exposure, our license agreements typically seek to limit our
exposure to product liability claims from our customers. However, these contract
provisions may not preclude all potential claims. Additionally, our insurance
policies may be inadequate to protect us from all liability that we may face.
Product liability claims could require us to spend significant time and money in
litigation or to pay significant damages. As a result, any claim, whether or not
successful, could harm our reputation and have a material adverse effect on our
business, results of operations and financial condition.

FORWARD-LOOKING STATEMENTS

         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.


                                       7
<PAGE>

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. Our 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, and we maintain a representative office at
14066 Catalina Street, San Leandro, California 94577. Our telephone number is
510-483-2383. Our agent in the United States is Mitchell S. Nussbaum, Loeb &
Loeb LLP, 345 Park Avenue, New York, New York 10154-0037.

         We are listed on the Over-The-Counter Bulletin Board ("OTCBB") in the
United States under the trading symbol "DFCT". After our merger with DICHAIN
Software, we became a leading supply chain management software and solutions
provider in China. We also have a paper manufacturing business. Our businesses
are not materially dependent on any licenses, patents or other contracts with
any third parties.

BUSINESS OPERATION AND REVIEW

         On April 30, 2003, certain of our major shareholders removed Mr. Horace
Yao Yee Cheong as our director and chairman, Ms. Cheung Kam Wa as our director
and chief executive officer and Mr. Kenneth Mak Kar Shun as our director. In
their place, Dr. Fan Di, Mr. Aaron Zhu Xiaojun, Mr. Kwok Yam Sheung, Dr. Robert
Fung Hing Piu and Dr. Godwin Wong were elected as our directors. Dr. Fan Di was
also appointed our chairman and chief executive officer and Mr. Zhu was
appointed as our chief financial officer.

         Since inception and subsequent entry as a public company in 1997 and up
to March 2004, our main business focus has been in the paper manufacturing
market in China and Hong Kong. However, due to changes in the industry and the
inability of our previous management, this business never became profitable and
resulted in losses for us and a significant depletion of shareholders' equity.

         SALE OF ASSETS

         Our board of directors 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. After their review, we determined that it
was not feasible to continue to pursue the earlier objective of building an
integrated paper manufacturer with four principal paper plants.

         On January 26, 2004, we entered into an agreement (the "Agreement")
with Gumption Trading Ltd., a company incorporated in the BVI and Guangzhou
Dransfield Paper Limited, a wholly owned subsidiary of ours. Pursuant to the
Agreement, we sold to Gumption Trading (i) all of the shares of our wholly owned
subsidiaries DF Paper Guangdong Ltd., Guangdong Dransfield Paper Ltd., DF Paper
Jiangsu Limited and Jiangsu Dransfield Paper Co. Ltd., and (ii) all fixed assets
of our subsidiary in Conghua, Guangzhou Dransfield Paper Limited. Guangzhou
Dransfield Paper agreed to lease back these



                                       8
<PAGE>

fixed assets from Gumption Trading for its paper manufacturing operations at a
rent of HK$1.00 per annum for a term of one year, renewable yearly thereafter
upon mutual agreement. For such purchase, Gumption Trading paid to us a nominal
aggregate amount of HK$5 and assumed all of our liabilities, including
liabilities related to such subsidiaries and assets described above, which we
incurred prior to January 28, 2004. We entered into the Agreement primarily to
streamline our operations. In connection with this transaction, we also received
a guarantee from a third party, which guaranteed to us and Guangzhou Dransfield
Paper Ltd. the due payment by Gumption Trading of all sums and charges under the
Agreement and due performance and observance by Gumption Trading of the
Agreement. We also entered into a deed of confirmation with Guangzhou Dransfield
Paper Ltd. and Qindao Haotian Investment Limited to clarify and define the
liabilities of Gumption Trading under the Agreement. This transaction closed on
January 28, 2004.

         In connection with the preparation of this Annual Report on Form 20-F
and after consultation with our legal counsel in the BVI, we were informed that
we should have sought and received shareholder approval under BVI law prior to
entering into the Agreement due to the fact that the combined assets being sold
by us at such time exceeded fifty percent (50%) of our total assets. We have
engaged BVI counsel and U.S. counsel to prepare the documents required to obtain
the approval of our shareholders at a special meeting to ratify the transaction
into which we entered with Gumption Trading. Pursuant to the laws of the BVI,
upon our receiving approval from a majority of our shareholders, the transaction
with Gumption Trading will be ratified and approved as if such shareholder
approval had been received prior to the execution of the Agreement. Section 83
of the International Business Companies Act (Cap. 291) of the BVI provides
dissenters rights for those of our shareholders who held their shares at the
time of this transaction and exercise their right to dissent from the
transaction entitling them to receive fair value for their shares. On November
8, 2004, we filed a report on Form 6-K with the SEC in connection with the
Agreement and the required shareholder approval.

         Our directors have determined to continue manufacturing and selling the
consumer-grade jumbo paper roll products at the Guangzhou facility located in
Conghua. The leased back assets are the basis for our current operating revenue
from our paper manufacturing business, which we believe provides us with a
solid platform for our existing paper manufacturing business.

         PRIVATE PLACEMENTS

         In February 2004, we completed a private placement with seven investors
for 21.5 million shares of our stock at US$0.20 per share or an aggregate amount
of US$4.3 million.

         On October 28, 2004, we received letters from three of the investors in
our February 2004 private placement stating their desire to rescind their
purchase of an aggregate of 11,200,000 shares in light of our subsequent receipt
of a delisting notice from Nasdaq in March 2004. These letters confirmed oral
requests made by these investors earlier in 2004. In March 2004; we established
a fund of RMB20 million (HK$18,843,000 or US$2,417,000) for investment purposes
with Shenzhen International Trust Investment Company, a nationally owned
investment company. As a result of the requests from investors, and for the
purpose of repaying these investors in the event that our board of directors
decided to take such action, the fund of RMB20 million (HK$18,843,000 or
US$2,417,000) was set aside into escrow (the "Escrow") pursuant to the terms of
a loan agreement dated March 26, 2004 between Shenzhen International Trust
Investment Company and an affiliate of ours, China Merchants DiChain Investment
Holdings Ltd. ("China Investment Holdings"). Pursuant to the terms of the loan
agreement, the initial duration of the loan was for one (1) year bearing
interest of 4.8% per year. The Escrow is now being held by China Investment
Holdings and is available to us on demand. All interest earned on the Escrow
remains with China Investment Holdings. DiChain Holdings Ltd., the parent and



                                       9
<PAGE>

owner of all of the capital stock of China Investment Holdings, agreed to
guarantee payment of the Escrow to us should China Investment Holdings fail to
repay the Escrow. Based on the advice of counsel, our board of directors
believes that it does not have a legal obligation under the placement documents
to refund the investors' purchase and at a meeting of the Board held on November
5, 2004, the Board decided to demand repayment of the Escrow as soon as
possible.

         On April 5, 2004, the Company raised US$2.1 million in a private
placement to one investor, Squadram Limited. We believe we are well positioned
to execute our new business strategy.

         THE MERGER OF DFCT AND DICHAIN SOFTWARE

         In February 2004, DICHAIN Software Systems (Shenzhen) Ltd. ("DICHAIN
Software") and our board of directors entered into discussions in connection
with a possible merger of the two companies. After reviewing the proposal, our
board concluded that the addition of DICHAIN Software's business would add
significant value to us in terms of overall revenue, net profit, and net assets.
Consequently, a meeting of our shareholders took place on March 25, 2004 and the
merger was voted on and passed. The merger was completed in May 2004.

         Prior to the merger, DiChain Software was affiliated with us (i)
through two directors, Dr. Fan Di, our Chairman and Chief Executive Officer, and
Aaron Zhu Xiaojun, our Chief Executive Officer and an Executive Director, that
were common to both entities and (ii) through the direct or indirect ownership
of shares of capital stock of both entities by DiChain Holdings Limited. DiChain
Holdings Limited, which is affiliated with China Merchants Group, a large
business conglomerate in China, held approximately 2% of our common stock
through its subsidiary DiChain Systems Ltd. and approximately 68% of the common
stock of DiChain Software prior to the merger.

         On May 25, 2004, we merged with DICHAIN Software. DICHAIN Software is
now a wholly owned subsidiary of ours. The information technology business of
DICHAIN Software has now become our primary business.

         Prior to the issuance of 197,799,000 shares of our stock to the six
shareholders of DICHAIN Software in connection with our merger with DICHAIN
Software, there were 47,670,000 shares of our stock outstanding. The 197,799,000
shares issued represent approximately 78.9% of the 250,619,712 shares now
outstanding after the merger.

         This 78.9% allocation of our common stock to the shareholders of
DiChain Software is consistent with DFCT's and DiChain Software's unaudited
current net asset values in U. S. dollars at the time of the merger, which were
as follows:

<Table>
<S>                                           <C>                         <C>
        DFCT                                  $ 3,970,000                       19.68%
        DiChain Software                      $16,203,000                       80.32%
                                              -----------                 -----------
                 Total:                       $20,173,000                      100.00%
</Table>

ABOUT DICHAIN SOFTWARE

         SUMMARY

         DICHAIN Software is engaged in the business of designing, manufacturing
and selling computer software and hardware products and systems solutions for
the supply chain management and logistics



                                       10
<PAGE>

industry in China. It has 210 employees with headquarters in Shenzhen and
subsidiaries in Shanghai, Beijing, Dalian, Wuhan, Chengdu and Chongqing. It has
300 clients and was rated by the International Data Corporation ("IDC"), a
leading U.S. based IT consulting firm, as one of the leading IT solution
providers in supply chain management and logistics in China in 2002 and 2003.
DICHAIN Software has more than 30 intellectual property patents pending.

         We Believe DICHAIN Software is the first company in China to integrate
GIS (Geographic Information System), GPS (Global Positioning System), wireless
and web technologies to provide complete IT and consultancy solutions for the
supply chain management and logistics operations industry. DICHAIN Software's
products and solutions have been deployed by more than 300 customers in China
and Hong Kong, including some of the largest logistics, manufacturing, and
distribution companies. After our merger with DICHAIN Software, we believe we
are positioned to continue to be a major IT solution provider in China in the
next three to five years.

         DICHAIN Software has strategic alliances with some of the world's
largest companies, including IBM, GE, Oracle, Hewlett Packard, ILOG, DELL,
Motorola, and China Mobile. We believe that these strategic partnerships enhance
our marketing ability. DICHAIN Software is a strategic partner with IBM in China
in the supply chain management and logistics operations industry and was awarded
by IBM as "the Best Value Added Reseller" in 2003. The areas of DICHAIN Software
and the IBM China strategic partnership range from technology exchange to
co-branding and co-marketing.

         DICHAIN Software is headquartered in Shenzhen with subsidiaries in
Shanghai, Beijing, Dalian, Wuhan, Chengdu and Chongqing. DICHAIN Software's main
product line is its DAP(R) ("DICHAIN application platform") series. DAP(R) is
the first domestic IT platform in China designed by applying international
state-of-the-art technologies and modern management concepts into the
standardization of logistics and supply chain management in China.

         DICHAIN Software's revenue is derived from the procurement of hardware
on behalf of its customers, professional services for system development,
including designing, planning, consulting and system integration, system
consultancy services and monthly subscription fees for system services.

OUR INDUSTRIES

         LOGISTICS OPERATIONS AND SUPPLY CHAIN MANAGEMENT

         With China's accession to the WTO, it is expected that more foreign
companies will invest and conduct business in China. This will further boost
international trade, which demands a high level of coordination and control for
optimal efficiency. Faced with increasing foreign competition, domestic Chinese
companies realize that they have to improve their efficiency, flexibility and
responsiveness to market changes in order to maintain their market share. An
efficient dynamic supply chain is regarded as one of the most crucial factors to
maintain or improve competitiveness.

         Companies compete on the basis of their service, which is often largely
determined by a company's ability to deliver product on time. Shortened time
throughout the supply chain process may give a company an advantage over its
competitors. Currently, logistics costs range on average between 30%-40% of
total operating costs. As provided by the Ministry of Transportation of China,
in developed countries with an advanced logistics infrastructure, this logistics
cost is approximately 10% of total costs. By employing integrated solutions that
combine e-logistics technologies and MIS software, Chinese companies can achieve
significant operational efficiencies and cost savings. As a result, a huge
demand for modern logistics has emerged in China. According to the World Bank,
the Chinese logistics market is



                                       11
<PAGE>

expected to grow at 20%-30% per annum over the next five to ten years versus a
global average growth of 10%-15%. The entire Asia Pacific logistics software
market is expected to grow even faster.

         Despite the growing demand of logistics software applications, China
lacks sophisticated infrastructure and advanced technology in the logistics and
supply chain management sector. There is no standardized logistics software
platform available to create a common interface linking logistics systems with
other operational and planning systems.

         A rapid expansion in China's road or land transportation sector demands
a focus on routing efficiencies. It is estimated by the Ministry of
Transportation of China that 60% of the freight capacity in China lies idle,
while its storage capacity is five times that of the U.S. By applying
information technology in managing logistics resources, including trucks, ships
and warehouses, it is believed by the Ministry of Transportation of China that
the freight delivery time between Northern and Southern China can be reduced by
seven to ten days. Consequently, the levels of inventory will decrease,
resulting in the acceleration of capital flow.

         An IDC survey report indicates that the market scale of IT products
consumption in China's logistic industry had already reached RMB1.63 billion in
2003, an increase of 18.1% from 2002. The software related products sales is RMB
320 million, 19.6% of the total market, an increase of 51% from 2002.

         The IDC survey also indicates that many small and mid-sized logistic
enterprises will accelerate their information technology purchases and
installations during the remainder of 2004 through 2008. Most of these purchases
are or will be the first information technology purchases for these companies.
Although, the size of each installation is or may be relatively small, the
Company believes that the total number of enterprise installations will raise
overall market demand.

         The IDC survey predicts that during 2004 through 2008, the IT
application market for China's logistic industry will also continue to develop.
This total market will increase from approximately RMB 700 million to
approximately RMB 1.5 billion.

         PAPER INDUSTRY IN CHINA

         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.

         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.

DICHAIN SOFTWARE'S SOLUTION

         DICHAIN Software provides an integrated, end-to-end logistics solution
for enterprises, transportation companies and logistics centers, such as ports,
airports and rail centers. DICHAIN Software can help manage inventory, track
goods and transport assets as they move to and from the warehouse, capture the
data associated with logistics operations and have the information available to
management for further analysis. DICHAIN Software's solutions are designed to
identify bottlenecks in



                                       12
<PAGE>

the supply chain and to improve efficiency in managing the flow of raw materials
and goods between warehouses, distribution and logistics centers. We believe
DICHAIN Software's solutions will help customers reengineer their logistics
processes by shortening lead-time, quoting reliable delivery dates, and
decreasing idle freight capacity. As a result, logistics costs can be lowered
significantly.

         In addition, DICHAIN Software can help companies link up with their
customers in order to provide better information exchange. We believe that
DICHAIN Software's knowledge of the Chinese market, including a clear
understanding of market trends, the regulatory environment, and customer and
pricing requirements, is a competitive advantage. With this knowledge, DICHAIN
Software is able to offer clients differentiated products and services that are
suitable for use in the Chinese market and which are competitively priced.

         We will continue to develop and extend DICHAIN Software's product and
service offerings to provide customers with comprehensive, advanced and
integrated logistics and supply chain management IT solutions. DICHAIN
Software's IT logistics solutions represent a revolutionary platform for
integrating operational and business planning systems and provide customers with
the following benefits:

         One scalable and adaptable integrated platform

         DICHAIN Software has designed its platform to provide the scalability
necessary to support volume growth in the movement of goods and people in the
shortest period of time. Its software is also adaptable to many computer
systems. In addition, DICHAIN Software can integrate its logistics and supply
chain management platform with its customers' other operational and business
planning systems, as well as their end customers' systems. This will help reduce
data entry redundancy in other applications and improve accuracy. As a result,
customers can have a fully integrated, automated and functional IT platform to
manage their businesses.

         Convenient real-time information accessibility

         DICHAIN Software has successfully applied GPS/GIS technology to its
logistics solutions. Through GIS (Geographic Information Systems) technology,
its customers can track their transportation fleets (e.g. buses, vans, taxis)
instantaneously, either through its web-based or wireless application systems.
This GIS solution also offers auto navigation and visual solutions in warehouse
management and logistics optimization. Our customers can then analyze and
respond quickly to market changes. DICHAIN Software's GPS (Global Positioning
System) solution helps the customers to improve communications and efficiency by
enabling them to better manage their transportation and shipping fleets and
employees.

         Immediate and cost-effective development of solutions

         Based on its proprietary solutions, DICHAIN Software can quickly
customize its logistics solutions to fit its customers' specific needs. Since
DICHAIN Software can spread its research and development costs over a large
installed base, DICHAIN Software is able to offer its solutions at an attractive
price. This enables customers to deploy IT logistics solutions more
cost-effectively than developing these capabilities in-house.

