B & S International Holdings Ltd. - Proxy Solicitation & Information Statement 2005

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

If you are in any doubt as to any aspect of this circular or as to the action to be taken, you should consult a licensed securities dealer, bank manager, solicitor, professional accountant or other professional adviser.

If you have sold or transferred all your shares in VXL Capital Limited, you should at once hand this circular and the accompanying forms of proxy to the purchaser or the transferee, or to the bank, licensed securities dealer or other agent through whom the sale or transfer was effected for transmission to the purchaser or the transferee.

The Stock Exchange of Hong Kong Limited takes no responsibility for the contents of this circular, makes no representation as to its accuracy or completeness and expressly disclaims any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this circular.

VXL CAPITAL LIMITED 卓越融資有限公司

(Incorporated in Hong Kong with limited liability)

(Stock Code: 727)

VERY SUBSTANTIAL ACQUISITION AND

PROPOSED CHANGE OF COMPANY NAME

Financial adviser to VXL Capital Limited

SOMERLEY LIMITED

A notice convening an extraordinary general meeting of the Company to be held at 10:00 a.m. on Thursday, 8 September 2005 at Suite 2707-8, One Exchange Square, 8 Connaught Place, Central, Hong Kong for the purpose of considering and, if thought fit, passing the ordinary resolution to approve, among others, the Acquisition is set out on pages 67 to 68 of this circular.

A notice convening another extraordinary general meeting of the Company to be held at 10:00 a.m. on Thursday, 15 September 2005 at Suite 2707-8, One Exchange Square, 8 Connaught Place, Central, Hong Kong for the purpose of considering and, if thought fit, passing the special resolution to approve the proposed change of company name is set out on pages 69 to 70 of this circular.

There are forms of proxy for use at the respective meetings accompanying this circular. Whether or not you are able to attend the aforesaid meetings in person, you are requested to complete the accompanying forms of proxy in accordance with the instructions printed thereon and return them to the Company’s share registrar and transfer office, Computershare Hong Kong Investor Services Limited at Shops 1712-16, 17/F., Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong, as soon as possible and in any event not later than 48 hours before the time for holding the respective meetings or any adjournment thereof. Completion and return of the forms of proxy will not preclude you from attending and voting in person at any of the aforesaid meetings or any adjournment thereof should you so wish.

23 August 2005

	Page
Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
Letter from the Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	3
Appendix I – Financial information of the Group. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	10
Appendix II – Unaudited financial information of the Property . . . . . . . . . . . . . . . . . . . . .	47
Appendix III – Pro forma financial information of the Enlarged Group . . . . . . . . . . . . . .	50
Appendix IV – Property valuation report. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	56
Appendix V – General information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	61
Notice of Extraordinary General Meeting I . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	67
Notice of Extraordinary General Meeting II . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	69

DEFINITIONS

In this circular, the following expressions have the following meanings unless the context requires otherwise:

“Acquisition”

acquisition of the Property by Arrow Star pursuant to the Offer Letter and the Formal Sale and Purchase Agreement

“Arrow Star” or “Purchaser”
Arrow Star Investment Limited, a company incorporated in Hong Kong with limited liability and a wholly-owned subsidiary of the Company
“Board”

the board of Directors

“Company”
VXL Capital Limited 卓越融資有限公司, a company incorporated in Hong Kong with limited liability, the shares of which are listed on the Main Board of the Stock Exchange
“Completion Date”
the completion date for the Acquisition, being 9 September 2005, or such other day as may from time to time be agreed in writing by and between the Purchaser and the Vendor
“Directors” directors of the Company
“Enlarged Group” the Group after completion of the Acquisition
“Extraordinary General Meeting I”
an extraordinary general meeting of the Company to be convened and held to consider and, if thought fit, to, among others, approve the Acquisition and confirm the signing and execution, perfection, and delivery of the Offer Letter and the Formal Sale and Purchase Agreement
“Extraordinary General Meeting II”
an extraordinary general meeting of the Company to be convened and held to consider and, if thought fit, to approve the proposed change of name of the Company
“Formal Sale and Purchase Agreement”

the formal agreement for the sale and purchase of the Property dated 23 June 2005 entered into between the Purchaser and the Vendor

“Group”

the Company and its subsidiaries

“Hong Kong”

the Hong Kong Special Administrative Region of the People’s Republic of China

“Kinco” or “Vendor”

Kinco Investment Holding Limited, the vendor of the Property

– 1 –

DEFINITIONS

“Latest Practicable Date” 22 August 2005, being the latest practicable date for ascertaining certain information for inclusion in this circular
“Licence” the licence (numbered H/3353 and be valid until 20 April 2008) granted under the Hotel and Guesthouse Accommodation Ordinance (Chapter 349 of the Laws of Hong Kong) to Long York permitting the same to operate, keep, manage or otherwise have control of the serviced units of the Property as hotel/guesthouse
“Listing Rules” the Rules Governing the Listing of Securities on the Stock Exchange
“Long York” Long York Limited, a company incorporated in Hong Kong with limited liability
“Offer Letter” the offer letter for the sale and purchase of the Property dated 10 June 2005 signed between the Purchaser and the Vendor
“Property” the property situated at 112 Chun Yeung Street, North Point, Hong Kong (also known as Inland Lot No. 6723 and Inland Lot No. 6724)
“SFO” Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong)
“Share(s)” share(s) of HK$0.20 each in the capital of the Company
“Shareholder(s)” holder(s) of the Shares
“Stock Exchange” The Stock Exchange of Hong Kong Limited
“VXL Partners” VXL Capital Partners Corporation Limited, a company incorporated in the British Virgin Islands and the controlling Shareholder holding approximately 74.26% of the issued Shares
“YMIM” Yu Ming Investment Management Limited, the beneficial owner of the Vendor and Long York and an independent third party who is not a connected person (as defined under the Listing Rules) of the Company
“HK$” Hong Kong dollar, the lawful currency of Hong Kong “sq. ft.” square feet
“%” per cent.

– 2 –

LETTER FROM THE BOARD

VXL CAPITAL LIMITED 卓越融資有限公司

(Incorporated in Hong Kong with limited liability)

(Stock Code: 727)

Executive Directors: Datuk LIM Chee Wah Mr. Percy ARCHAMBAUD-CHAO Ms. Patsy SO Ying Chi

Registered office: Suite 2707-8, One Exchange Square 8 Connaught Place Central Hong Kong

Independent non-executive Directors: Mr. Michael YEE Kim Shing Mr. Alan Howard SMITH Mr. Stephen YUEN Ching Bor

23 August 2005

To the Shareholders

Dear Sir or Madam,

VERY SUBSTANTIAL ACQUISITION AND PROPOSED CHANGE OF COMPANY NAME

INTRODUCTION

On 14 June 2005, the Board announced that Arrow Star, a wholly-owned subsidiary of the Company, extended an offer to purchase and the Vendor accepted the offer and agreed to sell the Property by signing the Offer Letter on 10 June 2005. The consideration for the Acquisition is HK$110,000,000.

On 23 June 2005, Arrow Star and the Vendor entered into the Formal Sale and Purchase Agreement with terms that are substantially the same as those in the Offer Letter. Details of the Formal Sale and Purchase Agreement are set out below.

– 3 –

LETTER FROM THE BOARD

The Board proposes to change the name of the Company from “VXL Capital Limited 卓越融資有限公司 ” to “VXL Capital Limited 卓越金融有限公司 ”.

The purpose of this circular is (i) to give you further information in relation to the Acquisition and the Property; (ii) to provide you with information in respect of the proposed change of the Company’s name; and (iii) to give the Shareholders notices of each of Extraordinary General Meeting I and Extraordinary General Meeting II to be convened and held for the purposes of considering and, if thought fit, passing the relevant resolutions to, among others, approve the Acquisition, confirm the signing and execution, perfection and delivery of the Offer Letter and the Formal Sale and Purchase Agreement and approve the proposed change of the Company’s name respectively, and other information required under the Listing Rules.

THE FORMAL SALE AND PURCHASE AGREEMENT DATED 23 JUNE 2005

Parties

Vendor: Kinco, an independent third party principally engaged in property holding. To the best of the Directors’ knowledge, information and belief and after having made all reasonable enquiries, the Vendor and its ultimate beneficial owner(s) are independent third parties who are not connected persons (as defined under the Listing Rules) of the Company.
Purchaser: Arrow Star, a wholly-owned subsidiary of the Company.

Summary

The Purchaser and the Vendor signed the Offer Letter pursuant to which the parties agreed on the sale and purchase of the Property at a consideration of HK$110,000,000. The parties have entered into the Formal Sale and Purchase Agreement on 23 June 2005. Completion of the Acquisition shall take place on or before 9 September 2005 or such other day as may from time to time be agreed in writing by and between the Purchaser and the Vendor.

Consideration and payment terms

The consideration payable by Arrow Star for the Acquisition is HK$110,000,000 and has been paid or shall be payable in cash in the following manner:

(i) an initial deposit of HK$5,500,000 has been paid upon signing of the Offer Letter;
(ii) a further deposit of HK$5,500,000 has been paid upon signing of the Formal Sale and Purchase Agreement on 23 June 2005; and
(iii) the remaining balance of HK$99,000,000 will be payable on the Completion Date.

– 4 –

LETTER FROM THE BOARD

The consideration for the Acquisition has been determined after arm’s length negotiations between the parties with reference to an indication of the market value of the Property in the region of HK$110,000,000 made by Knight Frank Hong Kong Limited, a firm of independent professional valuers with extensive experience on property and asset valuations in Hong Kong and China, in April 2005.

The Property was valued at HK$110,000,000 as at 30 June 2005 by Knight Frank Hong Kong Limited. The Property valuation report is set out in Appendix IV to this circular.

The consideration for the Acquisition will be financed as to 20% (i.e. HK$22,000,000) by internal resources of the Group and 80% (i.e. HK$88,000,000) by banking facilities. Out of the HK$88,000,000 banking facilities, HK$77,000,000 will be an instalment loan for 10 years and the balance of HK$11,000,000 will be a term loan for 3 years. The banking facilities will be secured by (i) a first legal charge for all monies on the Property; and (ii) a corporate guarantee of HK$88,000,000 given by the Company. The Directors consider that, taking into account the banking facilities available to the Group and the existing internal resources of the Group, the Group will have sufficient financial resources to complete the Acquisition.

INFORMATION ON THE PROPERTY

The Property is located at North Point and comprises 96 serviced units and a retail shop, with a total gross floor area of approximately 32,569 square feet, and is currently subject to tenancy. The current occupancy rate of the Property is over 90%. Based on the existing tenancy agreement and licence agreements, the Property is generating a monthly licensing and rental income of approximately HK$0.7 million. To the best of the Directors’ knowledge, information and belief and after having made all reasonable enquiries, the existing occupants of the Property are independent third parties who are not connected persons (as defined under the Listing Rules) of the Company. The Property is to be acquired by Arrow Star with the benefit of the existing tenancy agreement and licence agreements in respect of the Property.

The operation and management of the serviced units of the Property as hotel/guesthouse is subject to the Licence which is currently vested in Long York. After completion of the Acquisition, the Group will hold the Property as investment property and continue to lease out the Property as serviced units and retail shop to generate rental income. Pursuant to the Formal Sale and Purchase Agreement, the Vendor warranted that Long York shall keep all operation (excluding leasing/licencing of individual units of the Property) and service remained to the existing standard prior to any new appointment of property management company and Arrow Star shall have the rights to terminate the existing management/service agreement(s) of Long York or any service providers of the Property by giving not more than 3 months’ notice.

The Group previously intended to manage the Property by hiring its own property management team. However, having considered that the established relationships between Long York and various service providers such as security company, cleaning company and elevator maintenance company would facilitate a smooth transition, the Company has decided to retain Long York as its property management company after completion of the Acquisition. In the event that the existing management/service agreement(s) of Long York is/are terminated, the Group will appoint a management company to apply for the relevant licence, and the said management company will take up the operation and management of the serviced units of the Property accordingly. The Directors understand that there are a number of experienced property management companies in the market, which are qualified and suitable for operating and managing the serviced units of the Property, and do not anticipate any significant difficulties in appointing a suitable management company to replace Long York or obtaining the relevant licence for operating and managing the serviced units of the Property.

To the best of the Directors’ knowledge, information and belief, and after having made all reasonable enquiries, Long York, YMIM (the holding company of the Vendor and Long York) and its beneficial owner(s) are independent third parties who are not connected persons (as defined under the Listing Rules) of the Company.

– 5 –

LETTER FROM THE BOARD

REASONS FOR THE ACQUISITION

The Company is an investment holding company and its subsidiaries are principally engaged in investment holding and provision of corporate finance advisory services.

As disclosed in the composite document dated 6 April 2004 issued by VXL Partners and the Company, VXL Partners intended that the Group would continue with its existing core business of corporate finance and corporate advisory businesses. VXL Partners may assist the Group in expanding its client base and identifying strategic partners for the corporate finance advisory business and in exploring other suitable business opportunities, including participation in new investments, so as to enhance the earnings potential of the Group. In view of the recent rebound of the Hong Kong economy, in particular the property sector, the Group has positioned itself to enter into the property sector by engaging in real estate investment, property development and property management. The Group also intends to expand its existing business in financial services and to develop operations in resources banking sector by hiring new team of professionals with solid experience in the corporate finance and banking industries. The Group has been considering, from time to time, property investment opportunities that would generate synergies with the Group’s present investments and deliver acceptable and sustainable returns to the Shareholders. The Acquisition is the first step of the Group to realise its strategic plan in the property sector and allows the Group to generate a stable source of rental income. The Property comprises 96 serviced units and a retail shop. Services provided to its occupants include housekeeping, maid and linen services. As serviced apartments are getting increasingly popular in Hong Kong, the Directors consider that there will be a strong demand for the serviced units of the Property. The Directors, including the independent non-executive Directors, consider that the terms and conditions of the Offer Letter and the Formal Sale and Purchase Agreement are fair and reasonable and the Acquisition is in the interests of the Company and the Shareholders as a whole.

FINANCIAL EFFECTS OF THE ACQUISITION ON THE GROUP

Assets and liabilities

Expenses of approximately HK$5.2 million incurred by the Group in connection with the Acquisition would be capitalised, therefore the Property together with the capitalised expenses would be accounted for as a non-current asset of the Group. As there would be a corresponding decrease in current assets by the amount of cash paid for the Acquisition and an increase in liabilities by the amount of bank borrowings obtained for financing the Acquisition, the Acquisition is not expected to have any effect on the Group’s net asset value.

Earnings

As discussed in the paragraph headed “Information on the Property” above, the Property, under the existing tenancy agreement and licence agreements, is generating a monthly licensing and rental income of approximately HK$0.7 million. Given that the current occupancy rate of the Property is over 90% and serviced apartments are getting increasingly popular in Hong Kong, the Directors consider that there will be a strong demand for the serviced units of the Property. The Directors believe the Property will provide the Group a stable and satisfactory source of income.

– 6 –

LETTER FROM THE BOARD

Gearing

As at 31 December 2004, the Group did not have any bank borrowings. As the Company intends to finance the payment of the consideration for the Acquisition as to 20% by internal resources of the Group and 80% by banking facilities, the Group’s gearing ratio (defined as total bank borrowings divided by net assets) would increase from 0% to 46.5% on a pro forma basis based on the audited consolidated balance sheet of the Group as at 31 December 2004.

CHANGE OF COMPANY NAME

The Board proposes to change the name of the Company from “VXL Capital Limited 卓越融資有限公司 ” to “VXL Capital Limited 卓越金融有限公司 ”. The Directors propose to change the name of the Company irrespective of whether the Acquisition is completed or not. The proposed change of name of the Company is subject to:

(i) the passing of a special resolution at the Extraordinary General Meeting II by the Shareholders; and
(ii) the issue of the relevant Certificate of Incorporation on Change of Name by the Companies Registry in Hong Kong to the Company approving such change.

