JD Logistics, Inc. — Proxy Solicitation & Information Statement 2004

Nov 23, 2004

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

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

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

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

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(Stock Code: 1172)

MAJOR AND CONNECTED TRANSACTIONS DISPOSAL OF 51% INTEREST IN CHENGDU CHUANG’S CENTRE DEVELOPMENT COMPANY LIMITED

Independent financial adviser to the Independent Board Committee (as defined herein) and the Independent Shareholders (as defined herein)

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A letter of advice from Tai Fook Capital Limited to the Independent Board Committee and the Independent Shareholders is set out on pages 15 to 24 of this circular. The recommendation of the Independent Board Committee to the Independent Shareholders is set out on page 14 of this circular.

A notice convening an extraordinary general meeting of Midas International Holdings Limited to be held at 10:00 a.m. on Thursday, 9th December, 2004 at 20th Floor, Gloucester Tower, The Landmark, 11 Pedder Street, Central, Hong Kong is set out on page 93 of this circular. A form of proxy for use at the extraordinary general meeting is enclosed. Whether or not you intend to attend the meeting, you are requested to complete the accompanying form of proxy and return it in accordance with the instructions printed thereon as soon as possible to the Company’s registrars in Hong Kong, Computershare Hong Kong Investor Services Limited at 46th Floor, Hopewell Centre, 183 Queen’s Road East, Hong Kong and in any event not less than 48 hours before the time appointed for the holding of the meeting or any adjourned meeting. Completion and return of the form of proxy will not preclude you from attending and voting at the meeting or any adjourned meeting should you so wish.

23rd November, 2004

* For identification purpose only

CONTENTS

	Page
Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
Letter from the Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	5
Letter from the Independent Board Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	14
Letter from Tai Fook Capital. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	15
Appendix I – Financial information on the Group. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	25
Appendix II – Property valuation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	77
Appendix III – General information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	85
Notice of EGM. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	93

DEFINITIONS

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

“Agreement”	the conditional agreement dated 28th October, 2004 between
	the Vendor, the Purchaser, the Guarantor and Chengdu
	Subsidiary relating to the sale and purchase of the Sale
	Shares and the Loan
“associate(s)”	has the meaning ascribed to it under the Listing Rules
“Board”	the board of Directors
“Cash Consideration”	the cash consideration in a sum of RMB100 million
	(equivalent to approximately HK$93.5 million), being part
	of the Consideration
“CCIL”	Chuang’s Consortium International Limited, a company
	incorporated in Bermuda with limited liability whose shares
	(stock code: 367) are listed on the Stock Exchange
“Chengdu Subsidiary”	Chengdu Chuang’s Centre Development Company Limited
	(成都莊士中心開發有限公司), a company established in
	the PRC and a non wholly-owned subsidiary of the Company
	in which the Vendor and the Purchaser owned 51% and
	49% of the equity interest respectively as at the Latest
	Practicable Date
“Chuang’s China”	Chuang’s China Investments Limited, a company
	incorporated in Bermuda with limited liability whose shares
	(stock code: 298) are listed on the Stock Exchange
“Company”	Midas International Holdings Limited, a company
	incorporated in the Cayman Islands with limited liability
	and whose shares (stock code: 1172) are listed on the Stock
	Exchange
“Completion”	completion of the Agreement
“Consideration”	the Cash Consideration and the Consideration Property,
	being the consideration under the Agreement
“Consideration Property”	the 6th floor of the Property with an aggregate floor area
	of approximately 4,255 sq. m., being part of the
	Consideration
“Director(s)”	director(s) of the Company