OUR TECHNOLOGY PLATFORM

         The core of DICHAIN Software's applications is its DAP(R) (DICHAIN
application platform) technology. This is the first domestic IT platform in
China designed by applying global, state-of-the-art



                                       13
<PAGE>

technologies and modern management concepts into standardized logistics and
supply chain management. DAP adopts world-class information technologies such as
J2EE (Java 2 Platform, Enterprise Edition), XML/EDI (extensible markup
language), .NET and Internet service and combines with Internet, wireless, GPS
(Global Positioning System), and GIS (Geographical Information Systems) to cover
the supply chain management and logistics industries.

OUR PRODUCTS

TECHNOLOGY RELATED PRODUCTS

         DAP-based software products and solutions are deployed in industries
including, among others, the automobile, tobacco, food and beverage, electric
appliance, garment, chain business, port and pharmacy industries. DAP platform
also integrates with the information systems at customs, banks, and tax
authorities.

         Through our DAP(R) technology, we have products to serve a variety of
applications and industries. Our products are:

         o        DAP(R) Container Ports Operation System;

         o        DAP(R) Logistic Plan System;

         o        DAP(R) Warehouse Management System;

         o        DAP(R) Transportation Management System;

         o        DAP(R) Distribution Resource Planning System; and

         o        DAP(R) Office Automation System.

         DAP(R) CONTAINER PORTS OPERATION SYSTEM ("DAP CTOS")

         Based on modern shipping industry standards and requirements, DAP CTOS
is designed and developed to ensure that the operation of a port can meet the
ever changing challenges ports face, both now and in the future. DAP CTOS covers
all aspects of control, operations, planning and management of container
terminals. From trucking and rail operations, berthing, loading, and discharging
to management and control, DAP CTOS is the all-in-one solution for terminal
operators. Various interfaces provide seamless, integrated access to information
from clients and suppliers.

         Functions and Features

         DAP CTOS has the following functions and features that we believe give
it a competitive advantage over other technologies:

         o        Modularized design, flexible interface and scalable;

         o        Graphic interfaces, intuitive and simple to use;

         o        Standardized operational procedures and real-time data
                  sharing;

         o        Powerful graphical planning function;

         o        Extensive inquiring and analysis; and

         o        Unified security system.



                                       14
<PAGE>

         DAP(R) LOGISTIC PLAN SYSTEM ("DAP LPS")

         DAP LPS is designed for complex logistics operations with multi-level
distribution centers to maximize all resources of a logistics network. DAP LPS
seamlessly integrates GPS, Barcode, radio frequency and other modern logistics
technologies.

         Functions and Features

         DAP LPS's main functions and features are:

         o        Seamless connectivity with ERP (enterprise resource planning),
                  DRP (distribution resource planning) and SCM (supply chain
                  manager) supporting online order entry and order tracking; and

         o        Automatic order division function where users can freely set
                  different logistics solutions and order division parameters
                  according to their specific requirements.

         DAP(R) WAREHOUSE MANAGEMENT SYSTEM ("DAP WMS")

         DAP WMS offers complete warehouse management solutions. It is designed
for managing multiple warehouse locations. DAP WMS maximizes warehouse space
utilization as well as warehouse equipment efficiency. It enables users to
optimally allocate space for various products on its graphic warehouse rack
space. The system's paperless operations process greatly reduces the margin of
error and increases operation performance.

         Functions and Features

         DAP WMS:

         o        Supports VIM (vendor inventory manager), and QR (quick
                  response) and ECR (effective customer response);

         o        Enables planned cycle counting and random counting;

         o        Has user-defined functions for stocking a warehouse, for
                  setting maximum and minimum inventory levels, for order
                  placements and for tracking back-ordered goods; and

         o        Supports radio frequency and Barcode technologies.

         DAP(R) TRANSPORTATION MANAGEMENT SYSTEM ("DAP TMS")

         DAP TMS integrates GPS, GIS and wireless communication technology. DAP
TMS is capable of managing and tracking truck fleets in real-time. DAP TMS
utilizes ILOG's optimization components, offering routing optimization planning
solutions resulting in maximized fleet utilization and reduced capital assets
expenditure.

         Functions and Features

         DAP TMS's main functions and features:

         o        Enables route optimization and fleet utilization maximization;

         o        Supports multiple transport dispatch modes;



                                       15
<PAGE>

         o        Integrates seamlessly with GIS/GPS systems, to enable
                  real-time vehicle tracking;

         o        Supports TL (Truck Load), LTL (Less-Than-Truck Load), and
                  Container Tray transportation types; and

         o        Assists in managing vehicles in a fleet to optimize
                  efficiencies.

         DAP(R) DISTRIBUTION RESOURCE PLANNING SYSTEM ("DAP DRP")

         DAP DRP collects data from entire supply chain and sales channels to
assist in information flow. The system can manage various parties throughout a
distribution channel according to each party's individual profile. DAP DRP can
collect real-time information on inventory, orders, and sales of products from
various distribution channel points. This greatly enhances a businesses ability
to manage its inventory and respond quickly to market needs.

         Functions and Features

         DAP DRP's functions and features offer:

         o        Complete pricing system and pricing policy administration;

         o        Flexible operation flow control;

         o        Timely query of stock, marketing and financial information;
                  and

         o        Management of sales promotion.

         DAP(R) OFFICE AUTOMATION SYSTEM ("DAP OAS")

         DAP OAS manages email, examination and approval flow and documents. It
offers security and a user-friendly desktop interface. By deploying DAP OAS, the
client can optimize its back-end office support and decision making processes.

         Functions and Features

         DAP OAS's main functions and features enable:

         o        Voice mail messaging management and records management;

         o        Security;

         o        Telephone recording, data management and vehicle management;

         o        Business-to-business service arrangements, activity guides and
                  telephone directories; and

         o        Human resource management, recruitment and personal profiles.

PAPER PRODUCTS

         We produce and market consumer-grade hygienic tissue products that we
create by converting jumbo tissue rolls. 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. In the past, the
converting facility had experienced difficulty in locating consistent supplies
of domestic jumbo tissue rolls that met the quality and cost criteria for our
intended markets. Quality imports were available,



                                       16
<PAGE>

but high prices and import duties made such imports cost-prohibitive. In 2004,
we were able to secure quality supplies of jumbo tissue rolls in China, which
improved the quality of our products.

COMPETITION

SOFTWARE SOLUTIONS

         Software implementation in China has been cumbersome and many projects
require extensive customization and integration. Even though software licenses
are sold, supply-chain planning software companies have acted more as service
consultants and have yet to realize their target level of return from their
investments.

         Our competition in China can be divided into two groups: domestic
companies and international companies.

         In China, our domestic competition can be sub-divided into two groups:
large domestic companies such as Topsoft, Dongda, Founders, UFSoft, and Kingdee
and small- to medium-sized companies such as eGistics, Yuanwang Software,
PanChina, and AsiaBridge. We seek to compete with the large domestic companies
in our industry by focusing on our strength as a project-oriented company that
can provide services tailored to meet a customer's needs. We seek to compete
with small- to medium-sized companies in our industry by levering our economies
of scale. Our GIS/GPS/Wireless and Web integrated platforms enable seamless
integration across different systems of our customers, which we believe provides
us with a competitive advantage.

         We also complete with international companies in the supply chain
management and logistics software industry in China. International companies,
including SAP, Oracle, Manhattan Associates, have already established their
operations in China. Most of the international companies in our industry in
China target primarily subsidiaries of foreign-owned corporation operating in
China, which differs from our target market. Although our international
competitors have advanced technologies, we believe that their products are
generally more expensive than ours. We also believe that we have a competitive
advantage over these international companies because of our localized technical
support.

         The manufacturing and selling of computer software and hardware
products and systems solutions for the supply chain management and logistics
industry in China is characterized by rapidly evolving technology and intense
competition. Many companies of all sizes, including large companies located in
China, are engaged in this industry. Many of our competitors have substantially
greater financial and other resources, larger research and development staffs
and more experience in servicing this industry than we do. Moreover, potential
competitors have or may have patents or other rights that we may require in
order to remain competitive in the future.

PAPER MANUFACTURING

         In the past, our main competitors were mainly Chinese companies.
Starting in 2001, companies from the United States, Europe and Taiwan have
entered into the paper manufacturing industry in China. Most of these new
competitors have greater financial resources than we do, and they possess the
capability of vertical integration in the paper manufacturing process, from raw
material to final products. This vertical integration gives them a competitive
advantage, enabling them to better control their costs of raw materials and
assure high quality products.



                                       17
<PAGE>

         Chinese domestic paper manufacturing companies have been making efforts
to extend their market reach in both wholesale and retail markets. Most of the
paper-making companies are located in southern China. These companies have
established sale networks across China.

         Facing both domestic and international competition, our strategy is to
improve our supply chain management and extend our sales in Hong Kong and Macau,
where only a few China-based companies are currently marketing their products.
Many of our competitors in the paper manufacturing industry are larger than we
are and have substantially greater financial and other resources than we do.

STRATEGIES

         Our objective is to become one of the largest supply chain management
and logistics solution providers in China by providing state-of-the art
technologies and complete application solutions and services. The strategy to
achieve this objective includes the following key elements:

         CONTINUE TO DEVELOP TECHNOLOGY, STANDARDIZE ITS PRODUCTS AND PROTECT
INTELLECTUAL PROPERTY

         We intend to continue developing advanced products and technologies to
provide clients with total solutions. In order to achieve this, we plan to
establish an open architecture platform, expand GIS/GPS wireless applications,
improve integration and continue to build technology on both J2EE and .NET dual
platforms. By creating standardized modular applications, we will be able to
reduce development costs, as well as offer rapid system deployment and
implementation to clients. We also intend to continue developing our hardware
technology and to develop and standardize platform and modular products so as to
set industry standards and secure a leading position in the market.

         INCREASE BUSINESS CAPACITY THROUGH ADDITION AND RETENTION OF HIGH
QUALITY WORKFORCE

         We have assembled an outstanding group of domestic and international
professionals with experience in the logistics, supply chain management, and IT
industries. To grow our software development and consulting capabilities, we
intend to retain and recruit more local and foreign IT professionals and
experienced logistics and supply chain management experts. To retain and
motivate our staff we intend to offer advanced training, and monetary
performance and other incentives. By expanding our team of experts, we believe
we can provide our clients with more advanced end-to-end solutions.

         ESTABLISH AND REINFORCE STRATEGIC RELATIONSHIPS IN TECHNOLOGY AND
MARKETING

         We have collaborated with other information technology companies. We
believe we have received favorable terms for licensing key technologies from our
strategic partners and leveraging our existing network and service capabilities
to offer a wide range of logistics system solutions. We plan to work with other
companies for certain projects to boost marketing efforts and reach new clients.
Additionally, through our sales channel partners such as local distributors, we
intend to establish a presence throughout China and leverage our local market
knowledge. We intend to continue to enhance our technology and products, and to
promote our solutions by partnering with other technology, software, and third
party logistics companies.

         CONTINUE TO ENHANCE OUR EXPERTISE IN THE LOGISTICS DOMAIN AND CHINESE
MARKET

         We have acquired in-depth knowledge of the logistics industry and local
market through our team of experienced logistics experts and local
professionals. In order to further understand our clients' needs and foresee
emerging market trends, we intend to continue to improve our logistics domain
expertise and



                                       18
<PAGE>

local market intelligence. We plan to leverage our knowledge in logistics and
the PRC market to develop better products that will meet the precise
requirements and usage standards of our clients.

         We plan to sustain the paper-making business in the following areas:

         o        Improve our existing production and business operations;

         o        Expand our sales and marketing channels; and

         o        Reduce raw material and production costs.

         We will not continue our paper pulps (raw paper) making business, most
of which we have sold to Gumption Trading. We will continue manufacturing and
selling our consumer-grade tissue products at our facility located in Conghua.
In connection with this business, we plan to:

         o        Maintain the existing facilities and equipment and to increase
                  the production lines efficiency;

         o        Expand our sales and marketing channels by adding more sales
                  staff as well as establishing more channel agencies to sell
                  our products; and

         o        Improve our raw material procurement in the areas of cost,
                  quality and availability. We are actively seeking alternative
                  raw material sources both in China and in the international
                  markets. We believe that reducing raw material costs will
                  contribute to net profits.

SALES AND MARKETING

         We sell our products and services through our own branch offices across
China as well as through partner channels. Currently, we have eight branch
offices in the eight largest cities in China. We conduct product promotion road
shows and participate in industry trade shows. We also advertise in industry
media and over the Internet, and use direct mailings and electronic mailings.

         Currently, our sales and marketing teams operate from offices in
Beijing, Shanghai and Shenzhen. The teams' responsibilities include brand
establishment, preparation and distribution of marketing materials, organization
of promotional events, advertising, media and public relations and market
research and analysis.

         Our sales and marketing teams first conduct a thorough industry
analysis and carefully identify the target customers in specific market
segments. Each sales representative is responsible for a list of target
customers, and they analyze the customer profile and identify potential issues
in their logistics functions. The sales and marketing teams also share customer
intelligence used in the marketing process with the research and development
team in order to forecast technology trends and to generate new system solutions
for our clients.

         In addition to our marketing efforts, our sales staff works closely
with our product requirement and technical development team as well as industry
consultants. The sales staff's responsibilities include preparation and
submission of technical and solution proposals to prospective customers. They
pay regular visits to customers' sites, gather information on customers'
requirements, business and operational flow, and then work with the research and
development team to generate system solutions and proposals accordingly.



                                       19
<PAGE>

         We use both traditional and Internet media in our sales and marketing
efforts, as well as client referrals. We market ourselves using promotional
activities such as telephone calls to prospective and existing customers, direct
customer visits and contract negotiations. We also engage systems distributors
to represent us in solutions sales. Furthermore, we have established Internet
portal links and information and promotional relationships with key industry web
portals.

         We market our jumbo roll paper products through our sales staff, which
is currently comprised of four persons. Each sales person has a specific market
territory and client base. Our sales staff is responsible for generating new
sales from our existing customers as well as generating new customer accounts.
The majority of our customers for our jumbo roll paper products are located in
the southern part of China and in Hong Kong.

         For our software, sales revenue in the first half of a fiscal year is
generally slower as compared to the second half of a fiscal year. Typically, we
generate a majority of our sales revenue during the last quarter of a fiscal
year. Our jumbo roll paper business is not seasonal.

NASDAQ DELISTING

         In March 2004, we received a letter from the Nasdaq Listing
Qualifications Department indicating that we were subject to being delisted off
of The Nasdaq Small Cap Market because of our failure to comply with Nasdaq
Marketplace Rules 4320(e)(2)(B) and 4350(i)(1)(D)(ii). Rule 4320(e)(2)(B)
requires a company to have a minimum of $2,500,000 of shareholders' equity. Rule
4350(i)(1)(D)(ii) requires shareholder approval when a company issues more than
20% of its shares at a discounted price.

         We requested an oral hearing before the Nasdaq Listing Qualifications
Panel (the "Panel") to review the determination reached by the Nasdaq Listing
Qualifications Department. Under applicable rules, the hearing request stayed
the delisting of our common stock off of The Nasdaq Small Cap Market, pending a
decision by the Panel. Prior to the hearing, we presented a plan to the Panel
for achieving and sustaining compliance with Marketplace Rule 4320(e)(2)(B) and
we sought to comply with Marketplace Rule 4350(i)(1)(D)(ii).

         The hearing was held on April 22, 2004 in Washington, D.C. On May 21,
2004, the Company received a notification letter from counsel for the Nasdaq
Listing Qualifications Department stating that our common stock would be
delisted from The Nasdaq SmallCap Market effective as of the open of business on
Tuesday, May 25, 2004. On such date, our common stock was listed on the OTCBB
under the symbol "DFCT".

         In May 2004, our board sought to comply with newly-adopted SEC and
Nasdaq requirements regarding independent directors and corporate governance. We
increased the size of our board of directors to nine, including four executive
directors and five independent directors. We also created an audit committee
consisting of three independent directors with accounting, business and legal
backgrounds. We also adopted several corporate governance policies in order to
have greater transparency in our corporate practices and to increase management
accountability, including adopting corporate governance guidelines, an Audit
Committee Charter, a Code of Ethics for our Chief Executive Officer and our
Senior Financial Officers, employee compliance procedures for accounting and
auditing matters, a Compensation Committee Charter and a Nominating Committee
Charter.

         On June 7, 2004, after our merger with DICHAIN Software, we filed an
initial listing application to list our common stock on The Nasdaq SmallCap
Market. On August 17, 2004, we received a letter



                                       20
<PAGE>

from Nasdaq Listing Qualifications Department denying our application for
listing. On August 23, 2004, we filed an application for another hearing in
front of the Panel. We engaged the law firm of Loeb & Loeb LLP in New York to be
our new corporate counsel. The hearing was held on September 30, 2004 in
Washington, DC. At the time of filing this annual report, we have not received a
response from the Nasdaq regarding such hearing. We received a letter dated
November 4, 2004 from the Nasdaq Listing Qualifications Department regarding our
late filing of this Annual Report on Form 20-F. We responded to this letter and
have filed this Annual Report accordingly.