The change of the Company’s name will be effective from the date shown on the Certificate of Incorporation on Change of Name issued by the Companies Registry in Hong Kong. All existing share certificates of the Company bearing the existing name of the Company will continue to be evidence of title to the Shares and will continue to be valid for trading, settlement and registration purposes. Accordingly, there will not be any arrangement for an exchange of existing share certificates of the Company for new share certificates bearing the new name of the Company. The rights of the Shareholders will not be affected as a result of the proposed change of name. Should the change of name become effective, any issue of share certificates thereafter will be in the new Company name and the Shares will be traded on the Stock Exchange in the new name. Further announcement will be made should the proposed change of name of the Company become effective.

EXTRAORDINARY GENERAL MEETINGS

Extraordinary General Meeting I

The Acquisition constitutes a very substantial acquisition for the Company under Chapter 14 of the Listing Rules and is therefore subject to Shareholders’ approval pursuant to Rule 14.49 of the Listing Rules. No Shareholder will be required to abstain from voting at the Extraordinary General Meeting I.

Set out on pages 67 to 68 of this circular is a notice convening the Extraordinary General Meeting I to be held at Suite 2707-8, One Exchange Square, 8 Connaught Place, Central, Hong Kong at 10:00 a.m. on Thursday, 8 September 2005 at which an ordinary resolution will be proposed and, if thought fit, passed to, among others, approve the Acquisition and confirm the signing and execution, perfection and delivery of the Offer Letter and the Formal Sale and Purchase Agreement.

– 7 –

LETTER FROM THE BOARD

Extraordinary General Meeting II

The change of the Company’s name is subject to, among others, the passing of a special resolution at the Extraordinary General Meeting II. Set out on pages 69 to 70 of this circular is a notice convening the Extraordinary General Meeting II to be held at Suite 2707-8, One Exchange Square, 8 Connaught Place, Central, Hong Kong at 10:00 a.m. on Thursday, 15 September 2005 at which a special resolution will be proposed and, if thought fit, passed to approve the proposed change of the Company’s name.

Whether or not you are able to attend the aforesaid meetings, you are requested to complete the forms of proxy accompanying this circular in accordance with the instructions printed thereon and return them to the Company's share registrar and transfer office, Computershare Hong Kong Investor Services Limited at Shops 1712-16, 17/F., Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong, as soon as possible and in any event not later than 48 hours before the time for holding the respective meetings or any adjournment thereof. Completion and return of the forms of proxy will not preclude you from attending and voting in person at any of the aforesaid meetings or any adjournment thereof should you so wish.

PROCEDURE FOR DEMANDING A POLL

Pursuant to Article 89 of the Articles of Association of the Company, a poll may be demanded at any general meeting by:

(i) the chairman; or
(ii) at least three Shareholders present in person (or in the case of a Shareholder being a corporation by its duly authorised representative) or by proxy for the time being entitled to vote at the meeting; or
(iii) a Shareholder or Shareholders present in person (or in the case of a Shareholder being a corporation by its duly authorised representative) or by proxy and holding Shares conferring a right to vote at the meeting being Shares on which an aggregate sum has been paid up equal to not less than one-tenth of the total sum paid up on all the Shares conferring that right.

The Articles of Association of the Company also provides that a resolution shall first be put to vote by show of hands. The above-mentioned person or Shareholders may demand for a poll before or on the declaration of the result of the vote by show of hands.

– 8 –

LETTER FROM THE BOARD

RECOMMENDATION

The Directors consider that the terms and conditions of the Offer Letter and the Formal Sale and Purchase Agreement are fair and reasonable and the proposed change of the Company’s name and the Acquisition are in the interests of the Company and the Shareholders as a whole and therefore recommend the Shareholders to vote in favour of the respective resolutions to be proposed at Extraordinary General Meeting I and Extraordinary General Meeting II as set out in the notices convening the aforesaid meetings.

ADDITIONAL INFORMATION

Your attention is drawn to the financial information relating to the Group and the Property, the valuation report on the Property and other information set out in the appendices to this circular.

Yours faithfully, For and on behalf of the Board

VXL Capital Limited Datuk LIM Chee Wah Chairman

– 9 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

1. FINANCIAL SUMMARY

Set out below is a summary of the audited financial information of the Group for the two years ended 31 March 2003, the nine months ended 31 December 2003 and the year ended 31 December 2004, as extracted from the Company’s relevant annual reports:

CONSOLIDATED PROFIT AND LOSS ACCOUNTS

Turnover
Other revenue
Total revenue
Staff costs
Other operating expenses
Profit on disposal of
subsidiaries/a subsidiary
Profit/(loss) from operations
Finance costs
Share of (loss)/profits of
associated companies
Profit/(loss) before taxation
Taxation
Profit/(loss) attributable
to shareholders
Basic and diluted earnings/
(loss) per share_(Note)_

Period from
1 April 2003 to
Year ended
Year ended 31 March
31 December
31 December
2002
2003
2003
2004
HK$’000
HK$’000
HK$’000
HK$’000
89,503
27,442
7,274
3,739
10,104
6,986
12,068
–
99,607
34,428
19,342
3,739
(27,510)
(13,894)
(9,666)
(4,684)
(31,008)
(6,281)
(3,658)
(8,936)
–
187,377
–
1,470
41,089
201,630
6,018
(8,411)
(1,929)
(176)
–
–
(12)
40
1,452
1,230
39,148
201,494
7,470
(7,181)
(3,457)
(1,656)
(386)
1,032
35,691
199,838
7,084
(6,149)
HK$0.50
HK$2.78
HK$0.10
(HK$0.09)

Note: The calculation of basic earnings/(loss) per share is based on 72,000,000 ordinary shares in issue during the year/ period.

Diluted earnings/(loss) per share has not been presented as the Company has no dilutive potential ordinary shares in issue for the year/period.

– 10 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

CONSOLIDATED BALANCE SHEETS

As at 31 March 2002 HK$’000 Non-current assets Fixed assets 2,984 Interests in associated companies 2,333 Other investments 38,465 Other assets 2,350 46,132 Current assets Trading securities 15,435 Receivables under reverse repo transactions – Trade and other receivables 193,742 Tax recoverable 283 Bank balances and cash 510,265 719,725 Current liabilities Trade and other payables 367,089 Amounts due to ultimate holding company 16,499 Amounts due to a fellow subsidiary - Taxation payable 13,633 397,221 Net current assets 322,504 Total assets less current liabilities 368,636 Financed by: Share capital 14,400 Reserves 52,521 Retained earnings 301,715 Shareholders’ funds 368,636	As at As at As at 31 March 31 December 31 December 2003 2003 2004 HK$’000 HK$’000 HK$’000 189 213 511 2,373 2,247 2,286 22,082 256 256 – – – 24,644 2,716 3,053 5,863 5,985 – – 77,653 – 432 33,779 293 90 90 275 162,750 76,693 186,672 169,135 194,200 187,240 1,922 984 1,068 - - - - 45 - 306 513 - 2,228 1,542 1,068 166,907 192,658 186,172 191,551 195,374 189,225 14,400 14,400 14,400 58,679 116,651 116,651 118,472 64,323 58,174 191,551 195,374 189,225	As at As at As at 31 March 31 December 31 December 2003 2003 2004 HK$’000 HK$’000 HK$’000 189 213 511 2,373 2,247 2,286 22,082 256 256 – – – 24,644 2,716 3,053 5,863 5,985 – – 77,653 – 432 33,779 293 90 90 275 162,750 76,693 186,672 169,135 194,200 187,240 1,922 984 1,068 - - - - 45 - 306 513 - 2,228 1,542 1,068 166,907 192,658 186,172 191,551 195,374 189,225 14,400 14,400 14,400 58,679 116,651 116,651 118,472 64,323 58,174 191,551 195,374 189,225
		3,053 – – 293 275 186,672
		187,240 1,068 - - -
		1,068
		186,172
		189,225

		14,400 116,651 58,174

		189,225

– 11 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

2. AUDITED CONSOLIDATED FINANCIAL INFORMATION OF THE GROUP FOR THE YEAR ENDED 31 DECEMBER 2004

The following is the reproduction of the text of the audited financial statements of the Group contained in pages 17 to 51 of the annual report of the Company for the year ended 31 December 2004.

CONSOLIDATED PROFIT AND LOSS ACCOUNT

For the year ended 31 December 2004

			Period from	Period from
		Year ended	1 April 2003 to
		31 December	31 December
		2004		2003
	Note	HK$’000		HK$’000
Turnover	3	3,739		7,274
Other revenue	3	–		12,068
Total revenue		3,739		19,342
Staff costs	4	(4,684)		(9,666)
Other operating expenses		(8,936)		(3,658)
Profit on disposal of a subsidiary	5	1,470		–
(Loss)/profit from operations	6	(8,411)		6,018
Share of profits of an associated company		1,230		1,452
(Loss)/profit before taxation		(7,181)		7,470
Taxation	7	1,032		(386)
(Loss)/profit attributable to shareholders	8	(6,149)		7,084

Basic and diluted (loss)/earnings per share	9	(HK$0.09)		HK$0.10

– 12 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

CONSOLIDATED BALANCE SHEET

As at 31 December 2004

Note Non-current assets Fixed assets 11 Interest in an associated company 13 Other investment 14 Current assets Trading securities 15 Receivables under reverse repo transactions 16 Trade and other receivables 17 Tax recoverable Bank balances and cash 18 Current liabilities Other payables 19 Amount due to a fellow subsidiary Taxation payable Net current assets Total assets less current liabilities Financed by: Share capital 20 Reserves 21 Retained earnings 21 Shareholders’ funds	2004 HK$’000 511 2,286 256 3,053 – – 293 275 186,672 187,240 1,068 – – 1,068 186,172 189,225 14,400 116,651 58,174 189,225	2003 HK$’000 213 2,247 256
		2,716 5,985 77,653 33,779 90 76,693
		194,200 984 45 513
		1,542
		192,658
		195,374

		14,400 116,651 64,323
		195,374

– 13 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

BALANCE SHEET

As at 31 December 2004

Note Non-current assets Fixed assets 11 Interest in subsidiaries 12 Interest in an associated company 13 Other investment 14 Current assets Trading securities 15 Receivables under reverse repo transactions 16 Trade and other receivables 17 Tax recoverable Bank balances and cash 18 Current liabilities Other payables 19 Taxation payable Net current assets Total assets less current liabilities Financed by: Share capital 20 Reserves 21 Retained earnings 21 Shareholders’ funds	2004 HK$’000 412 9,059 1,250 256 10,977 – – 285 275 181,455 182,015 998 – 998 181,017 191,994 14,400 116,612 60,982 191,994	2003 HK$’000 – 15,000 1,250 256
		16,506 5,985 77,653 32,764 – 66,724
		183,126 618 513
		1,131
		181,995
		198,501

		14,400 116,612 67,489
		198,501

– 14 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

CONSOLIDATED CASH FLOW STATEMENT

For the year ended 31 December 2004

For the year ended 31 December 2004
				Period
		Year ended	1 April 2003 to
		31 December	31 December
		2004		2003
	Note	HK$’000		HK$’000
Operating activities
(Loss)/profit before taxation		(7,181)		7,470
Adjustments for:
Share of profits of an associated company		(1,230)		(1,452)
Interest income		(1,408)		(1,731)
Bad and doubtful debts		655		150
Depreciation of fixed assets		236		87
Profit on disposal of a subsidiary	5	(1,470)		–
Loss on disposal of interest in associates		–		149
Gain on disposal of investment securities		–		(11,883)
Operating loss before working capital changes		(10,398)		(7,210)
Decrease/(increase) in trade and other receivables		32,023		(733)
Increase /(decrease) in other payables		221		(938)
Decrease/(increase) in trading securities		5,985		(122)
(Decrease)/increase in amount due to a
fellow subsidiary		(45)		45
Increase in amount due to the former ultimate
holding company by a former subsidiary	5	2,145		–
Net cash inflow/(outflow) generated from operations		29,931		(8,958)
Hong Kong profits tax refund, net		550		–
Net cash inflow/(outflow) from operating activities		30,481		(8,958)
Investing activities
Purchase of fixed assets		(558)		(111)
Sales of a subsidiary, net of cash disposed	5	20		–
Interest received		1,408		855
Receipts from disposal of interest in
associated company		–		1,250
Dividends received from an associated company		975		–
Receipts from/(payments to) reverse repo transactions	16	77,653		(77,653)
Investment in and advances to an associated company		(4,135)		–
Proceeds for disposal of investment in an associated
company and assignment of advances to such
associated company		4,135		–
Net cash inflow/(outlfow) from investing activities		79,498		(75,659)
Financing activities
Dividends paid		–		(1,440)
Increase/(decrease) in cash and cash equivalents		109,979		(86,057)
Cash and cash equivalents at 1 January		76,693		162,750
Cash and cash equivalents at 31 December		186,672		76,693
Analysis of balances of cash and cash equivalents
Cash at banks and in hand		10,538		36,876
Short term deposits placed with banks		176,134		39,817
		186,672		76,693

– 15 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the year ended 31 December 2004

At 1 April 2003 Profit attributable to shareholders for the period 1 April 2003 to 31 December 2003 Reserve realised upon disposal of investment securities Dividends paid At 31 December 2003 and 1 January 2004 Loss attributable to shareholders for the year ended 31 December 2004 At 31 December 2004	Share capital HK’000 14,400 – – – 14,400 – 14,400	Share premium HK’000 116,612 – – – 116,612 – 116,612	Investment revaluation reserve HK’000 1,821 – (1,821) – – – –	Capital reserve HK’000 39 – – – 39 – 39	Retained earnings HK’000 58,679 7,084 – (1,440) 64,323 (6,149) 58,174	Total HK’000 191,551 7,084 (1,821) (1,440) 195,374 (6,149) 189,225

– 16 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the year ended 31 December 2004

1 GENERAL INFORMATION

The principal activities of the Company are investment holding and securities trading, whilst that of its subsidiaries are in the provision of corporate finance and advisory services.

The directors consider the ultimate holding company to be VXL Capital Partners Corporation Limited (“VXLCPL”) incorporated in British Virgin Islands. In the previous period 1 April 2003 to 31 December 2003, the former ultimate holding company was Kim Eng Holdings Limited incorporated in Singapore.

2 PRINCIPAL ACCOUNTING POLICIES

The principal accounting policies adopted in the preparation of these financial statements are set out below:

a) Basis of preparation

The financial statements have been prepared in accordance with accounting principles generally accepted in Hong Kong and comply with accounting standards issued by the Hong Kong Institute of Certified Public Accountants (“HKICPA”) and the requirements of the Hong Kong Companies Ordinance. They have been prepared under the historical cost convention except that, as disclosed in the accounting policies below, trading and investment securities are stated at fair value. The accounting policies adopted are consistent with those of the previous financial period.

The HKICPA has issued a number of new and revised Hong Kong Financial Reporting Standards and Hong Kong Accounting Standards (“HKFRSs”). These new HKFRSs are effective for accounting period beginning or after 1 January 2005. The Group has not early adopted the HKFRSs for the financial statements for the year ended 31 December 2004. The Group has already commenced an assessment of the impact of these new HKFRs but is not yet in a position to state whether these new HKFRSs would have a significant impact on its results of operations and financial position.

b) Group accounting

i) Consolidation

The consolidated financial statements include the financial statements of the Company and its subsidiaries made up to 31 December 2004.

Subsidiaries are those entities in which the Company, directly or indirectly, controls the composition of the board of directors, controls more than half the voting power or holds more than half of the issued and paid up share capital.

The results of subsidiaries acquired or disposed of during the year are included in the consolidated profit and loss account from the effective date of acquisition or up to the effective date of disposal, as appropriate. All significant intercompany transactions and balances within the Group are eliminated on consolidation.

The gain or loss on the disposal of a subsidiary represents the difference between the proceeds of the sale and the Group’s share of its net assets together with any unamortized goodwill or negative goodwill or goodwill/negative goodwill taken to reserves and which was not previously charged or recognized in the consolidated profit and loss account and any related accumulated foreign currency translation reserve.

In the Company’s balance sheet the investments in subsidiaries are stated at cost less impairment losses. The results of subsidiaries are accounted for by the Company on the basis of dividends received and receivable.

– 17 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

ii) Associated companies

An associated company is a company, not being a subsidiary or a joint venture, in which an equity interest is held for the long-term and significant influence is exercised in its management.