– 1 –

DEFINITIONS

“Disposal”	the disposal of the interest in Chengdu Subsidiary by the
	Vendor under the Agreement
“DTZ”	DTZ Debenham Tie Leung Limited, an independent firm of
	professional valuers for the Property Valuation
“EGM”	an extraordinary general meeting of the Company to be
	convened to consider and, if thought fit, approve the
	Agreement and the transactions contemplated thereunder
“Gold Throne”	Gold Throne Finance Limited, a company incorporated in
	the British Virgin Islands with limited liability and a wholly-
	owned subsidiary of Chuang’s China
“Group”	the Company and its subsidiaries
“Guarantor”	Sichuan Langjiu Group Company Limited (四川郎酒集團
	有限公司), a company established in the PRC and a
	subsidiary of the Purchaser
“HK$”	Hong Kong dollars, the lawful currency of Hong Kong
“Hong Kong”	the Hong Kong Special Administrative Region of the PRC
“Independent Board Committee”	the independent committee of the Board, comprising
	Mr. Shek Lai Him, Abraham, Dr. Li Sau Hung, Eddy and
	Mr. Yau Chi Ming, which has been established for the
	purpose of advising the Independent Shareholders in relation
	to the Agreement and the transactions contemplated
	thereunder
“Independent Shareholders”	independent Shareholders who are eligible to vote at the
	EGM in accordance with the requirements of the Listing
	Rules
“Latest Practicable Date”	18th November, 2004, being the latest practicable date for
	ascertaining certain information for inclusion in this circular
“Listing Rules”	the Rules Governing the Listing of Securities on the Stock
	Exchange
“Loan”	the remaining shareholder’s loan and accrued interest due
	to the Vendor by Chengdu Subsidiary of approximately
	RMB41.7 million (equivalent to approximately HK$39.0
	million) after partial set off by the transfer of the
	Consideration Property from Chengdu Subsidiary to the
	Vendor as described in the Agreement

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DEFINITIONS

“PRC”	the People’s Republic of China, which, for the purpose of
	this circular, excludes Hong Kong, the Macau Special
	Administrative Region of the PRC and Taiwan
“Property”	the commercial podium and basements of Chengdu Chuang’s
	Centre (成都莊士中心) at No. 1, Renmin South Road,
	Wuhou District, Chengdu, PRC
“Property Valuation”	the valuation on the Property and the Consideration Property
	prepared by DTZ, the text of which is set out in Appendix
	II to this circular
“Purchaser”	Luzhou Baoguang Group Company Limited (瀘洲寶光集
	團有限公司), a company established in the PRC and the
	holding company of the Guarantor
“RMB”	Renminbi, the lawful currency of the PRC
“Sale Shares”	51% equity interest in Chengdu Subsidiary currently owned
	by the Vendor
“Series B Preference Shares”	non-convertible non-voting redeemable preference shares
	with par value of HK$0.01 each in the capital of the
	Company
“SFO”	Securities and Futures Ordinance (Chapter 571 of the Laws
	of Hong Kong)
“Shareholder(s)”	holder(s) of Shares
“Share(s)”	ordinary share(s) of HK$0.10 each in the capital of the
	Company
“Share Option Scheme”	the share option scheme of the Company adopted by the
	Company on 13th December, 2001
“sq. m.”	square metre(s)
“Stock Exchange”	The Stock Exchange of Hong Kong Limited
“Tai Fook Capital”	Tai Fook Capital Limited, a licensed corporation under the
	SFO to carry out the Type 6 regulated activity (advising on
	corporate finance) and the independent financial adviser to
	the Independent Board Committee and the Independent
	Shareholders

– 3 –

DEFINITIONS

“Vendor”

“%”

Chuang’s Development (Chengdu) Limited (莊士發展（成 都）有限公司), a wholly-owned subsidiary of the Company per cent.

For the purpose of illustration only, amounts denominated in RMB in this circular have been translated into HK$ at the rate of HK$1.00 = RMB1.07. Such translation should not be construed as a representation that the amounts in question have been, could have been or could be converted at any particular rate or at all.

If there is any inconsistency between the Chinese names of the PRC entities mentioned in this circular and their English translations, the Chinese version shall prevail.

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LETTER FROM THE BOARD

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(Stock Code: 1172)

Executive Directors:

Mr. CHAN Sheung Chiu (Chairman)

Mr. KWONG Tin Lap (Managing Director) Mr. KWOK Chi Fai (Deputy Managing Director)

Ms. LI Mee Sum, Ann

Mr. TANG Chow Ming, Paul

Registered office: Century Yard, Cricket Square Hutchins Drive PO Box 2681GT, George Town Grand Cayman, Cayman Islands British West Indies

Mr. WONG Chi Sing

Non-Executive Directors:

Mr. LEE Sai Wai Mr. Dominic LAI

Independent Non-Executive Directors:

Mr. SHEK Lai Him, Abraham Dr. LI Sau Hung, Eddy Mr. YAU Chi Ming

Head office and principal place of business:

1st Floor 100 Texaco Road Tsuen Wan New Territories Hong Kong

23rd November, 2004

To the Shareholders

Dear Sir or Madam,

MAJOR AND CONNECTED TRANSACTIONS DISPOSAL OF 51% INTEREST IN CHENGDU CHUANG’S CENTRE DEVELOPMENT COMPANY LIMITED

INTRODUCTION

The Company announced on 1st November, 2004 that the Vendor entered into an agreement dated 28th October, 2004 with the Purchaser, the Guarantor and Chengdu Subsidiary whereby the Vendor agreed to dispose of and the Purchaser agreed to acquire the Sale Shares and the Loan.

