Guoxia Technology Co., Ltd. - Proxy Solicitation & Information Statement 2006

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 your licensed securities dealer, bank manager, solicitor, professional accountant or other professional adviser.

If you have sold or transferred all your shares in Wing On Travel (Holdings) Limited, you should at once hand this circular to the purchaser or transferee or to the bank, licensed securities dealer or other agent through whom the sale or the transfer was effected for transmission to the purchaser or 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.

==> picture [64 x 63] intentionally omitted <==

WING ON TRAVEL (HOLDINGS) LIMITED

(Incorporated in Bermuda with limited liability)

(Stock Code: 1189)

VERY SUBSTANTIAL DISPOSAL

Financial adviser to Wing On Travel (Holdings) Limited

SOMERLEY LIMITED

A notice convening a special general meeting of Wing On Travel (Holdings) Limited to be held at 8th Floor, Harcourt House, 39 Gloucester Road, Wanchai, Hong Kong on Monday, 17 July 2006 at 10:00 a.m. is set out on pages 141 to 142 to this circular. There is a form of proxy for use at the special general meeting accompanying this circular. Whether or not you are able to attend the meeting in person and vote at such meeting, you are advised to read the notice and complete the accompanying form of proxy in accordance with the instructions printed thereon as soon as possible and return it to the Company’s head office and principal place of business in Hong Kong at 7th Floor, Paul Y. Centre, 51 Hung To Road, Kwun Tong, Kowloon, Hong Kong as soon as possible and in any event not less than 48 hours before the time appointed for holding such meeting or any adjournment thereof. Completion and return of the form of proxy will not preclude you from attending and voting in person at the meeting or any adjournment thereof if you so wish.

30 June 2006

	Page
Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
Letter from the Board
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	4
The Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	5
Shareholding structure of Triumph Up and Kingsway . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	8
Use of proceeds and financial effect of the Disposal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	9
Reasons for the Disposal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	10
Management discussion and analysis on the Remaining Group . . . . . . . . . . . . . . . . . . . . . . . .	10
Future prospects of the Remaining Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	12
Listing Rules implications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	13
SGM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	13
Procedure for demanding a poll . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	14
Recommendation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	14
Further information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	14
Appendix I – Financial information of the Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	15
Appendix II – Unaudited pro forma financial information
on the Remaining Group. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	112
Appendix III – Valuation report on the Hotel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	122
Appendix IV – General information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	127
Notice of the SGM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	141

– i –

DEFINITIONS

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

“Agreement”	the conditional sale and purchase agreement dated 13 June 2006 and
	entered into among the Vendor, the Purchaser and the Company in
	relation to the Disposal
“Board”	the board of Directors
“Completion”	completion of the Agreement
“Company”	Wing On Travel (Holdings) Limited, a company incorporated in
	Bermuda with limited liability and the Shares of which are listed on
	the main board of the Stock Exchange
“Consideration”	HK$252,789,344.97, being the consideration for the Sale Shares under
	the Agreement
“Convertible Exchangeable	the HK$1,000 million 2% convertible exchangeable notes due 2011
Notes”	issued by the Company, which entitle the holders thereof to, among
	others, convert the principal amount outstanding into new Shares at
	the initial conversion price of HK$0.79 per Share (subject to
	adjustments)
“Deposit”	an initial refundable deposit in the sum of HK$10,317,932.45 which
	was paid by the Purchaser to the Vendor’s solicitors as stakeholder
	upon the signing of the Agreement
“Directors”	directors of the Company
“Disposal”	the proposed disposal of the Sale Shares by the Vendor to the
	Purchaser in accordance with the terms and conditions of the
	Agreement
“Group”	the Company and its subsidiaries
“Hong Kong”	The Hong Kong Special Administrative Region of the PRC
“Hotel”	Kingsway Hotel, a three-star hotel with a total 383 guest rooms located
	at Rua De Luis Gonzaga Gomes No. 176-230, Rua De Nagasaki No.
	64-A-82, Rua De Xiamen No. 37-A-59, Macau
“Independent Third Party(ies)”	third party(ies) independent of the Company and its connected persons
	(as defined in the Listing Rules)
“Kingsway”	Kingsway Hotel Limited, a company incorporated in Macau with
	limited liability and the owner and operator of the Hotel

– 1 –

DEFINITIONS

“Latest Practicable Date”	27 June 2006, being the latest practicable date prior to printing of
	this circular for the purpose of ascertaining certain information for
	inclusion in this circular
“Listing Rules”	the Rules Governing the Listing of Securities on the Stock Exchange
“Macau”	The Macau Special Administrative Region of the PRC
“Other Agreements”	the sale and purchase agreements entered into by: (i) all the other
	shareholders of Triumph Up as vendors and the Purchaser as purchaser
	in respect of the sale of the vendors’ respective interests in Triumph
	Up to the Purchaser; and (ii) the shareholder of Great Chain Limited
	as vendor and the Purchaser as purchaser in respect of the sale of the
	entire issued share capital of Great Chain Limited, which holds a
	5.75% effective interest in the Hotel, to the Purchaser
“PRC”	the People’s Republic of China, which shall, for the purpose of this
	circular, exclude Hong Kong and Macau
“Purchaser”	China Star Entertainment Limited, a company incorporated in
	Bermuda with limited liability, the shares of which are listed on the
	main board of the Stock Exchange
“Remaining Group”	the Group after Completion
“Sale Shares”	350 shares of US$1.00 each, representing approximately 56.91% of
	the entire issued share capital of Triumph Up
“SFO”	the Securities and Futures Ordinance (Chapter 571 of the Laws of
	Hong Kong)
“SGM”	the special general meeting of the Company to be convened and held
	for the Shareholders to consider and, if thought fit, approve the
	Disposal
“Share(s)”	ordinary share(s) of HK$0.10 each in the issued share capital of the
	Company
“Shareholder(s)”	holder(s) of the Share(s)
“Stock Exchange”	The Stock Exchange of Hong Kong Limited
“Triumph Up”	Triumph Up Investments Limited, a company incorporated in the
	British Virgin Islands with limited liability
“US” or “USA”	the United States of America

– 2 –

DEFINITIONS

“Vendor”	Harvest Metro Corporation, a company incorporated in the British
	Virgin Islands with limited liability and a wholly-owned subsidiary
	of the Company
“HK$”	Hong Kong dollars, the lawful currency of Hong Kong
“MOP”	Macau Pataca, the lawful currency of Macau
“RMB”	Renminbi, the lawful currency of the PRC

Amounts denominated in MOP in this circular have been converted into HK$ at the rate of MOP1.03=HK$1.0 for illustration purposes.

– 3 –

LETTER FROM THE BOARD

WING ON TRAVEL (HOLDINGS) LIMITED

(Incorporated in Bermuda with limited liability)

(Stock Code: 1189)

Executive Directors:

Mr. Yu Kam Kee, Lawrence, B.B.S., M.B.E., J.P. (Chairman)

Mr. Cheung Hon Kit (Managing Director) Dr. Yap, Allan Mr. Chan Pak Cheung, Natalis

Registered office: Clarendon House 2 Church Street Hamilton HM 11 Bermuda

Mr. Lui Siu Tsuen, Richard

Independent Non-Executive Directors:

Mr. Kwok Ka Lap, Alva Mr. Sin Chi Fai Mr. Wong King Lam, Joseph

Head office and principal place of business in Hong Kong: 7th Floor, Paul Y. Centre 51 Hung To Road Kwun Tong, Kowloon Hong Kong

30 June 2006

To the Shareholders and, for information only,

to the holders of the Convertible Exchangeable Notes

Dear Sir or Madam,

VERY SUBSTANTIAL DISPOSAL

INTRODUCTION

The Board announced on 14 June 2006 that the Vendor and the Purchaser had entered into the Agreement pursuant to which the Vendor agreed to sell and the Purchaser agreed to purchase the Sale Shares, representing approximately 56.91% of the issued share capital of Triumph Up, for a consideration of HK$252,789,344.97. Triumph Up indirectly holds approximately 55.75% of the issued share capital of Kingsway whose principal asset is the Hotel. Accordingly, the Group’s entire approximately 31.73% effective interest in the Hotel will be disposed of.

As set out in the announcements of the Company dated 24 November 2004 and 22 February 2005 and the circular of the Company dated 16 December 2004, the Company acquired approximately 65.04% of the issued share capital of Triumph Up at a consideration of HK$166.8 million in February 2005. In light of the 55.75% attributable interests held by Triumph Up in Kingsway, the effective interests in Kingsway acquired by the Company in February 2005 were 36.26%. On 13 July 2005, the Company disposed of approximately 8.13% interests in Triumph Up (i.e. 4.53% effective interests in Kingsway) to an Independent Third Party. Accordingly, as at the date of the Agreement, the Company was interested in approximately 31.73% effective interests in Kingsway.

– 4 –

LETTER FROM THE BOARD

The purpose of this circular is to provide you with, among others, (i) further details of the Agreement; (ii) financial and other information of the Group; (iii) pro forma financial information of the Remaining Group; (iv) valuation report on the Hotel; and (v) the notice of the SGM.

THE AGREEMENT

Date: 13 June 2006

Parties:

Vendor : Harvest Metro Corporation, a wholly-owned subsidiary of the Company

Purchaser : China Star Entertainment Limited, a company incorporated in Bermuda with limited liability, the shares of which are listed on the main board of the Stock Exchange Guarantor : the Company

As at the Latest Practicable Date, the Vendor was a wholly-owned subsidiary of the Company. Triumph Up is owned as to approximately 56.91% by the Vendor and as to the remaining approximately 43.09% by two Independent Third Parties.

To the best of the Directors’ knowledge, information and belief and having made all reasonable enquiries, the Purchaser and its single largest shareholder are Independent Third Parties. The Purchaser is an investment holding company and its subsidiaries are principally engaged in film production, distribution of film and television drama series, and the provision of post-production services.

Assets to be disposed of:

350 shares of US$1.00 each in the issued share capital of Triumph Up, representing approximately 56.91% of the issued share capital of Triumph Up and the entire interests in Triumph Up held by the Vendor as at the date of the Agreement. Triumph Up indirectly holds approximately 55.75% of the issued share capital of Kingsway whose principal asset is the Hotel. Accordingly, an effective interest of approximately 31.73% of the Hotel is to be disposed of by the Company. No connected persons (as defined under the Listing Rules) of the Company is interested in Kingsway or the Hotel, save for their indirect interests through the Company.

The Hotel is a three-star hotel named Kingsway Hotel held by Kingsway and is located at Rua De Luis Gonzaga Gomes No. 176-230, Rua De Nagasaki No. 64-A-82, Rua De Xiamen No. 37-A-59, Macau. The Hotel opened in 1992 and has a total of 383 guest rooms with ancillary facilities including, among others, a casino, a health spa, a night club and retails shops. For the year ended 31 December 2005, the average occupancy rate of the Hotel was about 83%.

– 5 –

LETTER FROM THE BOARD

For the year ended 31 December 2005, the unaudited consolidated turnover of Triumph Up is nil. For the year ended 31 December 2005, Triumph Up recorded the same amount of unaudited profit before taxation and profit after taxation of approximately HK$69.3 million. Such profit mainly comprised a share of results of Kingsway of approximately HK$8.4 million and a discount on acquisition of Xin Son Investments Limited and its associates, Xin Wei Property Investment Company Limited and Kingsway, of HK$60.9 million. Such discount on acquisition of subsidiaries is a one-off profit and represents the excess of the fair value of the 55.75% attributable interests in Kingsway over the cost of investments in the books of Triumph Up when it was acquired by the Group in February 2005. As a result, the Group recorded a corresponding discount on acquisition of subsidiaries of approximately HK$34.6 million (net of minority interests in Triumph Up) in its consolidated income statement for the year ended 31 December 2005. The principal assets of Triumph Up in February 2005 were its attributable interests in Kingsway whose principal asset is the Hotel. The unaudited net asset value of Triumph Up amounted to approximately HK$311.8 million as at 31 December 2005.

Triumph Up has not commenced business since its incorporation on 21 April 2004 until February 2005. Accordingly, it did not have any assets (save for its nominal issued share capital of 1 share of US$1.00) or liabilities as at 31 December 2004. Other than incorporation expenses of an immaterial amount, no other expenses or income were recorded by Triumph Up during the period since its incorporation to 31 December 2004.

According to the audited financial statements of Kingsway prepared using generally accepted accounting principles in Macau, Kingsway recorded a turnover of approximately MOP68.2 million (equivalent to approximately HK$66.2 million) for the year ended 31 December 2004 and MOP67.3 million (equivalent to approximately HK$65.3 million) for the year ended 31 December 2005 respectively, and a net profit after taxation of approximately MOP22.8 million (equivalent to approximately HK$22.1 million) for the year ended 31 December 2004 and MOP18.4 million (equivalent to approximately HK$17.9 million) for the year ended 31 December 2005 respectively.

Consideration:

The Consideration for the Sale Shares is HK$252,789,344.97, which has been/shall be paid in the following manner:–

(a) an initial refundable deposit in the sum of HK$10,317,932.45 was paid by the Purchaser to the Vendor’s solicitors as stakeholder upon the signing of the Agreement; and
(b) HK$242,471,412.52, being the balance of the Consideration, shall be paid by the Purchaser to the Vendor on Completion.

The Consideration was determined after arm’s length negotiations and with reference to an indicative valuation conducted on the Hotel by Wai & Ko Real Estate Ltd., an independent valuer, valuing the Hotel at approximately HK$810,000,000 as at 8 June 2006. On the basis of the net profit (excluding the one-off profit of discount on acquisition of subsidiaries of HK$60.9 million) of Triumph Up for the year ended 31 December 2005 of approximately HK$8.4 million (representing its share of results of associates), the Consideration represents a price to earning ratio of approximately 30.1 times. The excess of the Consideration over the net asset value of Triumph Up as at 31 December 2005 attributable to the Sale Shares is approximately HK$75.2 million.

– 6 –

LETTER FROM THE BOARD

Conditions precedent:

Completion is conditional upon the fulfilment or waiver of the following conditions:

(a) the passing of the necessary resolution(s) by the Shareholders (other than those (if any) who are required to abstain from voting under the Listing Rules) at a general meeting of the Company to approve and ratify the Vendor’s entry into of the Agreement and the performance of the transactions contemplated thereunder;
(b) the passing of the necessary resolution(s) by the shareholders of the Purchaser (other than those (if any) who are required to abstain from voting under the Listing Rules) at a general meeting of the Purchaser to approve and ratify the Purchaser’s entry into of the Agreement and the performance of the transactions contemplated thereunder;
(c) the Purchaser successfully obtaining financing from third party for the purpose of satisfying the balance of the Consideration on Completion;
(d) the relevant warranties of the Vendor contained in the Agreement remaining true and accurate in all material respects and not misleading in any material respect at Completion as if repeated at Completion and at all times between the date of the Agreement and Completion;
(e) all necessary statutory governmental and regulatory obligations having been complied with and all necessary regulatory authority in Hong Kong or in Macau, governmental and third party consents and approvals (including those person entitled to any pre-emption rights) and waivers for the purposes of the transactions contemplated under the Agreement having been obtained without any conditions (or subject to other conditions reasonably acceptable to the parties to the Agreement); and
(f) the Other Agreements becoming unconditional in all respects, other than the condition therein requiring the Agreement to become unconditional.

The Purchaser may waive condition (d) above in whole or in part at its sole discretion.

The Purchaser shall ensure that condition (c) be fulfilled within 30 days from the date of the Agreement. In the event condition (c) cannot be fulfilled within 30 days from the date of the Agreement, the Purchaser shall reimburse the Vendor for all costs and expenses incurred and to be incurred as a result of the non-fulfilment of such condition subject to a maximum amount of HK$500,000.

If any of the conditions has not been fulfilled (or waived as appropriate) on or before 30 November 2006 (save for condition (c) to be fulfilled within 30 days from the date of the Agreement as mentioned above), either the Vendor or the Purchaser shall be entitled to rescind the Agreement whereupon the Vendor’s solicitors shall release the Deposit (together with interest accrued thereon) to the Purchaser and the provisions of the Agreement shall from such date have no further force and effect and no party to the Agreement shall have any liability under them (without prejudice to the rights of the parties in respect of any antecedent breaches).

– 7 –

LETTER FROM THE BOARD

Completion

Completion shall take place on the third business day after fulfilment or waiver (if applicable) of all the conditions precedent to the Agreement or such other date as the parties to the Agreement may agree in writing.

SHAREHOLDING STRUCTURE OF TRIUMPH UP AND KINGSWAY

Set out below is the simplified shareholding structure of Triumph Up and Kingsway before and after Completion:

Before Completion

==> picture [424 x 230] intentionally omitted <==

----- Start of picture text -----

Independent Independent
Vendor
Third Party Third Party
100% 34.96% 56.91% 8.13%
Great Chain
Triumph Up
Limited
50% 50% 100%
Xin Son Investment Limited
(Note)
11.5% 50% Independent
Feng Ze Investments Limited (Note)
38.5% Third Party
Xin Wei Property Investment 25%
5.75%
Company Limited (Note)
19.25%
50%
Kingsway
----- End of picture text -----

Note: The principal activities of these companies are investment holding in Kingsway.

– 8 –

LETTER FROM THE BOARD

After Completion

==> picture [424 x 229] intentionally omitted <==

----- Start of picture text -----

Purchaser
100% 100%
Great Chain
Triumph Up
Limited
50% 50% 100%
Xin Son Investment Limited
11.5% 50% Independent
Feng Ze Investments Limited
38.5% Third Party
Xin Wei Property Investment 25%
5.75%
Company Limtied
19.25%
50%
Kingsway
----- End of picture text -----

USE OF PROCEEDS AND FINANCIAL EFFECT OF THE DISPOSAL

The net proceeds from the Disposal to be received by the Vendor on Completion after deducting the related expenses are estimated to be approximately HK$250.8 million. The Company intends to apply the net proceeds for the purposes of repayment of its borrowings and general working capital for the Group. As at the Latest Practicable Date, the Company has yet to decide on the apportionment of the aforesaid application of proceeds.

Upon Completion, the Group will cease to have any interests in Triumph Up and Triumph Up will also cease to be a subsidiary of the Company. Assuming the Disposal had been completed on 31 December 2005 and based on the Consideration for the Sale Shares, the Group is expected to record a gain of approximately HK$73.2 million from the Disposal. The unaudited pro forma financial information on the Remaining Group is set out in Appendix II to this circular.

– 9 –

LETTER FROM THE BOARD

REASONS FOR THE DISPOSAL

The Company is an investment holding company. The Group is principally engaged in the business of providing package tours, travel and other related services with branches in Hong Kong, Macau, Canada and the United Kingdom, and hotel operation business.

In light of the concession by the United Nations Educational, Scientific and Cultural Organisation to add Macau into the list of World Heritage Sites, and the opening of the new theme park, “the Fisherman’s Wharf”, the Board is optimistic about the economy and tourism industry of Macau. The Group acquired its interests in Triumph Up in February 2005 at a consideration of approximately HK$166.8 million. As mentioned above, the Consideration represents a historical price to earnings ratio of approximately 30.1 times and it is expected that the Group would record a gain of approximately HK$73.2 million from the Disposal, representing a return on investments of approximately 43.9%. Having considered the expected gain and satisfactory return, the Board is of the view that the Disposal represents an excellent opportunity for the Group to realise a substantial return on its investment. After Completion, the Remaining Group will not have interests in any other hotels in Macau and will concentrate on the businesses of providing package tours, travel and other related services, and hotel operation business. The Group will actively explore other investment opportunities in the region including Macau and other areas. With the completion of the issue of HK$1,000 million Convertible Exchangeable Notes in June 2006, the Directors believe the Group’s financial capacity has been strengthened and the Group is well positioned to enlarge its market share through expansion in its branch network and expand its leisure business and hotel network.

The Board understands that the principal terms of the Agreement (including the basis of the Consideration and payment terms) are substantially the same as those of the Other Agreements which were entered into by Independent Third Parties with the Purchaser. In light of this and the reasons and benefits of the Disposal as discussed above, the Directors consider that the terms of the Agreement are fair and reasonable and the Disposal is in the interests of the Company and the Shareholders as a whole.

MANAGEMENT DISCUSSION AND ANALYSIS ON THE REMAINING GROUP

Review of Operations

The notable growth momentum of the Hong Kong economy pursued throughout the year ended 31 December 2005 with gross domestic product registering a growth of 7.3% in 2005. Domestic consumption demand held firm along with the more entrenched economic recovery and improving labour market condition whereas the unemployment rate fell from 8.6% in mid-2003 to 5.2% at the end of 2005 and further down to a 57-month record low of 4.9% in April 2006. Notwithstanding the increasing interest rates and the appreciation of Renminbi, consumer demand and their spending power continued to be strong. Under this atmosphere, the performance of the tourism industry was promising and encouraging over the period under review where statistics shows both inbound arrivals and outbound departures upsurged greatly.

Based on the pro forma income statement of the Remaining Group as set out in Appendix II to this circular, turnover and gross profit for the Remaining Group for the year ended 31 December 2005 were HK$1,815.7 million and HK$346.4 million respectively. The profit for the year ended 31 December 2005 for the Remaining Group was approximately HK$94.2 million, which was arrived at after taking into account the discount on acquisition of subsidiaries of HK$34.6 million, finance costs of HK$59.4 million and gain on disposal of subsidiaries of approximately HK$70.2 million.

– 10 –

LETTER FROM THE BOARD

Travel and Related Services

Recovered from the sentiment of the Indian Ocean tsunami happened at the end of 2004, the number of outbound travellers rebounded during 2005. Statistics show that the number of outbound travellers exceeded 72 million and represented a 4.9% over 2004. Facing the high oil price and increasing operating cost which shrunk further the profit margin of the travel industry, the Remaining Group has continued to launch series of new products, providing quality service on existing markets and exploring new markets aggressively during the year to enhance its performance. Coupled with the growing number of inbound visitors of over 23 million in 2005, the Remaining Group has attained encouraging results during the year ended 31 December 2005.

Turnover and contribution to profit of this segment for the year ended 31 December 2005 reached HK$1,592.0 million and HK$56.4 million respectively.

Hotel and Leisure Services

Benefited from the expansion of the Closer Economic Partnership Arrangement and the PRC Individual Visit Scheme to Hong Kong, the hotel and leisure business in Hong Kong and the PRC have shown a rapid recovery during 2005.

The performance of the Remaining Group’s hotel and leisure business operated under the three hotels with the “Rosedale” brand in Hong Kong and the PRC and Luoyang Golden Gulf Hotel in the PRC during 2005 were largely benefited from the aforesaid arrangements in terms of both occupancy rate and room rate. Coupled with the adoption of appropriate market positioning strategy, the performance of this segment during the year ended 31 December 2005 was encouraging.

The turnover and contribution to profit of this segment for the year ended 31 December 2005 achieved HK$223.7 million and HK$28.2 million respectively.

Liquidity and Financial Resources

As at 31 December 2005, the Remaining Group’s total borrowings were approximately HK$1,036.2 million which comprised loans from related companies of HK$361.5 million, bank and short term loan repayable within one year of HK$38.3 million, bank and other loans repayable after one year of HK$271.3 million, obligations under finance leases of HK$0.1 million and promissory note of HK$365.0 million due in December 2007. All borrowings bear floating interest rates.

The gearing ratio, expressed as a percentage of total borrowings to shareholders’ equity, was 98.5% as at 31 December 2005.

Foreign Currency Exposure

The majority of the Remaining Group’s assets and liabilities and business transactions were denominated in Hong Kong dollars, US dollars and Renminbi. Despite the appreciation of Renminbi in 2005, the impact on the Remaining Group’s operation is minimal. The fluctuation of foreign currencies does not have a significant impact on the performance, results and operations of the Remaining Group during the year ended 31 December 2005 and in the foreseeable future.

The Remaining Group will continue to monitor closely its foreign currency exposure and requirements and to arrange for hedging facilities when necessary.

– 11 –

LETTER FROM THE BOARD

Employees

As at 31 December 2005, the Remaining Group had 1,996 employees of whom 25 were stationed overseas and 1,071 were stationed in the PRC. Competitive remuneration packages commensurate with the responsibilities, qualifications, experience and performance of individual employees are structured. The Remaining Group also provided training programmes, provident fund scheme and medical insurance for its employees. Total staff remuneration incurred for the year ended 31 December 2005 were approximately HK$135.4 million.

FUTURE PROSPECTS OF THE REMAINING GROUP

Travel and Related Services

In 2005, the PRC served approximately 1.2 billion inbound travellers and represented an increase of 10.3% over 2004. At the same time, online travel transactions in PRC reached RMB7 billion in 2005 and the number of Internet users was up by 18.3% as at the end of 2005. Coupled with the effect of the 2008 Beijing Olympic Games and the proposed 2010 Shanghai Disney Theme Park, the inbound revenue of the mainland is expected to grow in multiples in the coming years. The Remaining Group has well equipped itself to grasp this opportunity, through its joint venture currently acting as a land operator for the Remaining Group in the Guangdong Province, and the newly formed joint venture, Travoo, to further expand its business in the PRC aggressively.

The outbound market to southeast Asian countries has been gradually recovered from the Indian Ocean tsunami happened at the end 2004. The Remaining Group will put continuous efforts to ally with airlines and hotels so as to rebuild travellers’ confidence on spending their holidays in those attractive destinations such as Maldives and Phuket. Furthermore, the Remaining Group shall continue to make use of its expertise and experience in the business to expand its product lines, and to explore further leisure and sightseeing spots around the globe for its valuable customers.

Through the popularity of Internet, travel knowledge and destination information can be accessed directly and conveniently. Growing numbers of experienced travellers are keen on planning their own itineraries. To cope with the trend of this expanding FIT market, the Remaining Group has strengthened its leisure division and has actively bargained with its vendors to provide discounted airfare, high quality accommodation, transportation and dining services to its FIT customers. It is expected that the revenue generated from this business stream will occupy a significant portion of the revenue of the Remaining Group in the coming years.

During the year ended 31 December 2005, the Remaining Group has put considerable resources into its inbound business and the results are promising. With the opening of the Hong Kong Disney Land and the AsiaWorld-Expo in 2005, the skyrail to Po Nin Monastery (Ngong Ping 360) and the Wetland Park in 2006, the “A Symphony of Lights” being listed on Guinness World Record in November 2005, the proposed new cruise terminal at the old Kai Tak airport site, the staging of the equestrian events of 2008 Olympic Games in Hong Kong and the hosting of the East Asian Game 2009, the number of incoming visitors to and transit through Hong Kong is expected to grow to a significant extent. The Directors are confident that the inbound business of the Remaining Group will be greatly benefited from these favourable factors and will constitute a significant source of revenue and profits to the Remaining Group in the future.

– 12 –

LETTER FROM THE BOARD

Hotel and Leisure Services

The opening of Hong Kong Disney Land in September 2005 helped to reposition Hong Kong as a premier destination for family tourists in Southeast Asia. Coupled with the expansion of the Individual Visit Scheme to 44 PRC cities and the unprecedented opportunity of mainland tourism industry arising from the 2008 Beijing Olympic Games, the overall room rate and occupancy rate of the Remaining Group’s hotels operated in these cities in the coming years are expected to grow to a considerable extent.

Following the concession by the United Nations Educational, Scientific and Cultural Organisation to add Macau into the list of World Heritage Sites, the opening of the new theme park, “the Fisherman’s Wharf”, the number of visitors to Macau is expected to grow tremendously in the coming years. This will further boost the blooming tourism industry of the city. These developments provide the Remaining Group immense opportunities to enlarge its market share through its branch network. The Remaining Group will also keep on exploring investment opportunities in Macau so as to cope with its business strategy within the Pan-Pearl River Delta area.

The Remaining Group will continue to develop new products and provide quality service so as to differentiate itself from its competitors and to cope with the demanding needs of its valuable customers, and to stand ahead of the industry.

LISTING RULES IMPLICATIONS

The Disposal constitutes a very substantial disposal of the Company under the Listing Rules and is therefore subject to the approval of the Shareholders at the SGM. As the Purchaser is an Independent Third Party and no Shareholder has a material interest in the Disposal which is different from the other Shareholders, no Shareholder is required to abstain from voting in respect of the proposed ordinary resolution to approve the Disposal at the SGM.

SGM

A notice convening the SGM, at which an ordinary resolution will be proposed to the Shareholders to consider and, if thought fit, approve the Agreement, and all matters contemplated under the Agreement, is set out on pages 141 to 142 of this circular.

A form of proxy for use at the SGM is accompanied with this circular. If you are not able to attend the SGM, you are requested to complete the accompanying form of proxy in accordance with the instructions printed thereon and return it to the head office and principal place of business of the Company in Hong Kong at 7th Floor, Paul Y. Centre, 51 Hung To Road, Kwun Tong, Kowloon, Hong Kong as soon as possible and in any event not less than 48 hours before the time appointed for holding the SGM or any adjournment thereof. Completion and return of the form of proxy will not preclude you from attending and voting in person at the SGM or any adjournment thereof if you so wish.

– 13 –

LETTER FROM THE BOARD

PROCEDURE FOR DEMANDING A POLL

Pursuant to bye-laws 70 and 70A of the Company’s Bye-Laws, at any general meeting a resolution put to the vote of the meeting shall be decided on a show of hands unless a poll is (before or on the declaration of the result of the show of hands or on the withdrawal of any other demand for a poll) demanded:

(i) by the chairman of the meeting; or
(ii) by at least three Shareholders present in person or by a duly authorised corporate representative or by proxy for the time being entitled to vote at the meeting; or
(iii) by any Shareholder or Shareholders present in person or by a duly authorised corporate representative or by proxy and representing not less than one-tenth of the total voting rights of all the Shareholders having right to vote at the meeting; or
(iv) by any Shareholder or Shareholders present in person or by a duly authorised corporate representative or by proxy and holding Shares in the Company 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.

If (a) the aggregate proxies held by the chairman of a particular meeting, and the Directors, account for 5% or more of the total voting rights at the meeting, and (b) on a show of hands in respect of any resolution, the Shareholders at the meeting vote in the opposite manner to that instructed in the proxies referred to in (a) above, the chairman of the meeting and/or any Director holding the proxies referred to above shall demand a poll. However, if it is apparent from the total proxies held by the persons referred to in (a) above that a vote taken on a poll will not reverse the vote taken on a show of hands, then no poll shall be required.

RECOMMENDATION

The Directors consider that the Disposal is in the interests of the Company and the Shareholders as a whole. The Directors therefore recommend the Shareholders to vote in favour of the resolution to approve the Disposal to be proposed at the SGM.

FURTHER INFORMATION

Your attention is drawn to the financial information of the Group and the Remaining Group, the valuation report on the Hotel and other information contained in the appendices to this circular.

Yours faithfully, for and on behalf of the Board Wing On Travel (Holdings) Limited Lui Siu Tsuen, Richard

Executive Director

– 14 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Set out below is the text of a report, prepared for the purpose of incorporation in this circular, received from Deloitte Touche Tohmatsu in connection with the Group:

1. ACCOUNTANTS’ REPORT OF THE GROUP

==> picture [77 x 59] intentionally omitted <==

30 June 2006

The Directors

Wing On Travel (Holdings) Limited

Dear Sirs,

We set out below our report on the financial information (the “Financial Information”) regarding Wing On Travel (Holdings) Limited (the “Company”) and its subsidiaries (hereinafter collectively referred to as the “Group”) for each of the three years ended 31 December 2003, 2004 and 2005 (the “Relevant Periods”) for inclusion in the circular issued by the Company dated 30 June 2006 (the “Circular”) in connection with the proposed disposal of approximately 56.91% interest in Triumph Up Investments Limited held by the Group, pursuant to an agreement dated 13 June 2006 (“Agreement”) entered into between the Group and China Star Entertainment Limited, a company incorporated in Bermuda with its shares being listed on the main board of The Stock Exchange of Hong Kong Limited (the “Stock Exchange”).

The Company was incorporated in Bermuda on 11 August 1997. The Company is an investment holding company.

