G-Resources Group Limited — Annual Report 2004

Oct 19, 2004

PALADIN LIMITED

(Incorporated in Bermuda with limited liability) (Stock Code: 495)

ANNOUNCEMENT OF RESULTS FOR THE YEAR ENDED 30 JUNE 2004

The board of directors (the “Board”) of Paladin Limited (the “Company”) is pleased to announce the audited consolidated results of the Company and its subsidiaries (hereinafter collectively referred to as the “Group”) for the year ended 30 June 2004 together with comparative figures for the previous year as follows:

NOTES Turnover 3 Cost of sales Gross profit Other operating income Administrative expenses Reversal of impairment loss previously recognised in respect of leasehold land and buildings Gain on disposal of leasehold land and buildings Impairment loss recognised in respect of investment securities Impairment loss recognised in respect of leasehold land and buildings Impairment loss recognised in respect of club debenture	Year ended 2004 HK$’000 10,808 (10,771) 37 181 (28,108) 40,991 8,891 (5,300) – –	30 June 2003 HK$’000 10,338 (10,288) 50 160 (13,053) – – (800) (36,601) (1,100)

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NOTES Profit (loss) from operations Finance costs Net profit (loss) for the year Earnings (loss) per share – basic 5	Year ended 2004 HK$’000 16,692 (5,780) 10,912 2.1 cents	30 June 2003 HK$’000 (51,344) (12,841) (64,185) (12.1 cents)

Notes:

1. Basis of preparation of financial statements

In preparing the financial statements, the directors have given careful consideration to the future liquidity of the Group in light of its net current liabilities of HK$183,970,000 and deficit in shareholders’ funds of HK$50,880,000 as at 30 June 2004. The Group is dependent upon the financial support of its bankers and other lenders. As explained in note 18 to the financial statements, in September 2004, the Group obtained a commitment letter for a term loan facility from other banks to refinance the HK$ term loan of HK$623 million and other loan of HK$155 million (both together with the accrued interest and other bank charges). The HK$ term loan of HK$623 million and other loan of HK$155 million are due on 31 December 2004 and 1 October 2004 respectively. In addition, the Group is now in the process of soliciting new bankers to refinance the overdue US$ term loan of HK$78 million and the Additional Amount of HK$134 million, which is equivalent to 10% of the excess of the value of the Group’s properties under development as of 30 September 2004 performed by an independent professional valuer on an open market value basis over HK$660,000,000, as explained in note 19(c) to the financial statements. The Additional Amount shall be due for payment on 1 November 2004. Provided that the above term loan facility can be successfully obtained by the Group and the Group can successfully solicit new bankers to refinance the US$ term loan and the Additional Amount within a short period of time, the directors estimate the properties under development will be available for sale or pre-sale by 30

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November 2004 and will be completed by 30 April 2005. Against this background, the directors consider that, with the continuing support of the Group’s bankers and other lenders, the Group will be able to complete the development and to meet in full its financial obligations as they fall due for the foreseeable future. Accordingly, the financial statements have been prepared on a going concern basis.

2. Adoption of Hong Kong financial reporting standards

In the current year, the Group has adopted, for the first time, the Hong Kong Financial Reporting Standards (“HKFRS”) – Statement of Standard Accounting Practice (“SSAP”) 12 (Revised) “Income taxes” (“SSAP 12 (Revised)”) issued by the Hong Kong Institute of Certified Public Accountants (“HKICPA”). The term of HKFRS is inclusive of SSAPs and Interpretations approved by the HKICPA.

The principal effect of the implementation of SSAP 12 (Revised) is in relation to deferred tax. SSAP 12 (Revised) requires the adoption of a balance sheet liability method, whereby deferred tax is recognised in respect of all temporary differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, with limited exceptions. The adoption of SSAP 12 (Revised) has no material effect on the results for the current or prior accounting periods. Accordingly, no prior period adjustment has been required.

3. Business and geographical segments

Business segments

For management purposes, the Group is currently organised into two main operating divisions – general trading (e.g. textile products) and property development. These divisions are the bases on which the Group reports its primary segment information.

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Segment information about these businesses is presented below:

Year 2004

Income statement TURNOVER External sales RESULT Segment result Reversal of impairment loss previously recognised in respect of leasehold land and buildings Gain on disposal of leasehold land and buildings Impairment loss recognised in respect of investment securities Profit from operations Finance costs Net profit for the year Year 2003 TURNOVER External sales RESULT Segment result Impairment loss recognised in respect of leasehold land and buildings Impairment loss recognised in

General Property trading development Consolidated HK$’000 HK$’000 HK$’000 10,808 – 10,808 (10,169) (17,721) (27,890) 40,991 40,991 8,891 8,891 (5,300) 16,692 (5,780) 10,912 General Property trading development Consolidated HK$’000 HK$’000 HK$’000 10,338 – 10,338 (10,493) (2,350) (12,843) (36,601) (36,601)

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respect of club debenture Impairment loss recognised in respect of investment securities

(1,100)

respect of investment securities (800) Loss from operations (51,344) Finance costs (12,841) Net loss for the year (64,185)

Geographical segments

More than 90% of the Group’s turnover for the years ended 30 June 2004 and 2003 were attributable to operations carried out in Hong Kong. Also, almost all of the Group’s assets are located in Hong Kong. Therefore, no geographical segment information are presented.

4. Taxation

No provision for Hong Kong Profits Tax has been made in the financial statements as the Company and its subsidiaries had no assessable profit for both years.

5. Earnings (loss) per share

The calculation of the basic earnings (loss) per share is based on the net profit (loss) for the year of HK$10,912,000 (2003: net loss of HK$64,185,000) and on 528,271,615 (2003: 528,271,615) ordinary shares in issue during the year.