ORGANIZATIONAL STRUCTURE

         We are part of a group of companies. At the top of this group is
DICHAIN Holdings Ltd. DICHAIN Holdings Ltd. has a 55.11% interest in China
Merchants DiChain (Asia) Ltd., which has a wholly-owned subsidiary Dransfield
Holdings Ltd. that currently has a 2.3% interest in us. Prior to our merger with
DICHAIN Software, DICHAIN Holdings' wholly-owned subsidiary, DICHAIN Systems
Ltd., held a 68% interest in DICHAIN Software. Following the merger, DICHAIN
Software became our wholly-owned subsidiary and DICHAIN Systems Ltd. became a
majority holder of our shares.

         A list of our significant subsidiaries is set forth below:

<Table>
<Caption>
                                                            Country of
        Name of subsidiary                                  incorporation          Proportion of ownership
        ------------------                                  -------------          -----------------------
<S>                                                         <C>                   <C>

        DiChain Software Systems (Shenzhen)                 The PRC                100%
           Limited
        Dransfield Paper (Hong Kong) Trading                Hong Kong              100%
           Limited
        Guangzhou Dransfield Paper Ltd.                     The PRC                100%
</Table>

         Since the sale of our subsidiaries and assets we have been using leased
facilities and equipment for our paper manufacturing operations. These
facilities and equipment are used to convert jumbo tissue rolls into
consumer-grade hygienic tissue products. Our paper business is operating, on
average, at approximately 30% of our existing capacity. We believe that there
are no environmental issues related to our paper manufacturing business or our
software business. We currently have no plans to construct any new facilities
for our businesses.

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 in "Item 18. Financial Statements."

OVERVIEW

         The following discussion should be read in conjunction with "Item 3.
Key Information - Selected Financial Data" and our audited financial statements
and the notes thereto included elsewhere in this Annual Report.

         Certain vertical integration activities are reflected in the statements
of operation and cash flows for the fiscal years ended March 31, 2002, 2003 and
2004.



                                       21
<PAGE>

         The following is a summary of the impairment loss of property, plant
and equipment by category for the fiscal years ended March 31, 2002, 2003 and
2004:

<Table>
<Caption>
 Paper Manufacturing   Leasehold land and buildings   Machinery and equipment
 -------------------   ----------------------------   -----------------------
                         US$'000        HK$'000        US$'000        HK$'000
<S>                    <C>              <C>           <C>            <C>
        2002                 --             --          1,018          7,939
        2003                 --             --         12,537         97,792
        2004                 --             --             --             --
</Table>

         The following is a summary of the loss on disposal of fixed assets by
category for the fiscal years ended March 31, 2002, 2003 and 2004:

<Table>
<Caption>
 Paper Manufacturing                 Machinery and equipment
 -------------------                 -----------------------
                                     US$'000        HK$'000
<S>                                  <C>           <C>
        2002                             --             --
        2003                             --             --
        2004                          2,500         19,500
</Table>

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, 2004:

<Table>
<Caption>
Year ended March 31                             2002             2003             2004
                                             ----------       ----------       ----------
<S>                                          <C>              <C>              <C>
Sales                                               100%             100%             100%
Cost of sales                                     (82.4)           (75.4)           (87.6)
                                             ----------       ----------       ----------
Gross Margin                                       17.6             24.6             12.4
                                             ----------       ----------       ----------
Selling, general and administrative
     expenses                                    (103.1)           (94.9)          (193.7)
Other incomes and expenses, net                  (188.3)        (1,782.3)          (662.3)
                                             ----------       ----------       ----------
                                                 (291.4)        (1,877.3)          (856.0)
                                             ----------       ----------       ----------
Net loss                                         (273.8)        (1,852.7)          (843.6)
                                             ----------       ----------       ----------
</Table>



                                       22
<PAGE>
FISCAL YEAR ENDED MARCH 31, 2004 COMPARED WITH THE FISCAL YEAR ENDED MARCH 31,
2003.

SALES

         DFCT's sales in fiscal 2004 were HK$4.1 million (US$530,000) compared
with HK$5.5 million (US$704,000) in fiscal 2003. The decrease in sales was due
to DFCT's decision to exit from trading packaging grade papers.

GROSS MARGIN

         The Company achieved a gross margin of HK$512,000 (US$66,000) in fiscal
year 2004 as compared to HK$1.3 million (US$173,000) in fiscal year 2003 as a
result of the streamlining of its paper business.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

         Selling, general and administrative expenses for fiscal 2004 were
HK$8.0 million (US$1,026,000) compared with HK$5.2 million (US$668,000) in
fiscal 2003. The increase in expenses in fiscal 2004 was due to an increase in
fees of HK$2.2 million charged by a related party for providing management
services to the Company during fiscal 2004.

INTEREST EXPENSE, NET

         There was no interest income in fiscal 2004 and 2003. DFCT currently
has no interest bearing liabilities.

OTHER INCOME AND EXPENSES, NET

         DFCT had other income, net in fiscal 2004 of HK$218,000 (US$28,000)
compared with HK$26,000 (US$3,333) of other income, net in fiscal 2003. This
other income was mainly the result of the sale of scrap materials from DFCT's
paper business.



                                       23
<PAGE>

NET LOSS

         Net loss from ordinary activities attributable to shareholders was
HK$34.8 million (US$4.4 million) in fiscal 2004 compared to HK$101.7 million
(US$ 13.0 million) in fiscal 2003. A breakdown of our net loss this year is
provided below:

<Table>
<Caption>
NON-RECURRING ITEMS

                      HK$ Millions       US$ Millions     Explanation
<S>                   <C>                <C>              <C>
                          19.5                2.5         Loss on disposal of fixed assets
--------------------------------------------------------------------------------------------------------
                          (0.1)              (0.0)        Gain on dissolution of dormant subsidiaries
--------------------------------------------------------------------------------------------------------
                           8.0                1.0         Loss on disposal of subsidiaries
--------------------------------------------------------------------------------------------------------
Sub-total                 27.4                3.5
--------------------------------------------------------------------------------------------------------
RECURRING ITEMS

                           0.6                0.1         Corporate expenses for maintaining our listing
                           1.4                0.1         Depreciation
--------------------------------------------------------------------------------------------------------
Sub-total                  2.0                0.2
--------------------------------------------------------------------------------------------------------

                           5.4                0.7         Operational losses

--------------------------------------------------------------------------------------------------------
TOTAL                     34.8                4.4
========================================================================================================
</Table>

Items not affecting cash flow in fiscal 2004

<Table>
<Caption>
                       HK$ Millions      US$ Millions     Explanation
<S>                   <C>                <C>              <C>
                            1.4               0.1         Depreciation
                           19.5               2.5         Loss on disposal of fixed assets
                            8.0               1.0         Loss on disposal of subsidiaries
--------------------------------------------------------------------------------------------------------
TOTAL                      28.9               3.6
========================================================================================================
</Table>



                                       24
<PAGE>

A breakdown of our net loss in fiscal 2003 is provided below:

<Table>
<Caption>
NON-RECURRING ITEMS

                       HK$ Millions      US$ Millions     Explanation
<S>                    <C>               <C>              <C>
                           97.8              12.5         Fixed asset provision for the potential decline in value of two
                                                          unfinished paper mills and idle machineries in plant at Conghua.
                           (1.2)             (0.2)        Gain from long-term outstanding liabilities being remote to pay
--------------------------------------------------------------------------------------------------------------------------
Sub-total                  96.6              12.3
--------------------------------------------------------------------------------------------------------------------------

RECURRING ITEMS
                            0.7               0.1         Corporate expenses for maintaining our listing
                            2.0               0.3         Depreciation
--------------------------------------------------------------------------------------------------------------------------
Sub-total                   2.7               0.4
--------------------------------------------------------------------------------------------------------------------------

                            2.4               0.3         Operational losses due to insufficient turnover

--------------------------------------------------------------------------------------------------------------------------
TOTAL                     101.7              13.0
==========================================================================================================================
</Table>

Items not affecting cash flow in fiscal 2003

<Table>
<Caption>
                       HK$ Millions      US$ Millions     Explanation
<S>                    <C>               <C>              <C>
                           97.8              12.5         Fixed asset provision for the potential decline in value of two
                                                          unfinished paper mills and idle machineries in plant at Conghua.
                            2.0               0.3         Depreciation
                           (1.2)             (0.2)        Gain from long-term outstanding liabilities
--------------------------------------------------------------------------------------------------------------------------
Total                      98.6              12.6
==========================================================================================================================
</Table>

FISCAL YEAR ENDED MARCH 31, 2003 COMPARED WITH THE FISCAL YEAR ENDED MARCH 31,
2002.

SALES

         DFCT's sales in fiscal 2003 were HK$5.5 million (US$704,000) compared
with HK$6.6 million (US$846,000) in fiscal 2002. The decrease in sales was due
to the Company's decision to exit from trading packaging grade papers and the
reduction in sales due to limited working capital.



                                       25
<PAGE>

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 sales of higher margin products
and purchasing materials at a lower cost compared to 2002. Gross profit for
fiscal 2002 was HK$1.16 million (US$149,000).

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

         Selling, general and administrative expenses for fiscal 2003 were
HK$5.2 million (US$668,000) compared with HK$6.8 million (US$872,000) in fiscal
2002. The decrease in expenses in fiscal 2003 was due to tighter expense
controls and a reduction in overhead costs.

INTEREST EXPENSE, NET

         There was no interest income in fiscal 2003 and 2002. DFCT currently
has no interest bearing liabilities.

OTHER INCOME AND EXPENSE, NET

         DFCT had other income, net of HK$26,000 (US$3,333) in fiscal 2003 as
compared with other income, net in fiscal 2002 of HK$166,000 (US$21,282). The
other income, net in fiscal 2003 was received from a subsidiary and is not
expected to recur.

NET LOSS

         Net loss from ordinary activities attributable to shareholders was
HK$101.7 million (US$ 13.0 million) in fiscal 2003 compared to HK$18.1 million
(US$2.3 million) in fiscal 2002. A breakdown of DFCT's net loss for fiscal 2003
is provided below:

<Table>
<Caption>
A breakdown of our net loss in fiscal 2003 is provided below:

NON-RECURRING ITEMS

                       HK$ Millions       US$ Millions     Explanation
<S>                    <C>               <C>              <C>
                           97.8              12.5          Fixed asset provision for the potential decline in value of
                                                           two unfinished paper mills and idle machineries in plant at
                                                           Conghua.
------------------------------------------------------------------------------------------------------------------------
                           (1.2)             (0.2)         Gain from long-term outstanding liabilities
------------------------------------------------------------------------------------------------------------------------
Sub-total                  96.6              12.3
------------------------------------------------------------------------------------------------------------------------
</Table>



                                       26
<PAGE>

<Table>
<Caption>
RECURRING ITEMS

<S>                    <C>               <C>              <C>
                            0.7               0.1          Corporate expenses for maintaining our listing
------------------------------------------------------------------------------------------------------------------------
                            2.0               0.3          Depreciation
------------------------------------------------------------------------------------------------------------------------
Sub-total                   2.7               0.4
------------------------------------------------------------------------------------------------------------------------

------------------------------------------------------------------------------------------------------------------------
                            2.4               0.3          Operational losses due to insufficient turnover
------------------------------------------------------------------------------------------------------------------------

------------------------------------------------------------------------------------------------------------------------
TOTAL                     101.7              13.0
========================================================================================================================
</Table>

Items not affecting cash flow in fiscal 2003

<Table>
<Caption>
                       HK$ Millions       US$ Millions     Explanation
<S>                    <C>               <C>              <C>
                           97.8              12.5          Fixed asset provision for the potential decline in value of
                                                           two unfinished paper mills and idle machineries in plant at
                                                           Conghua.
------------------------------------------------------------------------------------------------------------------------
                            2.0               0.3          Depreciation
------------------------------------------------------------------------------------------------------------------------
                           (1.2)             (0.2)         Gain from long-term outstanding liabilities
------------------------------------------------------------------------------------------------------------------------
                           98.6              12.6
========================================================================================================================
</Table>

A breakdown of our net loss in fiscal 2002 is provided below:

<Table>
<Caption>
NON-RECURRING ITEMS

                      HK$ Millions        US$ Millions     Explanation
<S>                    <C>               <C>              <C>
                           7.9                1.0          Fixed asset provision for the potential decline in value of
                                                           two unfinished paper mills and idle machineries in plant at
                                                           Conghua.
------------------------------------------------------------------------------------------------------------------------
Sub-total                  7.9                1.0
------------------------------------------------------------------------------------------------------------------------

RECURRING ITEMS

                            0.7               0.1          Corporate expenses for maintaining our listing
------------------------------------------------------------------------------------------------------------------------
                            1.6               0.2          Depreciation
------------------------------------------------------------------------------------------------------------------------
Sub-total                   2.3               0.3
------------------------------------------------------------------------------------------------------------------------

------------------------------------------------------------------------------------------------------------------------
                            7.9               1.0          Operational losses
------------------------------------------------------------------------------------------------------------------------

------------------------------------------------------------------------------------------------------------------------
TOTAL                      18.1               2.3
========================================================================================================================
</Table>



                                       27
<PAGE>

Items not affecting cash flow in fiscal 2002

<Table>
<Caption>
                       HK$ Millions       US$ Millions     Explanation
<S>                    <C>               <C>              <C>
                           7.9                1.0          Fixed asset provision for the potential decline in value of
                                                           two unfinished paper mills and idle machineries in plant at
                                                           Conghua
------------------------------------------------------------------------------------------------------------------------
                           1.6                0.2          Depreciation
------------------------------------------------------------------------------------------------------------------------
                            --                 --          Gain from long-term outstanding liabilities
------------------------------------------------------------------------------------------------------------------------
Total                      9.5                1.2
========================================================================================================================
</Table>

         The net loss in fiscal 2002 was primarily due to operating losses of
HK$3.29 million due to lower sales and corporate expenses of HK$0.6 million
(US$0.08 million). The following items did not affect cash flow in fiscal 2002:
HK$7.94 million (US$1.02 million) for fixed asset provisions for the potential
decline in the valuation of our unfinished paper mills and HK$4.59 million
(US$0.59 million) from the loss in equity of an affiliate.

BALANCE SHEET ITEMS

         Significant changes to several balance sheet items occurred from fiscal
years 2003 to 2004 were:

         o        a decrease in fixed assets from HK$33.7 million (US$4.3
                  million) to HK$15,000 (US$2,000) reflecting the disposal of
                  fixed assets from the DFCT group to Gumption Trading Limited
                  in pursuant to the agreement dated January 26, 2004; and

         o        an increase in shareholders' equity from HK$19.9 million
                  (US$2.6 million) to HK$32.6 million (US$4.2 million) through
                  private placements and exercise of stock options of the
                  Company.

LIQUIDITY AND CAPITAL RESOURCES

         We had negative cash flows from operations of HK$6,489,000
(US$832,000), HK$787,000 (US$101,000) and HK$1,230,000 (US$158,000) in fiscal
years 2004, 2003, and 2002, respectively. The 2004, 2003 and 2002 net cash
outflows were all due to operating losses incurred for the paper mill in
Conghua.

         Net cash outflow used in investing activities was HK$18,881,000
(US$2,421,000) in 2004 and HK$3,000 (US$384) in 2003. Cash flow outlay for fixed
asset investments was insignificant in FY 2004 and 2003. Proceeds from disposal
of fixed assets were HK$1 for fiscal year 2004 and HK$0 for fiscal year 2003.

         Net cash inflow from financing activities was HK$41,657,000
(US$5,341,000) and HK$730,000 (US$94,000) in fiscal 2004 and 2003 respectively.
The net cash inflow was mainly the result of the Company's issuance of its
common stock during fiscal 2004 totalling HK$39,084,000 (US$5,011,000).

         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 - Litigation."



                                       28
<PAGE>

         As of March 31, 2004, we had working capital of approximately
HK$16,343,000 (US$2,095,000) representing cash and cash equivalents. We believe
that our working capital is sufficient for our present requirements for the next
12 months. After this time, we may need to raise additional funds through public
or private financing, which may include the sale of equity securities.

         In February 2004, we completed a private placement with seven investors
for 21.5 million shares of our stock at US$0.20 per share or an aggregate amount
of US$4.3 million.