As at the date of this report, the Company has direct and indirect interest in the following subsidiaries:

			Proportion of
	Place		nominal value of
	and date of	Issued and	issued share capital/
	incorporation/	paid up	registered capital		Principal activities
Name of company	registration	share capital	held by the Company		and place of operation
			Directly Indirectly
			%	%
Allied Glory Investment	Hong Kong	HK$2	– 55.7		Investment holding in The People’s
Limited (“Allied Glory”)	3 September 1991				Republic of China (the “PRC”)
(note 1)
Allied Profit Investments	British Virgin Islands	US$1	– 100.0		Investment holding in Hong Kong
Limited_(note 2)_	8 July 2003

– 15 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

1. ACCOUNTANTS’ REPORT OF THE GROUP (Cont’d)

			Proportion of	Proportion of
	Place		nominal value of
	and date of	Issued and	issued share capital/
	incorporation/	paid up	registered capital		Principal activities
Name of company	registration	share capital	held by the	Company	and place of operation
			Directly	Indirectly
			%	%
Apex Quality Group Limited	British Virgin Islands	US$5,548,172	–	67.9	Investment holding
(note 1)	23 April 2003
Apsley Agents Limited	British Virgin Islands	US$1	–	100.0	Recipient of agency commission
(note 2)	18 June 1997
Asian Fame Int’l	British Virgin Islands	US$1	–	100.0	Investment holding in Hong Kong
Limited_(note 2)_	28 October 1998
Asian Pearl Investments	British Virgin Islands	US$1	–	100.0	Investment holding in the PRC
Limited_(note 2)_	23 October 1997
Asian Universe Limited	Hong Kong	HK$2	–	100.0	Inactive
(note 1)	19 August 1998
Benchmark Pacific Limited	British Virgin Islands	US$1	–	100.0	Investment holding in Hong Kong
(note 2)	25 June 1997
China Hotel Net Limited	Hong Kong	HK$2	–	100.0	Inactive
(note 1)	16 January 2004
China Industrial Investment	Hong Kong	HK$20	–	67.9	Investment holding in Hong Kong
Corporation Limited	5 August 1983
(note 1)
Clever Basin Holdings	British Virgin Islands	US$1	–	67.9	Investment holding in Hong Kong
Limited_(note 1)_	16 April 2002
Credit Paradise Limited	Hong Kong	HK$2	–	100.0	Inactive
(note 1)	9 October 1990
Cyber Business Network	Hong Kong	HK$14,000,000	–	100.0	Provision of Internet technology
(Hong Kong) Limited	5 November 1999				services in Hong Kong
(note 1)

– 16 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

1. ACCOUNTANTS’ REPORT OF THE GROUP (Cont’d)

			Proportion of	Proportion of
	Place		nominal value of
	and date of	Issued and	issued share capital/
	incorporation/	paid up	registered capital		Principal activities
Name of company	registration	share capital	held by the	Company	and place of operation
			Directly	Indirectly
			%	%
DS Eastin Limited	Hong Kong	HK$20	–	67.9	Investment holding in the PRC
(note 1)	7 April 1993
Eagle Spirit Holdings	British Virgin Islands	US$1	–	100.0	Holding of a vessel in Hong Kong
Limited_(note 2)_	6 April 2005
Fast Choice Investments	British Virgin Islands	US$1	–	100.0	Investment holding in Thailand
Limited_(note 2)_	5 May 2006
Flying Horse (HK) Limited	Hong Kong	HK$2	–	67.9	Inactive
(note 1)	5 December 2003
Global Future Limited	British Virgin Islands	US$1	–	100.0	Recipient of agency commission
(note 2)	23 July 2002
Golden Sun Limited	Hong Kong	HK$2	–	100.0	Investment holding in Hong Kong
(note 1)	16 September 1998
Gui Tong Travel (Hong Kong)	Hong Kong	HK$11,150,000	–	100.0	Inactive
Company Limited_(note 1)_	20 July 1993
Harvest Metro Corporation	British Virgin Islands	US$1	–	100.0	Investment holding
(note 2)	2 January 2004
Harvest Year Finance Limited	British Virgin Islands	US$1	–	100.0	Inactive
(note 2)	18 April 2005
Hey Wealth Limited	Hong Kong	HK$2	–	67.9	Property holding in Hong Kong
(note 1)	25 November 1993
Hong Kong Wing On Travel	Malaysia	RM10	–	100.0	Inactive
& Tours Sdn. Bhd.(note 3)	18 February 1998

– 17 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

1. ACCOUNTANTS’ REPORT OF THE GROUP (Cont’d)

			Proportion of	Proportion of
	Place		nominal value of
	and date of	Issued and	issued share capital/
	incorporation/	paid up	registered capital			Principal activities
Name of company	registration	share capital	held by the	Company		and place of operation
			Directly	Indirectly
			%		%
Hong Kong Wing On Travel	Hong Kong	Ordinary –	–	100.0		Outbound travel and related services
Service Limited_(note 1)_	13 April 1982	HK$180,000,100				in Hong Kong
		Deferred –
		HK$20,000,000*
HKWOT (BVI) Limited	British Virgin Islands	US$1	100.0		–	Investment holding
(note 2)	15 October 2004
HMH China Investments	Bermuda	CAD$1,152,913	–	55.7		Investment holding
Limited_(note 1)_	21 December 1995
Hongkong Macau	British Virgin Islands	US$10	–	67.9		Investment holding
(International) BVI	25 April 1994
Limited_(note 2)_
International Travel	Hong Kong	HK$500,000	–	100.0		Provision of intergrated technology
Systems (Hong Kong)	25 August 2004					advisory services in Hong Kong
Limited_(note 1)_
International Travel	British Virgin Islands	US$1	–	100.0		Investment holding
Systems Inc.(note 2)	16 March 2004
Kingsgrove International	Hong Kong	HK$2	–	100.0		Property holding in Hong Kong
Limited_(note 1)_	11 June 1997
Lucky Million Investments	British Virgin Islands	US$1	–	67.9		Investment holding in Hong Kong
Limited_(note 2)_	12 November 1991
Luoyang Golden Gulf	PRC#	RMB145,000,000	–	40.8		Hotel ownership and operation
Hotel Co., Ltd.(note 4)	7 November 2003					in the PRC
Makerston Limited	British Virgin Islands	US$1	–	67.9		Investment holding in Hong Kong
(note 1)	29 April 1997

– 18 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

1. ACCOUNTANTS’ REPORT OF THE GROUP (Cont’d)

				Proportion of	Proportion of
	Place			nominal value of
	and date of		Issued and	issued share capital/
	incorporation/		paid up	registered capital		Principal activities
Name of company	registration		share capital	held by the	Company	and place of operation
				Directly	Indirectly
				%	%
Many Good Money	Hong Kong		HK$100,000	–	100.0	Money exchange services
Exchange Limited_(note 1)_	18 March 1983					in Hong Kong
Matrix Profits Limited	British Virgin Islands		US$1	–	67.9	Investment holding
(note 2)	8 December 2003
Mexmara Holdings Limited	British Virgin Islands		US$1	–	100.0	Property holding in Hong Kong
(note 1)	16 April 1993
Millennium Target Holdings	British Virgin Islands		US$1	–	100.0	Investment holding
Limited_(note 2)_	31 March 2000
Ming Hung (Holdings)	Hong Kong	HK$1,591,158,590		–	67.9	Investment holding in Hong Kong
Limited_(note 1)_	30 January 1973
Multi-Million Assets Limited	British Virgin Islands		US$1	–	55.7	Investment holding in Hong Kong
(note 2)	15 November 1991
Newbay Assets Limited	British Virgin Islands		US$1	–	100.0	Holding of motor vehicles
(note 2)	6 July 2005					in Hong Kong
Ocean Growth Enterprises	British Virgin Islands		US$10	–	100.0	Holding of a vessel in Hong Kong
Limited_(note 2)_	12 June 2001
Real Champion Group	British Virgin Islands		US$1	–	100.0	Investment holding in Hong Kong
Limited_(note 2)_	18 October 2004
Rosedale Group Investments	British Virgin Islands		US$1	–	67.9	Investment holding in Hong Kong
Limited_(note 2)_	16 May 2002
Rosedale Group Limited	Hong Kong		HK$2	–	67.9	Inactive
(note 1)	23 August 1999

– 19 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

1. ACCOUNTANTS’ REPORT OF THE GROUP (Cont’d)

			Proportion of	Proportion of
	Place		nominal value of
	and date of	Issued and	issued share capital/
	incorporation/	paid up	registered capital		Principal activities
Name of company	registration	share capital	held by the	Company	and place of operation
			Directly	Indirectly
			%	%
Rosedale Group	Hong Kong	HK$2	–	67.9	Provision of management services
Management Limited	7 November 2001				in Hong Kong
(note 1)
Rosedale Group Services	Hong Kong	HK$2	–	67.9	Provision of nominee and secretarial
Limited_(note 1)_	7 November 2001				services in Hong Kong
Rosedale Hotel Beijing	PRC#	US$17,200,000	–	64.5	Hotel ownership and operation
Co., Ltd.(note 5)	26 January 1987				in the PRC
Rosedale Hotel Group	Hong Kong	HK$2	–	67.9	Inactive
Limited_(note 1)_	6 August 1999
Rosedale Hotel Group	British Virgin Islands	US$1	–	67.9	Investment holding in Hong Kong
Limited_(note 2)_	8 February 1994
Rosedale Hotel Guangzhou	PRC##	US$11,500,000	–	55.2	Hotel ownership and operation
Co., Ltd.(note 6)	15 January 1987				in the PRC
Rosedale Hotel Management	British Virgin Islands	US$1	–	67.9	Hotel management services
International Limited	13 June 1995
(note 2)
Rosedale Hotel Management	Hong Kong	HK$2	–	67.9	Hotel management services
Limited_(note 1)_	20 June 1997				in Hong Kong
Rosedale Hotel Properties	PRC###	HK$500,000	–	67.9	Hotel and properties management
Management (Guangzhou)	29 April 2004				in the PRC
Limited_(note 7)_
Rosedale Oriental Hotel	British Virgin Islands	US$1	–	67.9	Inactive
Management Inc.(note 2)	2 October 2003

– 20 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

1. ACCOUNTANTS’ REPORT OF THE GROUP (Cont’d)

			Proportion of	Proportion of
	Place		nominal value of
	and date of	Issued and	issued share capital/
	incorporation/	paid up	registered capital		Principal activities
Name of company	registration	share capital	held by the	Company	and place of operation
			Directly	Indirectly
			%	%
Rosedale Park Limited	Hong Kong	HK$2	–	67.9	Hotel operation in Hong Kong
(note 1)	4 June 1991
Shropshire Property Limited	British Virgin Islands	Ordinary –	–	67.9	Investment holding in the PRC
(note 2)	20 April 2001	US$10
		Preference –
		US$1,000
Silver Bay Commodities	Hong Kong	HK$20,000	–	70.0	Investment holding in the PRC
Limited_(note 1)_	17 October 1996
Sinomatrix Limited	British Virgin Islands	US$1	–	100.0	Investment holding in Hong Kong
(note 2)	1 July 2003
South Africa Express	British Virgin Islands	US$1	–	100.0	Inactive
Limited_(note 2)_	3 July 1998
Star Vision Holdings	Hong Kong	HK$500,000	–	67.9	Premises subletting in Hong Kong
Limited_(note 1)_	11 December 2000
Success Billion Limited	British Virgin Islands	US$1	–	100.0	Investment holding in Hong Kong
(note 2)	8 February 2001
Success Fund Industrial	Hong Kong	HK$100	–	100.0	Property holding in the PRC
Limited_(note 1)_	21 February 1995
Success Profits Limited	British Virgin Islands	US$1	–	67.9	Investment holding in Hong Kong
(note 2)	1 December 2000
Super Good Limited	British Virgin Islands	US$1	–	67.9	Investment holding
(note 2)	19 September 1997
Super Grade Investment	British Virgin Islands	US$1	–	100.0	Property holding in Hong Kong
Limited_(note 1)_	21 May 1997

– 21 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

1. ACCOUNTANTS’ REPORT OF THE GROUP (Cont’d)

				Proportion of	Proportion of
	Place			nominal value of
	and date of		Issued and	issued share capital/
	incorporation/		paid up	registered capital		Principal activities
Name of company	registration		share capital	held by the	Company	and place of operation
				Directly	Indirectly
				%	%
Triumph Up Investments	British Virgin Islands		US$615	–	56.9	Investment holding in Macau
Limited_(note 2)_	21 April 2004
Truelead Investments	British Virgin Islands		US$1	–	100.0	Investment holding in Hong Kong
Limited_(note 2)_	12 April 2005
Watertours of Hong Kong	Hong Kong		Ordinary –	–	100.0	Watertour services in Hong Kong
Limited_(note 1)_	1 December 1971	HK$1,500,000
			“B” –
			HK$100*
Whole Bright Assets	British Virgin Islands		US$33,121	–	56.9	Investment holding in Macau
Limited_(note 2)_	1 December 2004
Wing On Air Service	British Virgin Islands		US$1	–	100.0	Investment holding in Hong Kong
Limited_(note 2)_	5 December 1997
Wing On Holidays (Macau)	Macau	MOP1,300,000		–	100.0	Travel and related services in Macau
Limited_(note 2)_	28 October 1995
Wing On Hotel Management	British Virgin Islands		US$4	–	100.0	Hotel management services
Limited_(note 2)_	14 July 1994					in the PRC
Wing On Technologies	Samoa		US$1	–	100.0	Investment holding in Hong Kong
(Holdings) Limited	21 December 1999
(note 2)
Wing On Travel (BVI)	British Virgin Islands		US$10,000	–	100.0	Investment holding
Limited_(note 2)_	7 August 1997
Wing On Travel (China)	Hong Kong		HK$2	–	100.0	Inactive
Limited_(note 1)_	9 April 1999
Wing On Travel (U.K.)	United Kingdom (“U.K.”)		£2	–	100.0	Travel and related services in the U.K.
Limited_(note 8)_	1 February 1993

– 22 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

1. ACCOUNTANTS’ REPORT OF THE GROUP (Cont’d)

			Proportion of	Proportion of
	Place		nominal value of
	and date of	Issued and	issued share capital/
	incorporation/	paid up	registered capital		Principal activities
Name of company	registration	share capital	held by the	Company	and place of operation
			Directly	Indirectly
			%	%
Wing On Travel Advertising	Hong Kong	HK$10,000	–	100.0	Inactive
Limited_(note 1)_	12 November 1997
Wing On Travel And Tour	Hong Kong	HK$2,000,000	–	100.0	Inbound travel and related services
Limited_(note 1)_	16 June 1989				in Hong Kong
Wing On Travel Finance	Hong Kong	HK$2	–	100.0	Money lending in Hong Kong
Limited_(note 1)_	1 August 1997
Wing On Travel Infotech	Hong Kong	HK$2	–	100.0	Information technology development
Limited_(note 1)_	9 April 1999
Wing On Travel International	British Virgin Islands	US$1	100.0	–	Investment holding
Limited_(note 2)_	5 December 1997
Wing On Travel Nominees	Hong Kong	HK$2	–	100.0	Provision of secretarial services
Limited_(note 1)_	3 July 2002				in Hong Kong
Wing On Travel Online	Samoa	US$10	–	80.0	Travel website
Limited_(note 2)_	21 December 1999
Wintime Property	British Virgin Islands	US$100	–	67.9	Investment holding
Developments	12 January 1994
Limited_(note 2)_
World Way (Pacific)	Hong Kong	HK$2	–	100.0	General trading in Hong Kong
Limited_(note 1)_	13 August 1997
Worldchamp Holdings	British Virgin Islands	US$10	–	100.0	Investment holding in the PRC
Limited_(note 2)_	26 September 2003
WOT Holidays (Canada)	Canada	C$15,000	–	100.0	Travel and related services
Limited_(note 9)_	10 October 1989				in Canada

– 23 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

1. ACCOUNTANTS’ REPORT OF THE GROUP (Cont’d)

			Proportion of	Proportion of
	Place		nominal value of
	and date of	Issued and	issued share capital/
	incorporation/	paid up	registered capital		Principal activities
Name of company	registration	share capital	held by the	Company	and place of operation
			Directly	Indirectly
			%	%
Xin Son Investment Limited	Macau	MOP100,000	–	56.9	Investment holding in Macau
(note 2)	23 September 1992
Yarra Group Limited	British Virgin Islands	US$1	–	67.9	Investment holding in Hong Kong
(note 2)	14 December 1993
Yechain Development	Hong Kong	HK$2	–	67.9	Property investment in Hong Kong
Limited_(note 1)_	9 June 1992
Yin Shuen Enterprises	Macau	MOP100,000	–	56.9	Investment holding in Macau
Company, Limited_(note 2)_	5 December 1994
Zillion Rich Assets Limited	British Virgin Islands	US$26,451	–	56.9	Investment holding in Macau
(note 2)	12 November 2004
洛陽電力旅行社有限公司	PRC####	RMB300,000	–	27.2	lnbound travel services in the PRC
(note 10)	22 December 1999
廣州市旅訊電子網絡系統	PRC###	HK$1,000,000	–	100.0	Development of travel management
有限公司 (note 11)	27 October 2004				systems in the PRC

– 24 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

1. ACCOUNTANTS’ REPORT OF THE GROUP (Cont’d)

Notes:

We have acted as auditors of these companies for each of the Relevant Periods or since their respective date of incorporation or acquisitions, where this is a shorter period. Audited financial statements have been prepared in accordance with Hong Kong Financial Reporting Standards (“HKFRSs”) for these companies for each of the Relevant Periods, or from their respective date of incorporation, where this is a shorter period.
No audited financial statements have been prepared for these companies, which were incorporated in countries where there was no statutory audit requirements.
The statutory financial statements of Hong Kong Wing On Travel & Tours Sdn. Bhd. for each of the Relevant Periods were prepared in accordance with the relevant accounting principles and financial regulations applicable in Malaysia and were audited by Deloitte & Touche, Malaysia, a member firm of Deloitte Touche Tohmatsu.
The statutory financial statements of Luoyang Golden Gulf Hotel Co., Ltd. for the two years ended 31 December 2005, since it became a subsidiary of the Group in January 2004, were prepared in accordance with the relevant accounting principles and financial regulations applicable in the PRC and were audited by 洛陽中華會計師事務所有限責任公司 .
The statutory financial statements of Rosedale Hotel Beijing Co., Ltd. for the two years ended 31 December 2005, since it became a subsidiary of the Group in January 2004, were prepared in accordance with the relevant accounting principles and financial regulations applicable in the PRC and were audited by Deloitte Touche Tohmatsu CPA Ltd (Beijing Branch).
The statutory financial statements of Rosedale Hotel Guangzhou Co., Ltd. for the two years ended 31 December 2005, since it became a subsidiary of the Group in January 2004, were prepared in accordance with the relevant accounting principles and financial regulations applicable in the PRC and were audited by 廣東正中珠江會計師務所 .
The statutory financial statements of Rosedale Hotel Properties Management (Guangzhou) Ltd. for the two years ended 31 December 2005, since it became a subsidiary of the Group in January 2004, were prepared in accordance with the relevant accounting principles and financial regulations applicable in the PRC and were audited by 廣州華信會計師事務所有限公司 .
The statutory financial statements of Wing On Travel (U.K.) Limited for the three years ended 31 December 2005 were prepared in accordance with the relevant accounting principles and financial regulations applicable in the U.K. and were audited by Baverstocks, registered auditors in the U.K.
The statutory financial statements of WOT Holidays (Canada) Limited for each of the Relevant Periods were prepared in accordance with the relevant accounting principles and financial regulations applicable in Canada and were audited by Lawrence Woo Ltd.
The statutory financial statements of 洛陽電力旅行社有限公司 for the two years ended 31 December 2005, since it became a subsidiary of the Group in January 2004, were prepared in accordance with the relevant accounting principles and financial regulations applicable in the PRC. The financial statements for the year ended 31 December 2004 were audited by 洛陽中華會計師事務所有限責任公司 and the financial statements for the year ended 31 December 2005 were audited by 河南匯通會計師事務所 .
The statutory financial statements of 廣州旅訊電子商貿有限公司 for the year ended 31 December 2005 were prepared in accordance with the relevant accounting principles and financial regulations applicable in the PRC and were audited by 廣東金橋會計師事務所有限公司 .
The deferred shares and “B” shares are owned by the Group, practically carry no rights to dividends or to receive notice of or to attend or vote at any general meeting of the respective companies or to participate in any distribution in winding up.
# The subsidiaries are PRC Sino-foreign equity joint ventures.
## This subsidiary is a PRC Sino-foreign co-operative joint venture. Allied Glory is entitled to recoup its total investment (including capital and interest) from the after-tax earnings of Rosedale Guangzhou before any amounts are distributed. Thereafter, the after-tax earnings of Rosedale Guangzhou are to be distributed at 80% and 20% to Allied Glory and other joint venture partner respectively.
### The subsidiaries are PRC wholly foreign owned enterprises.
#### This subsidiary is a PRC domestic company.

– 25 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

1. ACCOUNTANTS’ REPORT OF THE GROUP (Cont’d)

We have acted as auditors of the Company for each of the Relevant Periods. Audited consolidated financial statements have been prepared in accordance with HKFRSs for each of the Relevant Periods.

We have examined the audited consolidated financial statements (“Underlying Financial Statements”) of the Group for the Relevant Periods. Our examination was made in accordance with the Auditing Guideline 3.340 “Prospectuses and the Reporting Accountant” as recommended by the Hong Kong Institute of Certified Public Accountants (“HKICPA”).

The consolidated income statements and consolidated cash flow statements of the Group for each of the Relevant Periods and consolidated balance sheets as at 31 December 2003, 2004 and 2005 as set out in this report have been prepared based on the Underlying Financial Statements for the Relevant Periods for the purpose of preparing our report for inclusion in the Circular.

The Underlying Financial Statements are the responsibility of the Directors of the Company who approved their issue. The Directors of the Company are responsible for the contents of the Circular in which this report is included. It is our responsibility to compile the Financial Information from the Underlying Financial Statements, to form an independent opinion on the Financial Information and to report our opinion to you.

In our opinion, the Financial Information together with the notes thereon gives, for the purpose of this report, a true and fair view of the state of affairs of the Group as at 31 December 2003, 2004 and 2005 and of the results and cash flows of the Group for each of the Relevant Periods.

– 26 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

I. FINANCIAL INFORMATION

Consolidated Income Statements

Notes
Turnover
7
Direct operating costs
Gross profit
Other operating income
9
Distribution costs
Administrative expenses
Discount on acquisition of
subsidiaries
44(d)
Decrease in fair value of
investments held for trading
Net unrealised holding loss on
other investments
Increase in fair value of
investment property
17
Realised gain on derivative financial
instruments
(Impairment loss recognised) reversal
of impairment loss in respect of
leasehold land and buildings
16
(Impairment loss recognised) reversal
of impairment loss in respect of
properties under construction
16
Impairment loss recognised
in respect of available-for-sale
investments
19(b)
Impairment loss recognised
in respect of investments in securities
Release of negative goodwill arising
from acquisition of subsidiaries
23
Amortisation of goodwill arising on
acquisition of subsidiaries
Loss on disposal of
investment securities
Loss on disposal of interest in
a co-operative joint venture
Finance costs
10
Share of results of associates
18

Year ended 31 December
2003
2004
2005
HK$’000
HK$’000
HK$’000
(Restated)
(Restated)
1,416,235
1,722,177
1,815,718
(1,258,481)
(1,426,652)
(1,469,298)
157,754
295,525
346,420
22,536
20,784
20,415
(38,809)
(51,039)
(53,041)
(202,699)
(241,063)
(259,810)
–
–
34,574
–
–
(14,761)
(2,849)
(127)
–
170
2,000
619
–
–
5,650
(301)
4,511
4,874
(2,400)
(1,100)
900
–
–
(1,167)
(26,974)
(5,659)
–
–
1,863
–
(496)
–
–
(31,098)
–
–
(20,000)
–
–
(34,916)
(66,282)
(59,376)
(114,431)
(195)
8,006

– 27 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Loss on partial disposal of subsidiaries (Loss) gain on disposal of associates Impairment loss recognised in respect of interest in an associate Loss on disposal of discontinued operation 45 (Loss) profit before taxation 11 Taxation credit 13 (Loss) profit for the year Attributable to: Shareholders of the parent Minority interests Dividends 14 (Loss) earnings per share Basic 15 Diluted 15 Notes	– – (3,177) (23,471) 37,930 – (31,717) – – (32,697) – – (382,398) (2,852) 30,126 1,718 23 2,108 (380,680) (2,829) 32,234 (380,680) 8,556 31,109 – (11,385) 1,125 (380,680) (2,829) 32,234 – – 8,752 HK$ HK$ HK$ (Restated) (Restated) (2.08) 0.04 0.07 N/A N/A N/A Year ended 31 December 2003 2004 2005 HK$’000 HK$’000 HK$’000 (Restated) (Restated)

– 28 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Consolidated Balance Sheets

Notes Non-current assets Property, plant and equipment 16 Investment property 17 Interest in associates 18 Available-for-sale investments 19 Other long term investment 20 Investments in securities 21 Goodwill 22 Negative goodwill 23 Investment deposits 25 Club debenture, at cost Current assets Property held for sale, at cost Inventories 26 Amounts due from related companies 27 Amounts due from associates 28 Trade and other receivables 29 Consideration receivable on disposal of an associate and interest in a co-operative joint venture Loan receivables 30 Investments held for trading 31 Investments in securities 21 Tax recoverable Pledged bank deposits 48 Trading cash balances 32 Bank balances and cash Asset classified as held for sale 17	As at 31 December 2003 2004 2005 HK$’000 HK$’000 HK$’000 (Restated) (Restated) 70,213 1,708,682 1,702,860 1,400 3,400 – 221,467 1,989 220,422 – – 92,625 70,500 – – 99,258 93,789 – – 50,215 50,862 – (72,651) – – 221,695 201,419 – 713 713 462,838 2,007,832 2,268,901 – 98 98 667 5,807 6,113 2,928 6,522 65,177 11,732 391 122,449 350,838 276,500 324,505 108,000 – – 54,950 131,000 180,926 – – 9,086 2,847 2,778 – 36 31 37 390 6,800 6,925 416 246 284 111,709 134,317 43,103 644,513 564,490 758,703 – – 4,019 644,513 564,490 762,722	As at 31 December 2003 2004 2005 HK$’000 HK$’000 HK$’000 (Restated) (Restated) 70,213 1,708,682 1,702,860 1,400 3,400 – 221,467 1,989 220,422 – – 92,625 70,500 – – 99,258 93,789 – – 50,215 50,862 – (72,651) – – 221,695 201,419 – 713 713 462,838 2,007,832 2,268,901 – 98 98 667 5,807 6,113 2,928 6,522 65,177 11,732 391 122,449 350,838 276,500 324,505 108,000 – – 54,950 131,000 180,926 – – 9,086 2,847 2,778 – 36 31 37 390 6,800 6,925 416 246 284 111,709 134,317 43,103 644,513 564,490 758,703 – – 4,019 644,513 564,490 762,722
		2,268,901
		98 6,113 65,177 122,449 324,505 – 180,926 9,086 – 37 6,925 284 43,103
		758,703 4,019
		762,722

– 29 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Current liabilities Trade and other payables 33 Loans from related companies 34 Amounts due to associates 28 Amounts due to related companies 35 Obligations under finance leases – amount due within one year 36 Borrowings – amount due within one year 37 Convertible notes 38 Net current assets (liabilities) Total assets less current liabilities Non-current liabilities Loans from related companies 34 Obligations under finance leases – amount due after one year 36 Borrowings – amount due after one year 37 Convertible notes 38 Promissory note 39 Deferred taxation 40 Net assets Capital and reserves Share capital 41 Reserves 43 Equity attributable to shareholders of the parent Minority interests Total equity Notes	239,191 234,441 277,368 8,000 260,778 361,500 12,134 11,327 11,016 13,009 17,598 48,289 – 378 62 28,230 57,066 38,325 251,060 – – 551,624 581,588 736,560 92,889 (17,098) 26,162 555,727 1,990,734 2,295,063 223,312 112,098 – – 93 31 6,251 300,395 271,308 – 41,350 – – 365,000 365,000 – 243,354 244,680 229,563 1,062,290 881,019 326,164 928,444 1,414,044 183,167 322,267 437,586 113,219 307,875 541,390 296,386 630,142 978,976 29,778 298,302 435,068 326,164 928,444 1,414,044 As at 31 December 2003 2004 2005 HK$’000 HK$’000 HK$’000 (Restated) (Restated)	239,191 234,441 277,368 8,000 260,778 361,500 12,134 11,327 11,016 13,009 17,598 48,289 – 378 62 28,230 57,066 38,325 251,060 – – 551,624 581,588 736,560 92,889 (17,098) 26,162 555,727 1,990,734 2,295,063 223,312 112,098 – – 93 31 6,251 300,395 271,308 – 41,350 – – 365,000 365,000 – 243,354 244,680 229,563 1,062,290 881,019 326,164 928,444 1,414,044 183,167 322,267 437,586 113,219 307,875 541,390 296,386 630,142 978,976 29,778 298,302 435,068 326,164 928,444 1,414,044 As at 31 December 2003 2004 2005 HK$’000 HK$’000 HK$’000 (Restated) (Restated)
		736,560
		26,162
		2,295,063
		– 31 271,308 – 365,000 244,680
		881,019
		1,414,044

		437,586 541,390
		978,976 435,068
		1,414,044

– 30 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Consolidated Statements of Changes in Equity

Share capital HK$’000 At 1 January 2003 – as originally stated 183,167 – effects of changes in accounting policies (notes 2 and 3) – – as restated 183,167 Exchange difference arising on translation of financial statements of operations outside Hong Kong – Share of reserve of an associate – Net expense recognised directly in equity – Loss for the year – Total recognised income and expense for the year – 183,167 Transfer to investments in securities on reclassification of investments – Acquisition of a subsidiary – At 31 December 2003 183,167 Exchange difference arising on translation of financial statements of operations outside Hong Kong – Profit (loss) for the year – Total recognised income and expense for the year – 183,167	Share premium HK$’000 1,019,606 – 1,019,606 – – – – – 1,019,606 – – 1,019,606 – – – 1,019,606	Special reserve HK$’000 (Note 43b) 55,554 – 55,554 – – – – – 55,554 – – 55,554 – – – 55,554	Investment property revaluation reserve HK$’000 573 (573) – – – – – – – – – – – – – –	Convertible notes reserve HK$’000 – 20,468 20,468 – – – – – 20,468 – – 20,468 – – – 20,468	Translation reserve HK$’000 (111) – (111) (286) 73 (213) – (213) (324) – – (324) (757) – (757) (1,081)	Goodwill reserve HK$’000 (Note 43c) – (9,767) (9,767) – – – – – (9,767) 9,767 – – – – – –	Statutory reserves HK$’000 150 – 150 – – – – – 150 – – 150 – – – 150	Attributable to Accumulated shareholders (losses) of the profits parent HK$’000 HK$’000 (597,648) 661,291 (3,907) 6,221 (601,555) 667,512 – (286) – 73 – (213) (380,680) (380,680) (380,680) (380,893) (982,235) 286,619 – 9,767 – – (982,235) 296,386 – (757) 8,556 8,556 8,556 7,799 (973,679) 304,185	Minority interests HK$’000 – – – – – – – – – – 29,778 29,778 – (11,385) (11,385) 18,393	Total HK$’000 661,291 6,221
										667,512
										(286) 73
										(213) (380,680)
										(380,893)
										286,619 9,767 29,778
										326,164
										(757) (2,829)
										(3,586)
										322,578

– 31 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Recognition of equity component of convertible notes – Conversion into shares from convertible notes 102,500 Issue of shares 36,600 Share issue expenses – Acquisition of subsidiaries – Realisation on liquidation of a subsidiary – Transfer due to redemption of convertible notes – At 31 December 2004 322,267 Opening balance adjustments arising from adoption of new accounting policies (notes 2 and 3) – At 1 January 2005, as restated 322,267 Exchange difference arising on translation of financial statements of operations outside Hong Kong – Profit for the year – Total recognised income and expense for the year – 322,267 Conversion into shares from convertible notes 27,919 Issue of shares 87,400 Share issue expenses – Acquisition of subsidiaries – Partial disposal of subsidiaries – Cancellation of share premium_(note 43a) – Set off against accumulated losses – Dividends – Dividends paid to minority shareholders of subsidiaries – At 31 December 2005 437,586 Share capital _HK$’000	– 102,500 65,880 (3,832) – – – 1,184,154 – 1,184,154 – – – 1,184,154 27,081 118,920 (6,482) – – (1,323,673) – – – – Share premium HK$’000	– – – – – – – 55,554 – 55,554 – – – 55,554 – – – – – 1,323,673 (1,120,764) – – 258,463 Special reserve HK$’000 (Note 43b)	– – – – – – – – – – – – – – – – – – – – – – – – Investment property revaluation reserve HK$’000	75,863 (62,213) – – – – (20,468) 13,650 – 13,650 – – – 13,650 (13,650) – – – – – – – – – Convertible notes reserve HK$’000	– – – – – (847) – (1,928) – (1,928) 11,015 – 11,015 9,087 – – – – – – – – – 9,087 Translation reserve HK$’000	– – – – – – – – – – – – – – – – – – – – – – – – Goodwill reserve HK$’000 (Note 43c)	– – – – – – – 150 – 150 – – – 150 – – – – – – – – – 150 Statutory reserves HK$’000	– 75,863 9,506 152,293 – 102,480 – (3,832) – – – (847) 20,468 – (943,705) 630,142 72,651 72,651 (871,054) 702,793 – 11,015 31,109 31,109 31,109 42,124 (839,945) 744,917 1,623 42,973 – 206,320 – (6,482) – – – – – – 1,120,764 – (8,752) (8,752) – – 273,690 978,976 Attributable to Accumulated shareholders (losses) of the profits parent HK$’000 HK$’000	– – – – 279,909 – – 298,302 – 298,302 4,724 1,125 5,849 304,151 – – – 110,945 25,977 – – – (6,005) 435,068 Minority interests HK$’000	75,863 152,293 102,480 (3,832) 279,909 (847) – Total HK$’000
										928,444 72,651
										1,001,095
										15,739 32,234
										47,973
										1,049,068 42,973 206,320 (6,482) 110,945 25,977 – – (8,752) (6,005)
										1,414,044