6. Depreciation

Depreciation on property, plant and equipment for the year amounted to HK$2,579,000 (2003: HK$3,941,000).

EXTRACT FROM AUDITOR’S REPORT

Fundamental uncertainty relating to the going concern basis.

In forming our opinion, we have considered the adequacy of the disclosures made in note 2 to the financial statements which explain that the Group is dependent upon the financial support of its banker and other lenders. In September 2004, the Group obtained a commitment letter for a term loan facility from other banks to refinance the HK$ term loan of HK$623 million and

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other loan of HK$155 million (both together with the accrued interest and other bank charges). The HK$ term loan of HK$623 million and other loan of HK$155 million are due on 31 December 2004 and 1 October 2004 respectively. In addition, the Group is now in the process of soliciting new bankers to refinance the overdue US$ term loan of HK$78 million and the Additional Amount of HK$134 million, as explained in note 19(c) to the financial statements. The Additional Amount shall be due for payment on 1 November 2004. Provided that the above term loan facility can be successfully obtained by the Group and the Group can successfully solicit new bankers to refinance the US$ term loan and the Additional Amount within a short period of time, the directors estimate the properties under development will be available for sale or pre-sale by 30 November 2004 and will be completed by 30 April 2005. Against this background, the directors consider that, with the continuing support of the Group’s bankers and other lenders, the Group will be able to complete the development and to meet in full its financial obligations as they fall due for the foreseeable future. The financial statements have been prepared on a going concern basis, the validity of which depends upon the future funding being available. The financial statements do not include any adjustments that would result from failure to obtain such funding. We consider that the fundamental uncertainty has been adequately disclosed in the financial statements and our opinion is not qualified in this respect.

DIVIDENDS

The Directors of the Company do not recommend the payment of a final dividends (2003: Nil).

CLOSURE OF REGISTER OF MEMBERS

The Register of Members of the Company will be closed from 30 November 2004 to 3 December 2004, both days inclusive, during which period no transfer of shares will be effected.

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MANAGEMENT DISCUSSION AND ANALYSIS

The principal activities of the Group are the trading of textiles and re-development of Bowen Hill Apartments. The redevelopment is still under progress. The Company is still looking for new investment opportunities.

PROSPECT

The re-development of Bowen Hill Apartments will be completed within one year. The returns from the re-development will improve the Company financial structure.

LIQUIDITY, FINANCIAL RESOURCES AND CAPITAL STRUCTURE

As at 30 June 2004, net current liabilities of the Group were approximately HK$184 million (2003: HK$174 million). The current ratio was 0.86 (2003: 0.84). The cash and bank balance on hand was HK$1,000,000 (2003: HK$422,000).

As at 30 June 2004, the Group has outstanding borrowings of approximately HK$1,318 million comprising (i) secured bank loans and accrued interest and other borrowings cost on bank loans of approximately HK$709 million, (ii) other loans and amounts due to directors of subsidiaries of approximately HK$469 million and (iii) other payables and taxation payable of approximately HK$140 million. The bank borrowings are on floating interest rates basis.

The majority of the Group’s assets and borrowings are denominated either in Hong Kong dollars or US dollars thereby avoiding exposure to undesirable exchange rate fluctuations. In view of the stability of the exchange rate of HK dollars and US dollars, the directors consider that the Group has no significant exposure to exchange fluctuation and does not pledge against foreign exchange risk.

The Group’s bank loans were secured by leasehold land and buildings and properties under development held by the Group with a total net book value of approximately HK$1,246 million. The issued ordinary shares of a whollyowned subsidiary of the Company, Holyrood Limited, were

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also pledged to a bank to secure credit facilities granted to the Group. In addition, the Group’s bank deposits of approximately HK$11 million were pledged to a bank for guarantees in respect of bank loans.

The Directors consider that it is not meaningful to publish a gearing ratio for the Group until such time as the Group is in a positive shareholders’ equity position.

SIGNIFICANT INVESTMENTS, ACQUISITIONS AND DISPOSALS

During the year ended 30 June 2004, the Group had no material acquisitions and disposals of subsidiaries.

As at 30 June 2004, the Group had no material investment.

EMPLOYEES AND REMUNERATION POLICIES

As at 30 June 2004, the Group employed a total of 9 employees. They were remunerated according to market conditions.

CONTINGENT LIABILITIES

As at 30 June 2004, the Company has provided guarantees to banks in respect of banking facilities granted to its subsidiaries amounting to approximately HK$997 million.

PURCHASE, SALE AND REDEMPTION OF SHARES

During the year, neither the Company nor any of its subsidiaries purchased, sold or redeemed any of the Company’s listed shares.

CORPORATE GOVERNANCE

The Company has complied throughout the year with the Code of Best Practice as set out in Appendix 14 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited.

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PUBLICATION OF DETAILED ANNUAL RESULTS ON THE WEBSITE OF THE STOCK EXCHANGE OF HONG KONG LIMITED

A detailed annual results containing the information required by paragraphs 45(1) to 45(3) of Appendix 16 of the Listing Rules will be published on the website of The Stock Exchange of Hong Kong Limited in due course.

By Order of the Board Law Fong Acting Chairman

Hong Kong, 19 October 2004

As at the date of this announcement, the executive directors of the Company are Mr. LAW Fong and Mr. CHEN Te Kuang Mike, the non-executive director is Mr. OUNG Shih Hua James and the independent non-executive directors are Mr. ZHU Pei Qing, Ms. LU Ti Fen and Mr. KWOK Wai Chi.

Please also refer to the published version of this announcement in China Daily.

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