         On October 28, 2004, we received letters from three of the investors in
our February 2004 private placement stating their desire to rescind their
purchase of an aggregate of 11,200,000 shares in light of our subsequent receipt
of a delisting notice from Nasdaq in March 2004. These letters confirmed oral
requests made by these investors earlier in 2004. In March 2004, we established
a fund of RMB20 million (HK$18,843,000 or US$2,417,000) for investment purposes
with Shenzhen International Trust Investment Company, a nationally owned
investment company. As a result of the requests from investors, and for the
purpose of repaying these investors in the event that our board of directors
decided to take such action, the fund of RMB20 million (HK$18,843,000 or
US$2,417,000) was set aside into escrow (the "Escrow") pursuant to the terms of
a loan agreement dated March 26, 2004 between Shenzhen International Trust
Investment Company and an affiliate of ours, China Merchants DiChain Investment
Holdings Ltd. ("China Investment Holdings"). Pursuant to the terms of the loan
agreement, the initial duration of the loan was for one (1) year bearing
interest of 4.8% per year. The Escrow is now being held by China Investment
Holdings and is available to us on demand. All interest earned on the Escrow
remains with China Investment Holdings. DiChain Holdings Ltd., the parent and
owner of all of the capital stock of China Investment Holdings, agreed to
guarantee payment of the Escrow to us should China Investment Holdings fail to
repay the Escrow. Based on the advice of counsel, our board of directors
believes that it does not have a legal obligation under the placement documents
to refund the investors' purchase and at a meeting of the Board held on November
5, 2004, the Board decided to demand repayment of the Escrow as soon as
possible.

         At March 31, 2004, we did not have any financial instruments nor did we
have any borrowings or any outstanding debt. As of the filing of this Annual
report, we do not have any financial instruments or borrowings or any
outstanding debt. The Company holds its cash and cash equivalents in Hong Kong
dollars and RMB. We do not use any financial instruments for hedging purposes.

         The Company did not have any material commitments for capital
expenditures as of March 31, 2004 and it does not have any material commitments
as of the filing of this Annual Report.

RESEARCH AND DEVELOPMENT

         The Company has not incurred any significant research and development
expenses.

CONVERSIONS OF DEBT TO EQUITY

         On June 11, 2003, the management converted accumulated advances from
Dransfield Holdings totaling HK$5.7 million into common stock of the Company
resulting from 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 former employees of the Company as full and final settlement
of the arrears of salaries brought forward from previous years.



                                       29
<PAGE>

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 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 March 31, 2003. Management does not expect the adoption of this
Interpretation to have a material impact on the Company's financial position or
results of operations.

         In April 2003, the FASB issued SFAS No. 149, "Amendment of Statement
133 on Derivative Instruments and Hedging Activities" that amends and clarifies
accounting for derivatives instruments, including certain derivative instruments
embedded in other contracts, and for hedging activities under Statement 133.
With certain exceptions, SFAS No, 149 is effective for contracts entered into or
modified after June 30, 2003, and for hedging relationships designed after June
30, 2003. Management does not expect the adoption of this standard to have a
material impact on the Company's financial position or results of operations.

         In December 2003, the FASB issued Interpretation No. 46R, a revision to
Interpretation No. 46, "Consolidation of Variable Interest Entities.", which
addresses how a business enterprise should evaluate whether it has a controlling
financial interest in an entity through means other than voting rights and
accordingly should consolidate the entity. Interpretation No. 46R clarifies some
of the provisions of Interpretation No. 46 and exempts certain entities from its
requirements. Interpretation No. 46R is effective at the end of the first
interim period ending March 15, 2004. Management does not expect the adoption of
this statement to have a material impact on the Company's financial position or
results of operations.



                                       30
<PAGE>

TREND INFORMATION

PAPER BUSINESS

         The trend in the paper manufacturing industry in China is moving toward
specialized market segments and away from one company manufacture multiple lines
of paper products. Companies are positioning themselves into specific market
segments, such as office papers, domestic tissue papers, and out-of-home use
papers, among others. The paper manufacturing industry in China is also
experiencing consolidation through mergers and acquisitions, with smaller
companies being merged into or acquired larger companies. The paper
manufacturing industry in China is generally stable throughout the year and does
not experience seasonality. We believe that rising costs of utilities and
transportation will impact our profitability in fiscal 2005.

SOFTWARE BUSINESS

         The supply chain management and logistics software business in China is
generally seasonal in nature. Revenues in the first six months of each calendar
year are flat. Typically, the revenue of the last quarter of each calendar year
accounts for over 40% of the revenue for the entire year.

         The supply chain management and logistics software business in China is
experiencing a period of rapid growth due to an increase in demand for
information management systems by manufacturing and distribution businesses to
improve such businesses operating efficiency and productivity. According to the
Industry Report of 2004 of the Ministry of Information and Technology of the
People's Republic of China, demand for information management systems by small-
to medium-sized companies has grown even faster than the industry average. We
believe this trend will positively influence our operating results in the
future.

CONTRACTUAL OBLIGATIONS AND COMMITMENTS

         On January 26, 2004, we sold to Gumption Trading (i) all of the shares
of our wholly owned subsidiaries DF Paper Guangdong Ltd., Guangdong Dransfield
Paper Ltd., DF Paper Jiangsu Limited and Jiangsu Dransfield Paper Co. Ltd., and
(ii) all fixed assets of our subsidiary in Conghua, Guangzhou Dransfield Paper
Limited. Guangzhou Dransfield Paper agreed to lease back these fixed assets from
Gumption Trading for its paper manufacturing operations at a rent of HK$1.00 per
annum for a term of one year, renewable yearly thereafter upon mutual agreement.
For such purchase, Gumption Trading paid to us a nominal aggregate amount of
HK$5 and assumed all of our liabilities, including liabilities related to such
subsidiaries and assets described above, which we incurred prior to January 28,
2004.

         Except as set forth above, at March 31, 2004, we did not have any other
long-term debt obligations, capital lease obligations, operating lease
obligations, purchase obligations or any other long-term liabilities that are
reflected on our balance sheet.

OFF-BALANCE SHEET ARRANGEMENTS

         DFCT currently does not have any off-balance sheet arrangements.



                                       31
<PAGE>

ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES.

         DIRECTORS AND SENIOR MANAGEMENT

         Effective January 9, 2004, Professor Li Chang tendered his resignation
as the executive director of the Company.

         Effective January 21, 2004 and January 30, 2004, respectively, Mr. Kurt
W. Krause and Mr. Thomas J. Kenan tendered their resignation as independent
non-executive directors of the Company. Effective February 12, 2004, Mr. Zhou Li
Yang was appointed as an executive director.

         Effective February 25, 2004, Dr. Robert Fung Hing Piu changed his
directorship from executive director to non-executive director, and Mr. Michael
J. Reiser and Mr. Iain F. Bruce were appointed as independent non-executive
directors.

         Effective June 4, 2004, Dr. Robert Fung was re-classified as the
independent non-executive director and Mr. Barry J. Buttifant was appointed as
the independent non-executive director.

         Effective August 31, 2004, Mr. Kwok Yam Sheung tendered his resignation
as an executive director and Mr. Wang Wei was appointed as an executive
director.

         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.

<Table>
<Caption>
Person                             Age    Office                               Office Held Since     Term of Office(1)
------                             ---    ------                               -----------------     -----------------
<S>                                <C>    <C>                                  <C>                   <C>

Dr. Fan Di                          48    Chairman, Chief Executive Officer          Apr 2003                 *
                                          and Executive Director

Aaron Zhu Xiaojun                   36    Chief Financial Officer and                Apr 2003                 *
                                          Executive Director

Kwok Yam Sheung                     57    Secretary                                 April 2003                -

Zhou Li Yang                        45    Executive Director                         Feb 2004                 *

Wang Wei                            38    Executive Director                         Aug 2004                 *

Dr. Robert Fung Hing Piu            68    Independent Director                       Apr 2003                 *

Dr. Godwin Wong                     54    Independent Director                       Apr 2003                 *

Michael J Reiser                    43    Independent Director                       Feb 2004                 *

Iain F. Bruce                       63    Independent Director                       Feb 2004                 *

Barry J. Buttifant                  59    Independent Director                       Jun 2004                 *
</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.



                                       32
<PAGE>

         There are no family relationships among any of our Executive Directors
and Independent Directors.

EXECUTIVE DIRECTORS

DR. FAN DI

         Since April 2003, Dr. Fan has served as our Chairman, Chief Executive
Officer and an Executive Director. Dr. Fan is responsible for overseeing our
strategic development. Since April 2002, Dr. Fan has served as the Chairman and
Chief Executive Officer of China Merchants DiChain (Asia) Limited, a company
listed on the Stock Exchange of Hong Kong, Limited. From December 1999 to April
2002, he served as an Executive Director and Chief Financial Officer of China
Merchants Group. Dr. Fan is a director of China Merchants DiChain (Asia)
Limited and China Pharmaceuticals International Corporation. Dr. Fan has
substantial experience in financial management and business management. He holds
a Ph.D. in Business Administration from the Southern University of California.

MR. AARON ZHU XIAOJUN

         Since May 2003, Mr. Zhu has served as our Chief Financial Officer and
an Executive Director where his responsibilities include corporate strategic
marketing, business development and financings. From August 2002 to September
2004, Mr. Zhu served as an Executive Director of China Merchants DiChain (Asia)
Limited, a holding company listed on the Stock Exchange of Hong Kong. From
February 2004 to September 2004, Mr. Zhu served as Executive Director and
President of China Pharmaceuticals Limited, a China based United States public
company. From May 2003 to the present, Mr. Zhu has served as an Executive
Director and Chief Financial Officer of DF China Technology, a China-based
United States public company. From April 2000 to March 2003, Mr. Zhu served as
the Chief Executive Officer of DiChain Systems Ltd., the direct parent of
DiChain Software and a 56.1% shareholder of ours. Mr. Zhu also has substantial
experience in business development, marketing, and finance with companies based
in the United States. From November 1992 through March 1994, Mr. Zhu served as
an Investment Analyst for U.S. Media Corporation, a U.S.-based media investment
company. He also served as a financial controller and ERP/business consultant
for Fourth Shift Corporation in Asia and in the United States from March 1994 to
December 1996. From January 1997 to March 2000, Mr. Zhu served as a Vice
President at Carver Harrington Corporation in the United States, where his
responsibilities included sales and marketing development, finance and capital
market management, information technology and supply chain management. Mr. Zhu
holds a Bachelor Degree in Economics from Shenzhen University, the PRC and an
MBA degree from Regent University.

MR. ZHOU LI YANG

         Since February 2004, Mr. Zhou has served as one of our Executive
Directors. Since February 2002, Mr. Zhou has served as the Executive Vice
President of China Merchants DiChain (Asia) Limited, a holding company listed on
the Stock Exchange of Hong Kong, Limited. From May 2000 to August 2001, Mr. Zhou
served as the Investment Manager of Tianjin Development Holdings Ltd., a company
which primarily focuses on manufacturing and selling winery products, providing
stevedoring and storage services and investing. From February 1995 to October
1999, Mr. Zhou served as an Assistant Manager to Ka Wah Capital Ltd., an
investment banking arm of Citic Kawah Bank, a bank listed on the Stock Exchange
of Hong Kong. Mr. Zhou has extensive involvement in mergers and acquisitions,
investment banking and project investments in China and Hong Kong. He obtained a
Bachelor's Degree in Physics from Central-South University, China and a Master
of Science Degree in Business/Finance from the University of Baltimore.



                                       33
<PAGE>

MR. WANG WEI

         Dr. Wang has served as one of our Executive Directors since August 2004
and joined DiChain Software Systems in October 2000. Since November 2001, Dr.
Wang has served as a General Manager of DiChain Software. From August 1999 to
October 2000, Dr. Wang served as the Senior Manager and Chief Technology Officer
of Yin Pai Technology (SZ) Co., Ltd. and Zhu Yang Technology (SZ) Co., Ltd.,
each of which is focused on developing information technologies. Dr. Wang
received his Ph.D. degrees in Industrial Engineering and Management from Hong
Kong Technology University and Central China University.

NON-EXECUTIVE DIRECTORS

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 degrees from Harvard University.

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

MR. MICHAEL J. REISER

         Mr. Reiser is a practicing attorney in the United States. He graduated
from the University of Colorado and University of Colorado School of Law. He was
an Associate Attorney/Shareholder of Rankin, Sproat, Mires, Trapani & Reiser in
Oakland for the period of 1993 to 1999, and from 2000 to the present is a
partner in the Law Office of Reiser & Simone in Walnut Creek. Mr. Reiser
specializes in litigation.

MR. IAIN F. BRUCE

         Mr. Bruce has more than 35 years of international experience in
accounting and consulting. He joined KPMG Hong Kong in 1964 and was its senior
partner from 1991 to 1996. He is a member of the Institute of Chartered
Accountants of Scotland and the Hong Kong Society of Accountants. He has been a
member of the Securities and Futures Appeal Panel, Hong Kong since 1994 and also
serves on the boards of several publicly listed companies in Hong Kong and
overseas.



                                       34
<PAGE>

MR. BARRY J. BUTTIFANT

         Mr. Buttifant has been the managing director of Wo Kee Hong (Holdings)
Limited from May 2001 to November 2002 and thereafter became the Adviser to the
Board of Directors of Wo Kee Hong (Holdings) Limited. He is also an independent
non-executive director of Daiwa Associate Holdings Limited, Giordano
International Limited and MediaNation Inc. Prior to joining Wo Kee Hong
(Holdings) Limited, he was the Managing Director of IDT International Limited
for over eight years and worked for Sime Darby Hong Kong Limited and Polly Peck
Group for more than 11 years in the capacity of Finance Director and Managing
Director. From August 2004 to the present, Mr. Buttifant has been an Operating
Partner of Baring Private Equity Asia, a private equity business. Mr. Buttifant
is a fellow member of the Association of Chartered Certified Accountants and the
Hong Kong Society of Accountants. He is also a fellow member of the Chartered
Management Institute, the Hong Kong Management Association and the Hong Kong
Institute of Directors. He was appointed as an independent NYSE non-executive
director of Global-Tech Appliances Inc (GTA), a listed company in the U.S.,
effective November, 2003.

EXECUTIVE OFFICER

KWOK YAM SHEUNG

         Since April 2003, Mr. Kwok has served as our Secretary. From April 2003
to August 2004, Mr. Kwok served as one of our Executive Directors. Since April
2003, Mr. Kwok has also served as the Secretary of China Merchants DiChain
(Asia) Ltd., a holding company listed on the Stock Exchange of Hong Kong. Mr.
Kwok 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 served as the Company Secretary for a
number of publicly listed companies. Mr. Kwok has extensive experience in real
estate.

COMPENSATION

         Of the Company's directors and officers only Mr. Aaron Zhu Xiaojun and
Mr. Kwok Yam Sheung received compensation in fiscal 2004. Mr. Aaron Zhu Xiaojun
and Mr. Kwok Yam Sheung received an aggregate of HK$876,050 (US$112,365) in
compensation in the last fiscal year for their services in all capacities.
Specifically, Mr. Zhu received a salary of HK$501,050 (US$64,237) and Mr. Kwok
received a salary of HK$375,000 (US$48,128). During fiscal year 2004, none of
our other directors or officers received any bonus and none of their
compensation was paid pursuant to a bonus or profit-sharing plan. Each of Robert
Fung Hing Piu, Gordon Wong, Michael J. Reiser, Iain F. Bruce and Barry J.
Buttifant received 150,000 options, with an exercise price of US$.02 per share,
under our 2002 Stock Option Plan. These options expire in July 2013. There are
no present plans, arrangements, or understandings concerning any change in
compensation for our directors and officers. The Company has no pension,
retirement or similar benefits for directors and officers pursuant to a plan
contributed to by the Company.

BOARD PRACTICES

SERVICE CONTRACTS

         Neither the Company nor its subsidiaries have entered into any service
agreements with any of its executive directors or senior management.



                                       35
<PAGE>

COMMITTEES OF THE BOARD

         We have an Executive Committee, an Audit Committee, a Human Resources
(HR) Committee and a Nominating Committee. The members of each are set forth
below:

         Executive Committee: Messrs. Fan Di (Chairman), Aaron Zhu Xiaojun, Zhou
Li Yang and Wang Wei, each of whom is an executive board member.

         Audit Committee: Messrs. Iain F. Bruce (Chairman), Godwin Wong and
Barry J. Buttifant, each of whom is an independent board member.

         HR Committee (formerly called the Compensation Committee): Messrs.
Godwin Wong (Chairman), Iain F. Bruce and Robert Fung Hing Piu, each of whom is
an independent board member.

         Nominating Committee: Messrs. Robert Fung Hing Piu (Chairman), Barry J.
Buttifant and Michael J. Reiser, each of whom is an independent board member.

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

         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 applicable rules and regulations of the SEC.

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

         The Nominating Committee identifies individuals qualified to become
Board members, recommends to the Board candidates to fill Board vacancies and
newly-created director positions, recommends whether incumbent directors should
be nominated for re-election to the Board upon the expiration of their terms,
and oversees the evaluation of the Board's performance.