– 32 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Consolidated Cash Flow Statements

	Year	ended at 31 December	ended at 31 December
	2003	2004	2005
	HK$’000	HK$’000	HK$’000
	(Restated)	(Restated)
Cash flows from operating activities
(Loss) profit before taxation	(382,398)	(2,852)	30,126
Adjustments for:
Share of results of associates	114,431	195	(8,006)
Depreciation and amortisation
of property, plant and equipment	24,575	57,057	60,743
Interest income	(1,150)	(3,381)	(4,722)
Interest expenses	32,457	66,149	59,358
Finance lease charges	2,459	133	18
Loss on disposal of property,
plant and equipment	28,587	220	480
Loss on partial disposal of subsidiaries	–	–	3,177
Loss (gain) on disposal of associates	23,471	(37,930)	–
Loss on disposal of other investments	465	11	–
Allowance for irrecoverable trade debts	–	1,262	476
Increase in fair value of investment property	(170)	(2,000)	(619)
Impairment loss recognised in respect of
available-for-sale investments	–	–	1,167
Impairment loss recognised in respect of
investments in securities	26,974	5,659	–
Impairment loss recognised
(reversal of impairment loss)
in respect of properties under construction	2,400	1,100	(900)
Impairment loss recognised
(reversal of impairment loss)
in respect of leasehold land and buildings	301	(4,511)	(4,874)
Discount on acquisition of subsidiaries	–	–	(34,574)
Release of negative goodwill arising from
acquisition of subsidiaries	–	(1,863)	–
Amortisation of goodwill arising on
acquisition of subsidiaries	496	–	–
Decrease in fair value of investments
held for trading	–	–	14,761
Net unrealised holding loss on other investments	2,849	127	–
Loss on disposal of discontinued operations	32,697	–	–
Loss on disposal of investment securities	30,633	–	–
Loss on disposal of interest in a co-operative
joint venture	20,000	–	–
Impairment loss recognised in respect of
interest in an associate	31,717	–	–
Operating cash flows before movement in
working capital	(9,206)	79,376	116,611

– 33 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Movement in working capital
Decrease (increase) in inventories
(Increase) decrease in amounts due from
related companies
(Increase) decrease in amounts due from
associates
(Increase) decrease in trade and other
receivables
Decrease (increase) in trading cash balances
Increase (decrease) in trade and other
payables
Decrease in amounts due to associates
Increase (decrease) in amounts due to
related companies
Cash (used in) generated from operations
Interest paid
Finance lease charges paid
Taxation in other jurisdictions
refunded (paid)
Net cash (used in) from
operating activities

540
254
(306)
(1,972)
(3,594)
1,439
(7,282)
1,916
8,980
(46,582)
139,499
(47,407)
747
170
(38)
26,950
(111,100)
40,697
(13,354)
(807)
(481)
1,340
(77,065)
30,113
(39,613)
(50,727)
32,997
(48,819)
28,649
149,608
(12,429)
(53,578)
(57,735)
(2,459)
(133)
(18)
724
28
(63)
(62,983)
(25,034)
91,792
Year ended at 31 December
2003
2004
2005
HK$’000
HK$’000
HK$’000
(Restated)
(Restated)

– 34 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Note
Cash flows from investing activities
Proceeds on partial disposal of subsidiaries
Interest received
Proceeds from disposal of property,
plant and equipment
Acquisition of subsidiaries
44
Advances to related companies
Net cash outflow of loans advanced
to certain companies and individuals
Purchase of property, plant and equipment
Capital contribution to an associate
Purchase of investments held for trading
Payment for investment deposits
Decrease (increase) in pledged
bank deposits
Proceeds from disposals of
associates and advances
Acquisition of associates and advances
Purchase of other investments
Purchase of investment securities
Refund of other long term investment
Proceeds from disposal of other investments
Investment in an associate
Disposal of discontinued operation
(net of cash and cash equivalents
disposed of)
Net cash from (used in) investing activities

Year ended at 31 December
2003
2004
2005
HK$’000
HK$’000
HK$’000
(Restated)
(Restated)
–
–
22,800
1,150
3,381
4,722
41,611
9,908
1,671
–
(47,387)
(151,298)
–
–
(60,090)
(9,678)
(36,050)
(49,926)
(23,028)
(18,669)
(30,040)
–
–
(24,038)
–
–
(21,069)
–
(221,695)
(474)
412
(6,410)
(125)
13,219
188,988
–
–
(82,135)
–
(5,571)
(58)
–
–
(1)
–
–
70,500
–
4,860
12
–
(82)
–
–
26,911
–
–
49,804
(139,616)
(307,867)

– 35 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Cash flows from financing activities
Proceeds from issue of new shares for cash,
net of expenses of HK$6,482,000
(2004: HK$3,832,000 and 2003: nil)
New bank loans and other loans raised
Repayment of bank loans and other loans
Net cash inflow (outflow) from loans
from related companies
Dividends paid
Dividends paid to minority shareholders of
subsidiaries
Repayment of obligations under
finance leases
Proceeds from issue of convertible notes
Redemption of convertible notes
Net cash from financing activities
Net increase (decrease) in cash and
cash equivalents
Cash and cash equivalents at beginning
of the year
Effect of foreign exchange rate changes
Cash and cash equivalents
at end of the year
47
Note

–
98,648
199,838
61,096
5,569
14,424
(209,909)
(89,599)
(34,071)
224,838
141,564
(11,376)
–
–
(8,752)
–
–
(6,005)
(4,619)
(1,182)
(378)
–
70,200
–
–
(64,325)
–
71,406
160,875
153,680
58,227
(3,775)
(62,395)
53,793
111,709
106,136
(311)
(1,798)
(638)
111,709
106,136
43,103
Year ended at 31 December
2003
2004
2005
HK$’000
HK$’000
HK$’000
(Restated)
(Restated)

– 36 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

II. NOTES TO THE FINANCIAL INFORMATION

1. GENERAL

The Company is an exempted company incorporated in Bermuda with limited liability. Its shares are listed on the Stock Exchange. The addresses of the registered office and principal place of business of the Company are disclosed on page 4 of the Circular.

During the Relevant Periods, the Group is principally engaged in the business of providing package tours, travel and other related services and hotel operation. During the year ended 31 December 2003, the Group was also involved in the business of transportation services that was discontinued in October 2003.

The consolidated financial statements are presented in Hong Kong dollars which is the functional currency of the Company.

2. APPLICATION OF HONG KONG FINANCIAL REPORTING STANDARDS

For the year ended 31 December 2003, the Group has adopted, for the first time, the Statement of Standard Accounting Practice (“SSAP”) 12 “Income Taxes” (“SSAP 12 (Revised)”) issued by the HKICPA. The principal effect of the adoption of SSAP 12 (Revised) is in relation to deferred tax. In previous years, partial provision was made for deferred tax using the income statement liability method under which a liability was recognised in respect of timing differences arising, except where those timing differences were not expected to reverse in the foreseeable future. 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. In the absence of any specific transitional requirements in SSAP 12 (Revised), the new accounting policy has been applied retrospectively.

The adoption of SSAP 12 (Revised) has given rise to a goodwill of HK$9,767,000 and a corresponding decrease in the Group’s share of net assets of associates. The acquisition of the associates took place prior to 1 April 2001 and the corresponding goodwill was written off against goodwill reserve.

In addition, the adoption of SSAP 12 (Revised) has led to a decrease in accumulated losses of HK$3,052,000 as at 1 January 2003 and a corresponding increase in the Group’s share of net assets of associates. The net loss for the year ended 31 December 2003 have been decreased by HK$407,000.

– 37 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

2. APPLICATION OF HONG KONG FINANCIAL REPORTING STANDARDS (Cont’d)

For the year ended 31 December 2005, the Group has applied, for the first time, a number of new Hong Kong Financial Reporting Standards (“HKFRSs”), Hong Kong Accounting Standards (“HKASs”) and Interpretations (“INTs”) (hereinafter collectively referred to as “new HKFRSs”) issued by the HKICPA that are effective for accounting periods beginning on or after 1 January 2005. The application of the new HKFRSs has resulted in a change in the presentation of the consolidated income statement, consolidated balance sheet and consolidated statement of changes in equity. In particular, the presentation of minority interests and share of tax of associates has been changed as required by HKAS 1 “Presentation of financial statements”. The changes in presentation have been applied retrospectively. The adoption of the new HKFRSs has resulted in changes to the Group’s accounting policies in the following areas that have an effect on how the results for the current and/or prior accounting years are prepared and presented.

Business combinations

During the year ended 31 December 2005, the Group has applied HKFRS 3 “Business combinations” (“HKFRS 3”) which is effective for business combinations for which the agreement date is on or after 1 January 2005. The principal effects of the application of HKFRS 3 to the Group are summarised below:

Goodwill

In previous years, goodwill arising on acquisition was capitalised and amortised over its estimated useful life. The Group has applied the relevant transitional provisions in HKFRS 3. With respect to goodwill previously capitalised on the consolidated balance sheet, the Group has discontinued amortising such goodwill from 1 January 2005 onwards and such goodwill will be tested for impairment at least annually. Goodwill arising on acquisition after 1 January 2005 is measured at cost less accumulated impairment losses (if any) after initial recognition. As a result of this change in accounting policy, no amortisation of goodwill has been charged in the current year. Comparative figures for 2003 and 2004 have not been restated (see note 3 for the financial impact).

Excess of the Group’s interest in the net fair value of acquiree’s identifiable assets, liabilities and contingent liabilities over cost (previously known as “negative goodwill”)

In accordance with HKFRS 3, any excess of the Group’s interest in the net fair value of acquiree’s identifiable assets, liabilities and contingent liabilities over the cost of acquisition (“discount on acquisition”) is recognised immediately in profit or loss in the period in which the acquisition takes place. In previous years, negative goodwill arising on acquisition was presented as a deduction from assets and released to income based on an analysis of the circumstances from which the balance resulted. In accordance with the relevant transitional provisions in HKFRS 3, the Group has derecognised all negative goodwill on 1 January 2005, which was previously presented as a deduction from assets, with a corresponding adjustment to the Group’s accumulated (losses) profits (see note 3 for the financial impact).

– 38 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

2. APPLICATION OF HONG KONG FINANCIAL REPORTING STANDARDS (Cont’d)

Financial instruments

During the year ended 31 December 2005, the Group has applied HKAS 32 “Financial instruments: disclosure and presentation” (“HKAS 32”) and HKAS 39 “Financial instruments: Recognition and measurement” (“HKAS 39”). HKAS 32 requires retrospective application. HKAS 39, which is effective for annual periods beginning on or after 1 January 2005, generally does not permit the recognition, derecognition or measurement of financial assets and liabilities on a retrospective basis. The principal effects resulting from the implementation of HKAS 32 and HKAS 39 are summarised below:

Convertible notes

The principal impact of HKAS 32 on the Group is in relation to convertible notes issued by the Company that contain both liability and equity components. Previously, convertible notes were classified as liabilities on the consolidated balance sheet. HKAS 32 requires an issuer of a compound financial instrument that contains both financial liability and equity components to separate the compound financial instrument into the liability and equity components on initial recognition and to account for these components separately. In subsequent periods, the liability component is carried at amortised cost using the effective interest method. Because HKAS 32 requires retrospective application, comparative figures for 2003 and 2004 have been restated in order to reflect the increase in effective interest on the liability component (see note 3 for the financial impact).

Classification and measurement of financial assets and financial liabilities

The Group has applied the relevant transitional provisions in HKAS 39 with respect to classification and measurement of financial assets and financial liabilities that are within the scope of HKAS 39.

Prior to the accounting period beginning on 1 January 2005, the Group classified and measured its debt and equity securities in accordance with the benchmark treatment of SSAP 24 “Accounting for investments in securities” (“SSAP 24”). Under SSAP 24, investments in debt or equity securities are classified as “investment in securities”, “other long term investments” or “held-to-maturity investments” as appropriate. “Investment in securities” are carried at cost less impairment losses (if any) while “other long term investments” are measured at fair value, with unrealised gains or losses included in the profit or loss. Held-to-maturity investments are carried at amortised cost less impairment losses (if any). From 1 January 2005 onwards, the Group has classified and measured its debt and equity securities in accordance with HKAS 39. Under HKAS 39, financial assets are classified as “financial assets at fair value through profit or loss”, “available-for-sale financial assets”, “loans and receivables”, or “held-to-maturity financial assets”. “Financial assets at fair value through profit or loss” and “available-for-sale financial assets” are carried at fair value, with changes in fair values recognised in profit or loss and equity respectively. Available-for-sale equity investments that do not have quoted market prices in an active market and whose fair value cannot be reliably measured and derivatives that are linked to and must be settled by delivery of such unquoted equity instruments are measured at cost less impairment after initial recognition. “Loans and receivables” and “held-to-maturity financial assets” are measured at amortised cost using the effective interest method after initial recognition.

– 39 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

2. APPLICATION OF HONG KONG FINANCIAL REPORTING STANDARDS (Cont’d)

On 1 January 2005, the Group classified and measured its debt and equity securities in accordance with the transitional provisions of HKAS 39. As a result of the adoption of HKAS 39, the Group has redesignated “investments in securities” recorded in the consolidated balance sheet at 1 January 2005 amounting to HK$93,789,000 as “available-for-sale investments” and HK$2,778,000 as “investments held for trading”.

Financial assets and financial liabilities other than debt and equity securities

From 1 January 2005 onwards, the Group has classified and measured its financial assets and financial liabilities other than debt and equity securities (which were previously outside the scope of SSAP 24) in accordance with the requirements of HKAS 39. As mentioned above, financial assets under HKAS 39 are classified as “financial assets at fair value through profit or loss”, “available-for-sale financial assets”, “loans and receivables” or “held-to-maturity financial assets”. Financial liabilities are generally classified as “financial liabilities at fair value through profit or loss” or “other financial liabilities”. Financial liabilities at fair value through profit or loss are measured at fair value, with changes in fair value being recognised in profit or loss directly. “Other financial liabilities” are carried at amortised cost using the effective interest method after initial recognition. These requirements of HKAS 39 has had no financial impact to the Group.

Derivatives and hedging

From 1 January 2005 onwards, all derivatives that are within the scope of HKAS 39 are required to be carried at fair value at each balance sheet date regardless of whether they are deemed as held for trading or designated as effective hedging instruments. Under HKAS 39, derivatives (including embedded derivatives separately accounted for from the nonderivative host contracts) are deemed as held-for-trading financial assets or financial liabilities, unless they qualify and are designated as effective hedging instruments. The corresponding adjustments on changes in fair values would depend on whether the derivatives are designated as effective hedging instruments, and if so, the nature of the item being hedged. For derivatives that are deemed as held for trading, changes in fair values of such derivatives are recognised in profit or loss for the period in which they arise. Since there were no derivative financial instruments as at 1 January 2005, accordingly, comparative figures for 2003 and 2004 have not been restated.

Hotel properties

Hong Kong Interpretation 2 “The appropriate accounting policies for hotel properties” (“HK INT 2”) clarifies the accounting policy for owner-operated hotel properties. In previous years, the Group’s self-operated hotel properties were carried at cost less accumulated impairment loss and were not subject to depreciation. HK INT 2 requires owner-operated properties to be classified as property, plant and equipment in accordance with HKAS 16 “Property, plant and equipment”, and therefore be accounted for either using the cost model or the revaluation model. The Group has resolved to account for these hotel properties using the cost model. In the absence of any specific transitional provisions in HK INT 2, the new accounting policy has been applied retrospectively. Comparative figures have been restated (see note 3 for the financial impact).

– 40 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

2. APPLICATION OF HONG KONG FINANCIAL REPORTING STANDARDS (Cont’d)

Owner-occupied leasehold interest in land

In previous years, owner-occupied leasehold land and buildings were included in property, plant and equipment and measured using the cost model. During the year ended 31 December 2005, the Group has applied HKAS 17 “Leases” (“HKAS 17”). Under HKAS 17, the land and buildings elements of a lease of land and buildings are considered separately for the purposes of lease classification, unless the lease payments cannot be allocated reliably between the land and buildings elements, in which case, the entire lease is generally treated as a finance lease. To the extent that the allocation of the lease payments between the land and buildings elements can be made reliably, the leasehold interests in land are reclassified to prepaid lease payments under operating leases, which are carried at cost and amortised over the lease term on a straight line basis. This change in accounting policy has been applied retrospectively. Alternatively, where the allocation between the land and buildings elements cannot be made reliably, the leasehold interests in land continue to be accounted for as property, plant and equipment. As the directors consider the allocation between the land and buildings elements cannot be made reliably, no restatement has been made in the financial statements.

Investment properties

During the year ended 31 December 2005, the Group has, for the first time, applied HKAS 40 “Investment property” (“HKAS 40”). The Group has elected to use the fair value model to account for its investment properties which requires gains or losses arising from changes in the fair value of investment properties to be recognised directly in the profit or loss for the year in which they arise. In previous years, investment properties under the predecessor SSAP were measured at open market values, with revaluation surplus or deficit credited or charged to investment property revaluation reserve unless the balance on this reserve was insufficient to cover a revaluation decrease, in which case the excess of the revaluation decrease over the balance on the investment property revaluation reserve was charged to the income statement. Where a decrease had previously been charged to the income statement and a revaluation surplus subsequently arose, that increase was credited to the income statement to the extent of the decrease previously charged. The Group has applied the relevant transitional provisions in HKAS 40 and elected to apply HKAS 40 retrospectively. Comparative figures for 2003 and 2004 have been restated (see note 3 for the financial impact).

– 41 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

2. APPLICATION OF HONG KONG FINANCIAL REPORTING STANDARDS (Cont’d)

Deferred taxes related to investment properties

In previous years, deferred tax consequences in respect of revalued investment properties were assessed on the basis of the tax consequence that would follow from recovery of the carrying amount of the properties through sale in accordance with the predecessor Interpretation. In the current year, the Group has applied Hong Kong (SIC) Interpretation 21 “Income taxes – recovery of revalued non-depreciable assets” (HK(SIC) INT 21) which removes the presumption that the carrying amount of investment properties are to be recovered through sale. Therefore, the deferred tax consequences of the investment properties are now assessed on the basis that reflects the tax consequences that would follow from the manner in which the Group expects to recover the property at each balance sheet date. In the absence of any specific transitional provisions in HK(SIC) INT 21, this change in accounting policy has been applied retrospectively but did not have any financial impact to the Group.

The Group has not early applied the following new standards and interpretations that have been issued but are not yet effective. The directors of the Company anticipate that the application of these standards or interpretations will have no material impact on the consolidated financial statements of the Group.

HKAS 1 (Amendment)	Capital disclosure1
HKAS 19 (Amendment)	Actuarial gains and losses, group plans and disclosures2
HKAS 21 (Amendment)	Net investment in a foreign operation2
HKAS 39 (Amendment)	Cash flow hedge accounting of forecast intragroup
	transactions2
HKAS 39 (Amendment)	The fair value option2
HKAS 39 and HKFRS 4	Financial guarantee contracts2
(Amendments)
HKFRS 6	Exploration for and evaluation of mineral resources2
HKFRS 7	Financial instruments: Disclosures1
HK(IFRIC) – INT 4	Determining whether an arrangement contains a lease2
HK(IFRIC) – INT 5	Rights to interests arising from decommissioning,
	restoration and environmental rehabilitation funds2
HK(IFRIC) – INT 6	Liabilities arising from participating in a specific market
	– waste electrical and electronic equipment3
HK(IFRIC) – INT 7	Applying the restatement approach under HKAS 29
	“Financial Reporting in Hyperinflationary Economies”4
HK(IFRIC) – INT 8	Scope of HKFRS 25
HK(IFRIC) – INT 9	Reassessment of embedded derivatives6

1 Effective for annual periods beginning on or after 1 January 2007. 2 Effective for annual periods beginning on or after 1 January 2006. 3 Effective for annual periods beginning on or after 1 December 2005. 4 Effective for annual periods beginning on or after 1 March 2006. 5 Effective for annual periods beginning on or after 1 May 2006. 6 Effective for annual periods beginning on or after 1 June 2006.

– 42 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

3. SUMMARY OF THE EFFECTS OF THE CHANGES IN ACCOUNTING POLICIES

The effects of the changes in the accounting policies described above on the results for the Relevant Periods are as follows:

	Year	ended 31 December
	2003	2004	2005
	HK$’000	HK$’000	HK$’000
Recognition of discount on acquisition directly
in the income statement	–	–	34,574
Decrease in amortisation of goodwill	–	–	2,543
Increase in fair value of investment property	163	2,000	619
Depreciation of owner-operated hotel properties	–	(30,119)	(30,119)
Increase in interest on the liability component
of convertible notes	(9,871)	(12,571)	(1,623)
Decrease in negative goodwill released to income	–	–	(1,863)
Decrease in income tax expense	407	–	–
Increase in (loss) profit for the year	(9,301)	(40,690)	4,131

An analysis of the increase in (loss) profit for the year by line items presented according to their function is as follows:

Discount on acquisition of subsidiaries Decrease in amortisation of goodwill Increase in fair value of investment property Increase in administrative expenses Increase in finance costs Decrease in negative goodwill released to income Decrease in income tax expense	Year ended 31 December 2003 2004 2005 HK$’000 HK$’000 HK$’000 – – 34,574 – – 2,543 163 2,000 619 – (30,119) (30,119) (9,871) (12,571) (1,623) – – (1,863) 407 – – (9,301) (40,690) 4,131

– 43 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

3. SUMMARY OF THE EFFECTS OF THE CHANGES IN ACCOUNTING POLICIES (Cont’d)

The financial effects of the application of the new HKFRSs to the Group’s equity at 1 January 2003 are summarised below:

Share capital and other reserves Investment property revaluation reserve Convertible notes reserve Goodwill reserve Accumulated losses Total effects on equity	As originally stated HK$’000 1,258,366 573 – – (597,648) 661,291	Effect of SSAP 12 (Revised) HK$’000 – – – (9,767) 3,052 (6,715)	Effect of HKAS 32 HK$’000 – – 20,468 – (7,532) 12,936	Effect of HKAS 40 HK$’000 – (573) – – 573 –	As restated HK$’000 1,258,366 – 20,468 (9,767) (601,555) 667,512

The cumulative effects of the application of the new HKFRSs as at respective balance sheet dates are summarised below:

At 31 December 2003

At 31 December 2003 HK$’000 (Originally stated) Balance sheet items affected: Convertible notes (254,125) Other assets and liabilities 577,224 Total effect on assets and liabilities 323,099 Share capital and other reserves 1,258,153 Investment property revaluation reserve 736 Convertible notes reserve – Accumulated losses (965,568) Minority interests – Total effects on equity 293,321 Minority interests 29,778 323,099	Effect of HKAS 1 HK$’000 – – – – – – – 29,778 29,778 (29,778) –	Effect of HKAS 32 HK$’000 3,065 – 3,065 – – 20,468 (17,403) – 3,065 – 3,065	At Effect of 31 December HKAS 40 2003 HK$’000 HK$’000 (Restated) – (251,060) – 577,224 – 326,164 – 1,258,153 (736) – – 20,468 736 (982,235) – 29,778 – 326,164 – – – 326,164

– 44 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

3. SUMMARY OF THE EFFECTS OF THE CHANGES IN ACCOUNTING POLICIES (Cont’d)

At 31 December 2004

Balance sheet items affected: Property, plant and equipment Available-for-sale investments Investments in securities Negative goodwill Investments held for trading Convertible notes Other assets and liabilities Total effects on assets and liabilities Share capital and other reserves Investment property revaluation reserve Convertible notes reserve Accumulated losses Minority interests Total effects on equity Minority interests	At 31 December 2004 HK$’000 (Originally stated) 1,738,801 – 96,567 (72,651) – (55,000) (762,804) 944,913 1,560,197 2,736 – (930,191) – 632,742 312,171 944,913	Effect of HK INT 2 HK$’000 (30,119) – – – – – – (30,119) – – – (16,250) (13,869) (30,119) – (30,119)	Effect of HKAS 1 HK$’000 – – – – – – – – – – – – 312,171 312,171 (312,171) –	Effect of HKAS 32 HK$’000 – – – – – 13,650 – 13,650 – – 13,650 – – 13,650 – 13,650	Effect of HKAS 40 HK$’000 – – – – – – – – – (2,736) – 2,736 – – – –	At 31 December 2004 HK$’000 (Restated) 1,708,682 – 96,567 (72,651) – (41,350) (762,804) 928,444 1,560,197 – 13,650 (943,705) 298,302 928,444 – 928,444	Effect of HKFRS 3 HK$’000 – – – 72,651 – – – 72,651 – – – 72,651 – 72,651 – 72,651	Effect of HKAS 39 HK$’000 – 93,789 (96,567) – 2,778 – – – – – – – – – – –	At 1 January 2005 HK$’000 (Restated) 1,708,682 93,789 – – 2,778 (41,350) (762,804)
									1,001,095

									1,560,197 – 13,650 (871,054) 298,302
									1,001,095 –
									1,001,095

– 45 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

4. SIGNIFICANT ACCOUNTING POLICIES

The Financial Information has been prepared on the historical cost basis except for certain properties and financial instruments, which are measured at revalued amounts or fair values, as explained in the accounting policies set out below.

The Financial Information has been prepared in accordance with HKFRSs issued by the HKICPA. In addition, the Financial Information includes applicable disclosures required by the Rules Governing the Listing of Securities on the Stock Exchange and by the Hong Kong Companies Ordinance.

Basis of consolidation

The consolidated financial statements incorporate the financial statements of the Company and its subsidiaries. All inter-company transactions and balances within the Group are eliminated on consolidation.

The results of subsidiaries acquired or disposed of during the year are included in the consolidated income statement from the effective date of acquisition or up to the effective date of disposal, as appropriate.

Minority interests in the net assets of consolidated subsidiaries are presented separately from the Group’s equity therein. Minority interests in the net assets consist of the amount of those interests at the date of the original business combination and the minority’s share of changes in equity since the date of the combination. Losses applicable to the minority in excess of the minority’s interest in the subsidiary’s equity are allocated against the interests of the Group except to the extent that the minority has a binding obligation and is able to make an additional investment to cover the losses.

Goodwill

Goodwill arising on acquisition prior to 1 January 2005

Goodwill arising on an acquisition of a subsidiary for which the agreement date is before 1 January 2005 represents the excess of the cost of acquisition over the Group’s interest in the fair value of the identifiable assets and liabilities of the relevant subsidiary at the date of acquisition.

For previously capitalised goodwill arising on acquisition after 1 January 2001, the Group has discontinued amortisation from 1 January 2005 onwards, and such goodwill is tested for impairment annually, and whenever there is an indication that the cash generating unit to which the goodwill relates may be impaired (see the accounting policy below).

– 46 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

4. SIGNIFICANT ACCOUNTING POLICIES (Cont’d)

Goodwill arising on acquisition on or after 1 January 2005

Goodwill arising on an acquisition of a subsidiary for which the agreement date is on or after 1 January 2005 represents the excess of the cost of acquisition over the Group’s interest in the fair value of the identifiable assets, liabilities and contingent liabilities of the relevant subsidiary at the date of acquisition. Such goodwill is carried at cost less any accumulated impairment losses.

Capitalised goodwill arising on an acquisition of a subsidiary is presented separately in the consolidated balance sheet.

For the purposes of impairment testing, goodwill arising from an acquisition is allocated to each of the relevant cash-generating units, or groups of cash-generating units, that are expected to benefit from the synergies of the acquisition. A cash-generating unit to which goodwill has been allocated is tested for impairment annually, and whenever there is an indication that the unit may be impaired. For goodwill arising on an acquisition in a financial year, the cash-generating unit to which goodwill has been allocated is tested for impairment before the end of that financial year. When the recoverable amount of the cashgenerating unit is less than the carrying amount of the unit, the impairment loss is allocated to reduce the carrying amount of any goodwill allocated to the unit first, and then to the other assets of the unit pro rata on the basis of the carrying amount of each asset in the unit. Any impairment loss for goodwill is recognised directly in the consolidated income statement. An impairment loss for goodwill is not reversed in subsequent periods.

On subsequent disposal of a subsidiary, the attributable amount of goodwill capitalised is included in the determination of the amount of profit or loss on disposal.

Excess of an acquirer’s interest in the net fair value of an acquiree’s identifiable assets, liabilities and contingent liabilities over cost (“discount on acquisition”)

A discount on acquisition arising on an acquisition of a subsidiary for which an agreement date is on or after 1 January 2005 represents the excess of the net fair value of an acquiree’s identifiable assets, liabilities and contingent liabilities over the cost of the business combination. Discount on acquisition is recognised immediately in profit or loss.

As explained in note 3 above, all negative goodwill at 1 January 2005 has been derecognised with a corresponding adjustment to the Group’s accumulated (losses) profits.

– 47 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

4. SIGNIFICANT ACCOUNTING POLICIES (Cont’d)

Investments in associates

The results and assets and liabilities of associates are incorporated in the Financial Information using the equity method of accounting. Under the equity method, investments in associates are carried in the consolidated balance sheet at cost as adjusted for postacquisition changes in the Group’s share of the profit or loss and of changes in equity of the associate, less any identified impairment loss. When the Group’s share of losses of an associate equals or exceeds its interest in that associate, the Group discontinues recognising its share of further losses. An additional share of losses is provided for and a liability is recognised only to the extent that the Group has incurred legal or constructive obligations or made payments on behalf of that associate.

Where a group entity transacts with an associate of the Group, profits and losses are eliminated to the extent of the Group’s interest in the relevant associate.

Revenue recognition

Income from tour and travel services is recognised upon the departure date of each tour. Income from other travel related services is recognised when the services are rendered.

Hotel revenue from rooms and other ancillary services are recognised when the services are rendered.

Income from transportation services is recognised when the services are rendered.

Interest income from a financial asset is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts the estimated future cash receipts through the expected life of the financial asset to that asset’s net carrying amount.

Income from disposal of investments is recognised when the risks and rewards of the ownership of the investments have been transferred.

Sales of goods are recognised when goods are delivered and title has been passed.

Sales of other assets are recognised upon the execution of a binding sale agreement.

Property, plant and equipment

Property, plant and equipment other than properties under construction are stated at cost or fair value less subsequent accumulated depreciation and amortisation and accumulated impairment losses.

Depreciation and amortisation is provided to write off the cost or fair value of items of property, plant and equipment other than properties under construction over their estimated useful lives, using the straight line method.

– 48 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

4. SIGNIFICANT ACCOUNTING POLICIES (Cont’d)

Assets held under finance leases are depreciated over their estimated useful lives on the same basis as owned assets.

Properties under construction are stated at cost less accumulated impairment losses. Cost includes all development expenditure and other direct costs attributable to such projects. Properties under construction are not depreciated until completion of construction. Cost on completed properties is transferred to other categories of property, plant and equipment.

The land and buildings elements of a lease of land and buildings are considered separately for the purposes of lease classification, unless the lease payments cannot be allocated reliably between the land and buildings elements, in which case, the entire lease is generally treated as a finance lease.

An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the item) is included in the consolidated income statement in the year in which the item is derecognised.

Investment properties

On initial recognition, investment properties are measured at cost, including any directly attributable expenditure. Subsequent to initial recognition, investment properties are measured using the fair value model. Gains or losses arising from changes in the fair value of investment property are included in profit or loss for the period in which they arise.

An investment property is derecognised upon disposal or when the investment property is permanently withdrawn from use or no future economic benefits are expected from its disposal. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the income statement in the year in which the item is derecognised.

Other long term investment

Other long term investment is stated at cost less impairment loss.

Investments in securities

Investments in securities are recognised on a trade-date basis and are initially measured at cost.

At subsequent reporting dates, debt securities that the Group has the expressed intention and ability to hold to maturity (held-to-maturity securities) are measured at amortised cost, less any impairment loss recognised to reflect irrecoverable amounts. The annual amortisation of any discount or premium on the acquisition of a held-to-maturity security is aggregated with other investment income receivable over the terms of the investment so that the revenue recognised in each period represents a constant yield on the investment.

– 49 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

4. SIGNIFICANT ACCOUNTING POLICIES (Cont’d)

Investments other than held-to-maturity securities are classified as investment securities and other investments.

Investment securities, which are securities held for an identified long-term strategic purpose, are measured at subsequent reporting dates at cost, as reduced by any impairment loss that is other than temporary.