The purpose of this circular is to provide you with further information regarding, among other things, the Agreement, the financial information on the Group, the Property Valuation, the recommendation of the Independent Board Committee to the Independent Shareholders and the advice of Tai Fook Capital to the Independent Board Committee and the Independent Shareholders in relation to the Agreement and the transactions contemplated thereunder, and to give you notice of the EGM to be convened for the purpose of considering and, if thought fit, approving the Agreement and the transactions contemplated thereunder by way of poll.

* For identification purpose only

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LETTER FROM THE BOARD

THE AGREEMENT

Date:

28th October, 2004

Parties:

Chuang’s Development (Chengdu) Limited (莊士發展（成都）有限公司 ), a wholly-owned subsidiary of the Company, as the Vendor

Luzhou Baoguang Group Company Limited (瀘洲寶光集團有限公司 ), a company established in the PRC and the holding company of the Guarantor, as the Purchaser

Sichuan Langjiu Group Company Limited (四川郎酒集團有限公司), a company established in the PRC and a subsidiary of the Purchaser, as the Guarantor

Chengdu Chuang’s Centre Development Company Limited (成都莊士中心開發有限公司 ), a 51% subsidiary of the Company

Assets to be sold by the Vendor:

The Vendor has agreed to sell and the Purchaser has agreed to purchase the Sale Shares and the Loan. The Sale Shares represent the 51% equity interest in Chengdu Subsidiary currently owned by the Vendor. The Loan represents the remaining shareholder’s loan and accrued interest due to the Vendor by Chengdu Subsidiary after partial set off by the transfer of the Consideration Property from Chengdu Subsidiary to the Vendor as described below. Before such partial set off, the total outstanding sum of such loan was approximately RMB62.7 million (equivalent to approximately HK$58.6 million) as at 30th September, 2004.

Conditions:

Completion of the sale and purchase of the Sale Shares and the Loan is conditional upon:

• (1) the Agreement and the transactions contemplated thereunder having been approved by the Independent Shareholders at the EGM in accordance with the relevant provisions of the Listing Rules and all relevant approvals under the Listing Rules having been obtained;

• (2) the Purchaser’s shareholders having validly executed resolutions relating to the pledge of the Purchaser’s 49% equity interest in and its shareholder’s loan advanced to Chengdu Subsidiary, the Guarantor’s board of directors having validly executed resolutions approving the guarantee by the Guarantor and Chengdu Subsidiary having issued a letter confirming the filing and record of the share pledge by the Purchaser on its register of members; and

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LETTER FROM THE BOARD

• (3) the Chengdu Foreign Economic and Trade Commission having issued document(s) in writing relating to the filing and/or approval relating to the pledge of the Purchaser’s 49% equity interest in Chengdu Subsidiary in the event that such Commission agrees to process such filing and/or approval application.

All parties shall use their best endeavours to procure the satisfaction of the conditions as soon as practicable. If any of the conditions is not satisfied (or waived by the Vendor in writing) within 60 days from the date of the Agreement (i.e. 27th December, 2004) (or such other period as the parties may agree in writing), any of the parties may by notice in writing to the other parties terminate the Agreement. In the event the condition precedent (1) or (3) above is not so fulfilled, the Vendor should refund any part of the Cash Consideration received to the Purchaser without interest. In the event the condition precedent (2) above is not so fulfilled, any part of the Cash Consideration received by the Vendor will not be refunded to the Purchaser and shall be forfeited by the Vendor. The Company will not waive condition precedent (1) in any event and the Company will consider whether conditions precedent (2) and/or (3) would be waived if necessary. The Company has no current intention to waive any of the conditions precedent. None of the conditions precedent has been fulfilled as at the Latest Practicable Date.

Consideration:

The Purchaser has agreed (i) to pay to the Vendor the Cash Consideration, being a sum of RMB100 million (equivalent to approximately HK$93.5 million); and (ii) to procure the transfer of the Consideration Property from Chengdu Subsidiary to the Vendor free from all charges, mortgages, lien, encumbrances or third party rights, in order to partially set-off the loan owing by Chengdu Subsidiary to the Vendor by approximately RMB21.0 million (equivalent to approximately HK$19.6 million) from approximately RMB62.7 million (equivalent to approximately HK$58.6 million) as at 30th September, 2004 to approximately RMB41.7 million (equivalent to approximately HK$39.0 million). The market value of the Consideration Property was approximately HK$19.8 million (equivalent to approximately RMB21.2 million) as valued by an independent property valuer, DTZ, as at 30th September, 2004. DTZ is not connected with the directors, chief executive, substantial shareholders of the Company and its subsidiaries or any of their respective associates.