EMPLOYEES

         We had 58 full-time employees on March 31, 2004. Of those 58 employees,
two were in accounting and finance, 42 were in production, nine were in sales
and marketing, three were in administration and two were in product development.
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, 2004, the



                                       36
<PAGE>

percentage of the shares outstanding such ownerships represent, and any options
granted to them on the Company's shares:

<Table>
<Caption>
                                                                                                       Percentage of
Name                                Position                                       No. of Shares    Outstanding Shares
------                              --------                                       -------------    ------------------
<S>                                 <C>                                            <C>              <C>

Dr. Fan Di                          Chairman, Chief Executive Officer &                  0                  0
                                    Executive Director

Aaron Zhu Xiaojun                   Chief Financial Officer and Executive                0                  0
                                    Director

Zhou Li Yang                        Executive Director                                   0                  0

Wang Wei                            Executive Director                                   0                  0

Dr. Robert Fung Hing Piu            Independent Non-Executive Director                   0                  0

Dr. Godwin Wong                     Independent Non-Executive Director                   0                  0

Michael J. Reiser                   Independent Non-Executive Director                   0                  0

Iain F. Bruce                       Independent Non-Executive Director                   0                  0

Barry J. Buttifant                  Independent Non-Executive Director                   0                  0
</Table>

         At the Company's annual meeting of shareholders held on July 18, 2003,
our shareholders approved and adopted our 2002 Stock Option Plan, which will
expire in July 2013. Options to purchase shares of common stock granted and held
by directors and senior management are as follows:

<Table>
<Caption>
                                                   No. of                 Exercise
Name                                            Options Held                Price          Expiration Date
----                                            ------------          ------------          -------------
<S>                                             <C>                   <C>                 <C>

Dr. Fan Di                                                  0                    --                     --

Aaron Zhu Xiaojun                                           0                    --                     --

Zhou Li Yang                                                0                    --                     --

Wang Wei                                                    0                    --                     --

Dr. Robert Fung Hing Piu                              150,000                US$0.2          July 17, 2013

Dr. Godwin Wong                                       150,000                US$0.2          July 17, 2013

Michael J. Reiser                                     150,000                US$0.2          July 17, 2013

Iain F. Bruce                                         150,000                US$0.2          July 17, 2013

Barry J. Buttifant                                    150,000                US$0.2          July 17, 2013
</Table>

On August 13, 2004, the Board granted options pursuant to the 2002 Stock Option
Plan, amounting to 750,000 shares at US$0.2 per share to the independent
directors.


                                       37

<PAGE>

ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

MAJOR SHAREHOLDERS

         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, 2004 with regard to the Company's major shareholders, which
means those persons that are the beneficial owners of five percent or more of
our common stock:

<Table>
<Caption>
                                                                     Percentage of
               Name                         No. of Shares          Outstanding Shares
------------------------------------     --------------------     --------------------
<S>                                      <C>                      <C>
DiChain Systems Limited                           118,379,400                     56.1%
Farsight Holdings Limited                          29,669,850                     14.0%
Squadram Limited                                   23,001,910                     10.9%
Earnest Investments Services Limited               15,823,920                      7.5%
</Table>

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

         On April 16, 2004, pursuant to the subscription agreement entered into
between Squadram Limited and the Company, Squadram paid the subscription money
of US$2.1 million. The Company completed the transaction on April 20, 2004 and
issued 5,200,000 shares of its common stock to Squadram.

         On May 25, 2004, the Company has completed the merger transaction with
DICHAIN Software by the acquiring the entire issued share capital of DICHAIN
Software. The merger transaction was approved by shareholders at the
shareholders' meeting held on March 25, 2004. Prior to the merger, DiChain
Software was affiliated with the Company (i) through two directors, Dr. Fan Di,
the Company's Chairman and Chief Executive Officer and Aaron Zhu Xiaojun, the
Company's Chief Executive Officer and an Executive Director, that were common to
both entities and (ii) through the direct or indirect ownership of shares of
capital stock of both entities by DiChain Holdings Limited. DiChain Holdings
Limited, which is affiliated with China Merchants Group, a large business
conglomerate in China, held approximately 2% of our common stock through its
subsidiary DiChain Systems Limited and approximately 68% of the common stock of
DiChain Software prior to the merger. After the merger, DiChain Systems Limited,
Farsight Holdings Limited, Squadram Limited and Earnest Investments Services
Limited held approximately 56.1%, 14.0%, 10.9% and 7.5%, respectively, of the
issued and outstanding shares of the Company's common stock.

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

         Of the 250,619,712 outstanding shares of the Company's common stock at
September 30, 2004, 38,932,356 shares are held in the United States by
approximately 1,032 record holders, and 211,687,356 shares are held in Hong Kong
and China by approximately 410 shareholders, one of whom, DiChain Systems
Limited, a Hong Kong corporation, is a subsidiary of DiChain Holdings Limited.

         The Company is not directly or indirectly owned or controlled by any
other corporation, by any foreign government or by any other natural or legal
person, other than as set forth above with regard to the shareholdings of major
shareholders. The Company knows of no arrangements which may now or at a
subsequent date result in a change of control of the Company.



                                       38
<PAGE>


RELATED PARTY TRANSACTIONS

         The 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         2004         2004
                                                               --------     --------     --------     --------     --------
                                                                  HK$          HK$          HK$          HK$          US$
<S>                                                            <C>          <C>          <C>          <C>          <C>
Storage and delivery charges (Note (a))                             401          362          678           --           --

Management fee (Note (b))                                            --           --           --        2,200          282
</Table>

Notes:

(a)      Storage and delivery charges

         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.

(b)      Management fee

         On May 1, 2003, Victorison Logistics Limited ("VLL"), an affiliate of
the Company, entered into an agreement with the Company whereby VLL agreed to
provide management services to the Group at a monthly fee of HK$200,000
(US$25,641). According to the management, these transactions were carried out at
the terms determined and agreed by the relevant parties.

INTERESTS OF EXPERTS AND COUNSEL

         Not applicable.

ITEM 8.  FINANCIAL INFORMATION

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

LEGAL PROCEEDING

         In May 2004, Mr. Horace Yao Yee Cheong, the former chairman and
executive director of the Company, sued the Company, seeking, among other
things, unpaid remuneration of HK$480,000 and a short term advance of
HK$1,162,222, plus interest and costs, and specific performance by the Company
to allot to Mr. Yao 1,153,846 fully paid shares of common stock and 62,500
shares of common stock at US$0.001 par value.



                                       39
<PAGE>


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 ending March 31.

<Table>
<Caption>
Financial Year              High           Low
--------------------     ----------     ----------
<S>                      <C>            <C>
2000                     $   12.000     $    0.440
2001                     $    4.375     $    0.340
2002                     $    0.625     $    0.140
2003                     $    0.400     $    0.080
2004                     $    2.290     $    0.130
</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>
2002, 2nd Quarter     $    0.340     $    0.200
2002, 3rd Quarter     $    0.270     $    0.120
2002, 4th Quarter     $    0.400     $    0.090
2003, 1st Quarter     $    0.290     $    0.080
2003, 2nd Quarter     $    2.040     $    0.130
2003, 3rd Quarter     $    2.290     $    0.600
2003, 4th Quarter     $    1.050     $    0.260
2004, 1st Quarter     $    1.850     $    0.370
2004, 2nd Quarter     $    1.180     $    0.340
2004, 3rd Quarter     $    0.570     $    0.190
</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>
2004:
April         $    1.180     $    0.670
May           $    0.830     $    0.400
June          $    0.490     $    0.340
July          $    0.570     $    0.350
August        $    0.420     $    0.320
September     $    0.400     $    0.190
October       $    0.280     $    0.160
</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 currently listed on the
OTCBB.



                                       40
<PAGE>


ITEM 10. ADDITIONAL INFORMATION

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 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 in 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 our stock, our
Memorandum of Association must be amended by a majority vote of our shareholders
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 our 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 (10%) or more of the
outstanding shares of our common stock. 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 our securities or the
rights of non-residents or foreign shareholders to hold or exercise voting
rights on the securities imposed by foreign law or our constituent documents.

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

         There are no provisions in our Articles of Association governing an
ownership threshold above which shareholder ownership must be disclosed.

         With regard to the foregoing matters, the laws in the British Virgin
Islands are not significantly different than those in the United States.

         There are no conditions in our Memorandum and Articles of Association
governing changes in our capital or changes in the rights of holders of any
class of our stock that are more stringent than is required by law.



                                       41
<PAGE>


MATERIAL CONTRACTS

         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,
2002, including dates, parties, general nature of the contracts, terms and
conditions, and amount of consideration passing to or from the company or a
subsidiary.

         On January 26, 2004, we entered into the Agreement with Gumption
Trading Ltd. and Guangzhou Dransfield Paper Limited. Pursuant to the Agreement,
we sold to Gumption Trading (i) all of the shares of our wholly owned
subsidiaries DF Paper Guangdong Ltd., Guangdong Dransfield Paper Ltd., DF Paper
Jiangsu Limited and Jiangsu Dransfield Paper Co. Ltd., and (ii) all fixed assets
of our subsidiary in Conghua, Guangzhou Dransfield Paper Limited. Guangzhou
Dransfield Paper Limited agreed to lease back these assets from Gumption Trading
for its paper manufacturing operations at a rent of HK$1.00 per year for a term
of one year, renewable yearly thereafter upon mutual agreement. For such
purchase, Gumption Trading paid to us a nominal aggregate amount of HK$5 and
assumed all of our liabilities, including liabilities related to such
subsidiaries and assets, that we incurred prior to January 28, 2004. We entered
into this transaction primarily to streamline our operations. This transaction
closed on January 28, 2004. The Agreement has been filed as Exhibit 4.3 to this
Annual Report.

         A Deed of Guarantee and Deed of Confirmation were also entered into in
connection with the transactions contemplated by the Agreement. Pursuant to the
Deed of Guarantee, dated January 28, 2004, Qindao Haotian Investment Limited
guaranteed to us and Guangzhou Dransfield Paper Ltd. the obligations of Gumption
Trading Limited under the Agreement. The Deed of Guarantee has been filed as
Exhibit 4.4 to this Annual Report.

         The Deed of Confirmation, dated September 20, 2004, was entered into
among us, Guangzhou Dransfield Paper Ltd. and Qindao Haotian Investment Limited
to clarify and define the liabilities of Gumption Trading under the Agreement.
Pursuant to the terms of the Deed of Confirmation, Qindao Haotian Investment
Limited confirmed the validity of the Deed of Guarantee. The Deed of
Confirmation has been filed as Exhibit 4.5 to this Annual Report.

         On February 13, 2004, we entered into an Agreement for the Exchange of
Common Stock with DiChain Systems Limited, a limited company incorporated in
Hong Kong, Farsight Holdings Limited, a limited company incorporated in the
British Virgin Islands, Squadram Limited, a limited company incorporated in the
British Virgin Islands, and Earnest Investments Services Limited, a limited
company incorporated in the British Virgin Islands, pursuant to which DICHAIN
Software became our wholly owned subsidiary. The information technology business
of DICHAIN Software has now become our primary business. In connection with this
merger, we issued to DiChain Systems 197,799,000 shares of our common stock.
This transaction closed on May 25, 2004. This Agreement has been filed as
Exhibit 4.6 to this Annual Report.

         In February 2004, we completed a private placement of 21.5 million
shares of our stock at US$0.20 per share or an aggregate amount of US$4.3
million. In connection with this private placement, we entered into a letter
agreement dated February 4, 2004 with Quam Securities Company Limited ("Quam"),
in which Quam agreed to be the placing agent. On February 13, 2004, Quam and the
investors entered into placing letters and confirmations thereto in connection
with the private placement. The letter agreement is filed as Exhibit 4.7 to this
Annual Report on Form 20-F and the placing letters and related confirmations are
filed as Exhibits 4.8 through 4.14, respectively, to this Annual Report on Form
20-F.



                                       42
<PAGE>


         On April 5, 2004, we completed a private placement of 5.2 million
shares of our stock at US$0.4038 per share or an aggregate amount of
approximately US$2.1 million. In connection with this private placement, we
entered into a placing letter and related confirmation with Squadram Limited.
The subscription offer letter and related confirmation is filed as Exhibit 4.15
to this Annual Report on Form 20-F.

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 pegged to the U.S. dollar at
HK$7.80 to US$1.00. The central element in the arrangements for the peg 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.

         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" in Item 3
of this annual report. 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 peg at
HK$7.80 to US$1.00, if at all.



                                       43
<PAGE>


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 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 the Company may be inspected at
our offices at 14066 Catalina Street, San Leandro, California 94577 or at the
offices of our U.S. agent, Loeb & Loeb LLP, 345 Park Avenue, New York, New York
10154, Attn.: Mitchell S. Nussbaum, Esq.

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. We have no market risks.

ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES.

         Not applicable.



                                       44
<PAGE>


                                    PART II

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

         We maintain "disclosure controls and procedures," as such term is
defined under Securities Exchange Act Rule 13a-15(e), that are designed to
ensure that information required to be disclosed in our Securities Exchange Act
reports is recorded, processed, summarized, and reported within the time periods
specified in the SEC's rules and forms, and that such information is accumulated
and communicated to our management, including our Chief Executive Officer and
Chief Financial Officer, as appropriate, to allow timely decisions regarding
required disclosures. In designing and evaluating the disclosure controls and
procedures, our management recognized that any controls and procedures, no
matter how well designed and operated, can provide only reasonable assurance of
achieving the desired control objectives and in reaching a reasonable level of
assurance our management necessarily was required to apply its judgment in
evaluating the cost-benefit relationship of possible controls and procedures. We
have carried out an evaluation under the supervision and with the participation
of our management, including our Chief Executive Officer and Chief Financial
Officer, of the effectiveness of the design and operation of our disclosure
controls and procedures as of March 31, 2004. Based upon their evaluation and
subject to the foregoing, the Chief Executive Officer and Chief Financial
Officer concluded that as of March 31, 2004 our disclosure controls and
procedures were effective at the reasonable assurance level in ensuring that
material information relating to us, is made known to the Chief Executive
Officer and Chief Financial Officer by others within our company during the
period in which this report was being prepared.

         There were no changes in our internal controls or in other factors
during the most recent quarter that has materially affected, or is reasonably
likely to materially affect, our internal controls over financial reporting.

ITEM 16. [RESERVED]

ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT

         Our Audit Committee consists of three directors: Iain F. Bruce
(Chairman), Dr. Godwin Wong and Barry J. Buttifant, each of whom meets the
independence requirements and standards currently established by the SEC. In
addition, the Board of Directors has determined that Messrs. Bruce and Buttifant
are "audit committee financial experts" defined under the relevant rules of the
SEC.



                                       45
<PAGE>


ITEM 16B. CODE OF ETHICS

         We adopted a code of ethics that applies to our Chief Executive Officer
and Chief Financial Officer, and other persons who perform similar functions. A
copy of our Code of Ethics is filed as an exhibit to this Annual Report on Form
20-F. We also adopted a Code of Business Conduct and Ethics, which is filed as
an exhibit to this Annual Report on Form 20-F. Our Codes of Ethics are intended
to be a codification of the business and ethical principles which guide us, and
to deter wrongdoing, to promote honest and ethical conduct, to avoid conflicts
of interest, and to foster full, fair, accurate, timely and understandable
disclosures, compliance with applicable governmental laws, rules and
regulations, the prompt internal reporting of violations and accountability for
adherence to this Code.

ITEM 16C. PRINCIPAL ACCOUNTING FEES AND SERVICES

         During fiscal years ended March 31, 2004 and 2003, our principal
independent auditor was BDO McCabe Lo & Company. The following are the services
provided and the amount billed.

AUDIT FEES

         The aggregate fees billed by BDO McCabe Lo & Company for professional
services rendered for the audit of the Company's annual financial statements
were HK$268,000 (US$34,359) and HK$268,000 (US$34,359) for the fiscal years
ended March 31, 2004 and 2003, respectively.

AUDIT RELATED FEES

         Other than the fees described under the caption "Audit Fees" above, BDO
McCabe Lo & Company did not bill any fees for services rendered to us during
fiscal years 2004 and 2003 for assurance and related services in connection with
the audit or review of our consolidated financial statements.

TAX FEES

         The aggregate fees billed by BDO McCabe Lo & Company for tax services
during the fiscal years ended March 31, 2004 and 2003 were HK$7,000 and
HK$7,000, respectively.

ALL OTHER FEES

         There were no fees billed by BDO McCabe Lo & Company for other
professional services rendered during the fiscal years ended March 31, 2004 and
2003.

PRE-APPROVAL OF SERVICES

         The Audit Committee pre-approves all services, including both audit and
non-audit services, provided by our independent accountants. For audit services,
each year the independent auditor provides the Audit Committee with an
engagement letter outlining the scope of the audit services proposed to be
performed during the year, which must be formally accepted by the Committee
before the audit commences. The independent auditor also submits an audit
services fee proposal, which also must be approved by the Committee before the
audit commences.



                                       46
<PAGE>


ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARD FOR AUDIT COMMITTEES

         Not applicable.

ITEM 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS

         Not applicable.