Other investments are measured at fair value, with unrealised gains and losses included in net profit or loss for the year.

Club debenture

Club debenture is stated at cost less any identified impairment loss.

Financial instruments

Financial assets and financial liabilities are recognised on the consolidated balance sheet when a group entity becomes a party to the contractual provisions of the instrument. Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets and financial liabilities at fair value through profit or loss) are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at fair value through profit or loss are recognised immediately in profit or loss.

Financial assets

The Group’s financial assets are classified into one of the three categories, including financial assets at fair value through profit or loss, loans and receivables and available-forsale financial assets. All regular way purchases or sales of financial assets are recognised and derecognised on a trade date basis. Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within the time frame established by regulation or convention in the marketplace. The accounting policies adopted in respect of each category of financial assets are set out below.

Financial assets at fair value through profit or loss

Financial assets at fair value through profit or loss represent financial assets held for trading. At each balance sheet date subsequent to initial recognition, financial assets at fair value through profit or loss are measured at fair value, with changes in fair value recognised directly in profit or loss in the period in which they arise.

– 50 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

4. SIGNIFICANT ACCOUNTING POLICIES (Cont’d)

Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. At each balance sheet date subsequent to initial recognition, loans and receivables (including amounts due from related companies, amounts due from associates, trade and other receivables, loan receivables and bank deposits) are carried at amortised cost using the effective interest method, less any identified impairment losses. An impairment loss is recognised in profit or loss when there is objective evidence that the asset is impaired, and is measured as the difference between the asset’s carrying amount and the present value of the estimated future cash flows discounted at the original effective interest rate. Impairment losses are reversed in subsequent periods when an increase in the asset’s recoverable amount can be related objectively to an event occurring after the impairment was recognised, subject to a restriction that the carrying amount of the asset at the date the impairment is reversed does not exceed what the amortised cost would have been had the impairment not been recognised.

Available-for-sale financial assets

Available-for-sale financial assets are non-derivatives that are either designated or not classified as any of the other categories (set out above). At each balance sheet date subsequent to initial recognition, available-for-sale financial assets are measured at fair value. Changes in fair value are recognised in equity, until the financial asset is disposed of or is determined to be impaired, at which time, the cumulative gain or loss previously recognised in equity is removed from equity and recognised in profit or loss. Any impairment losses on availablefor-sale financial assets are recognised in profit or loss. Impairment losses on available-forsale equity investments will not reverse in subsequent periods. For available-for-sale debt investments, impairment losses are subsequently reversed if an increase in the fair value of the investment can be objectively related to an event occurring after the recognition of the impairment loss.

For available-for-sale equity investments that do not have a quoted market price in an active market and whose fair value cannot be reliably measured, they are measured at cost less any identified impairment losses at each balance sheet date subsequent to initial recognition. An impairment loss is recognised in profit or loss when there is objective evidence that the asset is impaired. The amount of the impairment loss is measured as the difference between the carrying amount of the asset and the present value of the estimated future cash flows discounted at the current market rate of return for a similar financial asset. Such impairment losses will not reverse in subsequent periods.

Financial liabilities and equity

Financial liabilities and equity instruments issued by a group entity are classified according to the substance of the contractual arrangements entered into and the definitions of a financial liability and an equity instrument.

– 51 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

4. SIGNIFICANT ACCOUNTING POLICIES (Cont’d)

An equity instrument is any contract that evidences a residual interest in the assets of the Group after deducting all of its liabilities. The Group’s financial liabilities generally include other financial liabilities. The accounting policies adopted in respect of financial liabilities and equity instruments are set out below.

Other financial liabilities

Other financial liabilities including trade and other payables, loans from related companies, amounts due to associates, amounts due to related companies, borrowings and promissory note are subsequently measured at amortised cost, using the effective interest rate method.

Convertible notes

Convertible notes issued by the Company that contain both financial liability and equity components are classified separately into respective liability and equity components on initial recognition. On initial recognition, the fair value of the liability component is determined using the prevailing market interest of similar non-convertible debts. The difference between the proceeds of the issue of the convertible notes and the fair value assigned to the liability component, representing the embedded call option for the holder to convert the loan notes into equity, is included in equity (convertible notes reserve).

In subsequent periods, the liability component of the convertible notes is carried at amortised cost using the effective interest method. The equity component, represented by the option to convert the liability component into ordinary shares of the Company, will remain in convertible notes reserve until the embedded option is exercised (in which case the balance stated in convertible notes reserve will be transferred to share premium). Where the option remains unexercised at the expiry date, the balance stated in convertible notes reserve will be released to the accumulated profits. No gain or loss is recognised in profit or loss upon conversion or expiration of the option.

Transaction costs that relate to the issue of the convertible notes are allocated to the liability and equity components in proportion to the allocation of the proceeds. Transaction costs relating to the equity component are charged directly to equity. Transaction costs relating to the liability component are included in the carrying amount of the liability portion and amortised over the period of the convertible notes using the effective interest method.

Equity instruments

Equity instruments issued by the Company are recorded at the proceeds received, net of direct issue costs.

– 52 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

4. SIGNIFICANT ACCOUNTING POLICIES (Cont’d)

Derivative financial instruments and hedging

The Group uses derivative financial instruments to hedge its exposure against changes in the fair value certain of its investments held for trading. Such derivatives are measured at fair value regardless of whether they are designated as effective hedging instruments.

The Group’s derivative financial instruments do not meet the requirements of hedge accounting in accordance with HKAS 39, accordingly, such derivatives are deemed as financial assets held for trading or financial liabilities held for trading. Changes in fair values of such derivatives are recognised directly in profit or loss.

Derecognition

Financial assets are derecognised when the rights to receive cash flows from the assets expire or, the financial assets are transferred and the Group has transferred substantially all the risks and rewards of ownership of the financial assets. On derecognition of a financial asset, the difference between the asset’s carrying amount and the sum of the consideration received and the cumulative gain or loss that had been recognised directly in equity is recognised in profit or loss.

For financial liabilities, they are removed from the Group’s consolidated balance sheet (i.e. when the obligation specified in the relevant contract is discharged, cancelled or expires). The difference between the carrying amount of the financial liability derecognised and the consideration paid is recognised in profit or loss.

Non-current assets held for sale

Non-current assets and disposal groups are classified as held for sale if their carrying amount will be recovered principally through a sale transaction rather than through continuing use. This condition is regarded as met only when the sale is highly probable and the asset (or disposal group) is available for immediate sale in its present condition.

Properties held for sale

Properties held for sale are stated at the lower of cost and net realisable value. Cost comprises all costs of purchase. Net realisable value is calculated at the actual or estimated selling price less related costs of marketing and selling.

Inventories

Inventories are stated at the lower of cost and net realisable value. Cost is calculated using the weighted average cost method.

– 53 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

4. SIGNIFICANT ACCOUNTING POLICIES (Cont’d)

Impairment (other than goodwill)

At each balance sheet date, the Group reviews the carrying amounts of its assets to determine whether there is any indication that those assets have suffered an impairment loss. If the recoverable amount of an asset is estimated to be less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount. An impairment loss is recognised as an expense immediately.

Where an impairment loss subsequently reverses, the carrying amount of the asset is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset in prior years. A reversal of an impairment loss is recognised as income immediately.

Taxation

Income tax expense represents the sum of the tax currently payable and deferred tax.

The tax currently payable is based on taxable profit for the year. Taxable profit differs from profit as reported in the income statement because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Group’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the balance sheet date.

Deferred tax is recognised on differences between the carrying amount of assets and liabilities in the Financial Information and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profit will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.

Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries and associates, except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future.

The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the asset to be recovered.

Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised. Deferred tax is charged or credited to profit or loss, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity.

– 54 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

4. SIGNIFICANT ACCOUNTING POLICIES (Cont’d)

Leasing

Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases.

The Group as lessor

Rental income from operating leases is recognised in the consolidated income statement on a straight line basis over the term of the relevant lease. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognised as an expense on a straight line basis over the lease term.

The Group as lessee

Assets held under finance leases are recognised as assets of the Group at their fair value at the inception of the lease or, if lower, at the present value of the minimum lease payments. The corresponding liability to the lessor is included in the consolidated balance sheet as a finance lease obligation. Lease payments are apportioned between finance charges and reduction of the lease obligation so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are charged directly to profit or loss.

Rentals payable under operating leases are charged to profit or loss on a straight line basis over the term of the relevant lease. Benefits received and receivable as an incentive to enter into an operating lease are recognised as a reduction of rental expense over the lease term on a straight line basis.

Borrowing costs

All borrowing costs are recognised as and included in finance costs in the consolidated income statement in the period in which they are incurred.

Foreign currencies

In preparing the financial statements of each individual group entity, transactions in currencies other than the functional currency of that entity (foreign currencies) are recorded in its functional currency (i.e. the currency of the primary economic environment in which the entity operates) at the rates of exchanges prevailing on the dates of the transactions. At each balance sheet date, monetary items denominated in foreign currencies are re-translated at the rates prevailing on the balance sheet date. Non-monetary items carried at fair value that are denominated in foreign currencies are re-translated at the rates prevailing on the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not re-translated.

– 55 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

4. SIGNIFICANT ACCOUNTING POLICIES (Cont’d)

Exchange differences arising on the settlement of monetary items, and on the translation of monetary items, are recognised in profit or loss in the period in which they arise. Exchange differences arising on the re-translation of non-monetary items carried at fair value are included in profit or loss for the period except for differences arising on the re-translation of non-monetary items in respect of which gains and losses are recognised directly in equity, in which cases, the exchange differences are also recognised directly in equity.

For the purposes of presenting the Financial Information, the assets and liabilities of the Group’s foreign operations are translated into the presentation currency of the Company (i.e. Hong Kong dollars) at the rate of exchange prevailing at the balance sheet date, and their income and expenses are translated at the average exchange rates for the year, unless exchange rates fluctuate significantly during the period, in which case, the exchange rates prevailing at the dates of transactions are used. Exchange differences arising, if any, are recognised as a separate component of equity (the translation reserve). Such exchange differences are recognised in profit or loss in the period in which the foreign operation is disposed of.

Goodwill and fair value adjustments on identifiable assets acquired arising on an acquisition of a foreign operation on or after 1 January 2005 are treated as assets and liabilities of that foreign operation and translated at the rate of exchange prevailing at the balance sheet date. Exchange differences arising are recognised in the translation reserve.

Retirement benefit costs

Payments to the Group’s defined contribution retirement benefit plans, state-managed retirement benefit schemes and/or the Mandatory Provident Fund Scheme are charged as expenses as they fall due.

5. KEY SOURCES OF ESTIMATION UNCERTAINTY

Estimated impairment of goodwill

Determining whether goodwill is impaired requires an estimation of the value in use of the cash-generating units to which goodwill has been allocated. The value in use calculation requires the Group to estimate the future cash flows expected to arise from the cash-generating unit and a suitable discount rate in order to calculate the present value. Where the actual future cash flows are less than expected, a material impairment loss may arise. As at 31 December 2005, the carrying amount of goodwill is HK$50,862,000. Details of the recoverable amount calculation are disclosed in note 24.

– 56 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

6. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES

The Group’s major financial instruments include trade and other receivables, loan receivables, amounts due from associates, amounts due from related companies, bank balances and cash, trade and other payables, loans from related companies, borrowings, convertible notes and promissory note. Details of these financial instruments are disclosed in respective notes. The risks associated with these financial instruments and the policies on how to mitigate these risks are set out below. The management manages and monitors these exposures to ensure appropriate measures are implemented on a timely and effective manner.

Currency risk

Several subsidiaries of the Company have sales and trade receivables denominated in foreign currencies, which expose the Group to foreign currency risk. The Group currently does not have a foreign currency hedging policy. However, the management monitors foreign exchange exposure and will consider hedging significant foreign currency exposure should the need arise.

Fair value interest rate risk

The Group’s fair value interest rate risk relates to its fixed-rate borrowings. However, the management considered the risk is insignificant to the Group.

Cash flow interest rate risk

The Group’s cash flow interest rate risk relates primarily to variable-rate bank borrowings. The Group currently does not have any policy on cash flow hedges of interest rate risk. However, the management monitors interest rate exposure and will consider hedging significant interest rate risk should the need arise.

Credit risk

The Group’s maximum exposure to credit risk in the event of the counterparties failure to perform their obligations as at 31 December 2005 in relation to each class of recognised financial assets is the carrying amount of those assets as stated in the consolidated balance sheet. In order to minimise the credit risk, the management of the Group has delegated a team responsible for determination of credit limits, credit approvals and other monitoring procedures to ensure that follow-up action is taken to recover overdue debts. In addition, the Group reviews the recoverable amount of each individual trade debt at each balance sheet date to ensure that adequate impairment losses are made for irrecoverable amounts. In this regard, the directors of the Company consider that the Group’s credit risk is significantly reduced.

– 57 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

7. TURNOVER

Turnover represents the amounts received and receivable from outside customers, less trade discounts and returns during the year. An analysis of the Group’s turnover is as follows:

Travel and related services Hotel and leisure services Transportation services	Year ended 31 December 2003 2004 2005 HK$’000 HK$’000 HK$’000 1,291,906 1,532,143 1,591,962 – 190,034 223,756 124,329 – – 1,416,235 1,722,177 1,815,718	Year ended 31 December 2003 2004 2005 HK$’000 HK$’000 HK$’000 1,291,906 1,532,143 1,591,962 – 190,034 223,756 124,329 – – 1,416,235 1,722,177 1,815,718
		1,815,718

8. BUSINESS AND GEOGRAPHICAL SEGMENTS

Business segments

During the two years ended 31 December 2004 and 2005, for management purposes, the Group was organised into two operating divisions – travel and related services, and hotel and leisure services. During the year ended 31 December 2003, the Group was also involved in the business of transportation services that was discontinued in October 2003. These divisions are the basis on which the Group reports its primary segment information.

– 58 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

8. BUSINESS AND GEOGRAPHICAL SEGMENTS (Cont’d)

Segment information about these businesses is presented as follows:

Continuing Discontinued operation operation Travel and related Transportation services services HK$’000 HK$’000 For the year ended 31 December 2003 TURNOVER External sales 1,291,906 124,329 Inter-segment sales – 5,248 Total 1,291,906 129,577 Inter-segment sales are charged at prevailing market price. RESULTS Segment results (60,214) (20,169) Interest income Increase in fair value of investment property Net unrealised holding loss on other investments Loss on disposal of investments in securities Unallocated corporate expenses Finance costs Share of results of associates (114,431) – Loss on disposal of associates (23,471) – Impairment loss recognised in respect of interest in an associate (31,717) – Loss on disposal of discontinued operation – (32,697) Loss before taxation Taxation credit Loss for the year	Elimination HK$’000 – (5,248) (5,248) – – – – –	Consolidated HK$’000 1,416,235 – 1,416,235 (80,383) 1,150 170 (2,849) (31,098) (32,156) (34,916) (114,431) (23,471) (31,717) (32,697) (382,398) 1,718 (380,680)

– 59 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

8. BUSINESS AND GEOGRAPHICAL SEGMENTS (Cont’d)

At 31 December 2003 ASSETS Segment assets Interest in associates Unallocated corporate assets Consolidated total assets LIABILITIES Segment liabilities Unallocated corporate liabilities Consolidated total liabilities OTHER INFORMATION Capital additions Amortisation of goodwill arising from acquisition of subsidiaries Depreciation and amortisation of property, plant and equipment Impairment losses recognised Loss on disposal of property, plant and equipment Loss on disposal of interest in a co-operative joint venture	Continuing Discontinued operation operation Travel and related Transportation services services HK$’000 HK$’000 676,963 – 221,467 – 245,147 – 7,947 15,081 – 496 4,935 19,640 29,675 – 28,419 168 20,000 –	Consolidated HK$’000 676,963 221,467 208,921
		1,107,351

		245,147 536,040
		781,187

		23,028 496 24,575 29,675 28,587 20,000

– 60 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

8. BUSINESS AND GEOGRAPHICAL SEGMENTS (Cont’d)

Travel and related services HK$’000 For the year ended 31 December 2004 TURNOVER External sales 1,532,143 Inter-segment sales – Total 1,532,143 Inter-segment sales are charged at prevailing market price. RESULTS Segment results 49,349 Interest income Increase in fair value of investment property Net unrealised holding loss on other investments Impairment loss recognised in respect of investments in securities Unallocated corporate expenses Finance costs Share of results of associates (195) Gain on disposal of associates 37,930 Loss before taxation Taxation credit Loss for the year	Hotel and leisure services HK$’000 190,034 1,234 191,268 3,582 – –	Elimination Consolidated HK$’000 HK$’000 – 1,722,177 (1,234) – (1,234) 1,722,177 – 52,931 3,381 2,000 (127) (5,659) (26,831) (66,282) – (195) – 37,930 (2,852) 23 (2,829)

– 61 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

8. BUSINESS AND GEOGRAPHICAL SEGMENTS (Cont’d)

	Travel and	Hotel and
	related	leisure
	services	services	Consolidated
	HK$’000	HK$’000	HK$’000
At 31 December 2004
ASSETS
Segment assets	728,181	1,667,209	2,395,390
Interest in associates	1,989	–	1,989
Unallocated corporate assets			174,943
Consolidated total assets			2,572,322
LIABILITIES
Segment liabilities	198,949	62,723	261,672
Unallocated corporate liabilities			1,382,206
Consolidated total liabilities			1,643,878
OTHER INFORMATION
Capital additions	5,221	1,696,828	1,702,049
Goodwill arising from acquisition
of subsidiaries	50,215	–	50,215
Allowance for irrecoverable trade debts	1,262	–	1,262
Depreciation and amortisation
of property, plant and equipment	4,204	52,853	57,057
Impairment losses recognised	6,759	–	6,759
Reversal of impairment loss in respect
of leasehold land and buildings	(4,511)	–	(4,511)
Loss (profit) on disposal of property,
plant and equipment	365	(145)	220

– 62 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

8. BUSINESS AND GEOGRAPHICAL SEGMENTS (Cont’d)

Travel and related services HK$’000 For the year ended 31 December 2005 TURNOVER External sales 1,591,962 Inter-segment sales – Total 1,591,962 Inter-segment sales are charged at prevailing market price. RESULTS Segment results 56,427 Interest income Discount on acquisition of subsidiaries – Realised gain on derivative financial instruments Increase in fair value of investment property Impairment loss recognised in respect of available-for-sale investments Decrease in fair value of investments held for trading Unallocated corporate expenses Finance costs Share of results of associates (396) Loss on partial disposal of subsidiaries – Profit before taxation Taxation credit Profit for the year	Hotel and leisure services HK$’000 223,756 1,264 225,020 28,249 34,574 8,402 (3,177)	Elimination Consolidated HK$’000 HK$’000 – 1,815,718 (1,264) – (1,264) 1,815,718 – 84,676 4,722 – 34,574 5,650 619 (1,167) (14,761) (29,640) (59,376) – 8,006 – (3,177) 30,126 2,108 32,234

– 63 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

8. BUSINESS AND GEOGRAPHICAL SEGMENTS (Cont’d)

	Travel and	Hotel and
	related	leisure
	services	services	Consolidated
	HK$’000	HK$’000	HK$’000
At 31 December 2005
ASSETS
Segment assets	903,727	1,754,845	2,658,572
Interest in associates	20,823	199,599	220,422
Unallocated corporate assets			152,629
Consolidated total assets			3,031,623
LIABILITIES
Segment liabilities	279,116	57,546	336,662
Unallocated corporate liabilities			1,280,917
Consolidated total liabilities			1,617,579
OTHER INFORMATION
Capital additions	24,672	6,761	31,433
Goodwill arising from acquisition
of subsidiaries	647	–	647
Allowance for irrecoverable trade debts	476	–	476
Depreciation and amortisation of
property, plant and equipment	6,088	54,655	60,743
Reversal of impairment loss in
respect of leasehold land and buildings	(4,874)	–	(4,874)
Reversal of impairment loss in
respect of properties under construction	(900)	–	(900)
Loss on disposal of property,
plant and equipment	175	305	480

– 64 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

8. BUSINESS AND GEOGRAPHICAL SEGMENTS (Cont’d)

Geographical segments

No geographical segment information in respect of the Group’s operations has been presented as over 90% of the Group’s operations were derived from Hong Kong during the Relevant Periods.

The analysis of carrying amount of segment assets and additions to property, plant and equipment and intangible assets by the geographical area in which the assets are located is as follows:

PRC Hong Kong South-east Asia Japan and Korea Others	Carrying amount of segment assets As at 31 December 2003 2004 2005 HK$’000 HK$’000 HK$’000 248,358 1,348,309 1,300,296 300,522 1,034,736 1,340,663 180,433 120,914 144,202 155,771 64,710 23,771 800 1,664 2,269 885,884 2,570,333 2,811,201	Additions to property, plant and equipment and intangible assets Year ended 31 December 2003 2004 2005 HK$’000 HK$’000 HK$’000 – 1,074,210 2,262 23,028 677,865 28,855 – 137 925 – – – – 52 38 23,028 1,752,264 32,080	Additions to property, plant and equipment and intangible assets Year ended 31 December 2003 2004 2005 HK$’000 HK$’000 HK$’000 – 1,074,210 2,262 23,028 677,865 28,855 – 137 925 – – – – 52 38 23,028 1,752,264 32,080
			32,080

9. OTHER OPERATING INCOME

An analysis of the Group’s other operating income is as follows: Exchange gain Income on sales of computer systems for online travel reservation and communication software Interest income Net income on sale of computer program source code Recovery of overseas sales tax Sundry income	Year ended 31 December 2003 2004 2005 HK$’000 HK$’000 HK$’000 335 135 81 – – 12,218 1,150 3,381 4,722 3,000 – – 8,242 – – 9,809 17,268 3,394 22,536 20,784 20,415	Year ended 31 December 2003 2004 2005 HK$’000 HK$’000 HK$’000 335 135 81 – – 12,218 1,150 3,381 4,722 3,000 – – 8,242 – – 9,809 17,268 3,394 22,536 20,784 20,415
		20,415

– 65 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

10. FINANCE COSTS

Interest on obligations under finance leases
Interest on borrowings wholly repayable
within five years
Interest on convertible notes
Interest on promissory note
Total finance costs
11.
(LOSS) PROFIT BEFORE TAXATION
(Loss) profit before taxation has been
arrived at after charging:
Allowance for irrecoverable trade debts
Auditors’ remuneration
Cost of inventories recognised as
expenses
Depreciation and amortisation on:
Owned assets
Assets held under finance leases
Information technology development
expenses
Loss on disposal of other investments
Loss on disposal of property, plant and
equipment
Minimum lease payments paid in respect of
rented premises
Share of tax of associates (included in share
of results of associates)
Staff costs *
and after crediting:
Rental income from investment property
and premises within the hotel properties
less outgoings of HK$495,000
(2004: HK$79,000 and 2003: nil)
Rental income from motor vehicles
Share of taxation credit of associates
(included in share of results of associates)

Year ended 31 December
2003
2004
2005
HK$’000
HK$’000
HK$’000
2,459
133
18
17,504
39,997
41,386
14,953
16,331
1,982
–
9,821
15,990
34,916
66,282
59,376
Year ended 31 December
2003
2004
2005
HK$’000
HK$’000
HK$’000
–
1,262
476
1,792
2,878
4,644
2,005
20,490
21,768
19,689
56,408
60,533
4,886
649
210
1,136
–
–
465
11
–
28,587
220
480
12,459
12,913
13,832
–
–
61
80,194
128,023
135,399
109
12,993
15,218
–
74
388
357
–
–

* The amount includes retirement benefit scheme contributions (net of forfeiture) of HK$6,908,000 (2004: HK$5,910,000 and 2003: HK$1,879,000).

– 66 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

12. DIRECTORS’ REMUNERATION AND HIGHEST PAID EMPLOYEES

Details of emoluments paid by the Group to each of the directors are as follows:

For the year ended 31 December 2003

Fees HK$’000 Executive directors: Mr. Yu Kam Kee, Lawrence B.B.S., M.B.E., J.P. – Mr. Cheung Hon Kit – Dr. Yap, Allan – Mr. Chan Pak Cheung, Natalis – Mr. Lui Siu Tsuen, Richard – Ms. Luk Yee Lin, Ellen – Dr. Chan Kwok Keung, Charles – Mr. Lee Chun Ting, Alex – Non-executive directors: Mr. Chan Yeuk Wai – Mr. Fok Kin-ning, Canning – Ms. Shih, Edith – Independent non-executive directors: Mr. Kwok Ka Lap, Alva – Mr. Lai Hing Chin, Dominic 200 Mr. Lam Kwong Siu** – 200	Salaries and other benefits HK$’000 – – – – – 710 – 790 1,980 – – – – – 3,480	Retirement benefit scheme contributions HK$’000 – – – – – 12 – 85 210 – – – – – 307	Total emoluments HK$’000 – – – – – 722 – 875 2,190 – – – 200 –
			3,987

– 67 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

12. DIRECTORS’ REMUNERATION AND HIGHEST PAID EMPLOYEES (Cont’d)

For the year ended 31 December 2004

Fees HK$’000 Executive directors: Mr. Yu Kam Kee, Lawrence B.B.S., M.B.E., J.P. – Mr. Cheung Hon Kit – Dr. Yap, Allan – Mr. Chan Pak Cheung, Natalis – Mr. Lui Siu Tsuen, Richard – Ms. Luk Yee Lin, Ellen – Dr. Chan Kwok Keung, Charles – Non-executive director: Mr. Chan Yeuk Wai – Mr. Fok Kin-ning, Canning – Ms. Shih, Edith – Independent non-executive directors: Mr. Kwok Ka Lap, Alva 30 Mr. Sin Chi Fai# – Mr. Wong King Lam, Joseph# – Mr. Lai Hing Chin, Dominic – 30	Salaries and other benefits HK$’000 – 2,890 – – – 664 – 2,923 – – – – – – 6,477	Retirement benefit scheme contributions HK$’000 – 12 – – – 12 – 45 – – – – – – 69	Total emoluments HK$’000 – 2,902 – – – 676 – 2,968 – – 30 – – –
			6,576

– 68 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

12. DIRECTORS’ REMUNERATION AND HIGHEST PAID EMPLOYEES (Cont’d)

For the year ended 31 December 2005

Executive directors: Mr. Yu Kam Kee, Lawrence B.B.S., M.B.E., J.P. Mr. Cheung Hon Kit Dr. Yap, Allan Mr. Chan Pak Cheung, Natalis Mr. Lui Siu Tsuen, Richard Ms. Luk Yee Lin, Ellen Non-executive director: Mr. Chan Yeuk Wai Independent non-executive directors: Mr. Kwok Ka Lap, Alva Mr. Sin Chi Fai Mr. Wong King Lam, Joseph	Fees HK$’000 – – – – – – – – 47 50 97	Salaries and other benefits HK$’000 – 1,265 – – – 664 1,800 39 – – 3,768	Retirement benefit scheme contributions HK$’000 – 5 – – – 12 12 – – – 29	Total emoluments HK$’000 – 1,270 – – – 676 1,812 39 47 50
				3,894

* The directors resigned in 2004.

** The directors resigned in 2003.

# The directors were appointed in 2004.

Note: The directors’ salaries and other benefits include the operating lease rentals amounting to HK$500,000 (2004: HK$1,200,000 and 2003: nil) in respect of rental premises provided to directors. The amounts were also included in the minimum lease payments paid in respect of rental premises under note 11 above.

– 69 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

12. DIRECTORS’ REMUNERATION AND HIGHEST PAID EMPLOYEES (Cont’d)

Details of emoluments paid by the Group to the five highest paid individuals (including directors, details of whose emoluments are set out above) are as follows:

Salaries and other benefits
Retirement benefit scheme contributions
Emoluments of the five highest paid
individuals were within the following
bands:
Nil – HK$1,000,000
HK$1,000,001 – HK$1,500,000
HK$1,500,001 – HK$2,000,000
HK$2,000,001 – HK$2,500,000
HK$2,500,001 – HK$3,000,000
Number of directors
Number of employees
TAXATION CREDIT
Over (under) provision for taxation in
other jurisdictions in prior years
Deferred tax_(note 40)_
Taxation credit

Year ended 31 December
2003
2004
2005
HK$’000
HK$’000
HK$’000
5,927
10,003
7,127
485
179
141
6,412
10,182
7,268
Year ended 31 December
2003
2004
2005
3
–
–
–
2
3
1
1
2
1
–
–
–
2
–
2
2
2
3
3
3
5
5
5
Year ended 31 December
2003
2004
2005
HK$’000
HK$’000
HK$’000
–
23
(63)
1,718
–
2,171
1,718
23
2,108

13. TAXATION CREDIT

No provision for Hong Kong Profits Tax has been made as the companies comprising the Group either have no assessable profit during the Relevant Periods or the estimated assessable profits were wholly absorbed by tax losses brought forward.

– 70 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

13. TAXATION CREDIT (Cont’d)

Taxation for other jurisdictions represents over (under) provision for taxation in prior years. No provision for overseas taxation has been made as the Group has no taxable profit during the three years ended 31 December 2005, 2004 and 2003 in other jurisdictions.

No charge or credit arose on the loss on discontinuance of the transportation services during the year ended 31 December 2003.

Taxation credit for the year can be reconciled to the (loss) profit before taxation per the consolidated income statement as follows:

(Loss) profit before taxation
Tax at the domestic income tax rate of
17.5% (2004: 17.5% and 2003: 17.5%)
Tax effect of share of results of associates
Tax effect of expenses that are not
deductible in determining taxable profit
Tax effect of income that is not taxable
in determining taxable profit
Tax effect of tax losses not recognised
Tax effect of tax losses utilised but
not previously recognised
Effect of different tax rates of
subsidiaries operating in other
jurisdictions
Over (under) provision in prior years
Increase in opening deferred tax
liability resulting from an increase
in Hong Kong Profits Tax rate
Taxation credit for the year

Year ended 31 December
2003
2004
2005
HK$’000
HK$’000
HK$’000
(382,398)
(2,852)
30,126
66,920
499
(5,272)
(20,025)
(34)
1,401
(16,107)
(8,358)
(13,706)
3,877
13,999
12,688
(33,901)
(6,645)
(7,965)
2,023
3,604
13,548
(314)
(3,065)
1,477
–
23
(63)
(755)
–
–
1,718
23
2,108

– 71 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

14. DIVIDENDS

	Year	ended 31 December	ended 31 December
	2003	2004	2005
	HK$’000	HK$’000	HK$’000
Interim dividend paid of HK2 cents
(2004: nil and 2003: nil) per share	–	–	8,752

The directors have declared a final dividend of HK1.5 cents per share for the year ended 31 December 2005 (2004: nil and 2003: nil) to those shareholders whose names appear on the register of members of the Company on 24 May 2006.