The Vendor agreed to accept the Consideration Property as part of the Consideration as a result of arm’s length negotiations between the Vendor and the Purchaser, having taken into account the fact that the Consideration Property is currently subject to a tenancy with annual rental of approximately RMB0.8 million (equivalent to approximately HK$0.7 million) per annum which will be escalating thereafter for the remaining lease term expiring in 2012. The Group currently intends to hold the Consideration Property for investment purpose.

Basis of Consideration:

The Consideration was determined after arm’s length negotiations between the Vendor and the Purchaser with reference to (i) the net asset value of Chengdu Subsidiary of approximately RMB119.9 million (equivalent to approximately HK$112.1 million) as at 30th September, 2004 as adjusted by the independent valuation of the Property by DTZ of HK$250.0 million (equivalent to approximately RMB267.5 million) as at 30th September, 2004; (ii) the outstanding balance of the shareholder’s loan of approximately RMB62.7 million (equivalent to approximately HK$58.6 million) owing by Chengdu Subsidiary to the Vendor as at 30th September, 2004. The adjusted net asset value of Chengdu Subsidiary of approximately RMB119.9 million (equivalent to approximately

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LETTER FROM THE BOARD

HK$112.1 million) as at 30th September, 2004 represents (i) the revalued amount of the Property of approximately RMB267.5 million (equivalent to approximately HK$250.0 million); (ii) other assets of approximately RMB3.8 million (equivalent to approximately HK$3.6 million); and (iii) the aggregate liabilities of approximately RMB151.4 million (equivalent to approximately HK$141.5 million) (inclusive of the outstanding balance of the shareholder’s loan of approximately RMB62.7 million (equivalent to approximately HK$58.6 million) owing by Chengdu Subsidiary to the Vendor).

The aggregate value of the Consideration of approximately RMB121.0 million (equivalent to approximately HK$113.1 million) represents a discount of approximately RMB2.8 million (equivalent to approximately HK$2.6 million) or approximately 2.3%, to the aggregate value of the 51% equity interest in Chengdu Subsidiary of approximately RMB61.1 million (equivalent to approximately HK$57.1 million) as at 30th September, 2004, and the loan of RMB62.7 million (equivalent to approximately HK$58.6 million) owing by Chengdu Subsidiary to the Vendor as at 30th September, 2004. The Directors consider the discount and the terms of the Agreement (including the Consideration) to be fair and reasonable which were arrived at after arm’s length negotiations between the Vendor and the Purchaser and are in the interests of the Group and the Shareholders as a whole.

Payment terms:

Under the Agreement, the Purchaser shall pay to the Vendor the Cash Consideration as follows:

• (i) RMB1 million (equivalent to approximately HK$0.9 million) within 7 days from the date of the Agreement (which amount has been received by the Vendor at the date of the Agreement);

• (ii) RMB19 million (equivalent to approximately HK$17.8 million) on the 30th day after fulfilment of the conditions precedent;

• (iii) RMB20 million (equivalent to approximately HK$18.7 million) on the 60th day after fulfilment of the conditions precedent;

• (iv) RMB25 million (equivalent to approximately HK$23.4 million) on the 90th day after fulfilment of the conditions precedent;

• (v) RMB15 million (equivalent to approximately HK$14.0 million) on the 120th day after fulfilment of the conditions precedent; and

• (vi) RMB20 million (equivalent to approximately HK$18.7 million) on 150th day after the fulfilment of the conditions precedent.

Unless agreed by the parties otherwise, the Vendor and the Purchaser agreed that Chengdu Subsidiary shall not dispose of, mortgage or do any act in a way unsatisfactory to the Vendor on any part of the Property prior to the fulfilment of the conditions precedent to the Agreement. After the fulfilment of the conditions precedent, Chengdu Subsidiary can sell the Property (other than the Consideration Property) at an aggregate consideration of not less than approximately RMB249.2 million (equivalent to approximately HK$232.9 million).