PART III

ITEM 17. FINANCIAL STATEMENTS

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

ITEM 18. FINANCIAL STATEMENTS



                                       47
<PAGE>


                   REPORT OF REGISTERED PUBLIC ACCOUNTING FIRM


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, 2003 and 2004 and the related consolidated statements of
operations, cash flows and stockholders' equity for each of the three years in
the period ended March 31, 2004. 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 audit in accordance with the standards of the Public
Company Accounting Oversight Board (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
audit 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, 2003 and 2004, and the consolidated results of its
operations and cash flows for each of the three years in the period ended March
31, 2004, 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 operating losses for each of the
last three years and has negative operating cash flows. 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 & Company


BDO McCabe Lo & Company
Certified Public Accountants

Hong Kong.

November 18, 2004



                                       48
<PAGE>
                    DF CHINA TECHNOLOGY INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS


ASSETS

<Table>
<Caption>
                                                                                                      MARCH 31,
                                                                                      ------------------------------------------
                                                                                         2003            2004           2004
                                                                                      ----------      ----------      ----------
                                                                                        HK$'000         HK$'000         US$'000
<S>                                                                                   <C>             <C>             <C>
Current assets
      Cash and cash equivalents                                                               56          16,343           2,095
      Accounts receivable, net of allowance for doubtful debts of
        HK$472 in 2004 and HK$693 in 2003 (Note 6)                                           785             549              70
      Inventories, net (Note 7)                                                              174             273              35
      Prepayments and other receivables                                                      121             743              94
      Due from affiliate (Note 11)                                                            --          18,843           2,417
      Tax recoverable                                                                          9               9              --
                                                                                      ----------      ----------      ----------
Total current assets                                                                       1,145          36,760           4,713
Property and equipment, net (Note 8)                                                      33,747              15               2
Interest in affiliate (Note 9)                                                                 1               1               0
                                                                                      ----------      ----------      ----------
Total assets                                                                              34,893          36,776           4,716
                                                                                      ==========      ==========      ==========

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities
      Accounts payable                                                                       972             648              83
      Accrued liabilities                                                                  4,553           3,075             394
      Construction payable                                                                 2,826              --              --
      Accrued rental payable                                                                 199              --              --
      Due to affiliate (Note 12)                                                           6,475           3,204             411
                                                                                      ----------      ----------      ----------
Total current liabilities                                                                 15,025           6,927             888
                                                                                      ----------      ----------      ----------

Commitments and contingencies (Note 13)

Stockholders' equity
      Common stock, no par value, 300,000,000 shares authorized; 19,915,292 and
        47,620,712 issued and outstanding at March 31, 2003 and 2004, respectively       241,920         286,748          36,763
Contributed surplus                                                                        4,677           4,677             600
Accumulated deficit                                                                     (226,729)       (261,576)        (33,535)
                                                                                      ----------      ----------      ----------
                                                                                          19,868          29,849           3,828
                                                                                      ----------      ----------      ----------
Total liabilities and stockholders' equity                                                34,893          36,776           4,716
                                                                                      ==========      ==========      ==========
</Table>

       See accompanying notes to these consolidated financial statements.



                                       49
<PAGE>
                    DF CHINA TECHNOLOGY INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS


<Table>
<Caption>
                                                                                 MARCH, 31
                                                         ----------------------------------------------------------
                                                            2002            2003            2004            2004
                                                         ----------      ----------      ----------      ----------
                                                           HK$'000         HK$'000         HK$'000        US$'000
<S>                                                      <C>             <C>             <C>             <C>
Net sales
      Paper merchanting                                       1,165             142              --              --
      Paper manufacturing                                     5,433           5,346           4,131             530
                                                         ----------      ----------      ----------      ----------
                                                              6,598           5,488           4,131             530
Cost of sales
      Paper merchanting                                      (1,083)           (114)             --              --
      Paper manufacturing                                    (4,355)         (4,025)         (3,619)           (464)
                                                         ----------      ----------      ----------      ----------
                                                             (5,438)         (4,139)         (3,619)           (464)

Gross profit                                                  1,160           1,349             512              66

Selling general and administrative expenses (Note 3)

- third parties                                              (6,439)         (4,483)         (5,801)           (744)
- related parties (Note 14)                                    (362)           (726)         (2,200)           (282)
                                                         ----------      ----------      ----------      ----------
                                                             (6,801)         (5,209)         (8,001)         (1,026)
                                                         ----------      ----------      ----------      ----------

Other income, net                                               166              26             218              28
Interest expenses                                                --              --              (3)             (1)
Loss on disposal of fixed assets (Note 8)                        --              --         (19,500)         (2,500)
Loss on disposal of subsidiaries (Note 15)                       --              --          (8,073)         (1,034)
Provision for doubtful debts                                    (60)            (48)             --              --
Equity in loss of an affiliate (Note 9)                      (4,594)             --              --              --
Impairment losses of property, plant and equipment
   (Note 10)                                                 (7,939)        (97,792)             --              --
                                                         ----------      ----------      ----------      ----------
                                                            (12,427)        (97,814)        (27,358)         (3,507)
                                                         ----------      ----------      ----------      ----------
Net loss                                                    (18,068)       (101,674)        (34,847)         (4,467)
                                                         ==========      ==========      ==========      ==========

Basic and diluted net loss per share                          (0.91)          (5.11)          (1.31)          (0.17)
                                                         ==========      ==========      ==========      ==========
</Table>

       See accompanying notes to these consolidated financial statements.



                                       50
<PAGE>


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

<Table>
<Caption>
                                                                                  MARCH, 31
                                                         ----------------------------------------------------------
                                                            2002            2003            2004            2004
                                                         ----------      ----------      ----------      ----------
                                                           HK$'000         HK$'000         HK$'000         US$'000
<S>                                                      <C>             <C>             <C>             <C>
Cash flows from operating activities
      Net loss                                              (18,068)       (101,674)        (34,847)         (4,467)
Adjustments to reconcile income to net cash provided
   by operating activities
      Equity in loss of an affiliate                          4,594              --              --              --
      Depreciation                                            1,588           1,987           1,419             182
      Impairment losses of property, plant and
         equipment                                            7,939          97,792              --              --
      Loss on disposal of property, plant and
         equipment (Note 8)                                      --              26          19,500           2,500
      Gain on dissolution of subsidiaries                        --              --             (94)            (12)
      Loss on disposal of subsidiaries                           --              --           8,073           1,034
      Provision for doubtful debts (doubtful debts
         written back)                                           60              48              78              10
      Provision (written back) for inventory
         obsolescence                                            (3)             --              --              --
Changes in working capital
      Accounts receivable                                      (490)             60             236              30
      Inventories                                               779             224             (98)            (12)
      Prepayments and other receivables                         413             159            (906)           (116)
      Tax recoverable                                           191              --              --              --
      Accounts payable                                          252            (138)           (272)            (35)
      Accrued liabilities                                     1,348           1,086             422              54
      Construction payable                                      604            (357)
      Accrued rental payable                                   (437)             --              --              --
                                                         ----------      ----------      ----------      ----------
Net cash used by operating activities                        (1,230)           (787)         (6,489)           (832)
                                                         ----------      ----------      ----------      ----------

Cash flows from investing activities
      Acquisition of property, plant and equipment             (105)             (3)            (22)             (3)
      Disposal of subsidiaries (net of cash and cash
         equivalents disposed of) (Note 15)                      --              --             (16)             (2)
      Proceeds from disposal of property, plant and
         equipment                                              361              --              --              --
      Due from affiliate (Note 11)                               --              --         (18,843)         (2,416)
                                                         ----------      ----------      ----------      ----------
Net cash provided (used) by investing activities                256              (3)        (18,881)         (2,421)
                                                         ----------      ----------      ----------      ----------

Cash flows from financing activities
      New issue of common stock                                  --              --          39,084           5,011
      Due to affiliate (Note 16)                                802             730           2,573             330
                                                         ----------      ----------      ----------      ----------
Net cash provided in financing activities                       802             730          41,657           5,341
                                                         ----------      ----------      ----------      ----------
Net decrease in cash and cash equivalents                      (172)            (60)         16,287           2,088
Cash and cash equivalents, at beginning of year                 288             116              56               7
                                                         ----------      ----------      ----------      ----------
Cash and cash equivalents, at end of year                       116              56          16,343           2,095
                                                         ==========      ==========      ==========      ==========
</Table>

       See accompanying notes to these consolidated financial statements.



                                       51
<PAGE>


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

<Table>
<Caption>
                                                         COMMON       CONTRIBUTED     ACCUMULATED
                                                          STOCK         SURPLUS         DEFICIT
                                                         HK$'000        HK$'000         HK$'000
<S>                                                      <C>          <C>             <C>
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)
New issue of 3,201,513 shares on conversion of
    debts on June 11, 2003                                 5,744             --              --
New issue of 1,680,000 shares for the exercise of
    options on August 1, 2003                              3,014             --              --
New issue of 100,310 shares for the exercise of
    options on August 25, 2003                               224             --              --
New issue of 48,909 shares for settlement of
    employee's debt on September 30, 2003                    401             --              --
New issue of 30,000 shares for the exercise of
    options on October 10, 2003                               54             --              --
New issue of 1,144,688 shares for private
    placement on November 18, 2003                         2,000             --              --
New issue of 21,500,000 shares for private
    placement on February 20, 2004, net                   33,391             --              --
Net loss                                                      --             --         (34,847)
                                                        --------        -------       ---------
Balance at  March 31, 2004                               286,748         (4,677)       (261,576)
                                                        ========        =======       =========
</Table>

       See accompanying notes to these consolidated financial statements.



                                       52
<PAGE>
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.

         On January 26, 2004, the Company entered into an agreement (the
"Agreement") with Gumption Trading Ltd., a company incorporated in the BVI, and
Guangzhou Dransfield Paper Ltd., a wholly owned subsidiary of the Company.
Pursuant to the Agreement, the Company sold to Gumption Trading (i) all of the
shares of its wholly owned subsidiaries DF Paper Guangdong Ltd., Guangdong
Dransfield Paper Ltd., DF Paper Jiangsu Limited and Jiangsu Dransfield Paper Co.
Ltd., and (ii) all fixed assets of its subsidiary in Conghua, Guangzhou
Dransfield Paper Limited. Guangzhou Dransfield Paper Limited agreed to lease
back assets from Gumption Trading for its paper manufacturing operations at a
rent of HK$1.00 per annum for a term of one (1) year, renewable yearly
thereafter upon mutual agreement. For such purchase, Gumption Trading paid to
the Company a nominal aggregate amount of HK$5 and assumed all of the Company's
liabilities, including liabilities related to such subsidiaries and assets,
incurred by the Company prior to January 28, 2004. The Company entered into this
transaction primarily to streamline its operations. This transaction closed on
January 28, 2004.

         The leased back assets are the basis for our current operating revenue
from our paper manufacturing business, which we believe provides us with a solid
platform for our existing paper manufacturing business.


         Subsequent to the year end, the Group merged with DiChain Software
Systems (Shenzhen) Ltd ("DiChain Software"). DiChain Software is now a
wholly-owned subsidiary of the Group engaged in the information technology
business. The Group intended to expand the information technology business in
the coming year by increasing the sales network and enhancing the marketing
team.

         Going Concern Risk Factors

         The Group incurred a net loss of HK$34,847,000 (US$4,467,000) for the
year ended March 31, 2004, incurred cumulative losses from inception to March
31, 2004, aggregating HK$261,576,000 (US$33,535,000), reported negative cash
flows from operations for the year ended March 31, 2004, of HK$6,489,000
(US$832,000). Notwithstanding that the financial statements have been prepared
under a going concern basis, the Company's management believes that the
streamlining of its paper business within the year and the merger with DiChain
Software Systems (Shenzhen) Ltd. in May 2004, will substantially improve both
the profitability and cash flows of the Group.



                                       53
<PAGE>
NOTE 1 - ORGANIZATION AND BASIS OF PRESENTATION - CONTINUED

         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$"). For presentation and convenience of the reader, the financial
statements have been translated into United States dollars ("US$") using the
approximated rate of exchange prevailing on March 31, 2004 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, 2004.

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.



                                       54
<PAGE>


NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED

         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.

         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.



                                       55
<PAGE>


NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED

         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.

         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. For disclosure purposes, pro-forma information in
accordance with Statement of Financial Accounting Standards No. 123 "Accounting
for Stock-Based Compensation" has been included.

         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. No options were granted in 2002. During fiscal year 2004, a total of
1,710,000 stock options were granted to certain members of the Company's
management at an exercise price of US$0.23 per share. The weighted-average fair
value of options granted in 2001, 2003 and 2004 estimated on the date of grant
using a Black-Scholes option pricing model was US$1.14, US$0.24 and US$0.24



                                       56
<PAGE>


respectively. 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:

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED

<Table>
<Caption>
                                                                         OPTIONS GRANTED IN
                                                          -----------------------------------------------
                                                              2001              2003             2004
<S>                                                       <C>               <C>             <C>
Risk-free interest rate                                           5.59%              2.5%            2.13%
Dividend yield                                                     Nil               Nil              Nil
Volatility factor of the expected market price of the
common stock                                                    295.21%              100%             100%
Weighted-average expect life                                2.34 years       9.125 years      9.292 years
</Table>

         Common Stock Options

         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, 2004, the Company has one stock-based employee
compensation plan, which is described more fully in Note 22. The Company
accounts for this plan 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>
                                                      2002           2003           2004           2004
                                                   ----------     ----------     ----------     ----------
                                                     HK$'000        HK$'000        HK$'000        US$'000
<S>                                                <C>            <C>            <C>            <C>
Net loss, as reported                                  18,068        101,674         34,847          4,467
Deduct: total stock-based employee                      3,167            251             --             --
compensation expense determined under the fair
value based method for all awards, net of
related tax effects
Pro forma net loss                                     21,235        101,925         34,847          4,467

Basic and diluted net loss per share
- As reported                                            0.91           5.11           1.31           0.17
- Pro forma                                              1.07           5.12           1.31           0.17
</Table>



                                       57
<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 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 March 31, 2003. Management does not expect the adoption of this
Interpretation to have a material impact on the Company's financial position or
results of operations.

         In April 2003, the FASB issued SFAS No. 149, "Amendment of Statement
133 on Derivative Instruments and Hedging Activities" that amends and clarifies
accounting for derivatives instruments, including certain derivative instruments
embedded in other contracts, and for hedging activities under Statement 133.
With certain exceptions, SFAS No, 149 is effective for contracts entered into or
modified after June 30, 2003, and for hedging relationships designed after June
30, 2003. Management does not expect the adoption of this standard to have a
material impact on the Company's financial position or results of operations.

                                       58


<PAGE>


NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED

         In December 2003, the FASB issued Interpretation No. 46R, a revision to
Interpretation No. 46, "Consolidation of Variable Interest Entities.", which
addresses how a business enterprise should evaluate whether it has a controlling
financial interest in an entity through means other than voting rights and
accordingly should consolidate the entity. Interpretation No. 46R clarifies some
of the provisions of Interpretation No. 46 and exempts certain entities from its
requirements. Interpretation No. 46R is effective at the end of the first
interim period ending March 15, 2004. Management does not expect the adoption of
this statement to have a material impact on the Company's financial position or
results of operations.

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, 2002, 2003
and 2004 were computed by dividing net loss applicable to common stock by the
weighted average number of 19,915,292, 19,915,292 and 26,522,467 shares of
common stock, respectively.

         The amount of diluted net loss per share for each of the years ended
March 31, 2002, 2003 and 2004 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 basic net loss per share are
605,000, 1,147,000 and nil for each of the years ended March 31, 2002, 2003 and
2004, respectively.


<Table>
<Caption>
                                                       YEAR           YEAR           YEAR            YEAR
                                                       ENDED          ENDED          ENDED           ENDED
                                                      MARCH 31,      MARCH 31,      MARCH 31,       MARCH 31,
                                                        2002           2003           2004           2004
                                                     ==========     ==========     ==========     ==========
                                                       HK$'000        HK$'000        HK$'000        US$'000
<S>                                                  <C>            <C>            <C>            <C>
Numerator for basic and diluted loss per share:
  Net loss                                              (18,068)      (101,674)       (34,847)        (4,467)
                                                     ==========     ==========     ==========     ==========
Denominator for basic and diluted loss per share:
  Weighted average number of shares                  19,915,292     19,915,292     26,522,467     26,522,467
                                                     ==========     ==========     ==========     ==========
Basic and diluted loss per share                        HK$0.91        HK$5.11        HK$1.31        US$0.17
                                                     ==========     ==========     ==========     ==========
</Table>


                                       59
<PAGE>


NOTE 3 - SUPPLEMENTARY INCOME STATEMENT INFORMATION


<Table>
<Caption>
                                                                YEAR ENDED MARCH 31,
                                                 ---------------------------------------------------
                                                   2002           2003          2004           2004
                                                 -------        -------       -------        -------
                                                 HK$'000        HK$'000       HK$'000        US$'000
<S>                                              <C>            <C>           <C>            <C>
Selling, general and administrative expenses
Depreciation                                       1,588          1,848         1,279            164

  Advertising expenses                               --             --            --             --
  Operating lease rentals                            --             --            --             --
  Research expenses                                  --             --            --             --
                                                 =======        =======       =======        =======
</Table>


NOTE 4 - SUPPLEMENTAL CASH FLOW INFORMATION


<Table>
<Caption>
                                                                 YEAR ENDED MARCH 31,
                                                 ---------------------------------------------------
                                                   2002           2003          2004           2004
                                                 -------        -------       -------        -------
                                                 HK$'000        HK$'000       HK$'000        US$'000
<S>                                              <C>            <C>           <C>            <C>
Cash paid during the year for
Interest                                            --             --               3              0
Income taxes                                        --             --            --             --
                                                 =======        =======       =======        =======
</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, a co-operative joint venture formed
in the PRC in which the Group has 100% interest (2003: 100%), is subject to PRC
income taxes at the applicable tax rate of 33% for Sino-foreign joint venture
enterprises. The joint venture is 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 fiftieth year. Under
the Income Tax Law applicable to Sino-foreign joint ventures, no PRC income tax
was levied on the above company as it did not generate assessable profits for
each of the three years ended March 31, 2004.