15. (LOSS) EARNINGS PER SHARE

The calculation of the basic (loss) earnings per share is based on the following data:

(Loss) earnings attributable to shareholders of the parent for the purpose of basic (loss) earnings per share Weighted average number of ordinary shares for the purpose of basic (loss) earnings per share	Year ended 31 December 2003 2004 2005 HK$’000 HK$’000 HK$’000 (380,680) 8,556 31,109 Number of shares Year ended 31 December 2003 2004 2005 183,167,328 201,251,437 418,541,133

Notes:

(a) No disclosure of diluted (loss) earnings per share has been presented as the conversion of the Company’s convertible notes would increase the earnings per share for the two years ended 31 December 2005 and 2004 and decrease the loss per share for the year ended 31 December 2003.
(b) A reconciliation of the restatement of basic (loss) earnings per share to adjust for the effects of changes in accounting policies is as follows:

Reported figures before adjustment Effects of changes in accounting policies Restated	Year ended 31 December 2003 2004 2005 HK$ HK$ HK$ (2.03) 0.18 0.06 (0.05) (0.14) 0.01 (2.08) 0.04 0.07	Year ended 31 December 2003 2004 2005 HK$ HK$ HK$ (2.03) 0.18 0.06 (0.05) (0.14) 0.01 (2.08) 0.04 0.07
		0.07

– 72 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

16. PROPERTY, PLANT AND EQUIPMENT

COST OR VALUATION At 1 January 2003 Currency realignment Additions Disposals Disposal of subsidiaries At 31 December 2003 Currency realignment Acquisition of subsidiaries Additions Disposals At 31 December 2004 Currency realignment Acquisition of subsidiaries Additions Disposals At 31 December 2005 Analysis of cost or valuation At 31 December 2003 At cost At valuation At 31 December 2004 At cost At valuation At 31 December 2005 At cost At valuation	Leasehold land and buildings HK$’000 311,341 – – (230,763) (425) 80,153 – – – (42,128) 38,025 – – – – 38,025 73,153 7,000 80,153 31,025 7,000 38,025 31,025 7,000 38,025	Properties Hotel under properties construction HK$’000 HK$’000 Note (a) – 46,728 – – – – – – – – – 46,728 – – 1,604,752 – – – – – 1,604,752 46,728 20,363 – – – – – – – 1,625,115 46,728 – 46,728 – – – 46,728 1,604,752 46,728 – – 1,604,752 46,728 1,625,115 46,728 – – 1,625,115 46,728	Furniture and fixtures HK$’000 3,129 49 889 (219) (487) 3,361 195 54,422 4,220 (7,198 ) 55,000 910 – 4,674 (3,040 ) 57,544 3,361 – 3,361 55,000 – 55,000 57,544 – 57,544	Leasehold improve- ments HK$’000 5,475 12 4,747 (1,642) – 8,592 118 15,907 12,043 (5,180) 31,480 518 393 5,470 (30) 37,831 8,592 – 8,592 31,480 – 31,480 37,831 – 37,831	Motor vehicles HK$’000 309,527 – 15,682 (62,084 ) (262,108 ) 1,017 20 1,448 937 (443) 2,979 82 – 5,921 (1,925 ) 7,057 1,017 – 1,017 2,979 – 2,979 7,057 – 7,057	Office equipment and machinery HK$’000 23,679 26 1,710 (301 ) (9,466 ) 15,648 243 6,665 1,655 (905 ) 23,306 1,378 1,000 2,593 (1,134 ) 27,143 15,648 – 15,648 23,306 – 23,306 27,143 – 27,143	Vessels HK$’000 7,181 – – (714) – 6,467 – – – – 6,467 – – 11,382 (153) 17,696 6,467 – 6,467 6,467 – 6,467 17,696 – 17,696	Total HK$’000 707,060 87 23,028 (295,723 ) (272,486 ) 161,966 576 1,683,194 18,855 (55,854 ) 1,808,737 23,251 1,393 30,040 (6,282 ) 1,857,139 154,966 7,000 161,966 1,801,737 7,000 1,808,737 1,850,139 7,000 1,857,139

– 73 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

16. PROPERTY, PLANT AND EQUIPMENT (Cont’d)

DEPRECIATION, AMORTISATION AND IMPAIRMENT At 1 January 2003 Currency realignment Provided for the year Impairment loss recognised for the year_(note (c)) Eliminated on disposals Eliminated on disposal of subsidiaries At 31 December 2003 Currency realignment Provided for the year (Reversal of impairment loss) impairment loss recognised for the year(note (c)) Eliminated on disposals At 31 December 2004 Currency realignment Provided for the year Reversal of impairment loss for the year(note (c))_ Eliminated on disposals At 31 December 2005 CARRYING VALUES At 31 December 2005 At 31 December 2004 At 31 December 2003	Leasehold land and buildings HK$’000 224,461 – 890 301 (166,556) (157) 58,939 – 299 (4,511 ) (33,161) 21,566 – 364 (4,874 ) – 17,056 20,969 16,459 21,214	Properties Hotel under properties construction HK’000 HK$’000 Note (a) – 5,728 – – – – – 2,400 – – – – – 8,128 – – 30,119 – – 1,100 – – 30,119 9,228 1,502 – 30,119 – – (900) – – 61,740 8,328 1,563,375 38,400 1,574,633 37,500 – 38,600	Furniture and fixtures HK$’000 2,193 33 331 – (145) (325) 2,087 152 17,771 – (6,501 ) 13,509 711 15,718 – (2,734 ) 27,204 30,340 41,491 1,274	Leasehold improve- ments HK$’000 3,284 12 1,460 – (813) – 3,943 17 5,464 – (4,793) 4,631 86 7,565 – (19) 12,263 25,568 26,849 4,649	Motor vehicles HK$’000 211,033 – 18,580 – (57,161 ) (171,869 ) 583 16 526 – (443) 682 60 1,200 – (230) 1,712 5,345 2,297 434	Office equipment and machinery HK$’000 16,783 17 3,132 – (176 ) (7,158 ) 12,598 197 2,697 – (828 ) 14,664 1,027 5,343 – (1,053 ) 19,981 7,162 8,642 3,050	Vessels HK$’000 5,967 – 182 – (674) – 5,475 – 181 – – 5,656 – 434 – (95) 5,995 11,701 811 992	Total HK$’000 469,449 62 24,575 2,701 (225,525 ) (179,509 ) 91,753 382 57,057 (3,411 ) (45,726 ) 100,055 3,386 60,743 (5,774 ) (4,131 ) 154,279 1,702,860 1,708,682 70,213

– 74 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

16. PROPERTY, PLANT AND EQUIPMENT (Cont’d)

The above items of property, plant and equipment are depreciated on a straight line basis of the following rates per annum:

Leasehold land and buildings Over the remaining unexpired terms of the leases Hotel properties Over the remaining unexpired terms of the leases or operating period Furniture and fixtures 10% – 20% Leasehold improvements 10% – 20% or the term of the lease or land use rights, if shorter Motor vehicles 8.33% – 20% Office equipment and machinery 20% Vessels 5%

An analysis of the properties of the Group held at the balance sheet date is as follows:

Long leases in Hong Kong Medium term leases in Hong Kong Medium term leases in the PRC (note b)	Leasehold land and buildings As at 31 December 2003 2004 2005 HK$’000 HK$’000 HK$’000 10,237 13,299 16,879 10,977 3,160 4,090 – – – 21,214 16,459 20,969	Hotel properties As at 31 December 2003 2004 2005 HK$’000 HK$’000 HK$’000 – 620,510 614,856 – – – – 954,123 948,519 – 1,574,633 1,563,375	Properties under construction As at 31 December 2003 2004 2005 HK$’000 HK$’000 HK$’000 – – – – – – 38,600 37,500 38,400 38,600 37,500 38,400	Properties under construction As at 31 December 2003 2004 2005 HK$’000 HK$’000 HK$’000 – – – – – – 38,600 37,500 38,400 38,600 37,500 38,400
				38,400

Notes:

(a) Included in the hotel properties at the balance sheet date is a hotel property with a carrying value of HK$142,195,000 (2004: HK$143,104,000 and 2003: nil) situated in Luoyang, the PRC and held under a medium term land use rights. The land use rights of the hotel property is currently held by Luoyang Power Supply Bureau, a minority shareholder of the subsidiary holding the hotel property. Pursuant to a land use rights agreement entered into between Luoyang Power Supply Bureau and the subsidiary on 15 April 1999 (before the Group acquired the said subsidiary in 2004), Luoyang Power Supply Bureau agreed to permit the said subsidiary to use the land use rights of the hotel property for a term commencing from April 1999 to April 2049 for hotel use.
(b) Included in the hotel properties held under medium term leases in the PRC of HK$948,519,000 (2004: HK$954,123,000 and 2003: nil)) is a hotel property with a carrying value of approximately HK$210,860,000 (2004: HK$212,050,000 and 2003: nil) of which a subsidiary of the Company has been granted the right to operate and manage the hotel in Guangzhou, the PRC for a period from January 1987 to January 2017, and subject to certain conditions to be fulfilled, the operating period may be extended for a further period of 20 years.

– 75 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

16. PROPERTY, PLANT AND EQUIPMENT (Cont’d)

(c) The directors reviewed the carrying amounts of its property, plant and equipment as at 31 December 2005 and identified that the value of properties under construction and certain properties has increased (2004: the value of properties under construction was impaired and the value of certain properties was increased and 2003: the value of properties under construction and certain properties was decreased). Accordingly, the carrying amounts of properties under construction and properties were stated to their recoverable amounts, which were determined with reference to the independent professional valuation on open market value as at 31 December 2003, 2004 and 2005.

The independent professional valuation as at 31 December 2005 has been carried out by Norton Appraisals Limited, an independent qualified professional valuer not connected with the Group. Norton Appraisals Limited has appropriate qualifications and recent experiences in the valuation of similar properties in the relevant locations. The valuation was carried out in accordance with the HKIS Valuation Standards on Properties (1st Edition 2005) published by the Hong Kong Institute of Surveyors, was arrived at by reference to market evidence of transaction prices for similar properties.

Details of property, plant and equipment which are stated at valuation at the balance sheet date are as follows:

At valuation – 31 July 1997 – 31 March 1998 _Less:_Accumulated depreciation, amortisation and impairment Net book value	Leasehold land and buildings As at 31 December 2003 2004 2005 HK$’000 HK$’000 HK$’000 4,800 4,800 4,800 2,200 2,200 2,200 7,000 7,000 7,000 (4,588) (4,628) (4,690) 2,412 2,372 2,310

The valuations as at 31 July 1997 and 31 March 1998 represented the carrying values (equivalent to their approximate fair values) of the leasehold land and buildings at the time when they ceased to be classified as investment properties. Had the leasehold properties been carried at their historical cost less accumulated depreciation, amortisation and impairment losses, the carrying value of the leasehold properties would have been stated at HK$2,310,000 (2004: HK$2,372,000 and 2003: HK$2,412,000).

The net book value of motor vehicles, and office equipment and machinery of the Group held under finance leases as at 31 December 2005 was HK$137,000 (2004: HK$1,774,000 and 2003: nil).

The net book value of motor vehicles of the Group leased to outsiders to earn rental income as at 31 December 2005 was HK$703,000 (2004: HK$890,000 and 2003: nil).

– 76 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

17. INVESTMENT PROPERTY/ASSET CLASSIFIED AS HELD FOR SALE

Fair value of investment property: At beginning of the year Increase in fair value Reclassified as held for sale At end of the year Asset classified as held for sale	As at 31 December 2003 2004 2005 HK$’000 HK$’000 HK$’000 1,230 1,400 3,400 170 2,000 619 – – (4,019) 1,400 3,400 – – – 4,019

The investment property of the Group is freehold and held outside Hong Kong.

On 13 July 2005, the Group entered into a sale agreement to dispose of the investment property. The disposal was completed on 20 January 2006, on which date the beneficial ownership was passed to the acquirer.

The fair value of the Group’s investment property before reclassification as asset classified as held for sale was determined based on its selling price at 20 January 2006. In the opinion of directors, there is no material difference between the fair value of investment property at 31 December 2005 and its fair value at 20 January 2006.

The fair value of the Group’s investment property at 31 December 2003 and 2004 has been arrived at on the basis of a valuation carried out on the respective dates by Norton Appraisals Limited, an independent qualified professional value not connected with the Group.

The Group’s property interest held under operating leases to earn rentals was measured using the fair value model and was classified and accounted for as investment property.

18. INTEREST IN ASSOCIATES

Cost of investments in associates, unlisted Share of post-acquisition reserves Impairment loss recognised	As at 31 December 2003 2004 2005 HK$’000 HK$’000 HK$’000 508,673 3,903 219,137 (255,489) (1,914) 1,285 253,184 1,989 220,422 (31,717) – – 221,467 1,989 220,422	As at 31 December 2003 2004 2005 HK$’000 HK$’000 HK$’000 508,673 3,903 219,137 (255,489) (1,914) 1,285 253,184 1,989 220,422 (31,717) – – 221,467 1,989 220,422
		220,422 –
		220,422

– 77 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

18. INTEREST IN ASSOCIATES (Cont’d)

Particulars of the Group’s principal associates at the respective balance sheet dates are as follows:

			Issued and
			paid up
			share
		Place of	capital/		Proportion of
	Form of	incorporation	registered	issued/registered capital
Name of associate	business structure	and operation	capital		held by the Group		Principal activities
			’000	2003	2004	2005
Ananda Travel Service	Limited liability	Australia	A$400	40%	40%	40%	Travel and related
(Aust.) Pty. Limited	company						services
Apex Quality Group	Limited liability	British Virgin	HK$43,276	49.6%	–	–	Investment holding
Limited (“Apex”)	company	Islands/
		Hong Kong
Feng Ze Investments	Limited liability	Macau	MOP115	–	–	28.5%	Investment holding
Limited (“Feng Ze”)	company
Heilongjiang Ananda	Sino-foreign	PRC	RMB283,140	50%	–	–	Operating of a hotel
Entertainment Company	equity joint						and an entertainment
Limited (“Heilongjiang	venture						resort complex and
Ananda”)							development of a
							residential and
							commercial complex
Kingsway Hotel Limited	Limited liability	Macau	MOP500	–	–	31.7%	Hotel ownership and
(“Kingsway Hotel”)	company						operation
Travoo International	Limited liability	British Virgin	US$6,120	–	–	50%	Investment holding
Limited	company	Islands
Wing On International	Sino-foreign	PRC	RMB5,000	49%	49%	49%	Travel and related
Travel Service Ltd.	equity joint						services
Guangdong	venture
Xin Wei Property	Limited liability	Macau	MOP100	–	–	31.7%	Investment holding
Investment Company	company
Limited

– 78 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

18. INTEREST IN ASSOCIATES (Cont’d)

During the year ended 31 December 2003, the directors reviewed the carrying amounts of interest in associates and considered that the recoverable amount of Heilongjiang Ananda is minimal due to its continuing operating losses. Accordingly, an amount of HK$31,717,000 was recognised as impairment loss to write off the carrying value of this associate in the financial statements.

On 9 July 2003, the Group entered into a sale and purchase agreement with an independent third party to dispose of its 49.3% interest in an associate, Rosedale Hotel Group Limited (“Rosedale”), for a consideration of HK$88,000,000. Under the agreement, the purchaser was obliged to pay a total of HK$20,000,000 on or before the completion of the sale, and the balance is payable within 12 months from the date of completion, against which 136,666,666 shares in Rosedale are pledged to the Group.

The completion of the disposal involved a number of transactions. Among them, Rosedale would undergo a group reorganisation, under which Rosedale continues as a public listed company concentrating on business other than hotel and leisure-related businesses; Apex, a former subsidiary of Rosedale, together with its subsidiaries would hold all assets and liabilities of Rosedale and its subsidiaries in relation to the hotel and leisure-related businesses; and shares of Apex would be distributed to shareholders of Rosedale by way of distribution in specie. Details of the group reorganisation are set out in the circular to shareholders of the Company on 31 October 2003.

In connection with the disposal of Rosedale, the Group made an unconditional cash offer for 77,920,268.1 Apex shares held by the Apex shareholders other than those held by China Strategic Holdings Limited and their respective associates and parties acting in concert with any of them. The offer period was from 19 December 2003 to 9 January 2004. As at 31 December 2003, holders of 800,194 shares, representing approximately 0.3% of the share capital of Apex, accepted and the Group held a 49.6% interest in Apex.

The disposal of Rosedale was completed on 16 December 2003. On disposal of Rosedale, the negative goodwill which was presented as a deduction from the interest in associate with a carrying value of HK$57,568,000 was released.

– 79 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

18. INTEREST IN ASSOCIATES (Cont’d)

The summarised financial information in respect of the Group’s associates is set out below:

		As at 31 December	As at 31 December
	2003	2004	2005
	HK$’000	HK$’000	HK$’000
Total assets	2,397,762	17,318	562,873
Total liabilities	1,441,879	11,053	161,554
Net assets	955,883	6,265	401,319

Share of net assets	221,467	1,989	220,422

	Year ended 31 December
	2003	2004	2005
	HK$’000	HK$’000	HK$’000
Turnover	394,854	61,246	111,531

(Loss) profit for the year	(232,308)	(418)	13,381

Share of results of associates for the year	(114,431)	(195)	8,006

AVAILABLE-FOR-SALE INVESTMENTS
Available-for-sale investments as at 31 December 2005 comprise:
			HK$’000
Equity securities
Unlisted shares, at cost			126,425
_Less:_Impairment losses recognised			(33,800)
			92,625

19. AVAILABLE-FOR-SALE INVESTMENTS

– 80 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

19. AVAILABLE-FOR-SALE INVESTMENTS (Cont’d)

Particulars of the Group’s major available-for-sale investments as at 31 December 2005 are as follows:

		Issued
		and paid
		up share
	Place of	capital	Proportion		of
	incorporation	registered	issued/registered		capital	Interest attributable
Name of entity	and operation	capital	held by	the subsidiaries			to the Group		Principal activities
		’000	2003	2004	2005	2003	2004	2005
Guilin Osmanthus Hotel	PRC	US$3,489	49.5%	49.5%	49.5%	49.5%	49.5%	49.5%	Operation of a hotel
					Note (a)
Guangxi Guijia Property	PRC	US$8,021	26%	26%	26%	18.2%	18.2%	18.2%	Property holding and
Management Company					Note (b)				operation of leisure
Limited (“Guangxi									services
Guijia”)

Notes:

(a) Though the Group holds a 49.5% interest in Guilin Osmanthus Hotel, the directors considered that the Group cannot exercise influence on the financial and operating policies of Guilin Osmanthus Hotel and accordingly, it is classified as an available-for-sale investment. The directors reviewed its carrying amount and considered that it is unlikely to recover the interest in Guilin Osmanthus Hotel and the present value of the estimated future cash flows expected to arise from the investment is minimal. Accordingly, an impairment loss of HK$26,974,000 was recognised in the financial statements to write down the carrying amount of the investment and an impairment loss of HK$26,974,000 was charged to the consolidated income statement for the year ended 31 December 2003. At 31 December 2003 and 2004, the investment was classified as investment securities (note 21) and an impairment loss of HK$26,974,000 (2003: HK$26,974,000) was recognised in the financial statements.
(b) Though a subsidiary of the Group holds a 26% interest in Guangxi Guijia, the directors considered that the Group cannot exercise significant influence on the financial and operating policies of Guangxi Guijia and accordingly, it is classified as an available-for-sale investment. At 31 December 2005, the directors reviewed its carrying amount with reference to its net assets and considered that it is unlikely to recover the full amount of the interest in Guangxi Guijia and accordingly an impairment loss of HK$6,826,000 was recognised in the financial statements to write down the carrying amount of the investment to its recoverable amount and an impairment loss of HK$1,167,000 was charged to the consolidated income statement for the year ended 31 December 2005. At 31 December 2003 and 2004, the investment was classified as investment securities (note 21) and an impairment loss of HK$5,659,000 (2003: nil) was recognised in the financial statements.

20. OTHER LONG TERM INVESTMENT

Other long term investment represented the contribution paid to a joint venture partner in 2001 for a joint development of a piece of land in Chengdu, the PRC, into a tourist attraction. On 11 December 2002, the Group entered into an agreement with the joint venture partner to withdraw from the project. Under the agreement, the joint venture partner would transfer the titles of a total of approximately 3,000 square meters of commercial areas and car parking spaces in a commercial building in Chengdu, the PRC, to the Group. The transaction was cancelled and the contribution paid was refunded during the year ended 31 December 2004.

– 81 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

21. INVESTMENTS IN SECURITIES

Upon the application of HKAS 39 on 1 January 2005, investment securities were reclassified to appropriate categories under HKAS 39 (see note 2 for details). Investment securities as at 31 December 2003 and 2004 are set out below.

Equity securities Unlisted shares, at cost Listed shares in Hong Kong _Less:_Impairment losses recognised Market value of listed shares Carrying amount analysed for reporting purposes as: Non-current Current	Investment securities 2003 2004 HK$’000 HK$’000 126,232 126,422 – – 126,232 126,422 (26,974) (32,633) 99,258 93,789 – – 99,258 93,789 – – 99,258 93,789	Other investments 2003 2004 HK$’000 HK$’000 – – 2,847 2,778 2,847 2,778 – – 2,847 2,778 2,847 2,778 – – 2,847 2,778 2,847 2,778	Total 2003 2004 HK$’000 HK$’000 126,232 126,422 2,847 2,778 129,079 129,200 (26,974) (32,633) 102,105 96,567 2,847 2,778 99,258 93,789 2,847 2,778 102,105 96,567

– 82 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

22. GOODWILL

COST At beginning of the year Arising from acquisition during the year (note 44 (b) and (d)) Disposal of a subsidiary_(note 45) At end of the year AMORTISATION AND IMPAIRMENT At beginning of the year Charge for the year Eliminated on disposal of a subsidiary (note 45)_ At end of the year CARRYING VALUES At end of the year	2003 HK$’000 13,232 – (13,232) – 165 496 (661) – –	2004 HK$’000 – 50,215 – 50,215 – – – – 50,215	2005 HK$’000 50,215 647 –
			50,862
			– – –
			–
			50,862

Particulars regarding impairment testing on goodwill are disclosed in note 24.

Until 31 December 2004, goodwill had been amortised over 20 years.

No amortisation was provided for the goodwill arising during the year ended 31 December 2004 as the acquisition was completed in December 2004. The directors considered that the amount involved was insignificant.

– 83 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

23. NEGATIVE GOODWILL

GROSS AMOUNT Arising from acquisition during the year ended 31 December 2004_(note 44(c))_ RELEASED TO INCOME Released during the year ended 31 December 2004 At 31 December 2004 Derecognised upon the application of HKFRS 3 At 1 January 2005	HK$’000 74,514 (1,863) 72,651 (72,651) –

As explained in note 2, all negative goodwill arising on acquisitions prior to 1 January 2005 was derecognised as a result of the application of HKFRS 3.

24. IMPAIRMENT TESTING ON GOODWILL

As explained in note 8, the Group uses business segments as its primary segment for reporting segment information. For the purposes of impairment testing, goodwill as set out in note 22 has been allocated to the cash generating unit (“CGU”) of the travel and related services segment.

The recoverable amount of this CGU has been determined on the basis of value in use calculation. The key assumptions for the value in use calculation are those regarding the discount rates, growth rates and expected changes to revenue and direct costs during the year. Management estimates discount rates using pre-tax rates that reflect current market assessments of the time value of money and the risks specific to the CGU. The growth rates are based on industry growth forecasts. Changes in revenue and direct costs are based on past practices and expectations of future changes in the market.

During the year, the Group performed impairment review for goodwill based on cash flow forecasts derived from the most recent financial budgets for the next five years approved by management using a discount rate of 15.5%, while the remaining forecast is based on the financial budget of the previous year under a 3% annual growth rate assumption. The value in use calculated by using the discount rate is higher than the carrying amount of CGU, accordingly, no impairment loss was considered necessary.

– 84 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

25. INVESTMENT DEPOSITS

Deposits for the acquisition of 100% interests in companies holding land use rights in the PRC_(note a) Deposits for the acquisition of a hotel booking business(note b) Deposits for the acquisition of subsidiaries(note c)_	As at 31 December 2003 2004 2005 HK$’000 HK$’000 HK$’000 – 150,000 150,000 – 50,945 51,419 – 20,750 – – 221,695 201,419	As at 31 December 2003 2004 2005 HK$’000 HK$’000 HK$’000 – 150,000 150,000 – 50,945 51,419 – 20,750 – – 221,695 201,419
		201,419

Notes:

(a) The amount represents deposits paid for the acquisition of 100% equity interests in certain companies holding land use rights in the PRC for various development projects, with the objective of developing hotels, shopping malls, recreational and other tourists related amenities respectively. The aggregate consideration for the purchase amounted to HK$180,000,000. The transactions have not been completed as at the date of this report.
(b) The amount represents the deposits paid for the acquisition of 51% interest in an enterprise established in the PRC engaging in full scale on-line and off-line hotel booking services for a consideration of approximately HK$51,500,000. The transaction has not been completed as at the date of this report.
(c) The amount represented the deposits paid for the acquisition of a 65.04% interest in Triumph Up Investments Limited (“Triumph Up”). The transaction was completed on 17 February 2005 and Triumph Up became a subsidiary of the Group during the year.

26. INVENTORIES

The inventories were carried at cost and represent principally food, beverages and general stores which are to be utilised in the ordinary course of operations.

– 85 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

27. AMOUNTS DUE FROM RELATED COMPANIES

The balances represent the aggregate amounts due from related parties. Certain directors of the Company are also directors of and/or have beneficial interests in these companies. The amounts are unsecured and interest free. Included in the amounts due from related companies as at 31 December 2005 were advances of HK$60,090,000 which are unsecured, interest free and repayable on demand, and the remaining balances were principally trading balances.

The aged analysis of the trading balances at the respective balance sheet dates is as follows:

0 – 30 days 31 – 60 days 61 – 90 days Over 90 days	As at 31 December 2003 2004 2005 HK$’000 HK$’000 HK$’000 – 661 3,019 4 47 183 – 462 144 2,924 5,352 1,741 2,928 6,522 5,087	As at 31 December 2003 2004 2005 HK$’000 HK$’000 HK$’000 – 661 3,019 4 47 183 – 462 144 2,924 5,352 1,741 2,928 6,522 5,087
		5,087

The fair value of the amounts due from related companies as at 31 December 2005 approximates the corresponding carrying amount.

28. AMOUNTS DUE FROM (TO) ASSOCIATES

The amounts due from (to) associates are unsecured, interest free and repayable on demand.

The fair value of the amounts due from (to) associates as at 31 December 2005 approximates the corresponding carrying amount.

29. TRADE AND OTHER RECEIVABLES

Included in trade and other receivables are trade receivables of approximately HK$20,596,000 (2004: HK$13,538,000 and 2003: HK$7,029,000) and the aged analysis of the trade receivables at the respective balance sheet dates is as follows:

0 – 30 days 31 – 60 days 61 – 90 days Over 90 days	As at 31 December 2003 2004 2005 HK$’000 HK$’000 HK$’000 2,617 7,446 12,241 1,573 2,869 3,051 815 1,414 1,453 2,024 1,809 3,851 7,029 13,538 20,596	As at 31 December 2003 2004 2005 HK$’000 HK$’000 HK$’000 2,617 7,446 12,241 1,573 2,869 3,051 815 1,414 1,453 2,024 1,809 3,851 7,029 13,538 20,596
		20,596

– 86 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

29. TRADE AND OTHER RECEIVABLES (Cont’d)

The Group allows an average credit period of 60 days to local customers and 90 days to overseas customers.

The fair value of the Group’s trade and other receivables as at 31 December 2005 approximates the corresponding carrying amount.

Included in other receivables was a balance of HK$17,456,000 (2004: nil and 2003: nil) which is secured by a 16.26% equity interest in Triumph Up.

30. LOAN RECEIVABLES

Loan to certain companies and individuals (notes a and b) Loan to a land operator_(note c)_ Fixed-rate loan receivables Variable-rate loan receivables	As at 31 December 2003 2004 2005 HK$’000 HK$’000 HK$’000 31,950 108,000 167,926 23,000 23,000 13,000 54,950 131,000 180,926 24,950 25,893 15,427 30,000 105,107 165,499 54,950 131,000 180,926	As at 31 December 2003 2004 2005 HK$’000 HK$’000 HK$’000 31,950 108,000 167,926 23,000 23,000 13,000 54,950 131,000 180,926 24,950 25,893 15,427 30,000 105,107 165,499 54,950 131,000 180,926
		180,926

		15,427 165,499
		180,926

The fair value of the Group’s loan receivables as at 31 December 2005, determined based on the present value of the estimated future cash flows discounted using the prevailing market rate as at the balance sheet date, approximates the corresponding carrying amount.

Notes:

(a) (i) Included in the balances were loans of HK$40,000,000 (2004: HK$40,000,000 and 2003: nil) which are secured by equity interests in an enterprise established in the PRC.
(ii) Included in the balances was a loan of HK$21,120,000 (2004: nil and 2003: nil) which is secured by 50% equity interest in Feng Ze which holds 11.5% attributable interest in the Kingsway Hotel.
(iii) Included in the balances were loans of HK$21,236,000 (2004: nil and 2003: nil) which are secured by the right in a property project in Macau of a consideration of HK$40,000,000.
(iv) Included in the balances was a loan of HK$10,327,000 (2004: nil and 2003: nil) which is secured by certain equity securities listed in Hong Kong.
(v) Included in the balances was a loan of nil (2004: HK$5,074,000 and 2003: nil) due from a related company which was unsecured, carried interest at market rate and repayable within one year. A director of the Company has beneficial interests in and is also director of the related company.

– 87 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

30. LOAN RECEIVABLES (Cont’d)

(b) Save for the loans mentioned in note 30(a)(i) to (iv), the amounts are unsecured, carrying interest at market rates and repayable on demand.
(c) The loan to a land operator represents an advance made to one of the Group’s land operators for the designated purpose of purchase of coaches. The amount is secured, bears interest at 10% per annum on the principal amount over a period of thirty months and should be repayable by thirty equal monthly instalments commencing August 2000. Pursuant to the subsequent supplemental agreements thereafter, the repayment date of the loan is extended to 31 December 2006.

31. INVESTMENTS HELD FOR TRADING

Investments held for trading as at 31 December 2005 include:

Listed securities Equity securities listed in Hong Kong Equity securities listed elsewhere	HK$’000 5,576 3,510
	9,086

The fair values of the above investments held for trading are determined based on the quoted market bid prices available on the relevant exchanges.

32. TRADING CASH BALANCES

The amounts represent foreign currencies held for money exchange purposes.

33. TRADE AND OTHER PAYABLES

Included in trade and other payables are trade payables of approximately HK$130,741,000 (2004: HK$113,844,000 and 2003: HK$77,121,000) and the aged analysis of the trade payables at the reporting dates is as follows:

0 – 30 days 31 – 60 days 61 – 90 days Over 90 days	As at 31 December 2003 2004 2005 HK$’000 HK$’000 HK$’000 44,715 60,876 71,157 15,687 22,542 26,706 9,593 16,316 19,022 7,126 14,110 13,856 77,121 113,844 130,741	As at 31 December 2003 2004 2005 HK$’000 HK$’000 HK$’000 44,715 60,876 71,157 15,687 22,542 26,706 9,593 16,316 19,022 7,126 14,110 13,856 77,121 113,844 130,741
		130,741

The fair value of the Group’s trade and other payables as at 31 December 2005 approximates the corresponding carrying amount.

– 88 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

34. LOANS FROM RELATED COMPANIES

Certain directors of the Company are also directors of and/or have beneficial interests in those companies. The loans are unsecured, bear interest at market rates and with the terms of repayment as follows:

Amounts repayable within 1 year Amounts repayable after 1 year but within 2 years Variable-rate loans from related companies	As at 31 December 2003 2004 2005 HK$’000 HK$’000 HK$’000 8,000 260,778 361,500 223,312 112,098 – 231,312 372,876 361,500 231,312 372,876 361,500	As at 31 December 2003 2004 2005 HK$’000 HK$’000 HK$’000 8,000 260,778 361,500 223,312 112,098 – 231,312 372,876 361,500 231,312 372,876 361,500
		361,500

		361,500

The fair value of the Group’s loans from related companies as at 31 December 2005 approximates the corresponding carrying amount.

35. AMOUNTS DUE TO RELATED COMPANIES

The balances represent principally trading balances including trade payables and loan interest payable, which are unsecured, interest free and repayable on demand.

The fair value of the amounts due to related companies as at 31 December 2005 approximates the corresponding carrying amount.

– 89 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

36. OBLIGATIONS UNDER FINANCE LEASES

Amounts payable under finance leases: Within one year Between one to two years _Less:_Future finance charges Present value of lease obligations _Less:_Amount due within one year shown under current liabilities Amount due after one year	Minimum lease payments As at 31 December 2003 2004 2005 HK$’000 HK$’000 HK$’000 – 395 86 – 106 19 – 501 105 – (30) (12) – 471 93	Present value of minimum lease payments As at 31 December 2003 2004 2005 HK$’000 HK$’000 HK$’000 – 378 62 – 93 31 – 471 93 – – – – 471 93 – (378) (62) – 93 31

The Group entered into finance leases to acquire certain of its property, plant and equipment. The terms of the finance leases ranged from 2 to 4 years and the average effective borrowing rate was 6.8% (2004: 6% and 2003: 8.5%) per annum. Interest rate was fixed at the contract date. The leases were on a fixed repayment basis and no arrangement was entered into for contingent rental payments. The Group’s obligations under the finance leases were secured by the lessors’ charge over the leased assets.

The fair value of the Group’s finance lease obligations as at the balance sheet date, determined based on the present value of the estimated future cash flows discounted using the prevailing market rate as at the balance sheet date, approximates the corresponding carrying amount.

– 90 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

37. BORROWINGS

Bank loans Bank overdrafts Other loans _Less:_Amount due within one year shown under current liabilities Amount due after one year Secured Unsecured Borrowings are repayable as follows: Within one year or on demand Between one to two years Between two to five years	As at 31 December 2003 2004 2005 HK$’000 HK$’000 HK$’000 921 329,091 300,209 – 28,181 – 33,560 189 9,424 34,481 357,461 309,633 (28,230) (57,066) (38,325) 6,251 300,395 271,308 921 327,287 306,633 33,560 30,174 3,000 34,481 357,461 309,633 28,230 57,066 38,325 6,251 30,020 28,828 – 270,375 242,480 34,481 357,461 309,633

The Group’s borrowings are variable-rate borrowings which are denominated in Hong Kong dollars. Included in the borrowings is a bank loan of HK$299,760,000 (2004: HK$328,400,000 and 2003: nil) which bears an annual interest rate of 0.8% over the Hong Kong Inter-bank Offered Rate and is repayable in full on 17 April 2009.

As at 31 December 2003, included in unsecured other loans of the Group were HK15,000,000 which were secured on assets provided by a related company (note 54(g)).