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LETTER FROM THE BOARD

The Vendor and the Purchaser have agreed to procure Chengdu Subsidiary to deposit the proceeds from any sales of the Property into a designated bank account to be operated and controlled by the Vendor. The Vendor and the Purchaser have agreed to procure Chengdu Subsidiary to lend such proceeds (after deducting relevant taxes and other expenses) as loans to the Purchaser for immediate payment of the Cash Consideration, which amount shall be paid from such bank account directly to the Vendor until the Cash Consideration has been settled in full. Such loans to be advanced by Chengdu Subsidiary to the Purchaser will therefore not exceed the Cash Consideration. The Purchaser shall pay to the Vendor on each payment date any shortfall if such proceeds shall be less than the Cash Consideration as described above.

The Purchaser has agreed to procure Chengdu Subsidiary to transfer the Consideration Property to the Vendor free from all charges, mortgages, lien, encumbrances or third party rights within 60 days after the fulfilment of all conditions precedent.

Security for Payment of the Consideration:

In order to secure the performance of the Purchaser’s obligations under the Agreement:

• (i) the Purchaser has agreed to provide valid shareholders’ resolutions of the Purchaser to pledge its 49% equity interest in Chengdu Subsidiary and its shareholder’s loan advanced to Chengdu Subsidiary to the Vendor. If the Purchaser is unable to pay the Cash Consideration on each payment date, the Vendor has the right to sell such interest and shareholder’s loan by public auction, and to pay any sum owing to the Vendor from the proceeds of such auction;

• (ii) if the Purchaser is unable to pay the Cash Consideration on each payment date, the Purchaser agrees and authorises the Vendor to sell the Property (other than the Consideration Property) by public auction, and to pay any sum owing to the Vendor from the proceeds of such auction; and

• (iii) the Guarantor has agreed to guarantee the obligations of the Purchaser (including the obligations to pay the Cash Consideration and to procure Chengdu Subsidiary to transfer the Consideration Property to the Vendor) and provide valid board resolutions of the Guarantor to guarantee the performance of all the obligations of the Purchaser under the Agreement.

Completion:

After fulfilment (or waiver by the Vendor) of all the conditions precedent, Completion shall take place on the first business day after the Vendor’s receipt of the Cash Consideration in full and the approval of the transfer of the Consideration Property to the Vendor by the relevant property ownership registration authority, or any other date as the Vendor and the Purchaser may otherwise agree. The Company will cease to hold any interest in Chengdu Subsidiary and Chengdu Subsidiary will cease to be a subsidiary of the Company upon Completion. The whole amount of the Loan will be assigned to the Purchaser upon Completion.

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LETTER FROM THE BOARD

INFORMATION ON THE GROUP

The Group is principally engaged in printing and property investment. The printing business focuses on two major sectors: books and paper products printing. The books printing division is the Group’s exporting arm serving clients in the United States, Europe, Australia and New Zealand. The paper products printing division provides services to manufacturers in the PRC and greeting cards and paper products printing services to customers overseas and in Hong Kong. The Group’s property investments provide a stable source of rental income.

INFORMATION ON THE PURCHASER AND THE GUARANTOR

The Purchaser is a company incorporated in the PRC and is controlled by Mr. Wang Junlin. Other than his interest in Chengdu Subsidiary, Mr. Wang Junlin is an independent third party and is not connected with the directors, chief executive, substantial shareholders of the Company and its subsidiaries or any of their respective associates. The Purchaser holds 49% equity interest in Chengdu Subsidiary and 80% interest in the Guarantor.

Save as disclosed herein, neither the Purchaser, the Guarantor nor their ultimate beneficial owners is connected with the directors, chief executive, substantial shareholders of the Company and its subsidiaries or any of their respective associates.

INFORMATION ON CHENGDU SUBSIDIARY AND THE PROPERTY

Chengdu Subsidiary is a company incorporated in the PRC and is owned as to 51% and 49% by the Vendor (which is a wholly-owned subsidiary of the Company) and the Purchaser respectively. Chengdu Subsidiary holds the entire interest in the Property, which is Chengdu Subsidiary’s principal asset. Prior to Completion, the Vendor and the Purchaser have nominated four directors and three directors to the board of Chengdu Subsidiary respectively. Such directors nominated by the Vendor will resign upon Completion.