The consolidated profit and loss account includes the Group’s share of the results of associated companies for the year, and the consolidated balance sheet includes the Group’s share of the net assets of the associated companies and goodwill/negative goodwill (net of accumulated amortization) on acquisition.

Equity accounting is discontinued when the carrying amount of the investment in an associated company reaches zero, unless the Group has incurred obligations or guaranteed obligations in respect of the associated company.

In the Company’ balance sheet the investments in associated companies are stated at cost less impairment losses. The results of associated companies are accounted for by the Company on the basis of dividends received and receivable.

iii) Translation of foreign currencies

Transactions in foreign currencies are translated at exchange rates ruling at the transaction dates. Monetary assets and liabilities expressed in foreign currencies at the balance sheet date are translated at rates of exchange ruling at the balance sheet date. Exchange differences arising in these cases are dealt with in the profit and loss account.

The balance sheet of subsidiaries and associated companies expressed in foreign currencies are translated at the rates of exchange ruling at the balance sheet date whilst the profit and loss account is translated at an average rate. Exchange differences are dealt with as a movement in reserves.

iv) Goodwill/negative goodwill

Goodwill represents the excess of the cost of an acquisition over the fair value of the Group’s share of the net assets of the acquired subsidiary/associated company at the date of acquisition.

Goodwill on acquisitions occurring on or after 1 January 2001 is included in intangible assets and is amortised using the straight-line method over its estimated useful life. Goodwill arising on major strategic acquisitions of the Group to expand its product or geographical market coverage is amortised over a maximum period of 15 years. For all other acquisitions goodwill is generally amortised over 5-10 years.

Goodwill on acquisitions that occurred prior to 1 January 2001 was eliminated against reserves. Any impairment arising on such goodwill is accounted for in the profit and loss account.

Negative goodwill represents the excess of the fair value of the Group’s share of the net assets acquired over the cost of acquisition.

For acquisitions after 1 January 2001, negative goodwill is presented in the same balance sheet classification as goodwill. To the extent that negative goodwill relates to expectations of future losses and expenses that are identified in the Group’s plan for the acquisition and can be measured reliably, but which do not represent identifiable liabilities at the date of acquisition, that portion of negative goodwill is recognized in the profit and loss account when the future losses and expenses are recognized. Any remaining negative goodwill, not exceeding the fair values of the non-monetary assets acquired, is recognized in the profit and loss account over the remaining weighted average useful life of those assets; negative goodwill in excess of the fair values of those non-monetary assets is recognized in the profit and loss account immediately.

For acquisitions prior to 1 January 2001, negative goodwill was taken directly to reserves on acquisition.

– 18 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

c)

Impairment

The carrying amounts of the Group’s assets are reviewed at each balance sheet date to determine whether there is any indication of impairment. If any such indication exists, the asset’s recoverable amount is estimated. An impairment loss is recognized whenever the carrying amount of an asset or its cashgenerating unit exceeds its recoverable amount. Impairment losses are recognized in the profit and loss account unless the relevant asset is carried at a revalued amount under another Statements of Standard Accounting Practice (“SSAP”), in which case the impairment loss is treated as a revaluation decrease under that SSAP.

d) Fixed assets

Fixed assets are stated at cost less accumulated depreciation and accumulated impairment losses.

Depreciation is provided to write off the cost of fixed assets over their estimated useful lives on a straight-line basis. The principal annual rates are as follow:

Furniture and fixtures	331/3%
Office equipment	331/3%
Computer and related equipment	331/3%

Improvements are capitalized and depreciated over their expected useful lives to the Group.

At each balance sheet date, both internal and external sources of information are considered to assess whether there is any indication that fixed assets are impaired. If any such indication exists, the recoverable amount of the asset is estimated and where relevant, an impairment loss is recognized to reduce the asset to its recoverable amount. Such impairment losses are recognized in the profit and loss account.

The gain or loss on disposal of a fixed asset is the difference between the net sales proceeds and the carrying amount of the relevant asset, and is recognized in the profit and loss account.

e) Investments in securities

i) Trading securities

Trading securities are stated in the balance sheet at fair value. Changes in fair value are recognized in the profit and loss account as they arise. Profits or losses on disposal of trading securities representing the difference between the net sales proceeds and the carrying amounts are recognized in the profit and loss account as they arise.

ii) Investment securities

Investment securities comprise listed and unlisted securities which are held for non-trading purposes and are stated in the balance sheet at fair value. Changes in fair value are recognized in the investment revaluation reserve until the security is sold, collected or otherwise disposed of, or until there is objective evidence that the security has been impaired, at which time the relevant cumulative gain or loss is transferred from the investment revaluation reserve to the profit and loss account.

Transfers from the investment revaluation reserve to the profit and loss account as a result of impairments are reversed when the circumstances and events that led to the impairment cease to exist and there is persuasive evidence that the new circumstances and events will persist for the foreseeable future.

Gains and losses on disposal of investments in securities are accounted for in the profit and loss account as they arise and loss include any amount previously held in the investment revaluation reserve in respect of that security.

f) Receivables under reverse repo transactions

Reverse repo bond transactions are purchase of a bond coupled with an agreement to resell the same or a substantially identical bond at a stated price at a future date. The bonds purchased under resale agreements are reported as receivables under reverse repo transactions in the balance sheet. The difference between the selling and purchase prices during the holding period for reverse repo bond transactions are treated as interest income and amortised to the profit and loss account.

– 19 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

g) Accounts receivable

Provision is made against accounts receivable to the extent they are considered to be doubtful. Accounts receivable in the balance sheet are stated net of such provision.

h) Cash and cash equivalents

Cash and cash equivalents are carried in the balance sheet at cost. For the purposes of the cash flow statement, cash and cash equivalents comprise cash on hand, deposits held at call with banks, cash investments with a maturity of three months or less from date of investment and bank overdrafts.

i) Provisions

Provisions are recognized when the Group has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources will be required to settle the obligation, and a reliable estimate of the amount can be made.

j) Employee benefits

i) Employee leave entitlements

Employee entitlements to annual leave and long service leave are recognized when they accrue to employees. A provision is made for the estimated liability for annual leave and long-service leave as a result of services rendered by employees up to the balance sheet date.

Employee entitlements to sick leave and maternity or paternity leave are not recognized until the time of leave.

ii) Bonus plans

The expected cost of bonus payments due wholly within twelve months after balance sheet date are recognized as a liability when the Group has a present legal or constructive obligation as a result of services rendered by employees and a reliable estimate of the obligation can be made.

iii) Pension obligations

The Group has a defined contribution Mandatory Provident Fund retirement benefit scheme (“the Scheme”) and the assets are held in independent trustee – administered funds. The Scheme is generally funded by payments from employees and by the relevant companies within the Group based on a percentage of the employee’s basic salary.

The Group’s contributions to the Scheme are expensed as incurred.

iv) Share options scheme

The Company operates a share option scheme for the purpose of providing incentives and rewards to eligible participants who contribute to the success of the Group’s operations. The financial impact of share options granted under the share option scheme is not recorded in the Company’s or the Group’s balance sheet until such time as the options are exercised, and no charge is recorded in the profit and loss account or balance sheet for their cost. Upon the exercise of share options, the resulting shares issued are recorded by the Company as additional share capital at the nominal value of the shares, and the excess of the exercise price per share over the nominal value of the shares is credited by the Company to the share premium account. Options which are cancelled prior to their exercise date, or which lapse, are deleted from the register of outstanding options.

– 20 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

k) Taxation

Current taxation is the expected tax payable on the taxable income for the year using tax rates enacted at the balance sheet date, and any adjustment to tax payable in respect of previous years.

Deferred taxation is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. Taxation rates enacted or substantively enacted by the balance sheet date are used to determine deferred taxation.

Deferred tax assets are recognized to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilized.

Deferred taxation is provided on temporary differences arising on investments in subsidiaries, associates and joint ventures, except where the timing of the reversal of the temporary difference can be controlled and it is probable that the temporary difference will not reverse in the foreseeable future.

l) Contingent liabilities and contingent assets

A contingent liability is a possible obligation that arises from past events and whose existence will only be confirmed by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Group. It can also be a present obligation arising from past events that is not recognized because it is not probable that outflow of economic resources will be required or the amount of obligation cannot be measured reliably.

A contingent liability is not recognized but is disclosed in the notes to the financial statements. When a change in the probability of an outflow occurs so that the outflow is probable, it will then be recognized as a provision.

A contingent asset is a possible asset that arises from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain events not wholly within the control of the Group.

A contingent asset is not recognized but is disclosed in the notes to the financial statements when an inflow of economic benefits is probable. When inflow is virtually certain, an asset is recognized.

m) Revenue recognition

Revenue is recognized when it is probable that the economic benefits will flow to the Group and when the revenue can be measured reliably on the following bases:

i) Financial advisory fees are recognized as revenue when the agreed services have been provided.
ii) Interest income is recognized as revenue on a time proportion basis, taking into account the principal amounts outstanding and the interest rate applicable.
iii) Realised gain/(loss) on trading of securities is recognized as revenue on a trade date basis.
iv) Unrealised gain/(loss) on trading of securities is recognized when trading securities are restated to fair value at the reporting date.
v) Dividend income is recognized when the right to receive payment is established.

n) Operating leases

Leases where substantially all the risks and rewards of ownership of assets remain with the leasing company are accounted for as operating leases. Payments made under operating leases net of any incentives received from the leasing company are charged to the profit and loss account on a straight-line basis over the lease periods.

– 21 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

o) Segment reporting

In accordance with the Group’s internal financial reporting the Group has determined that business segments be presented as the primary reporting format and geographical as the secondary reporting format.

Unallocated costs represent corporate expenses. Segment assets consist primarily of fixed assets, other receivables, bank balances and other assets. Segment liabilities comprise operating liabilities and exclude items such as taxation. Capital expenditure comprises additions to fixed assets.

In respect of geographical segment reporting, sales are based on the country in which the customer is located and total assets and capital expenditure are where the assets are located.

3 TURNOVER, REVENUE AND SEGMENT INFORMATION

The Group is principally engaged in investment holding, securities trading and the provision of corporate finance and advisory services. Revenues recognised during the year are as follows:

Placement/underwriting/sub-writing and financial advisory fees Interest income from – banks – trading investments Net income from investment and trading securities – realised gain – unrealised gain on trading securities Other revenue Gain on disposal of investment securities (including revaluation surplus of HK$1,821,000 previously recognised in investment revaluation reserve Dividend income from investments in securities Total revenue Primary reporting format – business segments	Year ended 1 31 December 2004 HK$’000 2,140 1,014 394 191 – 3,739 – – 3,739	Period April 2003 to 31 December 2003 HK$’000 3,951 856 875 387 1,205
		7,274 11,883 185
		19,342

The Group’s operating businesses are structured and managed separately, according to the nature of their operations and the services they provide. Each of the Group’s business segments represents a strategic business unit which are subject to risks and returns that are different from those of other business segments. Summary details of the business segments are as follows:

a) the trading and investment segment is engaged in securities trading and investment and other investment holding;
b) the corporate advisory segment is engaged in the provision of corporate finance and corporate advisory services; and
c) the corporate and others segment comprises operations other than those specified in (a) and (b) above. The revenue of this segment comprise interest income from banks. The assets of this segment mainly includes cash at banks and short term deposits placed with banks.

The following tables represent revenue, profit and certain asset, liability and expenditure information for the Group’s business segments.

– 22 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

For the year ended 31 December 2004

Segment revenue: Sales to external customers Segment results Profit on disposal of subsidiary Share of profits of an associated company Loss before taxation Taxation Loss attributable to shareholders Segment assets Interest in an associated company Unallocated assets Total assets Segment liabilities Unallocated liabilities Total liabilities Other segment information Capital expenditure Depreciation	Trading and investment HK$’000 585 585 – – – – –	Corporate advisory HK$’000 2,140 (2,090) 5,324 – 145 – 115	Corporate and others HK$’000 1,014 (8,376) 182,408 – 923 558 121	Elimination HK$’000 – – – – – – –	Consolidated HK$’000 3,739 (9,881) 1,470 1,230 (7,181) 1,032 (6,149) 187,732 2,286 275 190,293 1,068 – 1,068 558 236

– 23 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

For the period from 1 April 2003 to 31 December 2003

Segment revenue: Sales to external customers Other revenue Segment results Share of profits in an associated company Loss on disposal of interest in an associated company Profit before taxation Taxation Profit attributable to shareholders Segment assets Interest in an associated company Unallocated assets Total assets Segment liabilities Unallocated liabilities Total liabilities Other segment information Capital expenditure Depreciation	Trading and investment HK$’000 2,467 12,068 14,535 13,973 132,032 – – –	Corporate advisory HK$’000 3,951 – 3,951 (7,786) 1,128 404 87 111	Corporate and others HK$’000 856 – 856 (20) 77,669 625 – –	Elimination HK$’000 – – – – (16,250) – – –	Consolidated HK$’000 7,274 12,068
					19,342

					6,167 1,452 (149)
					7,470 (386)
					7,084

					194,579 2,247 90
					196,916

					1,029 513
					1,542

					87 111

Secondary reporting format – geographical segments

As the Group’s revenue, results, assets and liabilities for the year ended 31 December 2004 are derived from operations in Hong Kong, information by geographical segment has not been presented.

4 STAFF COSTS

The staff costs disclosed below are for all employees and include all directors’ emolument (note 10).

Wages, salaries and bonus Unutilised annual leave Pension costs – defined contribution plan Other	Year ended 1 31 December 2004 HK$’000 4,648 (234) 123 147 4,684	Period April 2003 to 31 December 2003 HK$’000 8,993 188 287 198
		9,666

– 24 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

5 DISPOSAL OF A SUBSIDIARY

On 7 December 2003, the Company entered into an agreement with Kim Eng Investment Limited (“KEI”) (the “Disposal Agreement”) pursuant to which the Company has conditionally agreed to dispose of all its 100% equity interests in Kim Eng Corporate Finance (Hong Kong) Limited (“KECF”) and Hart Industries (FarEast) Industries Limited (“HIL”) and 25% equity interest in Eva Assets Management Limited (“Eva”).

On 3 March 2004, a supplemental agreement was executed pursuant to the Disposal Agreement of which the Company only disposed 100% of all its equity interests in KECF but retained HIL and Eva.

The disposal of KECF was approved by independent shareholders at an extraordinary general meeting held on 29 March 2004. The total cash consideration for the disposal of this subsidiary was HK$5,000,000 and the profit on disposal was approximately HK$1,470,000.

The results of Kim Eng Corporate Finance (Hong Kong) Limited up to the date of disposal were as follows:

Period
1 January 2004 to
1
29 March
2004
HK$’000
Turnover
2,030
Operating expenses
(3,465)
Loss before taxation
(1,435)
The effect of the disposal is summarized as follows:
Period
1 January 2004 to
1
29 March
2004
HK$’000
Fixed assets
24
Current assets
5,788
Total assets
5,812
Total liabilities
(2,282)
Net assets
3,530
Profit on disposal
1,470
Total consideration
5,000
Satisfied by:
Cash consideration
5,000
Net cash inflow arising on disposal
Cash received
5,000
Cash and Bank balances disposed of
(4,980)
20

Period
April 2003 to
31 December
2003
HK$’000
3
(19)
(16)
Period
April 2003 to
31 December
2003
HK$’000
–
4,971
4,971
(7)
4,964

– 25 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

6 (LOSS)/PROFIT FROM OPERATIONS

(Loss)/profit from operations is stated after crediting and charging the following:

		Period
	Year ended	1 April 2003 to
	31 December	31 December
	2004	2003
	HK$’000	HK$’000
Charging/(crediting)
Legal and professional fees	1,259	223
Consultancy fees	3,554	–
Depreciation	236	87
Operating leases – land and building	726	686
Auditors’ remuneration	302	176
Loss on disposal of interest in an associated company	–	149
Net exchange (gains)/losses	(18)	385
Bad and doubtful debts	655	150

7 TAXATION

Hong Kong profits tax is calculated at the rate of 17.5% (2003: 17.5%) on the estimated assessable profit. There is no profits tax provided for the year as the Group did not have any assessable profit.