                                       60
<PAGE>


NOTE 5 - INCOME TAXES - CONTINUED

         Total income tax expense differs from the amount computed by applying
Hong Kong applicable statutory income tax rate of 2004: 17.5%, 2003: 16% and
2002: 16% to income before taxes as follows:


<Table>
<Caption>
                                                                              YEAR ENDED MARCH 31,
                                                              ---------------------------------------------------
                                                               2002           2003           2004           2004
                                                              -------        -------       -------        -------
                                                              HK$'000        HK$'000       HK$'000        US$'000
<S>                                                           <C>            <C>           <C>            <C>
Computed expected income taxes                                 2,891         16,268          6,450            827
Non-deductible losses of the Company and subsidiaries         (2,677)       (16,103)        (6,682)          (857)
Non taxable income                                               --             --             232             30
Change of tax rates                                              --             --             221             28
Valuation allowance                                             (214)          (165)          (221)           (28)
                                                              -------        -------       -------        -------
Tax credit for the year                                          --             --             --             --
                                                              =======        =======       =======        =======
Deferred tax asset is comprised the following:

Tax losses carried forward                                     2,195          2,360          2,581            331
Valuation allowance                                           (2,195)        (2,360)        (2,581)          (331)
                                                              -------        -------       -------        -------
                                                                 --             --             --             --
                                                              =======        =======       =======        =======
</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, 2004, the Group has Hong Kong tax losses carry forward
of approximately HK$14,747,000 (US$1,890,000) (2003: HK$14,747,000
(US$1,890,000)), (2002: HK$13,718,000 (US$1,758,000) 2001: HK$12,379,000
(US$1,587,000)), which has not yet been confirmed by the Hong Kong Inland
Revenue Department ("IRD") as the IRD implemented an assessing program known as
"Assess First Audit Later." Currently, the tax losses as can be carried forward
indefinitely.

NOTE 6 - ACCOUNTS RECEIVABLE, NET

<Table>
<Caption>
                                                                MARCH 31,
                                                -----------------------------------------
                                                  2003             2004             2004
                                                -------           -------         -------
                                                HK$'000           HK$'000         US$'000
<S>                                             <C>               <C>             <C>
Accounts receivable - trade                       1,478             1,021            131
Less: Allowance for doubtful debts                 (693)             (472)           (61)
                                                -------           -------         -------
Accounts receivable, net                            785               549             70
                                                =======           =======         =======
Movement of allowance for doubtful debts
  Balance as at April 1                             645               693             89
  Provided during the year                           48                78             10
  Reversal due to disposal of subsidiaries         --                (299)            38
                                                -------           -------         -------
Balance as at March 31                              693               472             61
                                                =======           =======         =======
</Table>


                                       61
<PAGE>


NOTE 7 - INVENTORIES, NET

<Table>
<Caption>
                                                                                        MARCH 31,
                                                                        -----------------------------------------
                                                                          2003             2004             2004
                                                                        -------           -------         -------
                                                                        HK$'000           HK$'000         US$'000
<S>                                                                     <C>               <C>             <C>
Raw materials                                                             1,148             1,262            162
Finished goods                                                              317               222             28
Less: Allowance for obsolescence and
     net realizable value                                                (1,291)           (1,211)          (155)
                                                                        -------           -------         -------
Inventories, net                                                            174               273             35
                                                                        =======           =======         =======
Movement of allowance for obsolescence and
     net realizable value
        Balance as at April 1                                             1,291             1,291            168
        Provided (written back) during the year                               -               (80)           (10)
                                                                        -------           -------         -------
Balance as at March 31                                                    1,291             1,211            155
                                                                        =======           =======         =======
</Table>


NOTE 8 - PROPERTY, PLANT AND EQUIPMENT


<Table>
<Caption>
                                                                                        MARCH 31,
                                                                        -----------------------------------------
                                                                          2003             2004             2004
                                                                        -------           -------         -------
                                                                        HK$'000           HK$'000         US$'000
<S>                                                                     <C>               <C>             <C>
Land and buildings                                                       17,000               --              --
Leasehold improvements                                                       92               --              --
Machinery and equipment                                                  16,600                15               2
Motor vehicles                                                              524               --              --
Furniture, fixtures and office equipment                                  3,507               --              --
                                                                        -------           -------         -------
                                                                         37,723                15               2
Less: Accumulated depreciation                                           (3,976)              --              --
                                                                        -------           -------         -------
                                                                         33,747                15               2
                                                                        =======           =======         =======
</Table>


         On January 26, 2004, the Company entered into the Agreement with
Gumption Trading Ltd., a company incorporated in the BVI, and Guangzhou
Dransfield Paper Ltd., a wholly owned subsidiary of the Company. Pursuant to the
Agreement, the Company sold to Gumption Trading (i) all of the shares of its
wholly owned subsidiaries DF Paper Guangdong Ltd., Guangdong Dransfield Paper
Ltd., DF Paper Jiangsu Limited and Jiangsu Dransfield Paper Co. Ltd., and (ii)
all fixed assets of its subsidiary in Conghua, Guangzhou Dransfield Paper
Limited. Guangzhou Dransfield Paper Limited agreed to lease back these assets
from Gumption Trading for its paper manufacturing operations at a rent of
HK$1.00 per annum for a term of one (1) year, renewable yearly thereafter upon
mutual agreement. For such purchase, Gumption Trading paid to the Company a
nominal aggregate amount of HK$5 and assumed all of the Company's liabilities
including liabilities related to such subsidiaries and assets, incurred by the
Company prior to January 28, 2004. The Group recorded a loss of HK$19,500,000
(US$2,500,000) resulting from the disposal of the fixed assets described above.

         The leased back assets are the basis for the Group's current operating
revenues from its paper manufacturing business, which the management believes
provide the Group with a solid platform for its existing paper manufacturing
business.


                                       62
<PAGE>


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$12,936,000 (US$1,658,000) 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 amounted to HK$1,332,000
(US$171,000). 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$3,262,000 (US$418,000) was recorded in 2002. 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.

         No movement was recognized for interest in Affiliate for the year ended
March 31, 2004.

NOTE 10 - IMPAIRMENT OF LONG-LIVED ASSETS

         No Impairment loss was recognized for the year ended March 31, 2004.

         During 2002, certain assets related to the Group's paper mills under
construction in Xinhui and Jiangyin were written down to amounts 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 dispose of the idle machinery and
equipment at the plant in Conghua. Management reviewed the carrying amounts of
all the assets and, after taking advice from professional valuers, recognized an
impairment loss of HK$97,792,000 (US$12,537,000) (2002: HK$7,939,000
(US$1,018,000)) for the year ended March 31, 2003 based on the fair market
values.


                                       63
<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,
                                                              ---------------------------------------------------
                                                               2002           2003           2004           2004
                                                              -------        -------       -------        -------
                                                              HK$'000        HK$'000       HK$'000        US$'000
<S>                                                            <C>           <C>           <C>            <C>
Paper manufacturing
- Leasehold land and buildings                                   --             --             --             --
- Machinery and equipment                                      7,939         97,792            --             --
                                                              -------        -------       -------        -------
                                                               7,939         97,792            --             --
                                                              =======        =======       =======        =======
</Table>

NOTE 11 - DUE FROM AFFILIATE



         On October 28, 2004, the Group received letters from three of the
investors in its February 2004 private placement stating their desire to rescind
their purchase of an aggregate of 11,200,000 shares in light of the Group's
subsequent receipt of a delisting notice from Nasdaq in March 2004. These
letters confirmed oral requests made by these investors earlier in 2004. In
March 2004, the Group established a fund of RMB20 million (HK$18,843,000 or
US$2,417,000) for investment purposes with Shenzhen International Trust
Investment Company, a nationally owned investment company. As a result of the
requests from investors, and for the purpose of repaying these investors in the
event that the Company's board of directors decided to take such action, the
fund of RMB20 million (HK$18,843,000 or US$2,417,000) was set aside into escrow
(the "Escrow") pursuant to the terms of a loan agreement dated March 26, 2004
between Shenzhen International Trust Investment Company and an affiliate of the
Group's, China Merchants DiChain Investment Holdings Ltd. ("China Investment
Holdings"). Pursuant to the terms of the loan agreement, the initial duration of
the loan was for one (1) year bearing interest of 4.8% per year. The Escrow is
now being held by China Investment Holdings and is available to the Company on
demand. All interest earned on the Escrow remains with China Investment
Holdings. DiChain Holdings Ltd., the parent and owner of all of the capital
stock of China Investment Holdings, agreed to guarantee payment of the Escrow to
the Group should China Investment Holdings fail to repay the Escrow. Based on
the advice of counsel, the Company's board of directors believes that it does
not have a legal obligation under the placement documents to refund the
investors' purchase and at a meeting of the Board held on November 5, 2004, the
Board decided to demand repayment of the Escrow as soon as possible.

NOTE 12 - DUE TO AFFILIATE

         The balance is due to an affiliate of Dransfield Holdings Ltd. ("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.


                                       64
<PAGE>


         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$5,744,000.

NOTE 13 - COMMITMENTS AND CONTINGENCIES

         Capital Commitments

         As of March 31, 2004, the Group had outstanding capital commitments as
follows:


<Table>
<Caption>
                                                                              YEAR ENDED MARCH 31,
                                                              ---------------------------------------------------
                                                               2002           2003           2004           2004
                                                              -------        -------       -------        -------
                                                              HK$'000        HK$'000       HK$'000        US$'000
<S>                                                           <C>            <C>           <C>            <C>
Property, plant and equipment                                 40,407         40,407            --             --
                                                              =======        =======       =======        =======
</Table>

         Contingencies

1.       On January 26, 2004, the Company, Gumption Trading Limited (the
"Purchaser") and Guangzhou Dransfield Paper Ltd. ("GDPL") entered into the
Agreement wherein the Company disposed of a majority of its assets primarily to
streamline its paper operations. The Purchaser assumed all the liabilities
including contingency liabilities of the Company and its subsidiaries incurred
by the Company prior to January 28, 2004. By a guarantee dated January 28, 2004
and by a deed of confirmation dated September 20, 2004, the guarantor, an
independent third party, guaranteed to the Company and GDPL the due payment by
the Purchaser of all sums and charges under the Agreement and due performance
and observance by the Purchaser of the terms and conditions of the Agreement.

         As a result of the disposal of the subsidiaries and the guarantee
provided by the guarantor, the liabilities, including contingent liabilities of
the Company and its subsidiaries incurred prior to January 28, 2004, have been
fully assumed by the Purchaser.

2.       Accordingly, as the liabilities of the Company and its subsidiaries in
relation to the pending litigations as mentioned in the last annual report were
incurred prior to the completion of the Agreement, the Purchaser has assumed all
the liabilities resulting from the said pending litigations.

         In May 2004, Mr. Horace Yao Yee Cheong ("Mr. Yao"), the former chairman
and executive director of the Company, sued the Company, seeking, inter alia,
the unpaid remuneration of HK$480,000 and a short term advance of HK$1,162,222,
plus interest and costs, and specific performance by the Company to allot to Mr.
Yao 1,153,846 fully paid shares of common stock and 62,500 shares of common
stock at US$0.001 par value. Mr. Yao's claim falls within the ambit of the
Agreement as supplemented by the Guarantee and thus no provision in relation to
the claimed amount has been made in the financial statements.

3.       In February 2004, the Company completed a private placement of 21.5
million shares of its common stock at US$0.20 per share or an aggregate amount
of US$4.3 million.


                                       65
<PAGE>


NOTE 13 - COMMITMENTS AND CONTINGENCIES - CONTINUED

         The Group received letters on October 28, 2004 from three of the
investors in its February 2004 private placement stating their desire to rescind
their purchase of an aggregate of 11,200,000 shares in light of our subsequent
receipt of a delisting notice from Nasdaq in March 2004. These letters confirmed
oral requests made by these investors earlier in 2004. The Company allocated
funds for the purpose of repaying these investors in the event that the Board
decides to take such action. Based on the advice of counsel, the Company's board
of directors believes that it does not have a legal obligation under the
placement documents to refund the investors' purchase.

4.       In connection with the preparation of this Annual Report on Form 20-F
and after consultation with its legal counsel in the BVI, the Group was informed
that it should have sought and received shareholder approval under BVI law prior
to entering into the Agreement due to the fact that the combined assets being
sold by the Group at such time exceeded fifty percent (50%) of its total assets.
The Group has engaged BVI counsel and U.S. counsel to prepare the documents
required to obtain the approval of its shareholders at a special meeting to
ratify the transaction into which we entered with Gumption Trading. Pursuant to
the laws of the BVI, upon the Group receiving approval from a majority of its
shareholders, the transaction with Gumption Trading will be ratified and
approved as if such shareholder approval had been received prior to the
execution of the Agreement. Section 83 of the International Business Companies
Act (Cap. 291) of the BVI provides dissenters rights for those of the Group's
shareholders who held their shares at the time of this transaction and exercise
their right to dissent from the transaction entitling them to receive fair value
for their shares. On November 8, 2004, we filed a report on Form 6-K with the
SEC in connection with the Agreement and the required shareholder approval. In
connection with the dissenters rights, the Group is unable to quantify at this
time the number of shareholders who held their shares at the time of this
transaction and who may exercise their right to dissent from the transaction.

NOTE 14 - 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,
                                                              ---------------------------------------------------
                                                               2002           2003           2004           2004
                                                              -------        -------       -------        -------
                                                              HK$'000        HK$'000       HK$'000        US$'000
<S>                                                           <C>            <C>           <C>            <C>
Storage and delivery charges (Note (a))                          362            725            --             --
Management fee paid
     (Note (b))                                                   --             --          2,200            282
                                                              =======        =======       =======        =======
</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.

         (b)      Management fee

                  On May 1, 2003, Victorison Logistics Limited ("VLL"), an
         affiliate of the Company, entered into an agreement with the Company
         whereby VLL agreed to provide management services to the Group at the
         monthly fee of HK$200,000 (US$25,641). According to the management,
         these transactions were carried out at the terms determined and agreed
         by the relevant parties.

                                       66
<PAGE>


NOTE 15 - LOSS ON DISPOSAL OF SUBSIDIARIES


<Table>
<Caption>
                                                 2004
                                               -------
                                               HK$'000
<S>                                            <C>
Net assets disposed of:
Property, plant and equipment                   12,835
Cash at bank                                        16
Prepayments and other receivables                  179
Accrued liabilities and other payables          (1,860)
Construction payable                            (2,826)
Accrued rental payable                            (199)
Due to affiliates                                  (72)
                                               -------
Loss on disposal of subsidiaries                 8,073

Satisfied by cash of HK$5                          --
                                               -------
Cash at bank disposed of                            16
                                               -------
</Table>

          The subsidiaries disposed of during the year did not have any
significant impact on the Group's operating results and cash flows.

NOTE 16 - NON-CASH TRANSACTION

         On June 11, 2003, the Company issued a total of 3,201,513 shares of the
Company at US$0.23 each to DHL to settle partially debts due to DHL up to a
total of HK$5,744,000.

NOTE 17 - 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.

         On January 26, 2004 pursuant to the Agreement, the Company disposed of
its four loss making subsidiaries and certain paper manufacturing assets at a
nominal total consideration of HK$5 whereas Gumption Trading Ltd. assumed all
the liabilities related to such subsidiaries and assets prior to January 28,
2004. Under the Agreement, Gumption Trading Ltd. also agreed to lease back part
of the paper manufacturing assets to the Group at a rent of HK$1.00 per annum.

NOTE 18 - 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.


                                       67
<PAGE>


         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 19 - 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.

         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
insignificant for the three years ended March 31, 2004.

NOTE 20 - 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.


                                       68
<PAGE>


         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.

