HARTCOURT IN USA: 6,56 $ = +17,33%!!$$$

I understand the concerns that some have raised regarding human rights and labor issues in China. I believe our best opportunity to exert a positive influence in these areas is to do more--not less--to encourage China's participation in the global community. Increasing trade and stronger economic relationships, including PNTR status and China's accession to the World Trade Organization, will do far more to nurture social and economic change in China than regularly threatening trade sanctions.

As I've talked to students throughout China, I have seen not just a passion for technology but also a passion for new ideas, for how Americans think, how our economy operates and how our social institutions work. I firmly believe the best way to build a strong and constructive relationship with China--and to address the concerns that have been raised over social issues--is through increased economic and cultural interaction.

With improved trade relations, high technology in particular can play an important role. Personal computers and the Internet are windows to the world. Today, only 2.5 percent of China's population owns a computer--compared with nearly 50 percent in the United States--and less than one percent has Internet access. But the numbers are growing at an astonishing rate. In 1997 China was already the sixth-largest market for PCs; by the end of next year it will probably rank third. During 1999 the number of Internet users in China quadrupled, and will likely more than double again this year, to more than 20 million.

Today, only a small percentage of Microsoft's revenues come from China, but we are making large investments there, because we believe in its future--not only as a place for Microsoft to do business but also as a fertile source of new ideas about how technology can improve people's lives.

Although our efforts in China are still relatively modest, Microsoft's current activities offer examples of how increased trade relations could serve as a positive vehicle for change in China:

We employ more than 450 people in our Chinese subsidiary, where salaries are far higher than the average Chinese wage. Our compensation and benefits are helping to raise the standard of living.
With more than 2,000 resellers, 600 certified training partners and four major product distributors in China, Microsoft's presence is helping to nurture Western-style business practices and values, which in turn leads to improved intellectual property protection, a key issue for high-technology companies in particular.
We are investing more than $ 80 million over six years in Microsoft Research, China, a research lab opened in Beijing in 1998. We chose Beijing as the site for this lab--one of only two international research facilities operated by Microsoft--because it offers an opportunity to tap into the deep pool of intellectual talent in China, as well as providing a test bed for addressing some of the unique challenges the Chinese marketplace presents. Our Beijing research facility employs nearly 100 highly skilled researchers who work closely with local universities and research institutes, as well as the Chinese government, to support China in its development of a strong information-technology industry.
Using funds recovered from anti-piracy efforts, Microsoft recently announced support for Beijing University's Center for the Study of Rule of Law, which will focus on intellectual property law and judicial procedures that promote innovation, entrepreneurship and creativity in the fields of science and technology.
The investments we are making today will have a direct, beneficial impact on Microsoft and many other U.S. technology companies. The opportunities are virtually limitless as the Chinese market for software grows, as China expands its information technology infrastructure, as intellectual property protections continue to advance and as U.S. companies develop new products for the most populous nation in the world.

A vote for PNTR is a vote for American jobs and trade opportunities in today's competitive global economy. I believe it is also a vote for strong democratic and social institutions in China, and a vote for a closer and more secure world.

The writer is chairman and chief software architect of the Microsoft Corp.

Artikel in der South China Morning Post
www.scmp.com/News/Business/Article/...ID-20001008004053389.asp

Friday, Septe mber 22, 2000

GEM

Hartcourt in
US$120m double
spin-off bid

ERIC NG

Nasdaq-listed Hartcourt Cos plans to raise up to US$120 million by spinning off two subsidiaries on the Growth Enterprise Market (GEM) next year.

The Los Angeles-based assets holding company is building a portfolio of Internet and telecommunications service
companies serving the mainland market.

Chairman Alan Phan said that Hartcourt had appointed Yuanta Securities and Access Capital as underwriters.
It plans to apply next month to Hong Kong Exchanges and Clearing for the listings.

"We expect the total market valuation of the two IPOs [initial public offerings] to reach up to US$600 million," he said. "It will be three times the current valuation of  Hartcourt Cos."
The company is aiming to list SinoBull Group in the first quarter and StreamingAsia in the second.
SinoBull is a provider of financial news, stock quotes and online stock trading solutions.

StreamingAsia provides solutions to Web publishers that enhance the broadcasting efficiency of audio and video content over the Internet.

Mr Phan said StreamingAsia had recorded revenues of US$2 million since its inception a year ago, and was "slightly
profitable". SinoBull was projected to register revenues of US$8 million this year and was "breaking even now".

Hartcourt shares are traded outside of the stock exchange floor, on the over-the-counter market.

Analysts said the company may face difficulty reaching its goal given the depressed market conditions and
investors` cautious attitude toward Internet and telecoms counters.

The GEM Index yesterday fell 2.8 per cent to its record low of 398.01.

Mr Phan said he expected market conditions to improve by the time the two subsidiaries are floated.


Copyright ©2000. South China Morning Post Publishers Ltd. All rights reserved.