The amount of taxation (credited)/charged for the Group represents:

Current taxation: – Hong Kong profits tax – Over provisions in prior years Share of taxation in an associated company	Year ended 1 31 December 2004 HK$’000 – (1,247) 215 (1,032)	Period April 2003 to 31 December 2003 HK$’000 207 – 179
		386

The taxation (credit)/expenses for the year/period can be reconciled to the (loss)/profit before taxation per the consolidated profit and loss account as follows:

(Loss)/Profit before taxation Tax calculated at 17.5% Tax effect of non-deductible expenses Tax effect of non-taxable revenue Tax effect on temporary differences not recognised Tax effect on utilisation of previously unrecognised tax losses Overprovision for tax in prior years Deferred tax assets not recognised	Year ended 1 31 December 2004 HK$’000 (7,181) (1,257) 255 (186) (34) – (1,247) 1,437 (1,032)	Period April 2003 to 31 December 2003 HK$’000 7,470
		1,307 112 (2,362 (6 (46 – 1,381
		386

– 26 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

8 (LOSS)/PROFIT ATTRIBUTABLE TO SHAREHOLDERS

The loss attributable to shareholders is dealt with in the accounts of the Company to the extent of HK$6,507,000 (2003: profit of HK$13,918,000).

9 BASIC AND DILUTED (LOSS)/EARNINGS PER SHARE

The calculation of basic (loss)/earnings per share is based on the Group’s loss attributable to shareholders of HK$6,149,000 (2003: profit of HK$7,084,000) and the 72,000,000 (2003:72,000,000) ordinary shares in issue during the year/period.

Diluted (loss)/earnings per share has not been presented as the Company has no dilutive potential ordinary shares in issue for the year ended 31 December 2004 and the period ended 31 December 2003.

10 DIRECTORS’ AND SENIOR MANAGEMENT’S EMOLUMENTS

(a) Directors’ emoluments

The aggregate amounts of emoluments payable to directors of the company during the year/period are as follows:

Fees – Non-executive – Non-executive for special assignment Other emoluments – Salaries, allowances and benefits in kind – Pension fund scheme contributions	Year ended 1 31 December 2004 HK$’000 402 234 – – 636	Period April 2003 to 31 December 2003 HK$’000 160 – 2,700 144
		3,004

Both the executive directors, Datuk Lim Chee Wah and Mr Chum Hon Wang Michael had waived their emoluments for the year ended 31 December 2004.

The number of directors whose emoluments fell within the following bands are as follows:

		Period
	Year ended	1 April 2003 to
	31 December	31 December
	2004	2003
Emoluments band
HK$0 – HK$1,000,000	4	4
HK$1,000,001 – HK$1,500,000	–	2

– 27 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(b) Five highest paid individuals

Directors Employees	Year ended 1 31 December 2004 – 5 5	Period April 2003 to 31 December 2003 2 3
		5

The five individuals whose emoluments were the highest in the Group for the year comprise of all employees (2003: 2 directors and 3 employees). The details of the emoluments are presented below whilst the emoluments for the two directors for 2003 are reflected in the analysis above.

Basic salaries, housing allowances other allowances and benefits in kind Bonuses Pension costs – defined contribution plan Emoluments band HK$0 – HK$500,000 HK$500,001 – HK$1,000,000 HK$1,000,001 – HK$1,500,000	Year ended 1 31 December 2004 HK$’000 2,235 42 61 2,338 Year ended 1 31 December 2004 4 1 – 5	Period April 2003 to 31 December 2003 HK$’000 2,580 101 23
		2,704

		Period April 2003 to 31 December 2003 – 2 1
		3

– 28 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

11 FIXED ASSETS

Group

Cost At 1 January 2004 Additions Disposal At 31 December 2004 Accumulated depreciation At 1 January 2004 Charge for the year Disposal At 31 December 2004 Net book value: At 31 December 2004 At 31 December 2003 Company Cost At 1 January 2004 Additions Disposal At 31 December 2004 Accumulated depreciation At 1 January 2004 Charge for the year Disposal At 31 December 2004 Net book value: At 31 December 2004 At 31 December 2003	Furniture and fixtures HK$’000 208 347 (27) 528 128 136 (4) 260 268 80 Furniture and fixtures HK$’000 – 323 – 323 – 86 – 86 237 –	Office equipment HK$’000 91 – (4) 87 88 3 (4) 87 – 3 Office equipment HK$’000 – – – – – – – – – –	Computer and related equipment HK$’000 262 211 (3) 470 132 97 (2) 227 243 130 Computer and related equipment HK$’000 – 211 – 211 – 36 – 36 175 –	Total HK$’000 561 558 (34) 1,085 348 236 (10) 574 511 213 Total HK$’000 – 534 – 534 – 122 – 122 412 –

– 29 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

12 INTEREST IN SUBSIDIARIES

INTEREST IN SUBSIDIARIES
Unlisted shares at cost Less: impairment loss of a subsidiary Amount due from a subsidiary	Company 2004 2003 HK$’000 HK$’000 10,000 15,000 (1,000) – 9,000 15,000 59 – 9,059 15,000
		15,000 –
		15,000

The following is a list of the subsidiaries at 31 December 2004:

		Principal	Particulars of
		activities and	issued share
	Place of	place of	capital and	Interest
Name	incorporation	operations	debt securities	held
KE Capital (Hong Kong) Limited	Hong Kong	Corporate	10,000,000 ordinary	*100%
(formerly known as Kim Eng Capital		finance advisory	shares of HK$1 each
(Hong Kong) Limited)		in Hong Kong
Hart Industries (Far East) Limited	Hong Kong	Dormant	2 ordinary shares	*100%
			of HK$1 each
VXL Nominees Limited	Hong Kong	Investment	2 ordinary shares	*100%
			of HK$1 each
Apogee Investments Limited	West Samoa	Dormant	1 ordinary share	100%
			of US$1 each
State Sino Investments Limited	West Samoa	Dormant	1 ordinary share	100%
			of US$1 each

Shares held directly by the Company.

VXL Nominees Limited (“VXLNL”), Apogee Investments Limited (“AIL”) and State Sino Investments Limited (SSIL) are subsidiaries purchased during the year. VXLNL is the only shareholder of AIL and SSIL. All these companies are purchased at par value. These companies have no trading results and no financial impact on the group at the reporting date.

During the year, the Group has disposed of one subsidiary, Kim Eng Corporate Finance (HK) Limited, details of which are set out in note 5. The intended disposal of 100% equity interest in Hart Industries (Far East) Limited (“HIL”) to Kim Eng Investment Limited (a wholly owned subsidiary of the former ultimate holding company) pursuant to an agreement dated 7 December 2003 was mutually revoked by a supplemental agreement dated 3 March 2004. Accordingly, HIL remains a wholly owned subsidiary of the Company.

– 30 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

13 INTERESTS IN AN ASSOCIATED COMPANY

			Group		Company	Company
		2004	2003		2004	2003
		HK$’000	HK$’000		HK$’000	HK$’000
Unlisted shares, at cost		1,250	1,250		1,250	1,250
Share of post-acquisition reserves		1,036	997		–	–
		2,286	2,247		1,250	1,250

Analysed as follows:
Share of net tangible assets		2,286	2,247

Details of the principal associated	company at 31 December 2004 are as			follows:
		Place of			Particulars of	Interest
	incorporation		Principal		issued share	held
Name	and operations		activities		capital	directly
Eva Asset Management Limited		Hong Kong	Investment		5,000,000 ordinary	25%
			management		shares of HK$1
			services		each

The intended disposal of the Company’s 25% equity interest in Eva Asset Management Limited (“Eva”) to Kim Eng Investment Limited (a wholly owned subsidiary of the former ultimate holding company) pursuant to an agreement dated 7 December 2003 was mutually revoked by a supplemental agreement dated 3 March 2004. Accordingly, Eva remains as an associated company of the Group.

14 OTHER INVESTMENT

Group 2004 2003 HK$’000 HK$’000 Club debenture, at market value 256 256 15 TRADING SECURITIES Group 2004 2003 HK$’000 HK$’000 Listed equity securities in Hong Kong, at fair value – 5,985	Company 2004 2003 HK$’000 HK$’000 256 256 Company 2004 2003 HK$’000 HK$’000 – 5,985	Company 2004 2003 HK$’000 HK$’000 256 256 Company 2004 2003 HK$’000 HK$’000 – 5,985

		2003 HK$’000 5,985

16 RECEIVABLES UNDER REVERSE REPO TRANSACTIONS

On 25 July 2003, the Group entered into reverse repo bond transactions with a third party for a consideration of approximately HK$77,653,000 (equivalent to US$10,000,000) for the purchase of marketable bonds with total face value of US$10,000,000 coupled with agreements to resell the same bonds at a stated price at a future date. According to the agreements, the return rate is 2.5% per annum with original maturity (resale date) on 23 January 2004, which was subsequently extended to 30 January 2004 and further to 26 March 2004 at a return rate of 2.1% per annum. During the year, the Group earned interest income on these transactions of HK$394,000 (2003: HK$875,000).

In prior year, the bonds purchased under reverse repo transactions amounting to HK$77,653,000 were reported as trading investments in the balance sheet. Such transactions should be recognised as collateralised financing to reflect the substance of the transaction and related risks and rewards of ownership of the assets and therefore related bonds purchased have been reclassified as “Receivables under reverse repo transactions” in these financial statements.

– 31 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

17 TRADE AND OTHER RECEIVABLES

Trade receivables Prepayments and deposits Other receivables	Group 2004 2003 HK$’000 HK$’000 – 915 284 – 9 32,864 293 33,779	Company 2004 2003 HK$’000 HK$’000 – – 276 9 32,764 285 32,764	Company 2004 2003 HK$’000 HK$’000 – – 276 9 32,764 285 32,764
			32,764

At 31 December 2003, other receivables of HK$31,888,000 were in respect of proceeds from the redemption of the Group’s interest in an open-ended mutual fund.

At 31 December 2004, the ageing analysis of the trade receivables were as follows:

Trade receivables: 0 – 30 days 31 – 180 days	Group 2004 2003 HK$’000 HK$’000 – 295 – 620 – 915	Group 2004 2003 HK$’000 HK$’000 – 295 – 620 – 915
		915

18 BANK BALANCES AND CASH

Cash at banks and in hand Short term deposits with banks OTHER PAYABLES Other payables Amount due to a related company	Group 2004 2003 HK$’000 HK$’000 10,538 36,876 176,134 39,817 186,672 76,693 Group 2004 2003 HK$’000 HK$’000 993 984 75 – 1,068 984	Company 2004 2003 HK$’000 HK$’000 5,321 26,907 176,134 39,817 181,455 66,724 Company 2004 2003 HK$’000 HK$’000 923 618 75 – 998 618	Company 2004 2003 HK$’000 HK$’000 5,321 26,907 176,134 39,817 181,455 66,724 Company 2004 2003 HK$’000 HK$’000 923 618 75 – 998 618
			618

19 OTHER PAYABLES

Details of the amount due to a related company are set out in note 25. The amount payable is unsecured, interest free and with no fixed repayment terms.

– 32 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

20 SHARE CAPITAL

Authorised: 200,000,000 shares of HK$0.20 each Issued and fully paid: 72,000,000 ordinary shares of HK$0.20 each	Group/Company 2004 2003 HK$’000 HK$’000 40,000 40,000 14,400 14,400	Group/Company 2004 2003 HK$’000 HK$’000 40,000 40,000 14,400 14,400

		14,400

Share option scheme

On 29 December 1997, a share option scheme (the “Scheme”) was approved and adopted by the Company, under which the directors may, at their discretion, offer to any employees (including any executive director) of the Group options to subscribe for such number of shares as the Board may determine up to a maximum aggregate number of shares equal to 10% of the total issued shares of the Company. The purpose of the Scheme is to allow the eligible employees to participate in the equity of the Company in order to motivate such employees to optimise their performance standards and efficiency, and to attract and retain key employees whose contributions are important to the long term growth and profitability of the Group. No single employee shall be granted an option which, if exercised in full, would result in the total number of shares already issued and issuable to him under all the options granted to him exceeding 25% of the aggregate number of shares for the time being issued and issuable under the Scheme. An option may be exercised in accordance with its terms at any time during a period to be notified by the Board to each grantee. Such period may commence on the expiry of 12 months after the date upon which the offer of the option is accepted and expire three years after the commencement date or 28 December 2007 whichever is the earlier. The consideration payable for the option is HK$1.00. The exercise price shall be a price determined by the Board which is the higher of (a) a price not less than 80% of the average of the closing prices of the shares on The Stock Exchange of Hong Kong Limited for the five days immediately preceding the offer date; and (b) the nominal value of a share. The Scheme will expire on 29 December 2007.

During the year, no share option was issued, exercised, cancelled, lapsed or outstanding, throughout the year.

21 RESERVES

At 1 January 2004 Loss for the year At 31 December 2004 Representing:– Company and subsidiaries Associated company At 31 December 2004	Share premium HK$’000 116,612 – 116,612 116,612 – 116,612	Group Capital Total reserve reserve HK$’000 HK$’000 39 116,651 – – 39 116,651 39 116,651 – – 39 116,651	Retained earnings HK$’000 64,323 (6,149)
			58,174

			57,138 1,036
			58,174

– 33 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Investment
revaluation
Share
reserve
premium
HK$’000
HK$’000
At 1 April 2003
1,820
116,612
Profit for the period
–
–
Reserve realized upon
disposal of other
investments
(1,820)
–
Dividends paid
–
–
At 31 December 2003
–
116,612
Representing:–
Company and subsidiaries
–
116,612
Associated company
–
–
At 31 December 2003
–
116,612
Investment
revaluation
reserve
HK$’000
At 1 April 2003
1,820
Profit for the period
–
Reserve realized upon
disposal of other
investments
(1,820)
Dividends paid
–
At 31 December 2003 and
1 January 2004
–
Loss for the year
–
At 31 December 2004
–
22
DEFERRED TAXATION
Unrecognised deferred tax assets/(liabilities) are as follows:
General bad debt allowance
Unused tax losses
Accelerated depreciation allowance

Group
Capital
Total
Retained
reserve
reserve
earnings
HK$’000
HK$’000
HK$’000
39
118,471
58,679
–
–
7,084
–
(1,820)
–
–
–
(1,440)
39
116,651
64,323
39
116,651
63,326
–
–
997
39
116,651
64,323
Company
Share
Total
Retained
premium
reserve
earnings
HK$’000
HK$’000
HK$’000
116,612
118,432
55,011
–
–
13,918
–
(1,820)
–
–
–
(1,440)
116,612
116,612
67,489
–
–
(6,507)
116,612
116,612
60,982
Group
2004
2003
HK$’000
HK$’000
–
26
2,818
1,381
47
(14)
2,865
1,393

– 34 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Deferred tax assets are recognised to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised. At 31 December 2004, the Group has estimated unrecognised tax losses of approximately HK$16,105,000 (2003: HK$7,891,000) to carry forward against future taxable income. Such tax loss has no expiry date under the current tax legislation.

No deferred tax liability has been provided in respect of the accelerated tax depreciation of the fixed assets as the amount involved is immaterial.

The Company has no other significant temporary differences arising during the year or as at 31 December 2004 and 31 December 2003.

23 CONTINGENT LIABILITIES

One of the Company’s subsidiaries, KE Capital (Hong Kong) Limited (“KE Capital”) was sued by a third party (the “plaintiff”) under a High Court action for the payment of HK$712,000 in respect of printing, translation and advertising services rendered by the third party in connection with a financial transaction for a customer of KE Capital, of which KE Capital acted as the financial adviser.

The directors are of the opinion that the amount in dispute should be borne by the customer and the Group has no obligation in respect of the services rendered by the plaintiff. Up to the date of approval of these financial statements, the litigation is still in progress. The directors therefore consider that no provision for the said amount is required in the financial statements of the Group for the year ended 31 December 2004.