The fair value of the Group’s borrowings as at 31 December 2005 approximates the corresponding carrying amount.

– 91 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

38. CONVERTIBLE NOTES

Convertible notes _Less:_Conversion into shares	As at 31 December 2003 2004 2005 HK$’000 HK$’000 HK$’000 251,060 184,137 41,350 – (142,787) (41,350) 251,060 41,350 –

In 2002, the Company issued convertible notes amounting to HK$370,000,000. The convertible notes carried interest at 2% per annum and were repayable within two years. The holders of the convertible notes had the right to convert on any business day the convertible notes into new shares of the Company at any time from time to time during a period of two years from the date of issues of the convertible notes, at an initial conversion price of HK$0.032 per share, subject to adjustments.

The outstanding convertible notes were repaid on maturity during the year ended 31 December 2004. Accordingly, the outstanding amount was classified under current liabilities as at 31 December 2003.

During the year ended 31 December 2004, the Company issued new convertible notes of nominal value amounting to HK$260,000,000 to finance the redemption of the convertible notes issued in 2002 and due in 2004. The new convertible notes carried interest at 2% per annum and should be repayable on 14 June 2007. The holders of the new convertible notes were entitled to convert on any business day the convertible notes into new shares of the Company at any time from the date of issue of the new convertible notes, at an initial conversion price of HK$0.02 per share, subject to adjustments.

Following the issue of shares in the Company pursuant to the placing and subscription agreement dated 4 February 2005, the conversion price of the convertible notes was adjusted to HK$0.0197 per share in accordance with its terms and conditions. On 14 March 2005, the day immediately preceding the effective date of the share consolidation as mentioned under note 41, the conversion price was adjusted to HK$1.97 per new consolidated share.

Upon the application of HKAS 32 (see note 2 for details), the convertible notes were split between the liability and equity elements, on a retrospective basis. The equity element is presented in equity heading “convertible notes reserve”. The effective interest rates of the liability components for the convertible notes issued in 2002 and 2004 are 6.2% and 14.7% respectively.

During the year ended 31 December 2005, all the convertible notes were converted into 27,918,781 new consolidated shares in the Company of HK$1 each at a conversion price of HK$1.97 per share (2004: HK$2.00) after adjusting for the share consolidation as mentioned under note 41.

– 92 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

39. PROMISSORY NOTE

The promissory note was issued during the year ended 31 December 2002 by a subsidiary of Apex (note 44(c)) to Hutchison Hotels Holdings (International) Limited as partial consideration for the acquisition of the entire share capital of, and shareholders’ loan to, Makerston Limited (“Makerston”), which holds indirectly a 95% interest in a group company holding a hotel property in Beijing. The promissory note is interest bearing at Hong Kong Inter-Bank Offered Rate plus 2%, repayable on 1 December 2007 and secured by the entire issued share capital of, and shareholders’ loan to, Makerston and its subsidiaries holding the aforesaid hotel property.

The fair value of the Group’s promissory note as at 31 December 2005 approximates the corresponding carrying amount.

40. DEFERRED TAXATION

The followings are the major deferred tax liabilities and assets recognised and movement thereon during the Relevant Periods:

Accelerated tax depreciation HK$’000 At 1 January 2003 13,062 Credit to income statement (note 13) (106) Effect of change in tax rate – charge (credit) to income statement_(note 13) 1,225 Released on disposal of subsidiaries (14,181) At 31 December 2003 – Acquisition of subsidiaries (note 44(c)) – At 31 December 2004 – Currency realignment – Credit to income statement (note 13)_ – At 31 December 2005 –	Tax losses HK$’000 (5,012) (2,133) (470) 7,615 – – – – – –	Hotel properties HK$’000 – – – – – 243,354 243,354 3,497 (2,171) 244,680	Others HK$’000 – (234) – 234 – – – – – –	Total HK$’000 8,050 (2,473) 755 (6,332) – 243,354 243,354 3,497 (2,171) 244,680

– 93 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

40. DEFERRED TAXATION (Cont’d)

As at 31 December 2005, the Group has unused tax losses of approximately HK$912,324,000 (2004: HK$947,791,000 and 2003: HK$555,159,000) available for offset against future profits. No deferred tax asset has been recognised in respect of the tax losses due to the unpredictability of future profit streams. Pursuant to the relevant laws and regulations in the PRC, the unutilised tax losses of approximately HK$39,000,000 (2004: HK$65,000,000 and 2003: nil) can be carried for a period of five years. The losses arising from overseas subsidiaries are insignificant, which will expire after a specific period of time, and other unrecognised tax losses may be carried forward indefinitely.

41. SHARE CAPITAL

Number of shares Authorised Shares of HK$0.01 each at 1 January 2003, 31 December 2003, 1 January 2004, 31 December 2004 and 1 January 2005 50,000,000,000 Consolidation of shares (49,500,000,000) Increase in authorised share capital 1,000,000,000 Shares of HK$1 each at 31 December 2005 1,500,000,000 Issued and fully paid Shares of HK$0.01 each at 1 January 2003, 31 December 2003 and 1 January 2004 18,316,732,770 Conversion into shares from convertible notes 10,250,000,000 Issue of shares 3,660,000,000 Shares of HK$0.01 each at 31 December 2004 32,226,732,770 Issue of shares 8,740,000,000 40,966,732,770 Consolidation of shares (40,557,065,443) Conversion into shares from convertible notes 27,918,781 Shares of HK$1 each at 31 December 2005 437,586,108	Amount HK$’000 500,000 – 1,000,000
	1,500,000

	183,167 102,500 36,600
	322,267 87,400
	409,667 – 27,919
	437,586

– 94 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

41. SHARE CAPITAL (Cont’d)

On 30 November 2004, the Company entered into two placing and subscription agreements with China Enterprises Limited (“CEL”), a subsidiary of China Strategic Holdings Limited (“CSH”) and a substantial shareholder of the Company, and Deutsche Bank AG, Hong Kong Branch (the “Placing Agent”) pursuant to which the Placing Agent agreed to place 6,000 million shares of HK$0.01 each in the Company then held by CEL at the price of HK$0.028 per share to independent investors and CEL would subscribe for up to 6,000 million new shares of HK$0.01 each in the Company at the same price of HK$0.028 per share. The first placing and subscription agreement and the second placing and subscription agreement related to the placing and the conditional subscription of 3,660 million and 2,340 million shares of HK$0.01 each in the Company respectively. The subscription of the shares under the second placing and subscription agreement was conditional upon, among others, the approval of the independent shareholders of the Company. The total proceeds from the above two placing and subscription agreements were used principally towards payments of HK$107.5 million of the consideration for the acquisition of interest in Kingsway Hotel and the balance was utilised as general working capital of the Group.

On 14 December 2004, 3,660 million shares were issued and allotted at the price of HK$0.028 per share in accordance with the first placing and subscription agreement and the proceeds, net of expense, amounted to approximately HK$98.6 million. The new shares issued rank pari passu in all respects with the then existing shares.

On 31 January 2005, 2,340 million shares were issued and allotted at the price of HK$0.028 per share in accordance with the second placing and subscription agreement and the proceeds, net of expense, amounted to approximately HK$63.1 million. The new shares issued rank pari passu in all respects with the then existing shares.

On 4 February 2005, the Company entered into a placing and subscription agreement with CEL and Tai Fook Securities Company Limited (“Tai Fook”) pursuant to which Tai Fook agreed to place up to 6,400 million shares in the Company then held by CEL at the price of HK$0.022 per share to independent investors and CEL would subscribe for up to 6,400 million new shares of the Company at the same price of HK$0.022 per share. The net proceeds from the placement amounted to approximately HK$136.8 million, net of expense. HK$50 million of the net proceeds will be used for financing the refurbishment, renovation and upgrading of Kingsway Hotel and the balance of approximately HK$86.8 million will be used for future investment opportunities relating to existing businesses. The subscription was completed on 18 February 2005. The new shares issued rank pari passu in all respects with the then existing shares.

On 4 February 2005, the directors proposed to the shareholders of the Company for approval of the consolidation of every one hundred shares of HK$0.01 each in the issued and unissued ordinary share capital of the Company into one share of HK$1 each. The consolidation of shares of the Company was approved by the shareholders of the Company in the special general meeting held on 14 March 2005.

On 17 May 2005, the directors proposed to the shareholders of the Company to increase the authorised share capital of the Company from HK$500,000,000 divided into 500,000,000 shares of HK$1 each to HK$1,500,000,000 divided into 1,500,000,000 shares of HK$1 each by the creation of an additional 1,000,000,000 shares of HK$1 each. The increase in the authorised share capital of the Company was approved by the shareholders of the Company in the special general meeting held on 5 July 2005.

– 95 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

42. SHARE OPTION SCHEME

The Company has a share option scheme (the “Scheme”), which was approved and adopted by shareholders of the Company on 3 May 2002, enabling the directors to grant options to employees, executives or officers of the Company or any of its subsidiaries (including executive and nonexecutive directors of the Company or any of its subsidiaries) and any suppliers, consultants, agents or advisers who will contribute or have contributed to the Company or any of its subsidiaries as incentives and rewards for their contribution to the Company or such subsidiaries. The maximum number of shares in respect of which options may be granted under the Scheme, when aggregated with any shares subject to any other schemes, shall not exceed 10% of the issued share capital of the Company on the date of approval and adoption of the Scheme (the “General Limit”). The Company proposed to refresh the General Limit so that the number of shares which may be issued upon exercise of all options to be granted under the Scheme and any other share option schemes of the Company would be increased to 10% of the shares in issue as at the date of approval of the General Limit as “refreshed”. The refreshment of the General Limit was approved by the shareholders of the Company in the annual general meeting held on 27 May 2005.

Option granted must be taken up within 30 days of the date of offer. The consideration payable for the option is HK$1. Options may be exercised at any time from the date of acceptance of the share option to such date as determined by the board of directors but in any event not exceeding 10 years. The exercise price is determined by the directors of the Company and will not be less than the higher of (i) the average closing price of the shares for the five business days immediately preceding the date of grant, (ii) the closing price of the shares on the date of grant or (iii) the nominal value of the shares of the Company.

No share options have been granted under the Scheme since its adoption at respective balance sheet dates.

On 22 June 2006, the Company granted 58,880,000 option at an exercise price of HK$0.728 with exercisable period from 22 June 2006 to 21 June 2008.

43. RESERVES

(a) On 17 May 2005, the directors proposed to the shareholders of the Company for approval of the cancellation of share premium account (the “Cancellation”) pursuant to which the entire amount standing to the credit of the share premium account of the Company would be cancelled and the credit arising from the Cancellation would be transferred to the contributed surplus account of the Company and such credit would be partially used to set off against the accumulated losses of the Company (the “Set Off”). The Cancellation and the Set Off were approved by the shareholders of the Company in the special general meeting held on 5 July 2005.
(b) The special reserve represents the difference between the nominal value of the shares of the acquired subsidiaries and the nominal value of the shares of the Company issued for the acquisition under the group reorganisation in September 1997.
(c) The goodwill reserve represents the goodwill on acquisition of Guilin Osmanthus Hotel which was written off against reserve. During the year ended 31 December 2003, the directors considered that following the change of the management of the Company, the Group cannot exercise significant influence on the financial and operating policies of Guilin Osmanthus Hotel and accordingly, resolved to classify the investment cost together with the goodwill reserve as an investment in securities thereafter.

– 96 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

43. RESERVES (Cont’d)

(d) The accumulated profits of the Group include profits of HK$1,062,000 (2004: losses of HK$2,137,000 and 2003: losses of HK$246,293,000) attributable to the associates of the Group.

44. ACQUISITION OF SUBSIDIARIES

(a) On 24 September 2003, the Group acquired 100% of the issued share capital of Sinomatrix Limited by assets swap mentioned under note 46(b). Sinomatrix Limited, in turn, holds 70% interest in Silver Bay Commodities Limited. The aggregate assets and liabilities are as follows:

		HK$’000
Investments in securities		99,258
Minority interests		(29,778)
Net assets acquired		69,480

The subsidiaries acquired during the year ended 31 December 2003	contributed an
insignificant amount to the Group’s turnover and loss from operations.

(b) In December 2004, the Group acquired 100% of the issued share capital of International Travel Systems Inc. (“ITS Inc.”). The effect of the acquisition is summarised as follows:

Property, plant and equipment Trade and other receivables Bank balances and cash Trade and other payables Net liabilities acquired Goodwill arising on acquisition Cash consideration Net cash outflow arising on acquisition: Cash consideration Bank balances and cash acquired	HK$’000 89 1,000 502 (1,806) (215) 50,215 50,000 (50,000) 502 (49,498)

ITS Inc. contributed an insignificant amount to the Group’s turnover and loss before taxation for 2004.

– 97 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

44. ACQUISITION OF SUBSIDIARIES (Cont’d)

(c) During the year ended 31 December 2004, the Group acquired through a cash offer further interest in its former associate, Apex. On 9 January 2004, Apex became a subsidiary of the Group. The effect of the acquisition is summarised as follows:

Property, plant and equipment
Club debenture
Investments in securities
Properties held for sale
Inventories
Trade and other receivables
Bank balances and cash
Trade and other payables
Amount due to the Group
Obligations under a finance lease
Bank and other borrowings
Amounts due to related companies
Promissory note
Deferred taxation
Minority interests
Net assets acquired
_Less:_Interest previously acquired and classified
as interest in an associate
Negative goodwill arising on acquisition
Cash consideration
Net cash inflow arising on acquisition:
Cash consideration
Bank balances and cash acquired

HK$’000
1,683,105
713
212
98
5,394
65,423
22,258
(104,544)
(9,425)
(1,467)
(378,829)
(81,654)
(365,000)
(243,354)
(279,909)
313,021
(218,360)
94,661
(74,514)
20,147
(20,147)
22,258
2,111

Apex contributed HK$190,034,000 to the Group’s turnover and HK$24,192,000 to the Group’s loss before taxation for 2004.

– 98 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

44. ACQUISITION OF SUBSIDIARIES (Cont’d)

(d) The Group acquired a 65.04% interest in Triumph Up on 17 February 2005 and 100% interest in Cyber Business Network (Hong Kong) Limited on 28 February 2005.

The net assets acquired in the transactions, and the discount and goodwill arising on acquisition, are as follows:

Acquiree’s carrying amount before combination HK$’000 Property, plant and equipment 1,393 Interest in associates 15,887 Trade and other receivables 114 Amount due from the Group 960 Amounts due from related companies 4 Amounts due from associates 126,231 Bank balances and cash 24 Trade and other payables (16) Amount due to the Group (2,214) Amounts due to associates (170) Amounts due to related companies (578) Net assets acquired 141,635 Minority interests Discount on acquisition Goodwill arising on acquisition Cash consideration Satisfied by: Cash paid Investment deposits Net cash outflow arising on acquisition: Cash consideration Bank balances and cash acquired	Fair value adjustments HK$’000 – 175,309 – – – – – – – – – 175,309	Fair value HK$’000 1,393 191,196 114 960 4 126,231 24 (16) (2,214) (170) (578) 316,944 (110,945) (34,574) 647 172,072 151,322 20,750 172,072 151,322 (24) 151,298

– 99 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

44. ACQUISITION OF SUBSIDIARIES (Cont’d)

The discount on acquisition is attributable to the increase in fair value of a hotel property which was held by an associate of the subsidiaries acquired.

The subsidiaries acquired during the year contributed HK$125,000 to the Group’s turnover and HK$43,673,000, including discount on acquisition of HK$34,574,000, to the Group’s profit before taxation.

If the acquisition had been completed on 1 January 2005, the Group’s turnover for the year would have been HK$1,815,784,000 and profit for the year would have been HK$33,004,000. The pro forma information is for illustrative purposes only and is not necessarily an indicative revenue and results of operations of the Group that actually would have been achieved had the acquisition been completed on 1 January 2005, nor is it intended to be a projection of future results.

These acquisitions have been accounted for by the acquisition method of accounting.

45. DISPOSAL OF DISCONTINUED OPERATION

On 25 October 2003, the Group entered into a sale and purchase agreement to dispose of its subsidiary, Trans-Island Limousine Service Limited and its subsidiaries (“Trans-Island Group”) which carried out all of the Group’s transportation services. The disposal was completed on 31 October 2003, when the control of Trans-Island Group was passed to the purchaser.

The results of the transportation services for the period from 1 January 2003 to 31 October 2003, which have been included in the consolidated financial statements for the year ended 31 December 2003, were as follows:

Turnover Direct operating costs Other operating income Administrative expenses Finance costs Loss before taxation Taxation credit Net loss for the year	HK$’000 124,329 (99,712) 1,403 (45,687) (2,337) (22,004) 1,718 (20,286)

During the year ended 31 December 2003, Trans-Island Group contributed HK$26,547,000 to the Group’s net operating cash flows, HK$11,644,000 in respect of investing activities, and HK$11,205,000 in respect of financing activities.

– 100 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

45. DISPOSAL OF DISCONTINUED OPERATION (Cont’d)

The net assets of Trans-Island Group at 31 October 2003, the date of disposal, were as follows:

Property, plant and equipment
Inventories
Amounts due from group companies
Trade and other receivables
Bank balances and cash
Trade and other payables
Tax payable
Bank borrowings
Obligations under finance leases
Deferred taxation
Net assets disposed of
Unamortised goodwill
Cash consideration
Commission and related expenses
Loss on disposal of discontinued operation
Net cash inflow arising from disposal:
Cash consideration
Less: Bank balances and cash disposed of
Commission and related expenses

HK$’000
92,977
56
8,775
24,779
3,356
(39,476)
(61)
(15,152)
(18,529)
(6,332)
50,393
12,571
62,964
(36,131)
26,833
5,864
32,697
36,131
(3,356)
(5,864)
26,911

The subsidiaries disposed of during the year ended 31 December 2003 contributed HK$124,329,000 to the Group’s turnover and HK$22,004,000 to the Group’s loss before taxation for that year.

– 101 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

46. MAJOR NON-CASH TRANSACTIONS

(a) During the year ended 31 December 2003, the Group disposed of its interests in Rosedale for a consideration of HK$88,000,000 of which HK$68,000,000 was due for payment after 31 December 2003.
(b) During the year ended 31 December 2003, the Group disposed of the amount receivable from the property purchaser together with interests in other investments amounting to HK$77,200,000 and HK$22,913,000 (including HK$287,000 receivable from the investee companies) respectively to exchange for a 70% interest in an investment company which holds a 26% interest in a PRC joint venture engaged in property holding and operation of leisure services. The acquired investee company is classified as investment securities at a fair value of HK$99,258,000 at the date of completion of the transaction.
(c) During the year ended 31 December 2004, the Group entered into finance lease arrangements in respect of assets with a total capital value of HK$186,000 at the inception of the finance leases.
(d) During the year ended 31 December 2004, the consideration receivable on disposal of interest in a co-operative joint venture of HK$40,000,000 was transferred to loan receivable.
(e) During the year ended 31 December 2004, the Company issued convertible notes to finance the redemption of the convertible notes issued in 2002 and due in 2004. The total consideration of 2004 convertible notes of HK$260,000,000 was partly settled by the cancellation of 2002 convertible notes of HK$189,800,000.
(f) During the year ended 31 December 2005, the Group disposed of a computer system for online travel reservation to Sino Express Travel Limited (“Sino”), a Hong Kong and Macau travel products supplier and wholesale distributor, at a consideration of US$500,000, which was settled by 2,500,000 common shares (valued at US$0.2 per share) of Sino Express Travel Limited (“Sino USA”), the 100% holding company of Sino.

Sino USA is a company incorporated in the United States of America with its shares traded on the Pink Sheets in the United States of America.

47. ANALYSIS OF THE BALANCES OF CASH AND CASH EQUIVALENTS

Bank balances and cash Bank overdrafts	As at 31 December 2003 2004 2005 HK$’000 HK$’000 HK$’000 111,709 134,317 43,103 – (28,181) – 111,709 106,136 43,103	As at 31 December 2003 2004 2005 HK$’000 HK$’000 HK$’000 111,709 134,317 43,103 – (28,181) – 111,709 106,136 43,103
		43,103

– 102 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

48. PLEDGE OF ASSETS

Save as otherwise disclosed, at the respective balance sheet dates, the Group’s credit facilities were secured by the Group’s assets as follows:

Hotel property Property interests Bank balances	As at 31 December 2003 2004 2005 HK$’000 HK$’000 HK$’000 – 620,510 614,856 19,839 14,060 18,290 390 6,800 6,925 20,229 641,370 640,071	As at 31 December 2003 2004 2005 HK$’000 HK$’000 HK$’000 – 620,510 614,856 19,839 14,060 18,290 390 6,800 6,925 20,229 641,370 640,071
		640,071

49. CONTINGENT LIABILITIES

An undertaking to Apex to indemnify it against any potential loss upon the transfer of the land use right in relation to the disposal thereof Guarantee to the holder of the promissory note issued by a subsidiary of Apex	As at 31 December 2003 2004 2005 HK$’000 HK$’000 HK$’000 37,347 – – 365,000 – – 402,347 – –	As at 31 December 2003 2004 2005 HK$’000 HK$’000 HK$’000 37,347 – – 365,000 – – 402,347 – –
		–

For the year ended 31 December 2003, the Group also had contingent liabilities in respect of liabilities arising from claims against Trans-Island Group in connection with its businesses before the disposal. The directors consider that the final outcomes of those claims would not be material and, accordingly, no provision had been made in the financial statements.

– 103 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

50. OPERATING LEASE COMMITMENTS

As lessee

At respective balance sheet dates, the Group had commitments for future minimum lease payments under non-cancellable operating leases which fall due as follows:

Land and buildings Within one year In the second to fifth years inclusive Equipment Within one year In the second to fifth years inclusive	As at 31 December 2003 2004 2005 HK$’000 HK$’000 HK$’000 13,752 9,690 14,660 7,777 3,029 4,866 21,529 12,719 19,526 – 358 358 – 1,254 896 – 1,612 1,254	As at 31 December 2003 2004 2005 HK$’000 HK$’000 HK$’000 13,752 9,690 14,660 7,777 3,029 4,866 21,529 12,719 19,526 – 358 358 – 1,254 896 – 1,612 1,254
		19,526

		358 896
		1,254

Operating lease payments represent rentals payable by the Group for certain of its office properties, shops and employees’ quarters as well as equipment. Leases are negotiated for an average term of two years.

As lessor

Property rental income earned during the year was HK$15,713,000 (2004: HK$13,072,000 and 2003: HK$109,000).

At respective balance sheet dates, the Group had contracted with tenants for the following future minimum lease payments for its investment property and premises within the hotel properties:

Within one year In the second to fifth years inclusive After five years	As at 31 December 2003 2004 2005 HK$’000 HK$’000 HK$’000 – 11,369 13,289 – 33,577 41,570 – – 12,622 – 44,946 67,481	As at 31 December 2003 2004 2005 HK$’000 HK$’000 HK$’000 – 11,369 13,289 – 33,577 41,570 – – 12,622 – 44,946 67,481
		67,481

– 104 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

51. CAPITAL COMMITMENTS

Contracted for but not provided in the financial statements in respect of acquisition of property, plant and equipment Contracted for but not provided in the financial statements in respect of investments	As at 31 December 2003 2004 2005 HK$’000 HK$’000 HK$’000 – 30,760 30,000 – 137,697 5,462 – 168,457 35,462	As at 31 December 2003 2004 2005 HK$’000 HK$’000 HK$’000 – 30,760 30,000 – 137,697 5,462 – 168,457 35,462
		35,462

52. PROVIDENT FUND SCHEMES

The Group has retirement schemes covering a substantial portion of its employees in Hong Kong. The principal schemes are defined contribution schemes. The assets of these schemes are held separately from those of the Group in funds under the control of independent trustees.

With effect from 1 December 2000, the Group joined a Mandatory Provident Fund Scheme (“MPF Scheme”) for all its new employees in Hong Kong employed therefrom or existing employees wishing to join the MPF Scheme. The MPF Scheme is registered with the Mandatory Provident Fund Scheme Authority under the Mandatory Provident Fund Schemes Ordinance. The assets of the MPF Scheme are held separately from those of the Group in funds under the control of an independent trustee. Under the rules of the MPF Scheme, the employer and its employees are required to make contributions to the MPF Scheme at rates specified in the rules. The only obligation of the Group in respect of MPF Scheme is to make the required contributions under the MPF Scheme.

The employees of the Group’s subsidiaries in the PRC are members of the state-managed retirement benefit scheme operated by the government of the PRC. The subsidiaries are required to contribute certain percentage of their payroll costs to the retirement benefit scheme to fund the benefits. The only obligation of the Group with respect to the retirement benefit scheme is to make the specified contributions.

The amounts charged to the income statement represent contributions payable to those schemes by the Group at rates specified in the rules of the schemes less forfeiture of HK$125,032 (2004: HK$277,134 and 2003: HK$1,003,589) arising from employees leaving the Group prior to completion of the qualifying service period, if any.

At the balance sheet date, the total amount of forfeited contributions, which arose upon employees leaving the retirement benefit schemes and which are available to reduce the contributions payable in future years was HK$548,759 (2004: HK$65,025 and 2003: HK$98,530).

– 105 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

53. POST BALANCE SHEET EVENTS

Subsequent to the balance sheet date, the following events have taken place:

(a) On 1 March 2006, the Company entered into a placing agreement with Success Securities Limited (“Success Securities”) pursuant to which Success Securities conditionally agreed to place up to 175 million shares in the Company at a price of HK$0.69 per share to independent investors (the “Placing”). The Placing is conditional on, among other things, the passing of the resolution at the special general meeting by the shareholders to approve the issue of the 175 million shares under the Placing (the “Placing Shares”).

The net proceeds of approximately HK$119.7 million from the Placing are intended to be used as general working capital for the Group.

In order to facilitate the issue of the Placing Shares, the Board proposes to conduct the capital reorganisation which involves (i) the reduction of the issued share capital of the Company by HK$0.90 per existing share by cancelling an equivalent amount of paid-up capital per existing share so that the nominal value of each existing share in issue will be reduced from HK$1 to HK$0.10; and (ii) the subdivision of every unissued existing share into 10 adjusted shares.

The Placing was completed on 25 April 2006.

(b) On 23 March 2006, the Company entered into a total of eight subscription agreements in relation to the subscription by eleven subscribers of the 2% convertible exchangeable notes with an aggregated principal amount of HK$1,000 million (the “Notes”). CEL, Hutchison International Limited and the nine other subscribers have conditionally agreed to subscribe for the Notes with principal amount of HK$300 million, HK$200 million and HK$500 million by cash respectively.

The initial conversion price of the Notes is HK$0.79 per share, after the share subdivision as mentioned in note (a) above, subject to adjustments. Unless previously converted or lapsed or redeemed by the Company, the Company will redeem the Notes on the fifth anniversary from the date of issue of the Notes (the “Maturity Date”) at the redemption amount which is 110% of the principal amount of the Notes outstanding.

Each of the noteholders shall have the right to convert, on any business day commencing from the 7th day after the date of issue of the Notes up to and including the date which is 7 days prior to the Maturity Date, the whole or any part (in an amount or integral multiple of HK$1,000,000) of the principal amount of the Notes into the shares of the Company (the “Conversion Shares”) at the then prevailing conversion price.

Subject to certain restrictions which are intended to facilitate compliance of relevant rules and regulations, each noteholder shall have the right to exchange from time to time all or part (in the amount of HK$10,000,000 or integral multiples thereof) of 50% of the initial principal amount of its Notes for shares in the share capital of any company which is an affiliated company or subsidiary of the Company that is to be listed on a stock exchange through an initial public offering at the price (the “Spinoff Shares”), subject to adjustments, at which the Spin-off Shares are actually issued to the public at the time of the listing on that stock exchange. As at the date of report, the Company does not have any concrete plan as regards any spin-off proposal.

– 106 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

53. POST BALANCE SHEET EVENTS (Cont’d)

The net proceeds of approximately HK$998.8 million raised from the Notes are expected to be used by the Group for the purpose of expanding its hotel business and travel related business. The directors of the Company have been identifying suitable investment targets in the hotel and travel related business for the Group. However, as at the date of report, no negotiations for investments in any targets have been materialised or proceeded to a matured stage. To the extent that the net proceeds are not immediately applied for the above purposes, the directors of the Company intended that the net proceeds may be used to reduce the gearing of the Group.

The subscription agreements, the issue of the Notes and the issue of the Conversion Shares was approved by the shareholders of the Company in the special general meeting held on 8 May 2006.

(c) On 13 June 2006, the Group entered into an agreement with China Star Entertainment Limited, a company incorporated in Bermuda with its shares listed on the Stock Exchange, in relation to the disposal of approximately 56.91% interest in Triumph Up at a consideration of approximately HK$252,789,000. Triumph Up indirectly holds approximately 55.75% interest in Kingsway Hotel. Accordingly, the Group’s approximately 31.73% effective interest in Kingsway Hotel will be entirely disposed of.

The net proceeds from the disposal are estimated to be approximately HK$250,800,000. The Group intends to apply the net proceeds for the purpose of repayment of its borrowings and general working capital of the Group.

54. RELATED PARTY TRANSACTIONS

(a) During the year, the Group had transactions with related parties as follows:

(I) Nature of transactions Name of company Property rental expenses Cycle Company Limited and paid and payable by Gunnell Properties Limited the Group Mass Success International Limited Paul Y. Building Management Limited Air ticketing and travel Hanny Holdings Limited service income received and its subsidiaries and receivable by Paul Y. – ITC Management the Group Limited PYI Corporation Limited (formerly known as “Paul Y. – ITC Construction Holdings Limited”) and its subsidiaries See Corporation Limited (formerly known as “Ruili Holdings Limited”) China Strategic Holdings Limited and its subsidiaries	Year 2003 HK$’000 1,630 1,790 – 3,420 666 – 486 – 213	ended 31 December 2004 2005 HK$’000 HK$’000 2,266 3,734 2,268 258 – 259 4,534 4,251 1,240 1,582 – 1,415 1,965 1,147 – 492 174 236	ended 31 December 2004 2005 HK$’000 HK$’000 2,266 3,734 2,268 258 – 259 4,534 4,251 1,240 1,582 – 1,415 1,965 1,147 – 492 174 236
			4,251

			1,582 1,415 1,147 492 236

– 107 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

54. RELATED PARTY TRANSACTIONS (Cont’d)

ITC Corporation Limited and its subsidiaries Paul Y. Management Limited Cheung Wah Ho Dyestuffs Company Limited PSC Corporation Limited Cyber Business Network (Hong Kong) Limited Pacific Century Premium Developments Limited and its subsidiaries SMI Corporation Limited and its subsidiaries Mobile Media Management Limited X-One Management Limited Interest paid on Million Good Limited convertible notes Loan interest paid and Nation Cheer Investment payable by the Group Limited Million Good Limited Hanny Holdings Limited and its subsidiaries Paul Y. – ITC Management Limited Cheung Tai Hong (BVI) Limited China Strategic Holdings Limited and its subsidiaries Interest on loan receivables See Corporation Limited (formerly known as “Ruili Holdings Limited”) Net income on sale of Cyber Business Network computer program (Hong Kong) Limited source code Website maintenance Cyber Business Network services paid by (Hong Kong) Limited the Group Secondment fee paid Mass Success International Limited Secondment fee received Manwide Holdings Limited (I) Nature of transactions Name of company	266 – 17 213 – 318 118 27 11 2,335 1,696 385 1,710 1,790 – – 2,229 6,114 – 3,000 – – – Year 2003 HK$’000	153 56 – 21 233 – 68 – 3 – – – – – – – – – 3,836 4,949 2,177 359 2,051 5,138 5,256 4,323 9,742 2,799 – 1,269 – 769 1,465 6,103 18,514 20,401 76 – – – 1,200 – – 2,492 – 1,154 ended 31 December 2004 2005 HK$’000 HK$’000	153 56 – 21 233 – 68 – 3 – – – – – – – – – 3,836 4,949 2,177 359 2,051 5,138 5,256 4,323 9,742 2,799 – 1,269 – 769 1,465 6,103 18,514 20,401 76 – – – 1,200 – – 2,492 – 1,154 ended 31 December 2004 2005 HK$’000 HK$’000
			4,949

			359

			5,138 4,323 2,799 1,269 769 6,103
			20,401

			–

			–

			–

			2,492

			1,154

– 108 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

54. RELATED PARTY TRANSACTIONS (Cont’d)

Certain directors of the Company are also directors of and/or have beneficial interests in those companies.

(II) Nature of transactions Name of company Agency fees paid by Ananda Travel Service, Inc. the Group (note) Air ticketing and travel Ananda Travel Service, Inc. services income received (note) by the Group	Year 2003 HK$’000 60 7	ended 31 December 2004 2005 HK$’000 HK$’000 – – – –	ended 31 December 2004 2005 HK$’000 HK$’000 – – – –

			–

Note:

During the year ended 31 December 2003, the above company acted as the Group’s land operations in the jurisdiction in which it is located.