The merger with a major Hong Kong-listed company was on track; but the change in their stock price caused the negotiated price to be too high for Hartcourt. Therefore, we opted to do the IPO's instead, where the total value obtained for Hartcourt shareholders would be projected at $300 Million US. The two IPO's are projected for an initial market value of $600 Million US, of which Hartcourt owns roughly half. With the merger, shareholders would get much less direct value and likely IPO shares could not be distributed directly to the shareholders. However, we are ready to resume the merger talks at anytime if their major shareholders agree to a similarly equitable price, and as always we are constantly aware of the opportunities partnerships could bring. Also, another listed firm has approached us recently for merger discussion. We shall keep all our options open, up until you receive your dividends. Whatever our decision is, your interest is the biggest factor.

2. The GEM listing:
Being American, we naturally want a NASDAQ listing. However, the GEM offers many advantages: more analysts, knowledgeable Asian investors, high valuation, less competition and stronger PR. In fact, the Sohu and Netease management now say that they regretted the decision to list on the NASDAQ instead of Hong Kong, where they have much greater recognition. By the way, we may still seek NASDAQ listings after the IPO's.

3. The Underwriters:
Some shareholders were looking for a big American firm for the underwriting. However, we plan to do the IPO's in Hong Kong, not in the US. So we chose Yuanta-Core Pacific- Yamaichi, the biggest firm in Taiwan and Hong Kong, with reach all across Asia. Besides their long list of successful IPO's, in Hong Kong they simply have more retail brokers as well as institutional clients than any American firm there. Also, there is much Taiwanese money focused on China's markets as well.

4. The Dividend of IPO Shares:
We expect at least $300 Million US worth of IPO shares from our ownership in StreamingAsia and SinoBull (about half of the projected $600 Million US total), and we plan to give them all to you as we have plenty of other assets ready to be injected into Hartcourt. One major concern is the tax liability of the company and the shareholders. We are working with our legal staff for the right structure to minimize this effect. However, if we cannot get some sort of a tax-free exchange, we still plan to distribute all of these shares, but maybe over a tax-friendly time period instead.

5. The Stock Split:
Two reasons for this decision: one, we expect our share price to go up substantially once the analysts and the institutional investors do the math; two, we are trying to attract more Asian investors who are used to the lower Hong Kong share prices. In fact, our bankers advised us to prepare to do more stock splits if necessary. One example to bear in mind is the recent Hong Kong offerings of Microsoft, Intel and other major NASDAQ stocks which turned out as a big flop, since Asian investors found those share prices much too high for their comfort zone. Besides, they probably like holding lots of tens of thousands of shares.

6. The Change in Management:
My management principle is to produce results in a shortest time at a minimum cost. We are like a football team, the quarterback must be replaced if he fails to deliver. At Hartcourt, we must compete with the fastest players in this new economy, and executives, including myself, must produce or we will be history. We will continue to change and seek out opportunity to keep up with the rising expectations, and there will be no excuse for failure.

7. The Financial Status:
Right now, we have $11 Million receivables from the exercise of options by Mr. Thomas Kwok. In addition, we have a $35 Million equity line from Swartz. We have also agreed to sell $20 Million worth of restricted shares to a private party. On December 31st, 1999, we had about $300,000 in cash and we went out and bought 6 companies since then. Let's see what we can do with $65 Million in our war chest.

8. New Acquisitions:
The $600 Million market cap for StreamingAsia and SinoBull is just the first step. More acquisitions are on the way to make our IPO's even bigger. From our news releases in the next few weeks, you will realize how big our aim is. We are like the express train, it will be non-stop until we reach our destination.

9. Other Divisions:
With all the news centering around StreamingAsia and SinoBull, we tend to forget that the other assets of Hartcourt are as big and as important. Hartcourt Capital is working hard with Koffman Securities to implement a wide field of online financial transactions ranging from brokerages to banking and insurance. Dr. Charlie Yang is in Beijing negotiating on details of a COL/Innostar broadband ISP network. We plan to bring two more IPO's to the market in 2002, continuing our plan of successive IPO's.

Of course, we have many critics. A year ago, when we announced that we signed these purchase agreements, they said we would never had the money to close the deals. Once we closed the deals, they said we would never be able to realize any profit from these deals. Now that we are able to "monetize" these assets for the shareholders, they said let's talk about history: the pens, the NASDAQ listing, the merger, etc. No wonder why people have never built a statue to any critic, only those willing to brave the odds.

We have worked very hard to arrive at this stage of the journey. Of course, we have experienced many delays and frustrations along the way. But our greatest glory, like Confucius once said, is not in never falling, but in rising every time we fall. And I guess the harder we work, the luckier we get.

With your strong support, we are creating an exciting future for all of us. The intensity of our desire to succeed is immeasurable. We go an extra mile on every task because we believe that nothing is impossible to a willing heart. We know what Robert Collier meant when he said, "In the moment that you carry this conviction, your dreams will become a reality."

Sincerely,

Dr. Alan V. Phan
Chairman & CEO



Certain statements in this letter may constitute "forward - looking" statements within the meaning of Section 21E of the Securities Exchange Act of 1934. Such "forward - looking" statements involve risks, uncertainties and other factors, which may cause the actual results, performance or achievements expressed or implied by such "forward - looking" statements to differ materially.