24 COMMITMENT

Commitments under operating leases

At 31 December 2004, the Group had future aggregate minimum lease payments under non-cancellable operating leases as follows:

Not later than one year Later than one year and not later than five years	Land and buildings 2004 2003 HK$’000 HK$’000 861 75 274 28 1,135 103	Land and buildings 2004 2003 HK$’000 HK$’000 861 75 274 28 1,135 103
		103

25 RELATED PARTY TRANSACTIONS

Significant related party transactions, which were carried out in the normal course of the Group’s business are as follows:

		Group
	2004	2003
	HK$’000	HK$’000
Management and administrative fee	75	–
Sharing of facilities and administrative services	–	270
Sharing of office premises	–	526

The management and administrative fee is payable to VXL Partners Management Limited Sdn Bhd, a corporation controlled by a director of the Company and a connected party under the definition of the Listing Rules 14A.31 for the provision of management and administrative services for the Group.

In respect of the above mentioned transactions, the Company’s independent non-executive directors confirmed that the said transactions were carried out or entered into by the Group in the ordinary and usual course of business of the Group; carried out/conducted either (i) on normal commercial terms or (ii) if there are no sufficient comparable transactions to judge whether they are on normal commercial terms, on terms no more or less favorable than terms available to/from (as appropriate) independent third parties.

– 35 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

The independent non-executive directors also confirmed that for the year ended 31 December 2004, the total payments for the management service by the Group to VXLCPCL was less than the HK$1,000,000 and each of the percentage ratios as defined by the Listing Rules 14.07 is less than 2.5% based on the audited annual reports of the Group for the previous financial year.

The sharing of facilities, administrative services and office premises transactions in year 2003 was between the Company and the former ultimate holding company, Kim Eng Holdings Limited.

26 PUT OPTION AGREEMENT

In conjunction with the acquisition exercise undertaken by VXL Capital Partners Corporation Limited in December, 2003 for the purchase of a controlling stake of 70.01% of the Company’s issued and paid up share capital, the Company has entered into a Put Option Agreement (“the Agreement”) on 7 December 2003 with Kim Eng Holdings Limited (“KEHL”), the vendor of the said shares.

The independent shareholders at the extraordinary meeting on 29 March 2004 approved the agreement whereby the Company is granted a Put Option under which the Company has a right, but not an obligation, to require KEHL to purchase the Company’s 100% equity interests in KE Capital (Hong Kong) Limited at a fixed consideration of HK$9 million at any time during the period from the completion of the Agreement to twelve months thereafter.

A new Listing Rule 14.92 came into effect on 31 March 2004 and restricts listed issuers to “dispose its existing business for a period of 24 months after a change in control (as defined in the Takeover Code) unless the assets acquired from the person or group of persons gaining such control or his/their associates and any other assets acquired by the listed issuer after such change in control can meet the trading record requirement of rule 8.05”. The Company is therefore unable to exercise the Put Option within the twelve months period in accordance with the Agreement.

The Put Option lapsed on 29 March 2005 and both the Group and KEHL have mutually discharged each other from the duties and liabilities under the Agreement.

27 COMPARATIVE FIGURES

The Company changed its financial year end from 31 March to 31 December commencing from year 2003. The comparative figures for 2003 covered the period from 1 April 2003 to 31 December 2003. Accordingly, the comparative figures are not comparable with the figures presented in the consolidated financial statements, the consolidated cash flow statement, the consolidated statement of changes in equity and the notes thereon for the year ended 31 December 2004.

28 APPROVAL OF THE FINANCIAL STATEMENTS

The financial statements on pages 17 to 51 were approved by the board of directors on 27 April 2005.

3. MANAGEMENT DISCUSSION AND ANALYSIS

The following is the management and discussion analysis extracted from the annual reports of the Company for the year ended 31 December 2004, for the nine months ended 31 December 2003 and for the years ended 31 March 2003 and 31 March 2002.

(i) For the year ended 31 December 2004

REVIEW OF RESULTS

Turnover

The Group’s turnover for the year was HK$3.7 million, representing a decrease of 48.6% when compared to last year. The drop in turnover was mainly attributable to the fall in corporate advisory fee and the reduction in trading and investment activities in securities. The market for corporate finance and advisory business was very competitive and the regulatory requirements are very stringent which resulted in difficulties in gaining new assignments and incurrence of additional time for completion of corporate exercise.

– 36 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Other revenue

In 2004, after the change of management, the Group has been focusing on developing and exploring new business opportunities. The investment activities in securities had reduced significantly. Therefore, there was no disposal income on investment securities as compared to HK$12 million non-recurring trading income on securities in respect of 2003.

Staff costs

The Group has reduced the number of employees consequent upon a reduction in the level of operations as one of the subsidiaries had been disposed of and the holding company was in the process of building up its core businesses. The staff costs dropped from HK$9.7 million to HK$4.7 million in 2004.

Operating expenses

The increase in operating expenses for the year under review was mainly due to legal & professional costs and consultancy fees in relation to aborted acquisition exercises, development of business plans, pursuit of potential business opportunities and evaluation of possible investment projects. In addition, bad debts were written off in 2004 amounted to HK$0.66 million.

The difficult market environment of the corporate advisory business, the reduction in securities dealings, the change of management and the business development costs were the major factors that attributed to the loss before tax of HK$7.2 million (2003: profit before tax of HK$7.5 million).

LIQUIDITY, FINANCIAL RESOURCES AND CAPITAL STRUCTURE

The Group had cash reserves of HK$186.7 million as at 31 December 2004. The cash reserves were placed in HKD cash and short term deposits with major banks in Hong Kong.

The Group had a very sound financial position and there were no borrowings during the year and as at the balance date. There was no change as to the share capital structure of the Group during the year.

During the year, a subsidiary was disposed of with a profit of HK$1.47 million. The disposal of the subsidiary was pursuant to the Disposal Agreement signed on 7 December 2003. Details of the disposal are set out in Note (5).

Current assets of the Group were recorded at HK$187.2 million as compared to the current liabilities of HK$1.1 million as at 31 December 2004. The Group has a strong working capital for future business plans and developments.

– 37 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Gearing ratio and financial management

Gearing ratio is measured on the basis of the Group’s total interest bearing debts net of cash reserves over the Company’s shareholders’ funds as of the reporting date. Net of debt balances, the Group had a net cash surplus (net of the total interest bearing debts and the cash reserves) of HK$186.7 million and HK$76.7 million at the close of 31 December 2004 and 2003 respectively. As such, the gearing ratio as required under paragraph 32 of Appendix 16 of the Listing Rules at these two days did not exist.

The Group did not have any exposure to fluctuation in foreign currency exchange rates arising from the operations. Therefore, the Group did not have any foreign exchange contracts for hedging purpose.

SEGMENT REPORTING

The Group is principally engaged in investment holding and the provision of corporate financial advisory services. The investments activities are mainly carried out in the holding company while the subsidiary, VXL Financial Services Limited (formerly known as “KE Capital (Hong Kong) Limited”), a company registered under the Securities and Futures Commission, carries out the corporate finance and advisory services.

The turnover in trading and investment together with the interest earned on funds was HK$1.6 million (42.8% of total turnover). The turnover in corporate advisory segment was HK$2.1 million (57.2% of total turnover).

The Group’s principal activities and revenue for the year ended 31 December 2004 were derived from operations in Hong Kong.

EMPLOYMENT AND REMUNERATION POLICY

The Group had a total of 6 employees, including executive directors as at 31 December 2004. The remuneration packages to employees were commensurable to the market trend. Other employee benefits include discretionary bonus based on individual performance, medical insurance and provident funds. The Group also adopts a share option scheme under which the directors may, at their discretion, offer to any employees and executive directors of the Group options to subscribe for shares in the Company.

CONTINGENT LIABILITIES

There is a litigation against one of the subsidiaries by a third party for the payment of HK$712,000 on printing, translation and advertising services rendered to a customer of the subsidiary. The litigation was lodged in 2003 and since then there was no further progress or action taken by the plaintiff. The directors are of the view that no provision for the said amount is required in the financial statements of the Group for the year ended 31 December 2004 as the amount in dispute should be borne by the customer.

– 38 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

FUTURE PLANS AND PROSPECTS

In view of the circumstances, the Group has positioned itself into three tier areas of strategic investments, namely property, financial services and resources banking.

Property Sector

The property group will adopt an integrated approach to investments that would generate synergies to create value and to deliver acceptable and sustainable returns to our shareholders and co-investors via knowledge-based and strategic investments into the Greater China area, which includes Hong Kong. Our aim is to adopt a value-based approach to property management in enhancing the medium to long-term capital value of the property portfolio.

Based on the current capital structure of the Company the property group will divide its business into 3 strategic segments.

Real Estate Investment
Property Development
Property Management

Financial Services Sector

The Board recognized that our subsidiary, KE Capital (Hong Kong) Limited (“KE”) is in an enviable position to provide corporate finance and financial advisory services to companies within the Greater China region. KE can serve to match the increasing number of China businesses seeking to raise capital and the growing number of investors looking for investment opportunities in China.

Therefore, the Group has upgraded our services by hiring a new team of professionals with a solid track record from the corporate finance and banking sector to strengthen the Group’s position in capitalizing the fast growing Chinese capital market.

Resources Banking Sector

The Group has noticed that we are now facing new challenges in the global economy with a possible inflationary outlook that has seen a tremendous surge in commodity prices, led by the oil and gold sectors. This is mainly due to the greater demand for natural resources in China to feed the economic growth. Hence, increasingly Chinese companies would require to source and compete for their raw materials overseas as well as increasing its domestic production for these raw materials. Our resource banking is to serve and meet these requirements by providing trading, investment and financing. To this end, a new team of professionals has been identified and will join our Group soon.

Looking ahead with the new team of financial and property professionals that the Group has recently hired, we are in a position to grow and maximize shareholder value through the above mentioned three core investments.

– 39 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(ii) For the nine months ended 31 December 2003

OPERATION REVIEW

Revenue

After the disposal of the brokerage businesses to a fellow subsidiary in mid 2002, the Group has only carried on its businesses in corporate finance and financial advisory services and investment and trading in securities. Affected by the sluggish local stock market, the outbreak of Severe Acute Respiratory Syndrome (“SARS”) in the first half of 2003 and the change of year-end date commencing this year, turnover of the corporate finance and financial advisory businesses fell by approximately 67%.

With the combination of the disposal of brokerage businesses and persistent low interest rates, the Group’s interest income fell significantly.

On account of disposal of investment in a mutual fund during the period, the Group realized approximately HK$11.9 million profit therefrom and reported a total net contribution of approximately HK$14.0 million to operating profit from securities investment and trading.

Costs

In line with a decline in the Group’s turnover, staff costs and other operating expenses fell by approximately 30% and 42%, respectively over the nine month period, owing largely to the disposal of the brokerage businesses in May 2002.

LIQUIDITY, FINANCIAL RESOURCES AND CAPITAL STRUCTURE

The Group had cash reserves of HK$76.7 million as at 31 December 2003. Most of cash reserves was placed in HK$ and US$ short-term deposits with major banks in Hong Kong.

Gearing ratio is measured on the basis of the Group’s total interest bearing debts net of cash reserves over the Company’s shareholders’ funds as of the reporting date. Net of debt balances, the Group had a net cash surplus of approximately HK$76.7 million and approximately HK$163 million at the close of 31 December 2003 and 31 March 2003, respectively. As such, a gearing ratio, as required under paragraph 32 of Appendix 16 to the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the “Listing Rules”), at these two days did not exist.

EMPLOYMENT AND REMUNERATION POLICY

The Group had a total of 18 employees, including executive directors, at 31 December 2003. Remuneration packages including basic salaries, bonuses, provident funds, and other kinds of staff benefits are competitive and are performance based. The Group also adopts a share option scheme under which the Directors may, at their discretion, offer to any employees and executive directors of the Group options to subscribe for shares in the Company.

– 40 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

PROSPECTS

As mentioned in our previous reports, the business outlook for the Group heavily relies on the prospect for our corporate finance and corporate advisory operations after the disposal of its brokerage businesses.

Despite the possible change in the controlling shareholder of the Group in the coming months, VXL Partners has clearly indicated its intention in the Announcement that VXL Partners will maintain the listing of the issued ordinary shares of the Company on The Stock Exchange of Hong Kong Limited and the Group will continue its existing core business of corporate finance and corporate advisory businesses. Both VXL Partners and its directors are of the opinion that the financial markets in the region and the PRC would offer vast business opportunity for the Group; and that leveraging on the extensive business connections of Datuk Lim, the sole beneficial owner of VXL Partners, VXL Partners may assist the Group in expanding its client base and identifying strategic partners for the corporate finance advisory business and in exploring other suitable business opportunities.

(iii) For the year ended 31 March 2003

OPERATION REVIEW

Revenue

The Group completed the disposal of its entire equity interest in the Brokerage Business Companies to a fellow subsidiary on 22 May 2002. Background to, and reasons for, the Disposal were disclosed in the circular of the Company to shareholders dated 28 March 2002. Pursuant to the disposal agreement, the Group would no longer participate in the disposed businesses, comprising securities and futures broking, share margin financing, financing on initial public offerings, underwriting and placement of securities, research, custody and nominee services after the disposal. The Group would only carry on its businesses in corporate finance and financial advisory services after the Disposal.

On account of the Disposal, the operating performance of the Group was badly hit by the discontinuation of the brokerage businesses, revenue from securities and futures broking and custody and nominee services plummeted over the previous year. Group interest income also fell on the repeated interest rate cuts in U.S. and HK as well as lack of margin financing activities.

Leveraging on the enlarged corporate finance team and their core-competencies, revenue from corporate finance and financial advisory activities, defying the subdued capital market, saw a slight growth over the year, to HK$12.0 million (2002: HK$11.1 million). Combined with the HK$0.6 million fee and commission income from placing, underwriting and sub-underwriting, total earnings from corporate finance operations for the year were HK$12.6 million. During the year, the corporate finance team was mandated to engage in 8 IPOs, of which 4 were completed, and 12 other financial advisory projects including 4 transactions relating to the Takeovers Code.

Despite the state of local economy and effect of the U.S. military attack on Iraq, the Group reported HK$6.8 million net income from securities investment and trading, of which HK$1.6 million was dividend income. In addition, the Group also reported a profit of HK$187.4 million from the Disposal in the year under review. Given its exceptional nature, the gain has been

– 41 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

excluded from the Group turnover as reported in the income statement. Instead, it is reported separately on the face of the income statement.

Costs

In line with the decline in Group’s turnover, costs shrank, with staff costs and other operating expenses falling 49% and 80%, respectively over the year, largely owing to the disposal of the Brokerage Business Companies.

LIQUIDITY, FINANCIAL RESOURCES AND CAPITAL STRUCTURE

The Group had cash reserves of HK$163 million as at 31 March 2003. Most of cash reserves were placed in HK$ and US$ short-term deposits with major banks in Hong Kong.

Gearing ratio is measured on the basis of the Group’s total interest bearing debt net of own cash reserves over the Company’s shareholders’ funds as of the reporting date. Net of debt balances, the Group had net surplus cash of HK$163 million and HK$334.6 million at the close of 31 March 2003 and 31 March 2002, respectively. As such, a gearing ratio, as required under paragraph 32 of Appendix 16 to the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the “Listing Rules”), at these two dates did not exist.

EMPLOYMENT AND REMUNERATION POLICY

The Group employed 9 staff at the year end date. Remuneration packages including basic salaries, commissions, bonuses, provident funds, and other kinds of staff benefits are competitive and are performance based. The Group also granted share options to certain directors and staffs of the Group under the Employees’ Share Option Scheme.

PROSPECTS

After completion of the Disposal, the Group will only continue to carry on its fee-based corporate finance and corporate advisory activities and its investment and trading in securities. In the absence of an alternative business plan, at present, the business outlook of the Group will heavily rely on the prospect of our corporate finance and corporate advisory activities, which in turn are dependent on the domestic and global economic conditions and market sentiment.

Globally, we see no sign of the U.S. or other major economies reviving in near future despite of the resounding victory of U.S. in Iraq’s war recently. The outbreak of SARS has further battered the already sluggish local economy, forcing the government to cut the growth forecast and implement economy stimuli measures. Local domestic economy is likely to be in for another year of recession, with unemployment, deflation and the budget-deficit worsening, which will threaten capital market and investor sentiment in the coming year. Thus, the Group’s operating performance is likely to remain depressed.