The Group paid an annual fee of nil (2004: nil and 2003: HK$10) to Ananda Holdings Limited for a non-exclusive licence to the Group to use the “Ananda” trademark.

Mr. Chan Yeuk Wai has minority interests in Ananda Travel Service, Inc.

(b) During the year, the Group received loans from related companies. Details of their relationships and the terms of the loans are set out in note 34.
(c) The Group maintained current accounts with related companies and associates and made certain advances to related companies. Their balances as at 31 December 2005 are set out in notes 27, 28 and 35.

Certain directors of the Company are also directors of and/or have beneficial interests in those companies.

(d) During the year ended 31 December 2004, the Group made a loan to a related company. Details of its relationship and the terms of the loan are set out in note 30(a)(v).
(e) During the year ended 31 December 2004, the Company issued convertible notes of nominal value amounting to HK$155,000,000 to CEL. Details of the convertible notes are set out in note 38. As at 31 December 2005, the related company holds the convertible notes of nil (2004: nominal value amounting to HK$55,000,000 and 2003: HK$84,800,000).

Certain directors of the Company are also directors of and/or have beneficial interests in that related company.

(f) During the year ended 31 December 2004, the Group received commission and hotel management fee of HK$3,628,000 (2003: nil) from Heilongjiang Ananda in accordance with the hotel management contract entered with Heilongjiang Ananda.

– 109 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

54. RELATED PARTY TRANSACTIONS (Cont’d)

(g) During the year ended 31 December 2003, a subsidiary of an indirect substantial shareholder pledged certain of its investments listed in Hong Kong with a lender to secure its loans to the Company. No commission or charges were paid to the subsidiary of the indirect substantial shareholder by the Group in respect of the security provided.
(h) During the year ended 31 December 2003, the Company executed a guarantee in favour of the holder of the promissory note issued by a subsidiary of Apex as security to secure the note to the extent of HK$365 million together with interest. No commission or charges were received from the Apex Group in respect of the guarantee.
(i) During the year ended 31 December 2003, two directors including a former executive director of the Company executed personal guarantees to a bank and a securities company to secure their loans granted to the Group. No commission or charges were paid to the directors by the Group in respect of the above guarantees.
(j) Compensation of key management personnel

The remuneration of directors and other members of key management during the year was as follows:

Short-term benefits Post-employment benefits	Year 2003 HK$’000 3,680 307 3,987	ended 31 December 2004 2005 HK$’000 HK$’000 6,507 3,865 69 29 6,576 3,894	ended 31 December 2004 2005 HK$’000 HK$’000 6,507 3,865 69 29 6,576 3,894
			3,894

The remuneration of directors and key executives is determined by the remuneration committee having regard to the performance of individuals and market trends.

III. SUBSEQUENT FINANCIAL STATEMENTS

No audited financial statements of the Group or any of its subsidiaries have been prepared in respect of any period subsequent to 31 December 2005.

Yours faithfully,

Deloitte Touche Tohmatsu

Certified Public Accountants Hong Kong

– 110 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

2. STATEMENT OF INDEBTEDNESS

Borrowings

At the close of business on 30 April 2006, being the latest practicable date prior to the printing of this circular, the Group had secured borrowings of approximately HK$658.8 million comprising bank loans of approximately HK$285.8 million, other loans of approximately HK$7.9 million, promissory note of HK$365.0 million and obligations under finance leases of approximately HK$0.1 million; and unsecured borrowings of approximately HK$304.3 million representing loans from related companies.

Securities and guarantees

The secured borrowings are secured by certain of the Group’s assets with carrying values of approximately HK$638.1 million.

Save as aforesaid or otherwise disclosed herein, and apart from intra-group liabilities, the Group did not have, at the close of business on 30 April 2006, any loan capital issued and outstanding or agreed to be issued, bank overdrafts, loans or other similar indebtedness, liabilities under acceptances or acceptance credits, debentures, mortgages, charges, hire purchase or finance lease commitments, guarantees, or other material contingent liabilities.

Foreign currency amounts have been translated into Hong Kong dollars at the exchange rates prevailing at the close of business on 30 April 2006.

The Directors have confirmed that, save for the issue of the Convertible Exchangeable Notes; the partial early redemption of the promissory note of HK$200.0 million; and the repayment of loans from related companies of approximately HK$141.5 million in June 2006, there has been no material change in the indebtedness and contingent liabilities of the Group since 30 April 2006 to the Latest Practicable Date.

3. WORKING CAPITAL

Taking into account the Remaining Group’s internal resources, the estimated net proceeds from the Disposal and presently available banking facilities and in the absence of any unforeseen circumstances, the Directors are of the opinion that the Remaining Group will have sufficient working capital to meet its present requirements for the next twelve months from the date of this circular.

– 111 –

UNAUDITED PRO FORMA FINANCIAL INFORMATION ON THE REMAINING GROUP

APPENDIX II

1. UNAUDITED PRO FORMA BALANCE SHEET OF THE REMAINING GROUP UPON COMPLETION OF DISPOSAL

(A) Introduction

The unaudited pro forma balance sheet of the Remaining Group has been prepared to illustrate the effect of the Disposal.

The unaudited pro forma balance sheet of the Remaining Group has been prepared in accordance with Rule 4.29 of the Listing Rules for the purpose of illustrating the effect of the Disposal as if the Disposal took place on 31 December 2005.

The unaudited pro forma balance sheet of the Remaining Group is based upon the audited consolidated balance sheet of the Group as at 31 December 2005, which has been extracted from the audited consolidated financial statements of the Group for the year ended 31 December 2005 as set out in Appendix I to this circular, after making pro forma adjustments relating to the Disposal that are (i) directly attributable to the transaction; and (ii) factually supportable.

The unaudited pro forma balance sheet of the Remaining Group is based on a number of assumptions, estimates and uncertainties. Accordingly, the accompanying unaudited pro forma balance sheet of the Remaining Group does not purport to describe the actual financial position of the Remaining Group that would have been attained had the Disposal been completed on 31 December 2005. The unaudited pro forma balance sheet of the Remaining Group does not purport to predict the future financial position of the Remaining Group.

The unaudited pro forma balance sheet of the Remaining Group should be read in conjunction with the historical information of the Group as set out in the audited consolidated financial statements of the Group for the year ended 31 December 2005 set out in Appendix I to this circular and other financial information included elsewhere in this circular.

The statement has been prepared by the Directors for illustrative purposes only and because of its nature, it may not give a true picture of financial position of the Remaining Group following completion of the Disposal.

– 112 –

UNAUDITED PRO FORMA FINANCIAL INFORMATION ON THE REMAINING GROUP

APPENDIX II

(B) Unaudited pro forma balance sheet

Non-current assets Property, plant and equipment Interest in associates Available-for-sale investments Goodwill Investment deposits Club debenture, at cost Current assets Property held for sale, at cost Inventories Amounts due from related companies Amounts due from associates Trade and other receivables Loan receivables Investments held for trading Tax recoverable Pledged bank deposits Trading cash balances Bank balances and cash Asset classified as held for sale Current liabilities Trade and other payables Loans from related companies Amounts due to associates Amounts due to related companies Obligations under finance leases – amount due within one year Borrowings – amount due within one year Net current assets Total assets less current liabilities	The Group as at 31 December 2005 HK$’000 (Audited) 1,702,860 220,422 92,625 50,862 201,419 713 2,268,901 98 6,113 65,177 122,449 324,505 180,926 9,086 37 6,925 284 43,103 758,703 4,019 762,722 277,368 361,500 11,016 48,289 62 38,325 736,560 26,162 2,295,063	Pro forma adjustments HK$’000 Notes – (199,599) – – – – (199,599) – – – (112,294) (97) – – – – – 250,800 138,409 – 138,409 – – (170) – – – (170) 138,579 (61,020)	Pro forma Remaining Group HK$’000 1,702,860 20,823 92,625 50,862 201,419 713
			2,069,302
			98 6,113 65,177 10,155 324,408 180,926 9,086 37 6,925 284 293,903
			897,112 4,019
			901,131
			277,368 361,500 10,846 48,289 62 38,325
			736,390
			164,741
			2,234,043

– 113 –

UNAUDITED PRO FORMA FINANCIAL INFORMATION ON THE REMAINING GROUP

APPENDIX II

Non-current liabilities Obligations under finance leases – amount due after one year Borrowings – amount due after one year Promissory note Deferred taxation Net assets Capital and reserves Share capital Reserves Equity attributable to shareholders of the parent Minority interests Total equity	31 271,308 365,000 244,680 881,019 1,414,044 437,586 541,390 978,976 435,068 1,414,044 The Group as at 31 December 2005 HK$’000 (Audited)	– – – – – (61,020) – 73,180 73,180 (134,200) (61,020) Pro forma adjustments HK$’000 Notes	31 271,308 365,000 244,680 Pro forma Remaining Group HK$’000
			881,019
			1,353,024

			437,586 614,570
			1,052,156 300,868
			1,353,024

Notes:

The adjustments reflect the gain on the Disposal of HK$73,180,000 attributable to the Remaining Group which are calculated based on:

(a) the net assets of HK$311,820,000 attributable to Triumph Up and its subsidiaries as at 31 December 2005 which included interest in associates of HK$199,599,000; amounts due from associates of HK$112,294,000; trade and other receivables of HK$97,000; and amounts due to associates of HK$170,000;

(b) the consideration of HK$252,789,000 and estimated legal and professional fees in relation to the Disposal of approximately HK$1,989,000; and

– 114 –

APPENDIX II UNAUDITED PRO FORMA FINANCIAL INFORMATION ON THE REMAINING GROUP

2. UNAUDITED PRO FORMA INCOME STATEMENT AND UNAUDITED PRO FORMA CASH FLOW STATEMENT OF THE REMAINING GROUP UPON COMPLETION OF DISPOSAL

(A) Introduction

The unaudited pro forma income statement and unaudited pro forma cash flow statement of the Remaining Group have been prepared to illustrate the effect of the Disposal.

The unaudited pro forma income statement and unaudited pro forma cash flow statement of the Remaining Group have been prepared in accordance with Rule 4.29 of the Listing Rules for the purpose of illustrating the effect of the Disposal as if the Disposal had taken place on 17 February 2005, which is the date of acquisition of Triumph Up by the Group, the earliest practicable date to illustrate the effect of the Disposal for the year ended 31 December 2005.

The unaudited pro forma income statement and unaudited pro forma cash flow statement of the Remaining Group are based upon the audited consolidated income statement and audited consolidated cash flow statement of the Group for the year ended 31 December 2005, which have been extracted from the audited consolidated financial statements of the Group for the year ended 31 December 2005 as set out in Appendix I to this circular, after making pro forma adjustments relating to the Disposal that are (i) directly attributable to the transaction; (ii) expected to have a continuing impact on the Remaining Group; and (iii) factually supportable.

The unaudited pro forma income statement and unaudited pro forma cash flow statement of the Remaining Group are based on a number of assumptions, estimates and uncertainties. Accordingly, the accompanying unaudited pro forma income statement and unaudited pro forma cash flow statement of the Remaining Group do not purport to describe the actual results and cash flow of the Remaining Group that would have been attained had the Disposal been completed on 17 February 2005 or to predict the future results and cash flow of the Remaining Group.

The unaudited pro forma income statement and unaudited pro forma cash flow statement of the Remaining Group should be read in conjunction with the audited consolidated financial statements of the Group for the year ended 31 December 2005 as set out in Appendix I to this circular and other financial information included elsewhere in this circular.

The statements have been prepared by the Directors for illustrative purposes only and because of their nature, they may not give a true picture of the results and the cash flow of the Remaining Group had the Disposal actually occurred on 17 February 2005 or for any future period.

– 115 –

UNAUDITED PRO FORMA FINANCIAL INFORMATION ON THE REMAINING GROUP

APPENDIX II

(B) Unaudited pro forma income statement

Turnover Direct operating costs Gross profit Other operating income Distribution costs Administrative expenses Discount on acquisition of subsidiaries Decrease in fair value of investments held for trading Increase in fair value of investment property Realised gain on derivative financial instruments Reversal of impairment loss in respect of leasehold land and buildings Reversal of impairment loss in respect of properties under construction Impairment loss recognised in respect of available-for-sale investments Finance costs Share of results of associates Loss on partial disposal of subsidiaries Loss on disposal of available-for-sale investments Gain on disposal of subsidiaries Profit before taxation Taxation credit Profit for the year Attributable to: Shareholders of the parent Minority interests	The Group for the year ended 31 December 2005 HK$’000 (Audited) 1,815,718 (1,469,298) 346,420 20,415 (53,041) (259,810) 34,574 (14,761) 619 5,650 4,874 900 (1,167) (59,376) 8,006 (3,177) – – 30,126 2,108 32,234 31,109 1,125 32,234	Pro forma adjustments HK$’000 Note 1 – – – – – – – – – – – – – – (8,403_)_ 3,177 (3,001) – (8,227) – (8,227) (4,943) (3,284) (8,227)	Pro forma adjustments HK$’000 Note 2 – – – – – – – – – – – – – – – – – 70,191 70,191 – 70,191 70,191 – 70,191	Pro forma Remaining Group HK$’000 1,815,718 (1,469,298) 346,420 20,415 (53,041) (259,810) 34,574 (14,761) 619 5,650 4,874 900 (1,167) (59,376) (397) – (3,001) 70,191 92,090 2,108 94,198 96,357 (2,159) 94,198

– 116 –

UNAUDITED PRO FORMA FINANCIAL INFORMATION ON THE REMAINING GROUP

APPENDIX II

(C) Unaudited pro forma cash flow statement

Cash flows from operating activities Profit before taxation Adjustments for: Share of results of associates Depreciation and amortisation of property, plant and equipment Interest income Interest expenses Finance lease charges Loss on disposal of property, plant and equipment Loss on partial disposal of subsidiaries Loss on disposal of available-for-sale investments Gain on disposal of subsidiaries Allowance for irrecoverable trade debts Increase in fair value of investment property Impairment loss recognised in respect of available-for-sale investments Reversal of impairment loss in respect of properties under construction Reversal of impairment loss in respect of leasehold land and buildings Discount on acquisition of subsidiaries Decrease in fair value of investments held for trading Operating cash flows before movement in working capital Movement in working capital Increase in inventories Decrease in amounts due from related companies Decrease in amounts due from associates Increase in trade and other receivables Increase in trading cash balances Increase in trade and other payables Decrease in amounts due to associates Increase in amounts due to related companies	The Group for the year ended 31 December 2005 HK$’000 (Audited) 30,126 (8,006) 60,743 (4,722) 59,358 18 480 3,177 – – 476 (619) 1,167 (900) (4,874) (34,574) 14,761 116,611 (306) 1,439 8,980 (47,407) (38) 40,697 (481) 30,113 32,997	Pro forma adjustments HK$’000 Note 3 61,964 8,403 – – – – – (3,177) 3,001 – – – – – – – – 70,191 – – – – – – – – –	Pro forma adjustments HK$’000 Note 4 – – – – – – – – – (70,191) – – – – – – – (70,191) – – – – – – – – –	Pro forma Remaining Group HK$’000 92,090 397 60,743 (4,722) 59,358 18 480 – 3,001 (70,191) 476 (619) 1,167 (900) (4,874) (34,574) 14,761 116,611 (306) 1,439 8,980 (47,407) (38) 40,697 (481) 30,113 32,997

– 117 –

UNAUDITED PRO FORMA FINANCIAL INFORMATION ON THE REMAINING GROUP

APPENDIX II

Cash generated from operations Interest paid Finance lease charges paid Taxation in other jurisdictions paid Net cash from operating activities Cash flows from investing activities Proceeds from partial disposal/disposal of subsidiaries Interest received Proceeds from disposal of property, plant and equipment Acquisition of subsidiaries Advances to related companies Net cash outflow of loans advanced to certain companies and individuals Purchase of property, plant and equipment Capital contribution to an associate Purchase of investments held for trading Payment for investment deposits Increase in pledged bank deposits Net cash (used in) from investing activities Cash flows from financing activities Proceeds from issue of new shares for cash, net of expenses of HK$6,482,0000 New bank loans and other loans raised Repayment of bank loans and other loans Net cash outflow from loans from related companies Dividends paid Dividends paid to minority shareholders of subsidiaries Repayment of obligations under finance leases Net cash from financing activities	149,608 (57,735) (18) (63) 91,792 22,800 4,722 1,671 (151,298) (60,090) (49,926) (30,040) (24,038) (21,069) (474) (125) (307,867) 199,838 14,424 (34,071) (11,376) (8,752) (6,005) (378) 153,680 The Group for the year ended 31 December 2005 HK$’000 (Audited)	70,191 – – – 70,191 – – – – – – – – – – – – – – – – – – – – Pro forma adjustments HK$’000 Note 3	(70,191) – – – (70,191) 250,800 – – – – – – – – – – 250,800 – – – – – – – – Pro forma adjustments HK$’000 Note 4	149,608 (57,735) (18) (63) 91,792 273,600 4,722 1,671 (151,298) (60,090) (49,926) (30,040) (24,038) (21,069) (474) (125) (57,067) 199,838 14,424 (34,071) (11,376) (8,752) (6,005) (378) 153,680 Pro forma Remaining Group HK$’000

– 118 –

UNAUDITED PRO FORMA FINANCIAL INFORMATION ON THE REMAINING GROUP

APPENDIX II

Net (decrease) increase in cash and cash equivalents Cash and cash equivalents at beginning of the year Effect on foreign exchange rate changes Cash and cash equivalents at end of the year	(62,395) 106,136 (638) 43,103 The Group for the year ended 31 December 2005 HK$’000 (Audited)	70,191 – – 70,191 Pro forma adjustments HK$’000 Note 3	180,609 – – 180,609 Pro forma adjustments HK$’000 Note 4	188,405 106,136 (638) 293,903 Pro forma Remaining Group HK$’000

Notes:

(1) The adjustment reflects:
(i) the exclusion of share of result of associates attributable to Triumph Up of HK$8,403,000 and profit shared by minority interests of HK$3,284,000 for the year ended 31 December 2005 as if the Disposal had been completed on 17 February 2005;
(ii) the reversal of the loss on disposal of approximately 8.13% interest in Triumph Up in July 2005, amounting to HK$3,177,000, since the approximately 8.13% interest would be classified as available-for-sale investments if the Disposal had been completed on 17 February 2006; and
(iii) the loss on disposal of available-for-sale investments, representing the approximately 8.13% interest in Triumph Up, of HK$3,001,000, comprising the proceeds from disposal of HK$22,800,000 and the carrying amount of HK$25,801,000, representing the investment cost of the approximately 8.13% interest in Triumph Up calculated on a pro-rata basis on the total investment cost.
(2) The adjustment reflects the gain on the Disposal of HK$70,191,000 attributable to the Remaining Group which is calculated based on the differences between:
(i) the consideration of HK$252,789,000 and estimated legal and professional fees in relation to the Disposal of approximately HK$1,989,000; and
(ii) the net assets of HK$317,355,000 attributable to Triumph Up and its subsidiaries as at 17 February 2005 which included interest in associates of HK$191,196,000; amounts due from associates of HK$126,232,000; trade and other receivables of HK$97,000; and amounts due to associates of HK$170,000;
(iii) less the minority interests in the net assets of Triumph Up of HK$110,945,000; and
(iv) less the carrying amount of approximately 8.13% interest in Triumph Up which would be transferred to available-for-sale investments of HK$25,801,000 as if the Disposal had been completed on 17 February 2006.
(3) The cash flows from operating activities were adjusted by the exclusion of share of result of associates attributable to Triumph Up of HK$8,403,000, reversal of loss on partial disposal of subsidiaries of HK$3,177,000 as mentioned in note 1(ii), loss on disposal of available-for-sale investments of HK$3,001,000, and gain on the Disposal of HK$70,191,000.
(4) The adjustment reflects the consideration of HK$252,789,000, net of estimated legal and professional fees in relation to the Disposal of approximately HK$1,989,000, and the gain on the Disposal of HK$70,191,000.

– 119 –

UNAUDITED PRO FORMA FINANCIAL INFORMATION ON THE REMAINING GROUP

APPENDIX II

3. ACCOUNTANTS’ REPORT ON UNAUDITED PRO FORMA FINANCIAL INFORMATION

The following is the text of a report received from Deloitte Touche Tohmatsu, for inclusion in this circular, in respect of the unaudited pro forma financial information of the Remaining Group as set out in this appendix:

==> picture [77 x 59] intentionally omitted <==

We report on the unaudited pro forma financial information of Wing On Travel (Holdings) Limited (the “Company”) and its subsidiaries (hereinafter collectively referred to as the “Group”) excluding Triumph Up Investments Limited and its subsidiaries (hereinafter referred to as the “Remaining Group”), which has been prepared by the directors of the Company for illustrative purposes only, to provide information about how the proposed disposal of approximately 56.91% interest in Triumph Up Investments Limited held by the Group might have affected the financial information presented, for inclusion in Appendix II of the circular dated 30 June 2006 (the “Circular”). The basis of preparation of the unaudited pro forma financial information is set out on Appendix II to the Circular.

Respective responsibilities of directors of the Company and reporting accountants

It is the responsibility solely of the directors of the Company to prepare the unaudited pro forma financial information in accordance with paragraph 29 of Chapter 4 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the “Listing Rules”) and with reference to Accounting Guideline 7 “Preparation of Pro Forma Financial Information for Inclusion in Investment Circulars” issued by the Hong Kong Institute of Certified Public Accountants (“HKICPA”).

It is our responsibility to form an opinion, as required by paragraph 29(7) of Chapter 4 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.

Basis of opinion

We conducted our engagement in accordance with Hong Kong Standard on Investment Circular Reporting Engagements 300 “Accountants’ Reports on Pro Forma Financial Information in Investment Circulars” issued by the HKICPA. Our work consisted primarily of comparing the unadjusted financial information with source documents, considering the evidence supporting the adjustments and discussing the unaudited pro forma financial information with the directors of the Company. This engagement did not involve independent examination of any of the underlying financial information.

– 120 –

UNAUDITED PRO FORMA FINANCIAL INFORMATION ON THE REMAINING GROUP

APPENDIX II

We planned and performed our work so as to obtain the information and explanations we considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the unaudited pro forma financial information has been properly compiled by the directors of the Company on the basis stated, that such basis is consistent with the accounting policies of the Group and that the adjustments are appropriate for the purpose of the unaudited pro forma financial information as disclosed pursuant to paragraph 29(1) of Chapter 4 of the Listing Rules.

The unaudited pro forma financial information is for illustrative purpose only, based on the judgements and assumptions of the directors of the Company, and, because of its hypothetical nature, does not provide any assurance or indication that any event will take place in the future and may not be indicative of:

the financial position of the Group as at 31 December 2005 or any future date; and
the results and cash flows of the Group for the year ended 31 December 2005 or any future period.

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(1) of the Listing Rules.

Deloitte Touche Tohmatsu

Certified Public Accountants

Hong Kong 30 June 2006

– 121 –

VALUATION REPORT ON THE HOTEL

APPENDIX III

The following is the text of a valuation report prepared for inclusion in this circular received from Wai & Ko Real Estate Ltd., being an independent valuer, in connection with its valuation of the Hotel as at 8 June 2006.

WAI & KO REAL ESTATE LTD.

Rua da Penha 20-22, Block 111, 7/b, Macau e mail. [email protected] Phone/Fax: +853 965978 Direct: +853 337476 Mobile: 6639851 Chartered Surveyors Valuers Estate Agents Chartered Arbitrators Consultants

Your Ref:

Our Ref: M/rev/3889

30 June 2006

The Directors, Wing On Travel (Holdings) Ltd., 7th Floor, Paul Y Centre, 51 Hung To Road, Kwun Tong, Kowloon, Hong Kong.

Dear Sirs,

In accordance with the recent instructions given by the management of Wing On Travel (Holdings) Limited (the “Company”) to value a property located in Macau, we confirm that we have made relevant enquiries and obtained such further information as we consider necessary to support our opinion of value of the property as at 8 June 2006 (hereinafter referred as the “date of valuation”). We understand that this report will be included in the circular of the Company for the purpose of complying the relevant requirements of the Rules Governing the Listing of Securities (the “Listing Rules”) on The Stock Exchange of Hong Kong Limited and this report is prepared in compliance with Chapter 5 of the Listing Rules.

We understand that the management of the Company will use this letter and the attached valuation certificate as part of its business due diligence and we have not been engaged to make specific sale or purchase recommendations. We further understand that the use of our work product will not supplant other due diligence, which the management of the Company should conduct, in reaching its business decisions regarding the property valued. Our work is designed solely to provide an independent valuation that will allow that management of the Company to make an informed decision.

We further understand that the management of the Company may refer to the valuation provided in this work product and provide a copy of this work product, if required, to any regulatory body or to support any public announcement that may be made by the Company.

Our valuation of the property is on the basis of Market Value and on the assumption that the subject land grant will be renewed in accordance with the laws of Macau and will be subject to payment of applicable ground rent, and the premium (if any) will not have a significant impact on the value of the property as at the date of valuation. The term Market Value is defined as “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”.

–122 –

VALUATION REPORT ON THE HOTEL

APPENDIX III

We have assumed that the property is free to dispose and transfer in the open market to both local and overseas purchasers without payment of additional premium to the government. Also, our valuation of the property has been made on the assumption that no deferred terms contract, leaseback, joint venture, management agreement or any other similar arrangement which would serve to increase the value of the property.

The property has been valued on market basis assuming sale with vacant possession. This approach considers the sales, listing or offerings of similar or substitute properties and related market data to establish a value estimate by processes involving comparison. The underlying assumption of this approach is that an investor will pay no more for a property than he or she would have to pay for a similar property of comparable utility.

We have relied solely on the information provided by the management of the Company and have fully accepted advice given to us on such matters as planning approvals or statutory notices, land use, easements, tenure, occupation, lettings, rentals, site and floor areas and all other relevant matter.

We have conducted a title search of the property at Conservatoria do Registo Predia (The Lands Registry) and obtained an Informacao Escrita (copy Title Registration) with regard to information relating to the property. However, we have not examined the original documents to verify the ownership and encumbrances or to ascertain that existence of any lease amendments, which may not appear on the copies handed to us. All documents disclosed (if any) to the property valued. Any responsibility for our misinterpretation of the documents cannot be accepted. We are not qualified to provide legal opinions, therefore, we are not in a position on advise and comment on the title and encumbrances to the property.

We have inspected the property in respect of which we have been provided with such information as we have required for the purpose of our valuation. We have not inspected those parts of the property which were covered, unexposed or inaccessible and such parts have been assumed to be in reasonable condition. We cannot express an opinion about or advise upon the condition of un-inspected parts and the attached valuation certificate should not be taken as making any implied representation or statement about such parts. No structural survey, investigation or examination has been made, but in the course of our inspection we did not note any serious defects in the property valued. We are not, however, able to report that the property is free from rot, infestation, settlement or any other defects. No tests were carried out to any of the services.

We have not carried out on-site measurements to verify the correctness of the area of the property, but have assumed that the areas shown on the documents provided to use are correct. All dimensions, measurements and areas are approximations.

Our engagement did not include land surveys to verify the legal boundaries and the exact location of the property. We need to state that we are not in the land survey profession, therefore, we are not in the position to verify or ascertain the correctness of the Company’s personnel with regard to the legal boundaries and location of the property. No responsibility is assumed.

In the course of valuation, we have solely depended on the advice given by the management of the Company. We are unable to accept any responsibility for the reliability of the advice.

–123 –

VALUATION REPORT ON THE HOTEL

APPENDIX III

No allowance has been made in our valuation for any charges, mortgage or amounts owing on the property. Unless otherwise stated, it is assumed that the property is free from encumbrances, land premium, restrictions, and outgoings of an onerous nature which could affect its valued. Should this not be the case, it might reduce the value now reported.

We are unable to accept any responsibility for the information that has not been provided to us by the management of the Company. Also, we have sought and received confirmation from the management of the Company that no material factors have been omitted from the information provided. Our analysis and valuation are based upon full disclosure between us and the Company of material and latent facts that may affect the valuations.

No responsibility is taken for changes in market conditions and no obligation is assumed to revise the attached valuation certificate to reflect events or conditions which occur subsequent to the date hereof.

To the best of our knowledge, all data set forth in the attached valuation certificate are true and accurate. Although gathered from reliable sources, no warranty is made nor liability assumed for the accuracy of any data, opinions, or estimates identified as being furnished by others which have been used in formulating the attached valuation certificate.

We have had no reason to doubt the truth and accuracy of the information provided to us by the management of the Company. We consider that we have been provided with sufficient information to reach an informed view, and have had no reason to suspect that any material information has been withheld.

The attached valuation certificate is provided for the stated purpose and for the sole use of the named Company. We accept no responsibility whatsoever to any other person in the event the named Company discloses information contained within this work product.

The attached valuation certificate is prepared in line with the ethics and guidelines as contained in the 1st Edition of the HKIS Valuation Standards on Properties published by the Hong Kong Institute of Surveyors (HKIS) which superseded the previous guidance notes published by the HKIS with effect from 1 January 2005. The valuation has been undertaken by valuer, acting as external valuer, qualified for the purpose of the valuation.

Unless otherwise stated, all monetary amounts are in Hong Kong dollars, and the adopted exchange rate was the prevailing rate as at the date of valuation, being Patacas (MOP) 1.03 per HK$1.

Our maximum liability relating to services rendered under this work product (regardless of form of action, whether in contract, negligence or otherwise) shall be limited to the charges paid to us for the portion of its services or work products giving rise to liability. In no event shall we be liable for consequential, special, incidental or punitive loss, damage or expense (including without limitation, lost profits, opportunity costs, etc,) even if it has been advised of their possible existence.

We retain a copy of this work product in our files, together with the data from which it was prepared. We consider these records confidential, and we do not permit access to them by anyone without your authorisation and prior arrangement made with us. Moreover, we will add the Company’s information into our client list for our future reference.

–124 –

VALUATION REPORT ON THE HOTEL

APPENDIX III

We hereby certify that the fee for this service is not contingent upon our conclusion of value and the valuer has neither present nor prospective interest in the property, the Company or the value reported.

We further certify that neither Wai & Ko Real Estate Ltd. nor the Directors thereof have any connection with the Company other than as retained valuers in accordance with the details set out in this letter.

The valuation certificate is attached.

Yours faithfully, For and on behalf of Wai & Ko Estate Ltd. A. G. Wilkinson

Mr. A. G. Wilkinson is a Fellow of the Royal Institution of Chartered Surveyors and a Fellow of the Hong Kong Institute of Surveyors who has been conducting assets valuation (including real estate properties) and advisory work in Hong Kong, Macau, Mainland China, Australia, New Zealand, Singapore, Malaysia, United Kingdom, Switzerland, and the United States of America for various purposes, Including advisory work for the Hong Kong Government, since 1966. He has more than 30 years of experience in valuing real estate properties in Macau.

–125 –

VALUATION REPORT ON THE HOTEL

APPENDIX III

VALUATION CERTIFICATE

Property

Land and Buildings known as Rua de Luis Gonzaga Gomes no. 176-230, Rua de Nagasaki no. 64-A-82 and Rua de Xiamen 37-A-59A, Kingsway Hotel.

Description and tenure

The property comprises a purpose built hotel with the usual accommodation compatible with its 3 star rating, standing on a rectangular site of 4,504 square metres and with a construction area of 18,165. 76 square metres.

The property is subject to a Government concession for a term of 25 years from 13 October 1989 renewable for successive periods till 19 December 2049. All property in Macau being held for that renewable term under the Basic Law.

Particulars of occupancy

The property is occupied as a 3 star hotel having 52 Car Parks in the Basement, a Ground Floor Reception, Lobby, Coffee Shop and usual offices.

First floor Casino and Shops.

Second Floor Night Club and Shops.

The 3rd, 5th-19th floors comprise 383 rooms and suites.

Current Open Market value as at 8 June 2006 HK$ HK$810,000,000

The present Government Rent payable per annum is MOP419,312.00.

Notes:

The registered owner of the property is Hotel Kingsway, Limitada.

The property is restricted in use to a Hotel for residential and commercial and car-park purposes.

Tenancy Agreements:

We are advised by the management of the Company that the tenancy agreements between Table dance, Karaoke and Sauna have expired and are not being renewed. The area occupied by these units was 2,609 square metres.

The Casino occupies an area of 1,191 square metres under an agreement between the Company and Sociedade de Jogos de Macau S.A.R.L. scheduled to expire on 16 May 2008.

We are advised that an agreement has been reached between the management of the Company and Sociedade de Jogos de Macau for the total area of 3,800 square metres to be let for use as a Casino at the annual rental of Forty million Hong Kong Dollars (HK$40,000,000.00).

Occupancy:

We are advised that the Hotel reached an occupancy of approximately 90% and 83% in 2004 and 2005 respectively.