NOTE 20 - SEGMENT REPORTING AND CONCENTRATIONS OF MAJOR CUSTOMERS - CONTINUED

         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>
                                                               2002        2003        2004        2004
                                                             --------    --------    --------    --------
                                                              HK$'000     HK$'000     HK$'000     US$'000
<S>                                                          <C>         <C>         <C>         <C>
Net sales

  Paper merchanting                                             1,165         142        --          --
  Paper manufacturing                                           5,433       5,346       4,131         530
                                                             --------    --------    --------    --------
Total consolidated net sales                                    6,598       5,488       4,131         530
                                                             ========    ========    ========    ========
Depreciation charge
  Paper merchanting                                              --          --          --          --
  Paper manufacturing                                           1,588       1,987       1,419         182
                                                             --------    --------    --------    --------
Total consolidated depreciation charge                          1,588       1,987       1,419         182
                                                             ========    ========    ========    ========
Profit/ (loss)
  Paper merchanting                                              (681)         28        --
  Paper manufacturing                                         (12,026)   (101,427)     (2,544)       (327)
                                                             --------    --------    --------    --------
Total segment loss                                            (12,707)   (101,399)     (2,544)       (327)
Reconciling items
  Corporate expenses                                             (767)       (275)     (4,730)       (606)
  Loss on disposal of subsidiaries                               --          --        (8,073)     (1,034)
  Loss on disposal of fixed assets                               --          --       (19,500)     (2,500)
  Equity in loss of an affiliate                               (4,594)       --          --          --
                                                             --------    --------    --------    --------
Total consolidated loss before income taxes                   (18,068)   (101,674)    (34,847)     (4,467)
                                                             ========    ========    ========    ========
Segment assets
  Paper merchanting                                                85           9           9           1
  Paper manufacturing                                         134,972      34,840       1,109         142
                                                             --------    --------    --------    --------
Total segment assets                                          135,057      34,849       1,118         143
Reconciling item
  Corporate assets                                                188          43      35,657       4,572
  Interest in an affiliate                                          1           1           1           1
                                                             --------    --------    --------    --------
Total consolidated assets                                     135,246      34,893      36,776       4,715
                                                             ========    ========    ========    ========
Expenditure for additions to property, plant and equipment
  Paper manufacturing                                             105           3          15           2
                                                             --------    --------    --------    --------
Total expenditure for additions                                   105           3          15           2
                                                             ========    ========    ========    ========
</Table>


                                       69
<PAGE>


NOTE 20 - SEGMENT REPORTING AND CONCENTRATIONS OF MAJOR CUSTOMERS - CONTINUED

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


<Table>
<Caption>
                                                      2002        2003        2004       2004
                                                    -------     -------     -------     -------
                                                    HK$'000     HK$'000     HK$'000     US$'000
<S>                                                 <C>        <C>          <C>          <C>
Net sales
  Hong Kong and Macau                                 1,165       2,397       1,948         250
  Other parts of the PRC                              3,667       3,091       2,183         280
  Other parts of Asia                                 1,766        --          --          --
                                                    -------     -------     -------     -------
Total consolidated net sales                          6,598       5,488       4,131         530
                                                    =======     =======     =======     =======
Depreciation charge
  Other parts of the PRC                              1,588       1,987       1,419         182
                                                    -------     -------     -------     -------
Total consolidated depreciation charge                1,588       1,987       1,419         182
                                                    =======     =======     =======     =======
Loss
  Hong Kong and Macau                                (1,506)       (275)       --
  Other parts of the PRC                            (16,281)   (101,399)    (34,847)     (4,467)
  Other parts of Asia                                  (281)       --
                                                    -------     -------     -------     -------
Total consolidated loss before income taxes         (18,068)   (101,674)    (34,847)     (4,467)
                                                    =======     =======     =======     =======
Long-lived assets
  Other parts of PRC                                133,549      33,747        --          --
                                                    -------     -------     -------     -------
Total long-lived assets                             133,549      33,747        --          --
                                                    =======     =======     =======     =======
Expenditure for additions to property, plant and
  equipment
  Other parts of the PRC                                105           3        --          --
                                                    -------     -------     -------     -------
Total expenditure for additions                         105           3        --          --
                                                    =======     =======     =======     =======
</Table>


         There were no inter-segment sales for the three years ended March 31,
2004.

         Major Customers

         For the fiscal year ended March 31, 2002, there was one customer
accounted for more that 10% of the total net assets. It was HK$1,282,000
(US$164,000 or 18.6%). For the fiscal year ended March 31, 2003, there were
three customers accounted for more than 10% of the total net sales. They were
HK$1,499,000 (US$192,000 or 27%), HK$948,000 (US$122,000 or 17%) and HK$553,000
(US$71,000 or 10.1%) respectively. For the fiscal year ended March 31, 2004,
five customers accounted for more than 10% of the total net sales. They were
HK$1,306,000 (US$167,000 or 31.6%), HK$563,000 (US$72,000 or 13.6%), HK$529,000
(US$68,000 or 12.8%), HK$524,000 (US$67,000 or 12.7%) and HK$444,000 (US$57,000
or 10.7%) respectively.


                                       70
<PAGE>


NOTE 21 - 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>
                                                      NUMBER
                                                        OF             WEIGHTED AVERAGE
                                                     OPTIONS            EXERCISE PRICE
                                                   ----------          ----------------
<S>                                                <C>                 <C>
        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
                                                   ----------
        Outstanding at March 31, 2003                 875,000               US$0.65
        Granted                                     1,710,000               US$0.37
        Exercised                                  (1,755,000)              US$0.37
        Cancelled                                    (830,000)              US$0.37
                                                   ----------
        As at March 31, 2004                             --
                                                   ==========
</Table>


                                       71
<PAGE>


NOTE 21 - COMMON STOCK OPTIONS - CONTINUED


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

         March 31, 2002                                             605,000             US$0.82
         March 31, 2003                                                --                   --
         March 31, 2004                                                --                   --
                                                                    =======            ========
         Weighted average fair value of options granted during
         the year ended
           March 31, 2002                                                                   --
           March 31, 2003                                                                  0.19
           March 31, 2004                                                                  0.24
                                                                                       ========
</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 pursuant to Plan 2 amounting to 542,000 shares at an exercise
price of US$0.286 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 option under Plan 2 as of March 31,
2003 had lapsed.

         On June 11, 2003, the board of directors granted to certain members of
the Company's management a total of 1,710,000 stock options pursuant to the 2002
Stock Option Plan, at an exercise price of US$ 0.23 per share, which exercise
price was the closing price of the Company's common stock on June 10, 2003. 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. No compensation expense was recognized for
the years ended March 31, 2002, 2003 and 2004 as the exercise prices of the
outstanding options exceeded the fair market value of the Company's shares as of
March 31, 2002, 2003 and 2004.

NOTE 22- CONTRIBUTED SURPLUS

         The amount represents a net compensation of HK$1,530,000 (US$196,000)
from a minority shareholder, which was accounted for as a capital transaction in
1998, and accumulated stock compensation expense of HK$3,147,000. No stock
compensation expense was recognized for the three years ended March 31, 2004.


                                       72
<PAGE>


NOTE 23 - POST BALANCE SHEET EVENTS

         1. In March 2004, the Company received a letter from the Nasdaq Listing
Qualifications Department indicating that it was subject to being delisted off
of The Nasdaq Small Cap Market because of its failure to comply with Nasdaq
Marketplace Rules.

            The Company requested an oral hearing before the Nasdaq Listing
Qualifications Panel (the "Panel") to review the determination reached by the
Nasdaq Listing Qualifications Department. Under applicable rules, the hearing
request stayed the delisting of the Company's common stock off of The Nasdaq
Small Cap Market, pending a decision by the Panel.

            The hearing was held on April 22, 2004 in Washington, D.C. On May
21, 2004, the Company received a notification letter from counsel for the Nasdaq
Listing Qualifications Department stating that its common stock would be
delisted from The Nasdaq SmallCap Market effective as of the open of business on
Tuesday, May 25, 2004. On such date, the Company's common stock was listed on
the OTCBB under the symbol "DFCT".

         2. On April 20, 2004 the Company issued 5,200,000 new shares of
US$0.404 per share to the unrelated investor, Squadram Limited raising a total
of HK$16.4 million (U.S.$2.1 million). The proceeds from the said new issue were
received in full.

         3. In February 2004, DICHAIN Software Systems (Shenzhen) Ltd. ("DICHAIN
Software") and the Company's board of directors entered into discussions in
connection with a possible merger of the two companies. After reviewing the
proposal, the board concluded that the addition of DICHAIN Software's business
would add significant value to the Group in terms of overall revenue, net
profit, and net assets. Consequently, a meeting of the Company's shareholders
took place on March 25, 2004 and the merger was voted on and passed.

            On May 25, 2004, the Company merged with DICHAIN Software. DICHAIN
Software is now a wholly owned subsidiary of the Company. The information
technology business of DICHAIN Software has now become the Group's primary
business.

         4. On June 7, 2004, after the merger with DICHAIN Software, the Company
filed an initial listing application to list its common stock on The Nasdaq
SmallCap Market. On August 17, 2004, the Company received a letter from Nasdaq
Listing Qualifications Department denying the application for listing. On August
23, 2004, the Company filed an application for another hearing in front of the
Panel. The hearing was held on September 30, 2004 in Washington, D.C. At the
time of filing this annual report, the Company has not received a response from
the Nasdaq regarding such hearing.

         5. As stated in Note 13(3) to the financial statements, the Company
completed a private placement of 21.5 million shares of its stock at US$0.20 per
share or an aggregate amount of US$4.3 million in February 2004. In connection
with this private placement, the Company received letters on October 28, 2004
from three of the investors in its February 2004 private placement stating their
desire to rescind their purchase of an aggregate of 11,200,000 shares in light
of our subsequent receipt of a delisting notice from Nasdaq in March 2004. These
letters confirmed oral requests made by these investors earlier in 2004.

                                       73
<PAGE>


Up to the date of this report, the Company has not received any further request
from those investors.

         6. As stated in Note 13(4) to the financial statements, the Company
filed a report on Form 6-K with the SEC on November 8, 2004 in connection with
the Agreement with Gumption Trading Ltd. and the required shareholder approval.

ITEM 19. EXHIBITS.

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


<Table>
<Caption>
        Exhibit                                                      Item
        --------           ---------------------------------------------------------------------------------------
<S>                        <C>
        1.1         --     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, as the surviving company, and Dransfield Paper Holdings Limited, as the
                           discontinuing company.(1)

        1.2         --     Memorandum of Association of Dransfield China Paper Corporation.(2)

        1.3         --     Restated and Amended Articles of Association of Dransfield China Paper Corporation.(3)

        1.4         --     Certificate of Incorporation, dated as of March 28, 2000, changing the name of the
                           corporation from Dransfield China Paper Corporation to DF China Technology, Inc.(4)

        4.1         --     1996 Share Option Scheme, as amended, adopted by Dransfield China Paper Corporation (now
                           known as DF China Technology, Inc.).(5)

        4.2         --     2002 Stock Option Plan.(6)

        4.3         --     Form of Agreement for the Sale and Purchase of Shares (the "Share Purchase Agreement")
                           in certain subsidiaries of DF China Technology Inc. and Certain Assets in the PRC, dated
                           as of January 26, 2004 among DF China Technology Inc., Gumption Trading Limited, a
                           company incorporated in the British Virgin Islands, and Guangzhou Dransfield Paper Ltd,
                           a company incorporated in the PRC.*
</Table>


                                       74
<PAGE>


<Table>
<Caption>
        Exhibit                                                      Item
        --------           ---------------------------------------------------------------------------------------
<S>                        <C>
        4.4         --     Form of Deed of Guarantee, dated as of January 26, 2004, of Qingdao Haotian Investment
                           Limited, as Guarantor, in connection with the Share Purchase Agreement.*

        4.5         --     Form of Deed of Confirmation, dated as of September 20, 2004, among DF China Technology
                           Inc., Gumption Trading Limited, a company incorporated in the British Virgin Islands,
                           and Guangzhou Dransfield Paper Ltd, a company incorporated in the PRC.*

        4.6         --     Agreement for the Exchange of Common Stock, dated as of February 13, 2004, by and among
                           DF China Technology Inc. and DiChain Systems Limited, a limited company incorporated in
                           Hong Kong, Farsight Holdings Limited, a limited company incorporated in the British
                           Virgin Islands, Squadram Limited, a limited company incorporated in the British Virgin
                           Islands, and Earnest Investments Services Limited, a limited company incorporated in the
                           British Virgin Islands.*

        4.7         --     Form of Letter Agreement, dated February 4, 2004, between DF China Technology, Inc. and
                           Quam Securities Company Limited, as Placement Agent.*

        4.8         --     Form of Placing Letter of Quam Securities Company Limited, as Placement Agent, to Asia
                           Century Development Limited, as Purchaser, dated February 13, 2004, and the related
                           placing confirmation, in connection with the purchase of 3,900,000 shares of DF China
                           Technology Inc.*

        4.9         --     Form of Placing Letter of Quam Securities Company Limited, as Placement Agent, to Global
                           China Enterprises Limited, as Purchaser, dated February 13, 2004, and the related
                           placing confirmation, in connection with the purchase of 3,100,000 shares of DF China
                           Technology Inc.*

        4.10        --     Form of Placing Letter of Quam Securities Company Limited, as Placement Agent, to Poly
                           Crown Limited, as Purchaser, dated February 13, 2004, and the related placing
                           confirmation, in connection with the purchase of 3,200,000 shares of DF China Technology
                           Inc.*

        4.11        --     Form of Placing Letter of Quam Securities Company Limited, as Placement Agent, to
                           Kinetic Point Limited, as Purchaser, dated February 13, 2004, and the related placing
                           confirmation, in connection with the purchase of 3,500,000 shares of DF China Technology
                           Inc.*

        4.12        --     Form of Placing Letter of Quam Securities Company Limited, as Placement Agent, to Host
                           Glory Limited, as Purchaser, dated February 13, 2004, and the related placing
                           confirmation, in connection with the purchase of 3,000,000 shares of DF China Technology
                           Inc.*

        4.13        --     Form of Placing Letter of Quam Securities Company Limited, as Placement Agent, to Sino
                           Castle Holdings Limited, as Purchaser, dated February 13, 2004, and the related placing
                           confirmation, in connection with the purchase of 1,000,000 shares of DF China Technology
                           Inc.*
</Table>


                                       75
<PAGE>


<Table>
<Caption>
        Exhibit                                                      Item
        --------           ---------------------------------------------------------------------------------------
<S>                        <C>
        4.14        --     Form of Placing Letter of Quam Securities Company Limited, as Placement Agent, to Gush
                           Intelligence Limited, as Purchaser, dated February 13, 2004, and the related placing
                           confirmation, in connection with the purchase of 3,800,000 shares of DF China Technology
                           Inc.*

        4.15        --     Form of Subscription Offer Letter of DF China Technology, Inc. to Squadram Limited and
                           the related subscription confirmation, each dated April 5, 2004, in connection with the
                           purchase by Squadram Limited of 5,200,000 shares of DF China Technology Inc.*

        8.1         --     List of all subsidiaries of DF China Technology, Inc.*

        11.1        --     Code of Ethics for CEO and Senior Financial Officers.*

        11.2        --     Code of Business Conduct and Ethics.*

        12.1        --     Section 302 Certification of Chief Executive Officer.*

        12.2        --     Section 302 Certification of Chief Financial Officer.*

        13.1        --     Section 906 Certification of the Chief Executive Officer.*

        13.2        --     Section 906 Certification of the Chief Financial Officer.*
</Table>

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

         *        Filed herewith.

         (1)      Incorporated by reference herein from DF China Technology,
                  Inc.'s Form S-1 (SEC File No. 333-11637) filed with the SEC on
                  September 9, 1996.

         (2)      Incorporated by reference herein from DF China Technology,
                  Inc.'s Amendment No. 1 to Form S-1 (SEC File No. 333-11637)
                  filed with the SEC on December 30, 1996.

         (3)      Incorporated by reference herein from DF China Technology,
                  Inc.'s Form 6-K filed with the SEC on March 7, 1997;
                  incorporated herein.

         (4)      Incorporated by reference herein from DF China Technology,
                  Inc.'s Amendment No. 2 on Form F-1 filed with the SEC on June
                  25, 1997.

         (5)      Incorporated by reference herein from DF China Technology,
                  Inc.'s Annual Report on Form 20-F for the fiscal year ended
                  March 31, 2002, filed with the SEC on October 15, 2002.

         (6)      Incorporated by reference herein from DF China Technology,
                  Inc.'s Form 6-K filed with the SEC on July 22, 2003.


                                       76
<PAGE>


                                   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 the annual report on its behalf.

                                     DF CHINA TECHNOLOGY, INC.


                                     By: /s/ Dr. Fan Di
                                        ----------------------------------------
                                     Name:  Dr. Fan Di
                                     Title: Chairman and Chief Executive Officer

Date:  November 18, 2004