Whilst we are bearish of the business environment in the coming year, we are however confident of the prospects for our relative position in the local capital market. The Group will keep enlarging its corporate finance operation, leveraging on the established distribution network of our affiliated brokerage companies, to explore and grasp more opportunities to ensure survival.

– 42 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(iv) For the year ended 31 March 2002

BUSINESS REVIEW

Revenue by business segments

Securities and futures broking

Amid the US economic slowdown and with Japan heading into another recession, global economics continued to shrink in 2001/2002. The ongoing effects of the bursting of the tech bubble and the September 11 attacks fueled the further deterioration in the economic picture. These factors fueled falling property prices and a rising unemployment rate locally. Investor sentiment in Hong Kong worsened, dragging the Hong Kong stock market daily turnover down by 35% in the year. Income from securities and futures broking, together with related custodian services, plunged in line with the market to HK$51.0 million for the year (2001: HK$78.4 million).

Corporate finance advisory and placements/underwriting/sub-underwriting

On account of the depressed market conditions, total earning from our corporate finance operations were HK$14.0 million (2001: HK$20.3 million), of which HK$2.3 million was derived from placements and underwriting and HK$11.7 million from corporate finance and corporate advisory businesses, respectively. With the hiring of a new corporate finance team in September and a tentative market revival in the second half, income from corporate finance and corporate advisory work for the second six months rose to HK$8.2 million as opposed to HK$3.5 million in the first half. During the year, the corporate finance team completed three IPOs and seventeen financial advisory assignments including eight transactions related to the Takeovers Code.

Investment and trading of securities

Despite the gloomy outlook and the turbulent trading environment, the Group increased its investment and trading in securities during the year and bolstered its capital employed in this area to HK$52.8 million at 31 March 2002.

The Group sold its remaining 304,500 shares in the Hong Kong Exchanges and Clearing Limited (“HKEx”), which were received in exchange for 1 share in Hong Kong Futures Exchange Limited (“HKFE”) when it was demutualised in March 2000. The disposal realised HK$4.2 million profits.

Given its exceptional nature, the gains realised from the disposal of the HKEx shares have been excluded from the Group turnover as reported in the income statement. The profits are incorporated in the separate line item “Other Revenue” in the income statement.

– 43 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Corporate and other segment

Included in corporate and other is interest income of HK$15.6 million for the year, approximately a 53.1% decline from last year. The Group recorded a decline in interest accruing from bank deposits and from financing clients, primarily caused by the numerous interest rate cuts, in concert with reduced bank balances over the year. On account of the total HK$98.6 million payments for the last final and interim dividends and bonus, the Group’s cash balance was reduced by HK$73.8 million during the year to HK$351.1 million at 31 March 2002.

Costs

Corresponding to the drop in Group revenue in the year, we saw a 23.6% decrease in other operating expenses. During the year, the Group increased the commission sharing ratios to salespeople, given the prevailing market conditions. This combined with high staff turnover and expansion of the corporate finance team, saw staff costs rise slightly amid the decline in turnover during the year.

LIQUIDITY AND FINANCIAL CONDITIONS

The Group had cash reserves of HK$351.1 million, which excludes HK$159.2 million of client funds that are kept in separate designated bank accounts, as at 31 March 2002. Most cash reserves were were placed in HK$ and US$ short-term deposits with major banks in Hong Kong.

Gearing ratio is measured on the basis of the Group’s total interest bearing debt, net of its own cash reserves, over the Company’s shareholders’ funds, as of the reporting date. Net of debt balances, the Group had net surplus cash of HK$334.6 million and HK$400.1 million at the close of 31 March 2002 and 31 March 2001, respectively. As such, a gearing ratio, as required under paragraph 40(2) of Appendix 16 to the Listing Rules, at these two days did not exist.

EMPLOYMENT AND REMUNERATION POLICY

The Group employed 64 staff at the year end date. Remuneration packages including basic salaries, commissions, bonuses, provident funds, and other kinds of staff benefits are competitive and are performance based. The Group also granted share options to certain directors and staffs of the Group under the Employees’ Share Option Scheme.

DISPOSAL OF BROKERAGE BUSINESS COMPANIES

On 28 February 2002, the Company entered into a disposal agreement with a fellow subsidiary, Kim Eng Investment Limited (“KEI”), pursuant to which the Company would dispose of its entire direct or indirect equity interests in Kim Eng Securities (Hong Kong) Limited, Kim Eng Futures (Hong Kong) Limited and Kim Eng Nominees (Hong Kong) Limited collectively defined as the “Brokerage Business Companies” hereafter), all being wholly owned subsidiaries of the Company, to KEI for an aggregate cash consideration of HK$159,473,220. The disposal was approved by independent shareholders at an extraordinary general meeting held on 15 April 2002 and was completed on 22 May 2002.

– 44 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

The disposal of the Brokerage Business Companies was unequivocally concluded by Kim Eng Ong Asia Holdings Ltd (“Kim Eng Singapore”) and the Directors that this represents the best solution to resolve the breach of a deed of non-competition entered into between Kim Eng Singapore and the Company on 5 January 1998, to minimise the potential conflicts of interests between Kim Eng Singapore and the Group and to protect, appropriately, the interests of the Company and its minority shareholders.

Reference can be made to the Company’s interim report for details in respect of the breach of the deed of non-competition.

Upon completion of the disposal, the Group will no longer participate in the disposed business, including securities and futures broking, provision of margin financing, placing and underwriting and nominee and custodian services. Thereafter, the Group will be principally engaged in corporate finance, corporate advisory and investment and trading in securities. Further details of the disposal are set out in the Company’s announcements dated 6 March 2002 and 24 May 2002.

Alongside, KEI also made the voluntary unconditional cash offer to acquire all the issued shares of the Company not already owned by KEI or parties acting in concert with it at HK$5.22 per share upon the completion of disposal of the Brokerage Business Companies. As stated in the composite offer document dated 24 May 2002 despatched to shareholders, the offer was open from 24 May 2002 to 14 June 2002, both days inclusive. Total 21,569,400 shares were tendered for the acceptance of the general offer at the close of the offer.

PROSPECTS

Following the disposal of the Brokerage Business Companies, the Company will principally continue to carry on its corporate finance and corporate advisory businesses. The Group will then no longer participate in the disposed business pursuant to the new deed of non-competition entered into between Kim Eng Singapore and the Company on 28 February 2002. It is also the intention of KEI and Kim Eng Singapore to maintain the listing of the Company on the Stock Exchange after the close of the offer. With improved market conditions and enlarged corporate finance teams, we saw a strong revival in turnover of the corporate finance operation, particularly in the second half.

Looking ahead, China’s accession to the World Trade Organisation and increasing evidence affirming the recovery in the US economy will likely benefit the Hong Kong economy and help haul the capital markets out of the trough. Following a subsidiary of the Company successfully gaining admission to the list of GEM sponsors, in October 2001, we are cautiously optimistic that we can gain more business opportunities and sustain the growth of our corporate finance and advisory business given our strengths and competencies. The corporate finance division has been mandated to act as lead sponsor for a number of IPO applications that are expected to be completed in 2002.

– 45 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

4. INDEBTEDNESS

As at 31 July 2005, being the latest practicable date prior to the printing of this circular for the purpose of ascertaining information relating to the indebtedness of the Group, the Group had outstanding mortgage loans of approximately HK$1,326,000 with respect to purchase of motor vehicles.

One of the Company’s subsidiaries, VXL Financial Services Limited (“VXLFSL”, at the material time known as KE Capital (Hong Kong) Limited) was sued by a third party (the “Plaintiff”) under a High Court action for the payment of approximately HK$713,000, together with the judgment interest thereon, in respect of printing, translation and advertising services rendered to a customer of VXLFSL, of which VXLFSL acted as the financial adviser in a financial transaction.

The Directors are of the opinion that the amount in dispute should be borne by the customer and the Group has no obligation in respect of the services rendered by the Plaintiff. Up to 31 July 2005, there is no further action taken by the Plaintiff and the litigation is still pending.

Saved as disclosed above, as at the close of business on 31 July 2005, the Group had no other outstanding mortgages or charges or debentures or other loan capital or bank overdrafts, loans or other similar indebtedness, finance lease commitments, liabilities under acceptance or credits or any guarantees or other material contingent liabilities.

5. WORKING CAPITAL

The Directors are of the opinion that, after taking into account the banking facilities currently available to the Group including banking facilities of HK$88,000,000 obtained on 5 August 2005 for the purpose of the Acquisition, and the existing internal resources of the Group, the Enlarged Group will have sufficient working capital for its normal operations for the next 12 months from the date of this circular.

6. MATERIAL CHANGE

Save as disclosed herein, the Directors are not aware, as at the Latest Practicable Date, of any material change in the financial or trading position of the Group since 31 December 2004, the date to which the latest published audited financial statements of the Company were made up.

– 46 –

APPENDIX II UNAUDITED FINANCIAL INFORMATION OF THE PROPERTY

1. UNAUDITED FINANCIAL INFORMATION OF THE PROPERTY

The following is the unaudited financial information of the Property (the “Unaudited Financial Information”) for the period from 15 October 2003 to 31 December 2003, the year ended 31 December 2004 and the six months ended 30 June 2005 (the “Relevant Periods”).

(I) Basis of preparation

Kinco acquired the Property on 15 October 2003. On 23 June 2005, Kinco entered into the Formal Sale and Purchase Agreement with Arrow Star to sell the Property for a cash consideration of HK$110,000,000.

The Unaudited Financial Information, which is compiled and derived from the management accounts of Kinco, includes rental and related income and operating expenses directly attributable to the Property for the Relevant Periods. After taking into consideration adjustments that are required in conformity with the principal accounting policies of the Company, the Unaudited Financial Information does not include the financial impact on the Property arising from the adoption of Hong Kong Accounting Standard 40 “Investment Property” (“HKAS 40”), which is effective for accounting period beginning on or after 1 January 2005.

The Group did not have investment properties before the Acquisition. The Directors confirmed that HKAS 40 will be applied in respect of the Property after the Acquisition as follows:

“Investment property is measured initially at its cost, including related transaction costs. After initial recognition, investment property is carried at fair value. Fair value is based on active market prices, adjusted, if necessary, for any difference in the nature, location or condition of the specific asset. These valuations are performed in accordance with the guidance issued by the International Valuation Standards Committee. These valuations are reviewed annually by external valuers. Changes in fair values are recognized in the profit and loss account.

Subsequent expenditure is charged to the asset’s carrying amount only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. All other repairs and maintenance costs are expensed in the profit and loss account during the financial period in which they are incurred.”

In addition, the Unaudited Financial Information has been prepared for illustrative purposes only and, because of its limited nature, may not give a true picture of the profit and loss account of the Property as if it had been owned and managed by the Company.

(II) Extract of principal accounting policies of the Group

(a) Fixed assets

Fixed assets, comprise leasehold improvements, furniture and fixtures and equipment, are stated at cost less accumulated depreciation and accumulated impairment losses.

– 47 –

APPENDIX II UNAUDITED FINANCIAL INFORMATION OF THE PROPERTY

Depreciation is provided to write off the cost of fixed assets over their estimated useful lives on a straight-line basis. The principal annual rates are as follows:

Leasehold improvements	331/3%
Furniture and fixtures	331/3%
Office equipment	331/3%
Computer and related equipment	331/3%

Improvements are capitalised and depreciated over their expected useful lives to the Group.

At each balance sheet date, both internal and external sources of information are considered to assess whether there is any indication that fixed assets are impaired. If such indication exists, the recoverable amount of the assets is estimated and where relevant, an impairment loss is recognised to reduce the assets to its recoverable amount. Such impairment losses are recognised in the profit and loss account.

The gain and loss on disposal of a fixed asset is the difference between the net sales proceeds and the carrying amount of the relevant assets, and is recognised in the profit and loss account.

(b) Revenue recognition

Rental income under operating leases net of any incentives is recognised on a straight line basis.

(III) Unaudited Financial Information

The following is a summary of unaudited revenue and expenses directly attributable to the Property for the Relevant Periods prepared on the basis set out in Section (I) above:

			For the
	From 15 October	Year ended six months ended
	to 31 December	31 December	30 June
	2003	2004	2005
	HK$’000	HK$’000	HK$’000
Rental and related income	5	3,035	3,974
Operating expenses	(195)	(4,897)	(3,017)

The above summary does not include the financial impact on the Property if HKAS 40 had been adopted by Kinco.

– 48 –

APPENDIX II UNAUDITED FINANCIAL INFORMATION OF THE PROPERTY

The Company’s auditors have carried out procedures on the Unaudited Financial Information as follows:

discussed with the management of the Company in respect of the basis as set out in (I) above; and
agreed the Unaudited Financial Information to the underlying management accounts of Kinco.

As the information based on which the Unaudited Financial Information has been prepared is limited, the auditors made no representations on the completeness and accuracy of the information and have emphasised that the Unaudited Financial Information cannot give a true and fair view of the financial results attributable to the Property.

– 49 –

APPENDIX III PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

1. UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

I. Unaudited pro forma consolidated net asset statement of the Enlarged Group

The following unaudited pro forma consolidated net asset statement of the Enlarged Group is prepared based on the audited consolidated balance sheet of the Group as at 31 December 2004 as set out in its published annual report for the year ended 31 December 2004, assuming that the Property had been acquired as at 31 December 2004.

This unaudited pro forma consolidated net asset statement has been prepared for illustrative purposes only and, because of its nature, may not give a true picture of the financial position of the Enlarged Group as at 31 December 2004, or at any future date.

The Group As at 31 December Pro forma 2004 adjustments Notes HK$’000 HK$’000 (Note 1) Non-current assets Fixed assets 511 6,520 2(a) Investment properties – 108,805 2(a) Interests in an associated company 2,286 Other investment 256 3,053 Current assets Trade and other receivables 293 Tax recoverable 275 Bank balances and cash 186,672 (27,325) 2(b) 187,240 Current liabilities Other payables 1,068 Net current assets 186,172 Total assets less current liabilities 189,225 Non-current liabilities Bank loans – 88,000 2(c) Net assets 189,225	The Enlarged Group Pro forma total HK$’000 (Unaudited) 7,031 108,805 2,286 256
	118,378 293 275 159,347
	159,915 1,068
	158,847
	277,225
	88,000
	189,225

– 50 –

PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

APPENDIX III

II. Unaudited pro forma consolidated profit and loss account of the Enlarged Group

The following unaudited pro forma consolidated profit and loss account of the Enlarged Group is prepared based on the audited consolidated profit and loss account of the Group for the year ended 31 December 2004 as set out in its published annual report for the year ended 31 December 2004, assuming that the Property had been acquired as at 1 January 2004.

This unaudited pro forma consolidated profit and loss account has been prepared for illustrative purposes only and, because of its nature, may not give a true picture of the results of the Enlarged Group for the year ended 31 December 2004, or for any future financial periods.

The Group
Year ended
31 December
Pro forma
2004
adjustments
Notes
HK$’000
HK$’000
(Note 1)
Turnover
3,739
2,807
2(d)(i) & (ii)
Staff costs
(4,684)
Other operating expenses
(8,936)
(4,897)
2(e)
Profit on disposal of a subsidiary
1,470
Loss from operations
(8,411)
Finance costs
–
(2,668)
2(f)
Share of profits of an
associated company
1,230
Loss before taxation
(7,181)
Taxation
1,032
3
Loss attributable to shareholders
(6,149)

The
Enlarged
Group
Pro forma
total
HK$’000
(Unaudited)
6,546
(4,684)
(13,833)
1,470
(10,501)
(2,668)
1,230
(11,939)
1,032
(10,907)

– 51 –

PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

APPENDIX III

III. Notes to the unaudited pro forma financial information of the Enlarged Group

The audited consolidated accounts of the Group for the year ended 31 December 2004 have been prepared in accordance with accounting principles generally accepted in Hong Kong and comply with accounting standards issued by the Hong Kong Institute of Certified Public Accountants (“HKICPA”). HKICPA has issued a number of new and revised Hong Kong Financial Reporting Standards and Hong Kong Accounting Standards (“new HKFRSs”) which are effective for accounting periods beginning on or after 1 January 2005. The Group has not early adopted these new HKFRSs in its audited accounts for the year ended 31 December 2004.