–126 –

GENERAL INFORMATION

APPENDIX IV

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. DISCLOSURE OF INTERESTS

(a) Interests of Directors or chief executive of the Company

As at the Latest Practicable Date, the interests and short positions of the Directors or chief executive of the Company in the shares, underlying shares or debentures of the Company or any of its associated corporations (within the meaning of Part XV of the SFO), which are required (i) 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 which they are taken or deemed to have under such provisions of the SFO); or (ii) pursuant to section 352 of the SFO, to be entered in the register referred to therein; or (iii) pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers set out in Appendix 10 to the Listing Rules adopted by the Company to be notified to the Company and the Stock Exchange are as follows:

Interests in underlying Shares under equity derivatives

Details of the option granted to Director under the share option scheme of the Company adopted on 3 May 2002 and amended on 27 May 2005 are as follows:

				Number of
				shares to be
				issued upon
			Exercise price	exercise of the
Name of Directors	Date of grant	Exercisable period	per share	share option
			(HK$)
Mr. Yu Kam Kee,	22 Jun 06	22 Jun 06 to 21 Jun 08	0.728	4,000,000
Lawrence
Mr. Cheung Hon Kit	22 Jun 06	22 Jun 06 to 21 Jun 08	0.728	4,000,000
Dr. Yap, Allan	22 Jun 06	22 Jun 06 to 21 Jun 08	0.728	4,000,000
Mr. Chan Pak Cheung,	22 Jun 06	22 Jun 06 to 21 Jun 08	0.728	1,500,000
Natalis
Mr. Lui Siu Tsuen,	22 Jun 06	22 Jun 06 to 21 Jun 08	0.728	4,600,000
Richard
Mr. Kwok Ka Lap,	22 Jun 06	22 Jun 06 to 21 Jun 08	0.728	500,000
Alva
Mr. Sin Chi Fai	22 Jun 06	22 Jun 06 to 21 Jun 08	0.728	500,000

– 127 –

GENERAL INFORMATION

APPENDIX IV

(b) Interests of Shareholders discloseable pursuant to the SFO

As at the Latest Practicable Date, so far as is known to the Directors or chief executive of the Company, the following persons (other than a Director or chief executive of the Company) had an interest or short position in the Shares and underlying Shares which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO:

(i) Interests in the Shares

					Approximate
Name of	Long position/		Nature of	Number of	percentage of
Shareholder	Short position	Capacity	interest	Shares held	shareholding
Hanny Holdings	Long position	Interest of	Corporate	124,334,481	20.30%
Limited		controlled	interest
(“Hanny Holdings”)		corporations
(Note 2(a))
Hanny Magnetics	Long position	Interest of	Corporate	124,334,481	20.30%
(B.V.I.) Limited		controlled	interest
(“Hanny Magnetics”)		corporations
(Note 2(a))
Powervote	Long position	Interest of	Corporate	124,334,481	20.30%
Technology		controlled	interest
Limited		corporations
(“Powervote”)
(Note 2(a))
Well Orient Limited	Long position	Interest of	Corporate	124,334,481	20.30%
(“Well Orient”)		controlled	interest
(Note 2(a))		corporations
Group Dragon	Long position	Interest of	Corporate	124,334,481	20.30%
Investments Limited		controlled	interest
(“Group Dragon”)		corporations
(Note 2(a))
China Strategic	Long position	Interest of	Corporate	124,334,481	20.30%
(B.V.I.) Limited		controlled	interest
(“China Strategic		corporations
BVI”)(Note 2(a))
China Enterprises	Long position	Interest of a	Corporate	124,334,481	20.30%
Limited		controlled	interest
(“CEL”)(Note 2(a))		corporation
Million Good Limited	Long position	Beneficial owner	Corporate	124,334,481	20.30%
(“Million Good”)			interest
(Note 2(a))
Deutsche Bank	Long position	Person having a	Corporate	73,651,000	12.02%
Aktiengesellschaft		security interest	interest
		in shares
Gandhara Advisors	Long position	Investment	Corporate	45,000,000	7.35%
Asia Ltd. (beneficial		manager	interest
owner is Gandhara
Master Fund Ltd.)

– 128 –

GENERAL INFORMATION

APPENDIX IV

(ii) Interests in underlying Shares under equity derivatives

				Number of	Approximate
				underlying	percentage of
				Shares (under	the issued
				unlisted equity	share capital
Name of	Long position/		Nature of	derivatives of	of the
Shareholder	Short position	Capacity	interest	the Company)	Company
(a) Mr. Li	Long position	Founder of	Corporate	253,164,556	41.33%
Ka-shing		discretionary	and other
(Note 1)		trusts and	interests
		interest of
		controlled
		corporations
Li Ka-Shing	Long position	Trustee and	Other	253,164,556	41.33%
Unity Trustee		beneficiary of	interest
Corporation		a trust
Limited (as
trustee of The
Li Ka-Shing
Unity
Discretionary
Trust)
(Note 1)
Li Ka-Shing	Long position	Trustee and	Other	253,164,556	41.33%
Unity		beneficiary of	interest
Trustcorp		a trust
Limited (as
trustee of
another
discretionary
trust)
(Note 1)
Li Ka-Shing	Long position	Trustee	Other	253,164,556	41.33%
Unity Trustee			interest
Company
Limited (as
trustee of The
Li Ka-Shing
Unity Trust)
(Note 1)
Cheung Kong	Long position	Interest of	Corporate	253,164,556	41.33%
(Holdings)		controlled	interest
Limited		corporations
(“CKH”)
(Note 1)

– 129 –

APPENDIX IV

GENERAL INFORMATION

				Number of	Approximate
				underlying	percentage of
				Shares (under	the issued
				unlisted equity	share capital
Name of	Long position/		Nature of	derivatives of	of the
Shareholder	Short position	Capacity	interest	the Company)	Company
Hutchison	Long position	Interest of a	Corporate	253,164,556	41.33%
Whampoa		controlled	interest	(Note 1)
Limited		corporation
(“HWL”)
(Note 1)
Hutchison	Long position	Beneficial	Corporate	253,164,556	41.33%
International		owner	interest	(Note 1)
Limited
(“HIL”)
(Note 1)
(b) Hanny	Long position	Interest of	Corporate	379,746,835	61.99%
Holdings		controlled	interest
(Note 2(b))		corporations
Hanny	Long position	Interest of	Corporate	379,746,835	61.99%
Magnetics		controlled	interest
(Note 2(b))		corporations
Powervote	Long position	Interest of	Corporate	379,746,835	61.99%
(Note 2(b))		controlled	interest
		corporations
Well Orient	Long position	Interest of	Corporate	379,746,835	61.99%
(Note 2(b))		controlled	interest
		corporations
Group Dragon	Long position	Interest of	Corporate	379,746,835	61.99%
(Note 2(b))		controlled	interest
		corporations
China Strategic	Long position	Interest of	Corporate	379,746,835	61.99%
BVI		controlled	interest
(Note 2(b))		corporations
CEL	Long position	Interest of a	Corporate	379,746,835	61.99%
(Note 2(b))		controlled	interest
		corporation
Million Good	Long position	Beneficial	Corporate	379,746,835	61.99%
(Note 2(b))		owner	interest
(c) PMA Asian	Long position	Beneficial	Corporate	38,101,266	6.22%
Opportunities		owner	interest
Fund_(Note 3)_

– 130 –

APPENDIX IV

GENERAL INFORMATION

				Number of	Approximate
				underlying	percentage of
				Shares (under	the issued
				unlisted equity	share capital
Name of	Long position/		Nature of	derivatives of	of the
Shareholder	Short position	Capacity	interest	the Company)	Company
PMA Prospect	Long position	Beneficial	Corporate	65,316,456	10.66%
Fund_(Note 3)_		owner	interest
Diversified	Long position	Beneficial	Corporate	70,886,076	11.57%
Asian		owner	interest
Strategies
Fund_(Note 3)_
PMA Capital	Long position	Investment	Corporate	183,544,304	29.96%
Management		Manager	interest
Limited
(Note 3)
(d) DKR Capital	Long position	Interest of	Corporate	126,582,278	20.66%
Inc.		controlled	interest
(Note 4)		corporations
DKR	Long position	Interest of	Corporate	126,582,278	20.66%
Management		controlled	interest
Co. Inc.		corporations
(Note 4)
DKR Capital	Long position	Interest of	Corporate	126,582,278	20.66%
Partners LP		controlled	interest
(Note 4)		corporations
DKR Oasis	Long position	Investment	Corporate	126,582,278	20.66%
Management		manager	interest
Co. LP
(Note 4)
Oasis	Long position	Interest of	Corporate	126,582,278	20.66%
Management		controlled	interest
Holdings LLC		corporations
(Note 4)
DKR	Long position	Beneficial owner	Corporate	126,582,278	20.66%
SoundShore			interest
Oasis Holding
Fund Ltd.
(e) Gandhara	Long position	Investment	Corporate	253,164,557	41.33%
Advisors		manager	interest
Asia Ltd.
(beneficial
owner is
Gandhara Master
Fund Ltd.)

– 131 –

APPENDIX IV

GENERAL INFORMATION

				Number of	Approximate
				underlying	percentage of
				Shares (under	the issued
				unlisted equity	share capital
Name of	Long position/		Nature of	derivatives of	of the
Shareholder	Short position	Capacity	interest	the Company)	Company
(f) Michael Austin	Long position	Interest of	Corporate interest	50,697,085	9.07%
(Note 5)		controlled
		corporations
Clive Harris	Long position	Interest of	Corporate interest	50,697,085	9.07%
(Note 5)		controlled
		corporations
Highbridge	Long position	Interest of	Corporate interest	50,697,085	9.07%
GP, Ltd.		controlled
(Note 5)		corporations
Highbridge	Long position	Investment	Corporate interest	50,697,085	11.59%
International		manager
LLC
(Note 5)
Highbridge	Long position	Investment	Corporate interest	50,697,085	9.07%
Capital		manager
Management
LLC
(Note 5)
JP Morgan	Long position	Investment	Corporate interest	50,697,085	8.28%
Chase & Co.		manager
(Note 5)

Notes:

(1) Li Ka-Shing Unity Holdings Limited, of which each of Mr. Li Ka-shing, Mr. Li Tzar Kuoi, Victor and Mr. Li Tzar Kai, Richard is interested in one-third of the entire issued share capital, owns the entire issued share capital of Li Ka-Shing Unity Trustee Company Limited. Li Ka-Shing Unity Trustee Company Limited as trustee of The Li Ka-Shing Unity Trust, together with certain companies which Li Ka-Shing Unity Trustee Company Limited as trustee of The Li Ka-Shing Unity Trust is entitled to exercise or control the exercise of more than one-third of the voting power at their general meetings, hold more than one-third of the issued share capital of CKH.

In addition, Li Ka-Shing Unity Holdings Limited also owns the entire issued share capital of Li Ka-Shing Unity Trustee Corporation Limited (“TDT1”) as trustee of The Li Ka-Shing Unity Discretionary Trust (“DT1”) and Li Ka-Shing Unity Trustcorp Limited (“TDT2”) as trustee of another discretionary trust (“DT2”). Each of TDT1 and TDT2 holds units in The Li Ka-Shing Unity Trust. The discretionary beneficiaries of DT1 and DT2 are, inter alia, Mr. Li Tzar Kuoi, Victor, his wife and children and Mr. Li Tzar Kai, Richard.

Certain subsidiaries of CKH are entitled to exercise or control the exercise of one-third or more of the voting power at the general meetings of HWL. HWL holds the entire issued share capital of HIL.

By virtue of the SFO, HWL, CKH, Li Ka-Shing Unity Trustee Company Limited, TDT2, TDT1 and Mr. Li Ka-shing who is the settlor and may be regarded as a founder of each of DT1 and DT2 for the purpose of the SFO, are all deemed to be interested in 253,164,556 underlying Shares (in respect of unlisted equity derivatives of the Company) held by HIL.

– 132 –

GENERAL INFORMATION

APPENDIX IV

Pursuant to the subscription agreement dated 23 March 2006 entered into between HIL and the Company, HIL has conditionally agreed to subscribe at completion of the subscription agreement a 2% convertible exchangeable note due 2011 (the “HIL Note”) issued by the Company with a principal amount of HK$200,000,000. Completion of the subscription agreement took place on 8 June 2006. HIL or its nominee(s) is entitled to convert the HIL Note into 253,164,556 new shares of par value of HK$0.10 each in the capital of the Company on full conversion at an initial conversion price of HK$0.79 per share (subject to adjustment).

(2) (a) Million Good is a wholly-owned subsidiary of CEL, whose shares are traded on the OTC Bulletin Board in the US, which in turn is a company owned as to approximately 55.22% effective equity interest and approximately 88.79% effective voting interest by China Strategic BVI. China Strategic BVI is wholly-owned by Group Dragon.
Group Dragon is owned as to 98.92% by Well Orient. Well Orient is a wholly-owned subsidiary of Powervote which, in turn is a wholly-owned subsidiary of Hanny Magnetics. Hanny Magnetics is a wholly-owned subsidiary of Hanny Holdings. Hanny Holdings, Hanny Magnetics, Powervote, Well Orient, Group Dragon, China Strategic BVI and CEL are deemed to be interested in 124,334,481 Shares held by Million Good by virtue of the SFO.
(2) (b) Pursuant to the subscription agreement dated 23 March 2006 entered into between CEL and the Company, the Company issued a 2% convertible exchangeable note due 2011 with a principal amount of HK$300 million (the “CEL Note”) to CEL entitling the holder to convert the CEL Note into 379,746,835 new Shares of the Company at an initial conversion price of HK$0.79 per share (subject to adjustment).
(3) PMA Asian Opportunities Fund, PMA Prospect Fund and Diversified Asian Strategies Fund are wholly-controlled by PMA Capital Management Limited.

PMA Asian Opportunities Fund has total interest in 46,076,266 Shares (representing 7.52% shareholding interest), of which 38,101,266 Shares relate to its derivative interests.

PMA Prospect Fund has total interest in 77,394,456 Shares (representing 12.63% shareholding interest), of which 65,316,456 Shares relate to its derivative interests.

Diversified Asian Strategies Fund has total interest in 82,021,076 Shares (representing 13.39% shareholding interest), of which 70,886,076 Shares relate to its derivative interests.

PMA Capital Management Limited has total interest in 216,294,304 Shares (representing 35.31% shareholding interest), of which 183,544,304 Shares relate to its derivative interests.

(4) DKR Oasis Management Co. LP is controlled as to 49% by Oasis Management Holdings LLC and as to 51% by DKR Capital Partners LP which is controlled as to 50% by DKR Management Co. Inc. DKR Management Co. Inc. is controlled as to 100% by DKR Capital Inc..

DKR Capital Inc., DKR Management Co. Inc., DKR Capital Partners LP, DKR Oasis Management Co. L.P., Oasis Management Holdings LLC and DKR Soundshore Oasis Holding Fund Ltd. have total interest in 140,824,278 Shares (representing 22.99% shareholding interest), of which 126,582,278 Shares relate to its derivative interests.

(5) Highbridge GP, Ltd. is controlled as to 50% by Michael Austin and 50% by Clive Harris. Highbridge International LLC is wholly-controlled by Highbridge Master L.P. which is whollycontrolled by Highbridge GP. Ltd.. Highbridge Asia Opportunities Master L.P. is wholly-controlled by Highbridge GP, Ltd..

Highbridge Capital Management, LLC is controlled as to 55% by JP Morgan Asset Management Holdings Inc. which is wholly-controlled by JP Morgan Chase & Co..

JP Morgan Chase & Co has total interest in 60,109,085 Shares (representing 9.81% shareholding interest), of which 50,697,085 Shares relate to its derivative interests.

– 133 –

GENERAL INFORMATION

APPENDIX IV

(iii) Substantial shareholders of other members of the Group

So far as is known to the Directors or chief executive of the Company, the following persons (other than a Director or chief executive of the Company) 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 the other members of the Group as at the Latest Practicable Date:

		Percentage of
Name of subsidiary	Name of shareholder	shareholding
Silver Bay Commodities Limited	China Fortune Resources	30%
	Limited
Triumph Up Investments Limited	Mr. Chan Chak Mo	34.96%
Wing On Travel Online Limited	Fullex Limited	20%

Save as disclosed above, the Directors or chief executive of the Company are not aware that there are any other persons (not being a Director or chief executive of the Company) who, as at the Latest Practicable Date, had an interest or short position in the Shares and underlying Shares which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO, or who 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 meeting of any other members of the Group, or had any options in respect of such capital.

– 134 –

GENERAL INFORMATION

APPENDIX IV

3. COMPETING INTERESTS

As at the Latest Practicable Date, save as disclosed below, none of the Directors or their respective associates was interested in any business which competes or was likely to compete, whether directly or indirectly, with the business of the Company. The Directors confirm that the Group is capable of carrying on its businesses independently of, and at arm’s length from, the businesses as disclosed below which are considered to compete or likely compete with the businesses of the Group. The Directors also confirm that the respective management and administration of the businesses as set out below are independent from the Group.

		Description of
	Name of entity	businesses of
	which businesses	the entity which
	are considered	are considered
	to compete or	to compete or
	likely to compete	likely to compete	Nature of interest
	with the businesses	with the businesses	of the Director
Name of Director	of the Group	of the Group	in the entity
Mr. Yu Kam Kee,	Fung Choi Properties	Property investment	Director and
Lawrence	Limited	in Hong Kong	substantial
			shareholder
	City Champ Limited	Property investment	Director and
		in Hong Kong	substantial
			shareholder
	Oceanpass Holdings Ltd.	Property investment	Director and
	and its subsidiaries	in Hong Kong	substantial
			shareholder of
			Oceanpass
			Holdings Ltd.
Mr. Cheung Hon Kit	A non wholly-owned	Property business	Director
	subsidiary of	in the PRC
	Hanny Holdings
	Cheung Tai Hong	Property development	Chairman of CTHH
	Holdings Limited	and investment in	and director of
	(“CTHH”) and	Hong Kong and	its subsidiaries
	its subsidiaries	the PRC
	China Development	Property investment	Director and
	Limited	in Hong Kong	shareholder
	Artnos Limited	Property investment	Director and
		in Hong Kong	shareholder

– 135 –

GENERAL INFORMATION

APPENDIX IV

		Description of
	Name of entity	businesses of
	which businesses	the entity which
	are considered	are considered
	to compete or	to compete or
	likely to compete	likely to compete	Nature of interest
	with the businesses	with the businesses	of the Director
Name of Director	of the Group	of the Group	in the entity
	Co-Forward	Property investment	Director and
	Development Ltd.	in Hong Kong	shareholder
	Orient Centre Limited	Property investment	Shareholder
		in Hong Kong
	Super Time Limited	Property investment	Director and
		in Hong Kong	shareholder
	Asia City Holdings Ltd	Property investment	Director and
		in Hong Kong	shareholder
	Supreme Best Ltd.	Property investment	Shareholder
		in Hong Kong
Dr. Yap, Allan	Hanny Holdings	Property investment	Executive director of
	and its subsidiaries	in Hong Kong	Hanny Holdings
Mr. Lui Siu Tsuen,	Hanny Holdings and	Property investment	Executive director of
Richard	its subsidiaries	in Hong Kong	Hanny Holdings

4. SERVICE CONTRACTS

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

– 136 –

GENERAL INFORMATION

APPENDIX IV

5. MATERIAL CONTRACTS

The following contracts (not being contracts entered into in the ordinary course of business of the Group) have been entered into by the members of the Group within the two years preceding the date of this circular and are or may be material:

(i) the conditional joint venture agreement dated 11 November 2005 entered into amongst, inter alia, the Company and Guangdong China Travel Services (Holdings) Ltd. in relation to the provision of travel and related services;
(ii) the sale and purchase agreement dated 20 November 2004 entered into between Mr. Chan Chak Mo and the Vendor in relation to the sale and purchase of an 80% equity interest in Triumph Up at the consideration of HK$157,504,000 (the “Acquisition”);
(iii) the placing agreement dated 30 November 2004 entered into amongst the Company, CEL and Deutsche Bank AG, Hong Kong branch, the placing agent, in respect of the placing of 3,660 million existing shares of HK$0.01 each (the “Original Share”) before the 100 into 1 share consolidation taking effect on 15 March 2005 and capital reorganisation taking effect on 11 April 2006 at the placing price of HK$0.028 per Original Share and the conditional subscription by CEL of 3,660 million new Original Shares at the subscription price of HK$0.028 per Original Share;
(iv) the placing agreement dated 30 November 2004 entered into amongst the Company, CEL and Deutsche Bank AG, Hong Kong branch, the placing agent, in respect of the placing of 2,340 million existing Original Shares by CEL at the placing price of HK$0.028 per Original Share and the conditional subscription by CEL of 2,340 million new Original Shares at the subscription price of HK$0.028 per Original Share;
(v) the agreement dated 24 December 2004 entered into between Grand Skill Developments Limited and Wing On Travel International Limited in relation to the acquisition of the entire issued share capital of International Travel Systems Inc. at the consideration of HK$50,000,000;
(vi) the placing agreement dated 4 February 2005 entered into amongst the Company, CEL and Tai Fook Securities Company Limited, the placing agent, in respect of the placing of 6,400 million existing Original Shares by CEL at the consideration of HK$0.022 per placing Original Share and the conditional subscription by CEL of 6,400 million new Original Shares at the subscription price of HK$0.022 per Original Share;
(vii) the supplemental agreement dated 17 February 2005 entered into between Mr. Chan Chak Mo and the Vendor to amend the terms of the Acquisition;
(viii) the placing agreement dated 1 March 2006 entered into between the Company and Success Securities Limited, the placing agent, in relation to the placing of up to 175 million new Shares at the placing price of HK$0.69 per Share; and

– 137 –

GENERAL INFORMATION

APPENDIX IV

(ix) 8 conditional subscription agreements all dated 23 March 2006 entered into between the Company and each of (a) CEL, (b) Highbridge International LLC, (c) Highbridge Asia Opportunities Master L.P., (d) PMA Asian Opportunities Fund, PMA Prospect Fund, Asian Diversified Total Return Limited Duration Company and Diversified Asian Strategies Fund collectively, (e) DKR SoundShore Oasis Holding Fund Ltd., (f) Hutchison International Limited, (g) Mr. Ma Ho Man, Hoffman and (h) Gandhara Advisors Asia Ltd. in relation to the subscription of HK$1,000 million 2% convertible exchangeable note.

6. LITIGATION

As at the Latest Practicable Date, none of the members of the Group was engaged in any litigation or arbitration or claims of material importance which was known to the Directors to be pending or threatened against any member of the Group.

7. EXPERTS AND CONSENTS

The following are the qualifications of the experts who have given opinion or advice which are contained in this circular.

Name Qualification Deloitte Touche Tohmatsu (“Deloitte”) certified public accountants Wai & Ko Real Estate Ltd. (“Wai & Ko”) professional property valuer

Each of Deloitte and Wai & Ko has given and has not withdrawn its written consent to the issue of this circular with the inclusion of its letter as set out in this circular and references to its name in the form and context in which they appear respectively.

As at the Latest Practicable Date, each of Deloitte and Wai & Ko was not beneficially interested in the share capital of any member of the Group, nor did it have any right (whether legally enforceable or not) to subscribe for or to nominate persons to subscribe for securities in any member of the Group, nor did it have any interest, either direct or indirect, in any assets which had been since 31 December 2005 (being the date to which the latest published audited financial statements of the Company were made up) acquired or disposed of by or leased to or were proposed to be acquired or disposed of by or leased to any member of the Group.

– 138 –

GENERAL INFORMATION

APPENDIX IV

8. MISCELLANEOUS

(a) As at the Latest Practicable Date, there was no contract or arrangement entered into by any member of the Group subsisting at the Latest Practicable Date in which any Director was materially interested and which was significant in relation to the business of the Group.
(b) As at the Latest Practicable Date, none of the Directors had any direct or indirect interest in any assets which had been acquired, disposed of or leased to, or which are proposed to be acquired, disposed of or leased to, the Company or any of its subsidiaries since 31 December 2005 (the date to which the latest published audited financial statements of the Company were made up).
(c) The Hong Kong branch share registrars and transfer office of the Company is Secretaries Limited located at 26th Floor, Tesbury Centre, 28 Queen’s Road East, Wanchai, Hong Kong.
(d) The qualified accountant of the Company is Ms. Chan Ling, Eva, who is a fellow member of the Hong Kong Institute of Certified Public Accountants.
(e) The company secretary of the Company is Ms. Fung Mei Ling, who is an associate member of the Institute of Chartered Secretaries and Administrators and the Hong Kong Institute of Chartered Secretaries.
(f) The English texts of this circular and the accompanying form of proxy shall prevail over their respective Chinese texts.

9. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents will be available for inspection during normal business hours (Saturdays and public holidays excepted) at the head office and principal place of business of the Company in Hong Kong at 7th Floor, Paul Y. Centre, 51 Hung To Road, Kwun Tong, Kowloon, Hong Kong from the date of this circular up to and including 17 July 2006, being the date of the SGM:

(a) the memorandum of association and Bye-laws of the Company;
(b) the annual reports of the Company for each of the two years ended 31 December 2004 and 2005;
(c) the accountants’ report of the Group, the text of which is set out in Appendix I to this circular;
(d) the accountants’ report on the unaudited pro forma financial information of the Remaining Group from Deloitte, the text of which is out in Appendix II to this circular;
(e) the valuation report on the Hotel, the text of which is set out in Appendix III to this circular;

– 139 –

GENERAL INFORMATION

APPENDIX IV

(f) the material contracts referred to in the section headed “Material contracts” in this appendix;
(g) the written consents referred to in the section headed “Experts and consents” in this appendix; and
(h) a copy of each of the circulars of the Company issued pursuant to the requirements set out in Chapters 14 and/or 14A of the Listing Rules which have been issued since 31 December 2005.

– 140 –

NOTICE OF THE SGM

WING ON TRAVEL (HOLDINGS) LIMITED

(Incorporated in Bermuda with limited liability)

(Stock Code: 1189)

NOTICE IS HEREBY GIVEN that a special general meeting (the “meeting”) of Wing On Travel (Holdings) Limited (the “Company”) will be held at 8th Floor, Harcourt House, 39 Gloucester Road, Wanchai, Hong Kong on Monday, 17 July 2006 at 10:00 a.m. for the purposes of considering and, if thought fit, passing, with or without modifications, the following resolution as ordinary resolution of the Company:

ORDINARY RESOLUTION

“ THAT :–

(a) the entering into of the conditional agreement for sale and purchase dated 13 June 2006 (the “S&P Agreement”), a copy of which has been produced to the meeting marked “A” and initialled by the Chairman of the meeting for the purpose of identification, between Harvest Metro Corporation (the “Vendor”), a wholly-owned subsidiary of the Company, as vendor, China Star Entertainment Limited (the “Purchaser”) as purchaser, and the Company as the Vendor’s guarantor whereby the Vendor has agreed to sell, and the Purchaser has agreed to purchase, 350 shares of US$1.00 each, representing approximately 56.91% of the entire issued share capital of Triumph Up Investments Limited, for a consideration of HK$252,789,344.97, upon the terms and subject to the conditions therein contained, be and is hereby approved, confirmed and ratified and the transactions contemplated under the S&P Agreement be and are hereby approved; and
(b) any one director of the Company be and is hereby authorised for and on behalf of the Company to do all acts and things and execute and deliver all documents whether under the common seal of the Company or otherwise as may be necessary, desirable or expedient to carry out or to give effect to any or all transactions contemplated under the S&P Agreement.”

By Order of the Board Wing On Travel (Holdings) Limited Lui Siu Tsuen, Richard Executive Director

Hong Kong, 29 June 2006

– 141 –

NOTICE OF THE SGM

Notes:

Any member entitled to attend and vote at the meeting is entitled to appoint one or more than one proxy to attend and vote instead of such member. A proxy need not be a member of the Company. In addition, a proxy or proxies representing either an individual member or a member which is a corporation, shall be entitled to exercise the same powers on behalf of the member which he or they represent as such member could exercise.
A form of proxy for use at the meeting is enclosed.
The instrument appointing a proxy and (if required by the board of directors of the Company) the power of attorney or other authority (if any) under which it is signed, or a certified copy of such power of authority, shall be delivered to the Company’s head office and principal place of business in Hong Kong at 7th Floor, Paul Y. Centre, 51 Hung To Road, Kwun Tong, Kowloon, Hong Kong not less than forty-eight (48) hours before the time appointed for holding the meeting or adjourned meeting at which the person named in the instrument proposes to vote or, and in default the instrument of proxy shall not be treated as valid.
Completion and return of the form of proxy shall not preclude a member of the Company from attending and voting in person at the meeting or on the poll concerned and, in such event, the instrument appointing a proxy shall be deemed to be revoked.
Where there are joint holders of any share of the Company, any one of such holders may vote at the meeting either personally or by proxy in respect of such share as if he were solely entitled thereto, but if more than one of such holders be present at the meeting personally or by proxy, then the one of such holders whose name stands first on the register of members of the Company in respect of such share shall alone be entitled to vote in respect thereof. Several executors or administrators of a deceased member in whose name any share stands shall for this purpose be deemed joint holders thereof.

– 142 –

AI assistant

Guoxia Technology Co., Ltd. — Proxy Solicitation & Information Statement 2006

50736_rns_2006-06-30_2042f33b-106e-407d-93b3-df1f25b121a7.pdf

WING ON TRAVEL (HOLDINGS) LIMITED

VERY SUBSTANTIAL DISPOSAL

SOMERLEY LIMITED

CONTENTS

DEFINITIONS

DEFINITIONS

DEFINITIONS

WING ON TRAVEL (HOLDINGS) LIMITED

VERY SUBSTANTIAL DISPOSAL

INTRODUCTION

LETTER FROM THE BOARD

THE AGREEMENT

Parties:

Assets to be disposed of:

LETTER FROM THE BOARD

Consideration:

Conditions precedent:

Completion

SHAREHOLDING STRUCTURE OF TRIUMPH UP AND KINGSWAY

Before Completion

LETTER FROM THE BOARD

After Completion

USE OF PROCEEDS AND FINANCIAL EFFECT OF THE DISPOSAL

REASONS FOR THE DISPOSAL

MANAGEMENT DISCUSSION AND ANALYSIS ON THE REMAINING GROUP

Review of Operations

Travel and Related Services

Hotel and Leisure Services

Liquidity and Financial Resources

Foreign Currency Exposure

Employees

FUTURE PROSPECTS OF THE REMAINING GROUP

Travel and Related Services

Hotel and Leisure Services

LISTING RULES IMPLICATIONS

SGM

PROCEDURE FOR DEMANDING A POLL

RECOMMENDATION

FURTHER INFORMATION

1. ACCOUNTANTS’ REPORT OF THE GROUP

1. ACCOUNTANTS’ REPORT OF THE GROUP (Cont’d)

1. ACCOUNTANTS’ REPORT OF THE GROUP (Cont’d)

1. ACCOUNTANTS’ REPORT OF THE GROUP (Cont’d)

1. ACCOUNTANTS’ REPORT OF THE GROUP (Cont’d)

1. ACCOUNTANTS’ REPORT OF THE GROUP (Cont’d)

1. ACCOUNTANTS’ REPORT OF THE GROUP (Cont’d)

1. ACCOUNTANTS’ REPORT OF THE GROUP (Cont’d)

1. ACCOUNTANTS’ REPORT OF THE GROUP (Cont’d)

1. ACCOUNTANTS’ REPORT OF THE GROUP (Cont’d)

1. ACCOUNTANTS’ REPORT OF THE GROUP (Cont’d)

1. ACCOUNTANTS’ REPORT OF THE GROUP (Cont’d)

I. FINANCIAL INFORMATION

Consolidated Income Statements

Consolidated Balance Sheets

APPENDIX I

Consolidated Statements of Changes in Equity

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Consolidated Cash Flow Statements

II. NOTES TO THE FINANCIAL INFORMATION

1. GENERAL

2. APPLICATION OF HONG KONG FINANCIAL REPORTING STANDARDS

2. APPLICATION OF HONG KONG FINANCIAL REPORTING STANDARDS (Cont’d)

Business combinations

Goodwill

2. APPLICATION OF HONG KONG FINANCIAL REPORTING STANDARDS (Cont’d)

Financial instruments

Convertible notes

Classification and measurement of financial assets and financial liabilities

2. APPLICATION OF HONG KONG FINANCIAL REPORTING STANDARDS (Cont’d)

Financial assets and financial liabilities other than debt and equity securities

Derivatives and hedging

Hotel properties

2. APPLICATION OF HONG KONG FINANCIAL REPORTING STANDARDS (Cont’d)

Owner-occupied leasehold interest in land

Investment properties

2. APPLICATION OF HONG KONG FINANCIAL REPORTING STANDARDS (Cont’d)

Guoxia Technology Co., Ltd. Proxy Solicitation & Information Statement 2006