The Group has already commenced an assessment on the impact of these new HKFRSs but is not yet in a position to state whether these new HKFRSs would have a significant impact on its results of operations and financial position.

The pro-forma adjustments, derived using the accounting policies as adopted in the audited consolidated accounts of the Group for the year ended 31 December 2004, reflect the following:
(a) being the aggregate cost incurred in acquiring the Property, including (i) consideration of HK$110,000,000; and (ii) stamp duty of HK$4,125,000, legal costs of approximately HK$100,000, and agency fee of HK$1,100,000.
(b) being cash payment relating to 20% of the consideration for the Acquisition, and the related stamp duty, legal costs and agency fee totalling HK$27,325,000, financed by the internal resources of the Group.
(c) being bank loans of HK$88,000,000 to be drawn under the new banking facilities obtained by the Group on 5 August 2005 for the financing of 80% of the consideration of the Acquisition, of which HK$77,000,000 and HK$11,000,000 are carried at interest rates of prime rate minus 2% and prime rate minus 1.75% per annum, respectively. These facilities will be secured by (i) a first legal charge for all monies on the Property; and (ii) a corporate guarantee of HK$88,000,000 given by the Company. The bank loan of HK$77,000,000 shall be repaid by 108 equal monthly instalments starting from the thirteenth calendar month after the drawn down date while the bank loan of HK$11,000,000 shall be repaid upon the end of the maturity period of three years.
(d) (i) being rental and related income derived from the Property of approximately HK$3,035,000 for the year ended 31 December 2004, based on the Unaudited Financial Information of the Property included in Appendix II of this circular; and

– 52 –

PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

APPENDIX III

  - (ii) being reduction in interest income of HK$228,000 for the year ended 31 December 2004 in relation to the cash paid by the Group of approximately HK$27,325,000 for the purpose of the Acquisition as set forth under note 2(b) above based on the average interest rate earned by the Group for the year ended 31 December 2004.

(e) being other operating expenses in relation to the management and maintenance of the Property for the year ended 31 December 2004, based on the Unaudited Financial Information of the Property included in Appendix II to this circular.
(f) being interest expenses of approximately HK$2,668,000 for the bank borrowings of HK$88,000,000, assuming that such borrowings had been drawn down on 1 January 2004 with a corresponding prime rate of 5%.
No current and deferred tax assets were recognised in the unaudited pro forma consolidated profit and loss account given the loss arising from the pro forma adjustments as stated in note (2) above.

– 53 –

PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

APPENDIX III

2. REPORT ON UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

The following is the text of a report received from PricewaterhouseCoopers, Certified Public Accountants, in respect of the unaudited pro forma financial information of the Enlarged Group as set out in this appendix for inclusion in this circular.

羅兵咸永道會計師事務所

PricewaterhouseCoopers 22/F, Prince’s Building Central, Hong Kong

23 August 2005

The Directors VXL Capital Limited

Dear Sirs,

We report on the unaudited pro forma financial information of VXL Capital Limited (the “Company”) and its subsidiaries (hereinafter collectively referred to as the “Group”) set out on pages 50 to 53 under the headings of unaudited pro forma financial information of the Enlarged Group in Appendix III of the Company’s circular dated 23 August 2005 in connection with the very substantial acquisition of property situated at 112 Chun Yeung Street, North Point, Hong Kong (the “Property”) from Kinco Investment Holding Limited (“Kinco”) by Arrow Star Investment Limited, a wholly owned subsidiary of the Company (the “Acquisition”). The unaudited pro forma financial information has been prepared by the directors of the Company, for illustrative purposes only, to provide information about how the Acquisition might have affected the relevant financial information of the Group as at and for the year ended 31 December 2004.

Responsibilities

It is the responsibility solely of the directors of the Company to prepare the unaudited pro forma financial information in accordance with paragraphs 14.69 and 4.29 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (“the Listing Rules”).

It is our responsibility to form an opinion, as required by paragraph 4.29 of the Listing Rules, on the unaudited pro forma financial information and to report our opinion to you. We do not accept any responsibility for any reports previously given by us on any financial information used in the compilation of the unaudited pro forma financial information beyond that owed to those to whom those reports were addressed by us at the dates of their issue.

– 54 –

PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

APPENDIX III

Basis of opinion

We conducted our work with reference to the Statements of Investment Circular Reporting Standards and Bulletin 1998/8 “Reporting on pro forma financial information pursuant to the Listing Rules” issued by the Auditing Practices Board in the United Kingdom, where applicable. Our work, which involved no independent examination of any of the underlying financial information, consisted primarily of comparing the unadjusted financial information with the source documents, considering the evidence supporting the adjustments and discussing the unaudited pro forma financial information with the directors of the Company.

Our work does not constitute an audit or review in accordance with Statements of Auditing Standards issued by the Hong Kong Institute of Certified Public Accountants, and accordingly, we do not express any such assurance on the unaudited pro forma financial information.

The unaudited pro forma financial information has been prepared on the basis set out on pages 52 to 53 for illustrative purposes only and, because of its nature, it may not be indicative of:

the financial position of the Enlarged Group as at 31 December 2004 or at any future date, or
the results of the Enlarged Group for the year ended 31 December 2004 or for any future financial periods.

Opinion

In our opinion:

a) the unaudited pro forma financial information has been properly compiled by the directors of the Company on the basis stated;
b) such basis is consistent with the accounting policies of the Group, and
c) the adjustments are appropriate for the purposes of the unaudited pro forma financial information as disclosed pursuant to paragraph 4.29 of the Listing Rules.

Yours faithfully

PricewaterhouseCoopers

Certified public accountants Hong Kong

– 55 –

PROPERTY VALUATION REPORT

APPENDIX IV

The following is the text of the letter, a summary of valuation and valuation certificate received from Knight Frank Hong Kong Limited, a firm of independent professional valuers, in connection with their valuation as at 30 June 2005 of the Property and other property interest held by the Group for the purpose of inclusion in this circular.

The Directors VXL Capital Limited Suites 2707-2708, One Exchange Square No. 8 Connaught Place Central Hong Kong

==> picture [109 x 128] intentionally omitted <==

23 August 2005

Dear Sirs,

In accordance with the instructions from VXL Capital Limited (the “Company”) for us to value the properties as per attached valuation certificate, we confirm that we have carried out inspections, made relevant enquiries and searches and obtained such further information as we consider necessary for the purpose of providing you with our opinion of values of the properties as at 30 June 2005.

Our valuation of each of the properties is our opinion of its Market Value which we would define as intended to mean “the estimated amount for which a property should exchange on the date of valuation between a willing buyer and a willing seller in an arm’s-length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently and without compulsion”.

Our valuations have been made on the assumption that the owners sell the properties on the open market in their existing states without the benefit of deferred term contracts, leasebacks, joint ventures, management agreements or any similar arrangements which would serve to increase the values of the properties.

In valuing the property in Group I which is to be acquired and to be held for investment by the Company, we have adopted the Direct Comparison Method by making reference to the comparable sales transactions.

The property in Group II which is leased by the Company has no commercial value due to the short term nature or the prohibition against assignment or subletting or otherwise to the lack of substantial profit rent.

– 56 –

PROPERTY VALUATION REPORT

APPENDIX IV

We have relied to a considerable extent on the information provided by the Company and have accepted advice given to us by the Company on such matters as planning approvals, statutory notices, easements, tenure, particulars of occupancy, floor areas and all other relevant matters. We have caused searches to be made at the Land Registry. However, we have not scrutinised the original documents to verify ownership or to ascertain the existence of any amendments which may not appear on the copies handed to us. Dimensions, measurements and areas included in the valuation certificate are based on information contained in the documents provided to us and are therefore only approximations. We have no reason to doubt the truth and accuracy of the information provided to us by the Company which is material to the valuations.

We have inspected the exterior of the properties. During the course of our inspection, we did not note any serious defects. However, no structural survey has been made and we are therefore unable to report as to whether the properties are or are not free of rot, infestation or any other defects. No tests were carried out on any of the services.

No allowance has been made in our valuations for any charges, mortgages or amounts owing on any properties nor for any expenses or taxation which may be incurred in effecting a sale. Unless otherwise stated, it is assumed that the properties are free from encumbrances, restrictions and outgoings of any onerous nature which could affect their values.

We enclose herewith our summary of valuation and valuation certificate.

Yours faithfully, For and on behalf of

KNIGHT FRANK HONG KONG LIMITED C.K. Lau

MHKIS MRICS RPS(GP) Executive Director

Note: Mr. C.K. Lau, a professional member of The Royal Institution of Chartered Surveyors, a member of The Hong Kong Institute of Surveyors and a Registered Professional Surveyor in General Practice, has over 11 years postqualification experience in the valuation of properties in Hong Kong and the People’s Republic of China.

– 57 –

PROPERTY VALUATION REPORT

APPENDIX IV

SUMMARY OF VALUATION

Property

Market Value in existing state as at 30 June 2005

Group I – Property to be acquired and to be held for investment by the Company

1. No. 112 Chun Yeung Street, North Point, Hong Kong Sub-total : Group II – Property leased by the Company 2. Suites 2707-2708, One Exchange Square, No. 8 Connaught Place, Central, Hong Kong Sub-total : Grand-total:	HK$110,000,000
	HK$110,000,000
	No commercial value
	No commercial value
	HK$110,000,000

– 58 –

PROPERTY VALUATION REPORT

APPENDIX IV

VALUATION CERTIFICATE

Group I – Property to be acquired and to be held for investment by the Company

Property Description and tenure 1. No. 112 The property comprises a 25Chun Yeung Street, storey (there being no 4th, 14th North Point, and 24th Floors) building Hong Kong accommodating a retail shop and 96 serviced units. The building Inland Lot Nos. was completed in about 1997. 6723 and 6724.

The total gross floor area of the property is approximately 32,569 sq. ft..

The property is held under two Government leases each for a term of 75 years from 5th September, 1921 renewed for a further term of 75 years.

The total Government rent payable for the property is HK$15,388 per annum.

Market Value in Particulars of existing state as at occupancy 30 June 2005 A portion of the HK$110,000,000 Ground Floor is subject to a tenancy for a term of 3 years from 1 January 2005 at a rent of HK$29,000 per month inclusive of rates and government rent but exclusive of management fee with an option to renew for a further term of 2 years at a rent of not less than the then market rent or not exceeding 110% of the existing rent. The 96 serviced units are let under short-term licences generating a total monthly licencing income of approximately HK$700,000.

Notes:

(1) The registered owner of the property is Kinco Investment Holding Limited.
(2) Arrow Star Investment Limited (a wholly-owned subsidiary of the Company) has entered into an Agreement for Sale and Purchase with Kinco Investment Holding Limited on 23 June 2005 to purchase the property at a consideration of HK$110,000,000 registered vide Memorial No. 05071800110044 (deed pending registration). The completion of the acquisition is expected to be on or before 9 September 2005.
(3) The property is subject to a Mortgage dated 15 October 1993 to secure banking facilities in favour of Hang Seng Bank Limited registered by Memorial No. 9038531.
(4) The property is subject to a Further Charge dated 8 June 2005 in favour of Hang Seng Bank Limited registered by Memorial No. 05061302380408.
(5) The property is situated within an area zoned for “Commercial/Residential” uses under North Point Outline Zoning Plan No. S/H8/19 dated 1 January 2005.

– 59 –

PROPERTY VALUATION REPORT

APPENDIX IV

Group II – Property leased by the Company

Description

Property

Suites 2707-2708, The property comprises two One Exchange office units on the 27th Floor of Square, a 52-storey commercial building No. 8 completed in about 1984. Connaught Place, Central, The lettable area of the property Hong Kong. is approximately 3,621 sq. ft..

Particulars of occupancy

The property is let to the Company for a term of 3 years from 1 May 2005 at a rent of HK$181,050 per month exclusive of rates and management charges. The tenant is entitled to a rent-free period from 1 May 2005 to 31 August 2005.

Market Value in existing state as at 30 June 2005

No commercial value

The property is occupied by the Company as an office.

– 60 –

GENERAL INFORMATION

APPENDIX V

1. RESPONSIBILITY STATEMENT

This circular includes particulars given in compliance with the Listing Rules for the purpose of giving information with regard to the Group. The Directors collectively and individually accept full responsibility for the accuracy of the information contained in this circular and confirm, having made all reasonable enquiries, that to the best of their knowledge and belief, there are no other facts the omission of which would make any statement herein misleading.

2. DIRECTORS’ INTERESTS

As at the Latest Practicable Date, the interests and short positions of each Directors and chief executive of the Company in the shares, underlying shares and debentures of the Company and its associated corporations (within the meaning of Part XV of the SFO) which had been notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short positions in which they were taken or deemed to have taken under such provisions of the SFO), or which were required, pursuant to section 352 of the SFO, to be entered in the register referred to therein, or will be required, pursuant to the Model Code for Securities Transactions by Directors of Listed Companies in the Listing Rules, to be notified to the Company and the Stock Exchange were as follows:

			Approximate
			percentage of
			total issued
			share capital
			as at the
			Latest
	Long position	Nature	Practicable
Name of Director	in Shares	of interests	Date
			(%)
Datuk Lim Chee Wah (“Datuk Lim”)	53,465,400_(Note 1)_	Interest through	74.26
		a controlled
		corporation
Percy Archambaud-Chao	15,000,000_(Note 2)_	Interest through	20.83
(“Mr. Chao”)		a controlled
		corporation

Notes:

The corporate interest in these Shares are held through VXL Partners, a company which is wholly and beneficially owned by Datuk Lim.
The corporate interest in these Shares are held through Huge More Limited, a company which is wholly and beneficially owned by Mr. Chao.

– 61 –

GENERAL INFORMATION

APPENDIX V

Save as disclosed above, as at the Latest Practicable Date, none of the Directors or chief executive of the Company had any interest and short positions in the shares, underlying shares and debentures of the Company or any associated corporations (within the meaning of Part XV of the SFO) which were required to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short positions in which they were taken or deemed to have taken under such provisions of the SFO), or which are required, pursuant to section 352 of the SFO, to be entered in the register maintained by the Company referred to therein, or were required, pursuant to the Model Code for Securities Transactions by Directors of Listed Companies contained in the Listing Rules, to be notified to the Company and the Stock Exchange.

3. SHAREHOLDERS’ INTERESTS

As at the Latest Practicable Date, so far as is known to the Directors or chief executives of the Company, the following persons (not being a Director or chief executive of the Company) had an interest or short position in the shares and underlying shares of the Company which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO, or were, directly or indirectly, interested in 10% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of any other members of the Group or had any option in respect of such capital:

			Approximate
			percentage of total
			issued share capital
	Long position	Nature of	as at the Latest
Name of Shareholder	in Shares	interests	Practicable Date
			(%)
VXL Partners	38,465,400	Beneficial	53.42
	(Note 1)
	15,000,000	Security interest	20.83
	(Note 2)
Huge More Limited	15,000,000	Interest through	20.83
	(Note 2)	a controlled corporation
Chen Wai Wai Vivien	15,000,000	Interest through	20.83
	(Note 3)	a controlled corporation
Crosby Investment	15,000,000	Interest through	20.83
Holdings Inc.	(Note 3)	a controlled corporation
Laird Developments	15,000,000	Interest through	20.83
Limited	(Note 3)	a controlled corporation
Prosum Finance	15,000,000	Security interest	20.83
Company Limited	(Note 3)

– 62 –

GENERAL INFORMATION

APPENDIX V

Notes:

These Shares are registered in the name of VXL Partners, a company which is wholly and beneficially owned by Datuk Lim.
These Shares are registered in the name of Huge More Limited, a company which is wholly and beneficially owned by Mr. Chao and VXL Partners has a security interest in the entire issued share capital in such company.
Prosum Finance Company Limited, a company which is wholly owned by Laird Developments Limited, has a security interest in these Shares (which are registered in the name of Huge More Limited). Laird Developments Limited is wholly owned by Crosby Investment Holdings Inc., which is in turn wholly and beneficially owned by Chen Wai Wai Vivien.

Save as disclosed above, as at the Latest Practicable Date, so far as is known to the Directors or chief executives of the Company, no other persons (not being a Director or chief executive of the Company) had an interest or short position in the shares and underlying shares of the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO, or was directly or indirectly interested in 10% or more of the normal value of any class of share capital carrying rights to vote in all circumstances at general meetings of any other members of the Group or had any option in respect of such capital.

4. MATERIAL CONTRACTS

Save as disclosed below, no material contracts (not being contracts entered into in the ordinary course of business carried out by the Group) have been entered into by any member of the Group within the two years preceding the date of this circular:

(a) a disposal agreement dated 7 December 2003 entered into between the Company and Kim Eng Investment Limited (“KEI”) in relation to the disposal by the Company of its entire interest in Kim Eng Corporate Finance (Hong Kong) Limited (“KECF”), and Hart Industries (Far East) Limited (“HIL”) and 25% equity interest in Eva Asset Management Limited (“Eva”) to KEI for an aggregate consideration of HK$6,706,000;
(b) a supplemental agreement to the disposal agreement specified in (a) above dated 3 March 2004 entered into between the Company and KEI whereby the Company only disposed of its entire interest in KECF but retained HIL and Eva;
(c) a put option agreement dated 29 March 2004 entered into between the Company and Kim Eng Holdings Limited (“KEHL”) in relation to the option granted by KEHL in favour of the Company pursuant to which the Company is entitled to require KEHL to purchase the entire issued share capital of Kim Eng Capital (Hong Kong) Limited at an exercise price of HK$9,000,000;
(d) the Offer Letter; and
(e) the Formal Sale and Purchase Agreement.

– 63 –

GENERAL INFORMATION

APPENDIX V

5. LITIGATION AND CLAIMS

VXL Financial Services Limited (“VXLFSL”, which was known as Kim Eng Capital (Hong Kong) Limited at the material time) is named as the defendant in a High Court action in Hong Kong (Action No.: HCA2118/2003) (the “Legal Action”) whereby VXLFSL was being sued by Capital Financial Press Limited (the “Plaintiff”) for payment of an amount of HK$712,822.50 together with the related interests and costs. The Legal Action was initiated pursuant to an alleged breach of contract and non-payment by VXLFSL of certain printing costs, translation services, circulating charges, advertising fees and other related charges in connection with a restructuring proposal for Akai Holdings Limited to which VXLFSL acted as the financial adviser. VXLFSL filed a defence for the Legal Action on 28 July 2003. The Plaintiff filed a reply to defence on 10 November 2003. Up to the Latest Practicable Date, the Legal Action is still outstanding for settlement negotiation.

Save as disclosed above, as at the Latest Practicable Date, no member of the Enlarged Group was engaged in any litigation, arbitration or claims of material importance and the Directors are not aware of any litigation, arbitration or claims of material importance pending or threatened against any member of the Enlarged Group.

6. EXPERTS AND CONSENTS

The following are the qualifications of the experts who have been named in this circular or have given opinions or advice which are contained in this circular:

Name	Qualification
PricewaterhouseCoopers	Certified Public Accountants
Knight Frank Hong Kong Limited	Professional property valuers
(“Knight Frank”)

Each of PricewaterhouseCoopers and Knight Frank has given and has not withdrawn its written consent to the issue of this circular with the inclusion herein of its letter or references to its name in the form and context in which they respectively appear.

Neither PricewaterhouseCoopers nor Knight Frank has any shareholding, directly or indirectly, in any member of the Group or the right (whether legally enforceable or not) to subscribe for or to nominate persons to subscribe for securities in any member of the Group.

Neither PricewaterhouseCoopers nor Knight Frank had any direct or indirect interests in any assets which had been, since 31 December 2004 (being the date to which the latest published audited accounts of the Company were made up), (i) acquired or disposed of by; or (ii) leased to; or (iii) proposed to be acquired or disposed of by; or (iv) proposed to be leased to any member of the Group.

– 64 –

GENERAL INFORMATION

APPENDIX V

7. SERVICE CONTRACTS

As at the Latest Practicable Date, none of the Directors had any existing or proposed service contracts with the Company or any member of the Group which does not expire or is not determinable by the Group within one year without payment of compensation (other than statutory compensation).

8. CONTRACTS OR ARRANGEMENTS AND COMPETING BUSINESSES

On 28 December 2004, the Company signed a service level agreement (the “Service Level Agreement”) with VXL Partners Management SDN BHD, a corporation controlled by Datuk LIM Chee Wah, a Director and a connected person (as defined under the Listing Rules) of the Company, for the provision of management and administrative services for the Group. The Service Level Agreement became effective from 1 January 2005 for a term of 12 months and can be terminated by either party by written notice. The Service Level Agreement constituted a connected transaction but was exempted from reporting, announcement and independent shareholders’ approval requirements under Rule 14A.31 of the Listing Rules. Save as disclosed above, as at the Latest Practicable Date, none of the Directors was materially interested in any contracts or arrangements subsisting at the date of this circular which is significant in relation to the business of the Company.

As at the Latest Practicable Date, none of the Directors had any direct or indirect interest in any assets which had been, since 31 December 2004 (being the date to which the latest published audited accounts of the Company were made up), (i) acquired or disposed of by; or (ii) leased to; or (iii) proposed to be acquired or disposed of by; or (iv) proposed to be leased to any member of the Group.

As at the Latest Practicable Date, none of the Directors nor his/her associates was interested in any business which competes or is likely to compete, either directly or indirectly, with business of the Group.

– 65 –

GENERAL INFORMATION

APPENDIX V

9. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents are available for inspection during normal business hours at the registered office of the Company at Suite 2707-8, One Exchange Square, 8 Connaught Place, Central, Hong Kong, from the date of this circular and up to and including 8 September 2005:

the memorandum and articles of association of the Company;
the material contracts referred to in the sub-section headed “Material Contracts” in this appendix;
the letter signed by PricewaterhouseCoopers setting out their opinion on the unaudited pro forma financial information of the Enlarged Group as set out in Appendix III to this circular;
the property valuation report of the Property issued by Knight Frank contained in Appendix IV to this circular;
the letters of consent referred to under the sub-section headed “Experts and Consents” in this appendix; and
the annual reports of the Company for the year ended 31 December 2004, the nine months period ended 31 December 2003 and the year ended 31 March 2003.

10. MISCELLANEOUS

The Board comprises six Directors, of which Datuk LIM Chee Wah, Mr. Percy ARCHAMBAUD-CHAO and Ms. Patsy SO Ying Chi are executive Directors and Mr. Michael YEE Kim Shing, Mr. Alan Howard SMITH and Mr. Stephen YUEN Ching Bor are independent non-executive Directors.
The company secretary of the Company is Ms. Emily HO Kit Man. She is an associate member of both The Hong Kong Institute of Chartered Secretaries and The Institute of Chartered Secretaries and Administrators.
The qualified accountant of the Company is Ms. YAU Yue Ka. She is an associate member of The Hong Kong Institute of Certified Public Accountants and a member of the American Institute of Certified Public Accountants.
The share registrar and transfer office of the Company is Computershare Investor Services Limited at Shops 1712-16, 17/F., Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong.
The registered office of the Company is situated at Suite 2707-8, One Exchange Square, 8 Connaught Place, Central, Hong Kong.
The English text of this circular prevails over the Chinese text.

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NOTICE OF EXTRAORDINARY GENERAL MEETING I

VXL CAPITAL LIMITED 卓越融資有限公司

(Incorporated in Hong Kong with limited liability)

(Stock Code: 727)

NOTICE OF EXTRAORDINARY GENERAL MEETING I TO BE HELD ON THURSDAY, 8 SEPTEMBER 2005

NOTICE IS HEREBY GIVEN that an extraordinary general meeting of VXL Capital Limited (“Company”) will be held at 10:00 a.m. on Thursday, 8 September 2005 at Suite 2707-8, One Exchange Square, 8 Connaught Place, Central, Hong Kong for the purpose of considering and, if thought fit, passing, with or without modifications, the following resolution which will be proposed as an ordinary resolution of the Company:

ORDINARY RESOLUTION

“ THAT

(i) the Acquisition of the Property (both as defined in the circular of the Company dated 23 August 2005 (“Circular”)) from Kinco Investment Holding Limited by Arrow Star Investment Limited on the terms and conditions of the Offer Letter and the Formal Sale and Purchase Agreement (both as defined in the Circular), a copy of each of which has been produced to this meeting marked “A” and “B” respectively and signed by the chairman of the meeting for the purpose of identification, and all transactions contemplated thereunder as described in the Circular, a copy of which has been produced to this meeting marked “C” and signed by the chairman of the meeting for the purpose of identification, be and are hereby approved; (ii) the signing and execution (under hand or under seal), perfection and delivery of the Offer Letter and the Formal Sale and Purchase Agreement be and are hereby confirmed; and (iii) the directors of the Company be and they are hereby authorized to do all such acts and things (including, without limitation, signing, execution (under hand or under seal), perfection and delivery of all documents) which are in their opinion necessary, appropriate, desirable or expedient to implement and give effect to the terms of the Acquisition and all transactions contemplated under each of the Offer Letter and the Formal Sale and Purchase Agreement and all other matters incidental thereto or in connection therewith and to agree to and make such variation, amendment and waiver of any of the matters relating thereto or in connection therewith.”

By order of the Board VXL Capital Limited Emily HO Kit Man Company Secretary

Hong Kong, 23 August 2005

– 67 –

NOTICE OF EXTRAORDINARY GENERAL MEETING I

Notes:

A form of proxy for use at the meeting is being despatched to the shareholders of the Company together with a copy of this notice.
The instrument appointing a proxy shall be in writing under the hand of the appointor or of his attorney duly authorised in writing or, if the appointor is a corporation, either under its seal or under the hand of any officer or attorney duly authorised.
Every shareholder entitled to attend and vote at the extraordinary general meeting convened by the above notice shall be entitled to appoint one or more proxies to attend and vote instead of him. A proxy need not be a shareholder of the Company.
In order to be valid, the form of proxy, together with the power of attorney or other authority (if any) under which it is signed or a notarially certified copy of such power or authority, must be deposited at the Company’s share registrar and transfer office, Computershare Hong Kong Investor Services Limited, at Shops 1712-16, 17/F., Hopewell Centre, 183 Queen’s Road East, Wan Chai, Hong Kong not less than 48 hours before the time appointed for holding the extraordinary general meeting or any adjournment thereof.
Completion and deposit of the form of proxy will not preclude a shareholder of the Company from attending and voting in person at the extraordinary general meeting convened or any adjournment thereof, and in such event, the form of proxy will be deemed to be revoked.

– 68 –

NOTICE OF EXTRAORDINARY GENERAL MEETING II

VXL CAPITAL LIMITED 卓越融資有限公司

(Incorporated in Hong Kong with limited liability)

(Stock Code: 727)

NOTICE OF EXTRAORDINARY GENERAL MEETING II TO BE HELD ON THURSDAY, 15 SEPTEMBER 2005

NOTICE IS HEREBY GIVEN that an extraordinary general meeting of VXL Capital Limited (“Company”) will be held at 10:00 a.m. on Thursday, 15 September 2005 at Suite 2707-8, One Exchange Square, 8 Connaught Place, Central, Hong Kong for the purpose of considering and, if thought fit, passing, with or without modifications, the following resolution which will be proposed as a special resolution of the Company:

SPECIAL RESOLUTION

“ THAT the name of the Company be changed from “VXL Capital Limited 卓越融資有限公司 ” to “VXL Capital Limited 卓越金融有限公司 ”, subject to the relevant Certificate of Incorporation on Change of Name be issued by the Companies Registry in Hong Kong to the Company approving such change.”

By order of the Board VXL Capital Limited Emily HO Kit Man Company Secretary

Hong Kong, 23 August 2005

– 69 –

NOTICE OF EXTRAORDINARY GENERAL MEETING II

Notes:

A form of proxy for use at the meeting is being despatched to the shareholders of the Company together with a copy of this notice.
The instrument appointing a proxy shall be in writing under the hand of the appointor or of his attorney duly authorised in writing or, if the appointor is a corporation, either under its seal or under the hand of any officer, or attorney duly authorised.
Every shareholder entitled to attend and vote at the extraordinary general meeting convened by the above notice shall be entitled to appoint one or more proxies to attend and vote instead of him. A proxy need not be a shareholder of the Company.
In order to be valid, the form of proxy, together with the power of attorney or other authority (if any) under which it is signed or a notarially certified copy of such power or authority, must be deposited at the Company’s share registrar and transfer office, Computershare Hong Kong Investor Services Limited, at Shops 1712-16, 17/F., Hopewell Centre, 183 Queen’s Road East, Wan Chai, Hong Kong not less than 48 hours before the time appointed for holding the extraordinary general meeting or any adjournment thereof.
Completion and deposit of the form of proxy will not preclude a shareholder of the Company from attending and voting in person at the extraordinary general meeting convened or any adjournment thereof, and in such event, the form of proxy will be deemed to be revoked.

– 70 –

AI assistant

B & S International Holdings Ltd. — Proxy Solicitation & Information Statement 2005

50104_rns_2005-08-23_154ac8d4-cc55-4530-b38a-24b4bc2787b8.pdf

VXL CAPITAL LIMITED 卓越融資有限公司

VERY SUBSTANTIAL ACQUISITION AND

PROPOSED CHANGE OF COMPANY NAME

Financial adviser to VXL Capital Limited

SOMERLEY LIMITED

CONTENTS

DEFINITIONS

DEFINITIONS

VXL CAPITAL LIMITED 卓越融資有限公司

VERY SUBSTANTIAL ACQUISITION AND PROPOSED CHANGE OF COMPANY NAME

INTRODUCTION

LETTER FROM THE BOARD

THE FORMAL SALE AND PURCHASE AGREEMENT DATED 23 JUNE 2005

Parties

Summary

Consideration and payment terms

LETTER FROM THE BOARD

INFORMATION ON THE PROPERTY

REASONS FOR THE ACQUISITION

FINANCIAL EFFECTS OF THE ACQUISITION ON THE GROUP

Assets and liabilities

Earnings

Gearing

CHANGE OF COMPANY NAME

EXTRAORDINARY GENERAL MEETINGS

Extraordinary General Meeting I

Extraordinary General Meeting II

PROCEDURE FOR DEMANDING A POLL

RECOMMENDATION

ADDITIONAL INFORMATION

1. FINANCIAL SUMMARY

CONSOLIDATED PROFIT AND LOSS ACCOUNTS

CONSOLIDATED BALANCE SHEETS

2. AUDITED CONSOLIDATED FINANCIAL INFORMATION OF THE GROUP FOR THE YEAR ENDED 31 DECEMBER 2004

CONSOLIDATED PROFIT AND LOSS ACCOUNT

CONSOLIDATED BALANCE SHEET

BALANCE SHEET

CONSOLIDATED CASH FLOW STATEMENT

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

1 GENERAL INFORMATION

2 PRINCIPAL ACCOUNTING POLICIES

a) Basis of preparation

b) Group accounting

ii) Associated companies

iii) Translation of foreign currencies

iv) Goodwill/negative goodwill

c)

Impairment

d) Fixed assets

e) Investments in securities

ii) Investment securities

f) Receivables under reverse repo transactions

g) Accounts receivable

h) Cash and cash equivalents

i) Provisions

j) Employee benefits

i) Employee leave entitlements

ii) Bonus plans

iii) Pension obligations

iv) Share options scheme

k) Taxation

l) Contingent liabilities and contingent assets

m) Revenue recognition

n) Operating leases

o) Segment reporting

3 TURNOVER, REVENUE AND SEGMENT INFORMATION

For the period from 1 April 2003 to 31 December 2003

Secondary reporting format – geographical segments

4 STAFF COSTS

5 DISPOSAL OF A SUBSIDIARY

6 (LOSS)/PROFIT FROM OPERATIONS

7 TAXATION

8 (LOSS)/PROFIT ATTRIBUTABLE TO SHAREHOLDERS

9 BASIC AND DILUTED (LOSS)/EARNINGS PER SHARE

10 DIRECTORS’ AND SENIOR MANAGEMENT’S EMOLUMENTS

(a) Directors’ emoluments

B & S International Holdings Ltd. Proxy Solicitation & Information Statement 2005