As at 31st December, 2003, the audited net asset value of Chengdu Subsidiary amounted to approximately RMB19.0 million (equivalent to approximately HK$17.8 million). For the year ended 31st December, 2002, both the audited net loss before taxation and the audited net loss after taxation of Chengdu Subsidiary amounted to approximately RMB0.8 million (equivalent to approximately HK$0.7 million). For the year ended 31st December, 2003, both the audited net loss before taxation and the audited net loss after taxation of Chengdu Subsidiary amounted to approximately RMB3.2 million (equivalent to approximately HK$3.0 million). For the nine months ended 30th September, 2004, both the unaudited net loss before taxation and the unaudited net loss after taxation of Chengdu Subsidiary amounted to approximately RMB1.1 million (equivalent to approximately HK$1.0 million).

The Property has a gross floor area of 41,584 sq. m. comprising a 7-storey commercial podium and three levels of basements. The Consideration Property is the entire 6th floor of the commercial podium with an aggregate floor area of about 4,255 sq. m.. The carparks located in the basements and commercial podium of the Property (including the Consideration Property) are leased to an independent third party for a respective term of three years and ten years expiring in March 2006 and October 2012.

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LETTER FROM THE BOARD

REASONS FOR AND BENEFITS OF THE AGREEMENT

The Property is held by the Group for investment purpose. Based on the existing tenancy agreements of the Property (excluding the Consideration Property), the annual rental income foregone by the Group as a result of the Disposal amounted to approximately RMB14.8 million. However, the Directors are of the view that the sale of Chengdu Subsidiary could allow the Group to consolidate its resources in the continuing development of the Group’s printing business. The Directors believe that the Disposal represents an opportunity that would effectively allow the Group to realize its interest in the Property at a selling price which is comparable to the prevailing market valuation.

In addition, given that (i) the Disposal would give rise to an estimated gain of approximately HK$8.2 million based on the Consideration of approximately HK$113.1 million, the Group’s book costs of approximately HK$98.9 million as at 30th September, 2004 and PRC taxes and transaction costs of approximately HK$6.0 million; and (ii) the Consideration Property is currently subject to a tenancy with annual rental of approximately RMB0.8 million (equivalent to approximately HK$0.7 million) per annum and will be escalated for the remaining lease term, the Directors are of the view that the Agreement and the transactions contemplated thereunder are in the interests of the Group and the Shareholders as a whole. It is currently expected that the estimated gain of HK$8.2 million will be realized by the Group for the financial year ending 31st December, 2005, and the Disposal will increase the consolidated net asset value of the Group by approximately HK$8.2 million, being the book gain as a result of the Disposal.

USE OF PROCEEDS

The proceeds from the Disposal, before expenses, amounted to RMB100 million (equivalent to about HK$93.5 million) will be used for working capital purpose for expansion of its existing core businesses. The Group intends to hold the Consideration Property for investment purpose.

PROSPECTS OF THE GROUP

The Group’s core printing business has shown continuous growth in turnover and profit. For the year ended 31st December, 2003, the Group’s turnover increased by 18% to HK$675.2 million and net profit increased by 5% to HK$52.4 million compared with the previous corresponding period. As referred to in the interim report of the Company for the six months ended 30th June, 2004, the turnover of the Group increased by 12% to HK$307.7 million whereas the unaudited consolidated net profit of the Group amounted to approximately HK$22.2 million, representing an increase of approximately 9.4% compared with the previous corresponding period.

The Group is optimistic about the sales and business environment for printing business as the export trend to overseas market is increasing gradually and the domestic growth rate in the PRC market is steadily increasing. To enrich its core competence, the Group has monitored the market demand and technological requirements and will continue to invest in new technology in prepress, additional printing and post-press machines, and expansion of production plants and staff quarters. The Group is exploring the feasibility of investment in printing business and the establishment of new production plants in other areas of the PRC.

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LETTER FROM THE BOARD

IMPLICATIONS UNDER THE LISTING RULES

The Agreement constitutes a major transaction of the Company under Rule 14.06 of the Listing Rules. As Chengdu Subsidiary is a non wholly-owned subsidiary of the Company in which the Vendor and the Purchaser own 51% and 49% of its equity interest respectively, the Purchaser is a connected person of the Company under Rule 14A.11 of the Listing Rules. The Guarantor is a subsidiary of the Purchaser, and is therefore also a connected person of the Company. As such, the Agreement and the transactions contemplated thereunder (including the proposed loans by Chengdu Subsidiary to the Purchaser for payment of the Cash Consideration to the Vendor and the Guarantor’s role) also constitute connected transactions of the Company under the Listing Rules.

The Agreement and the transactions contemplated thereunder are subject to the approval of the Independent Shareholders at the EGM by way of an ordinary resolution in accordance with the requirements of the Listing Rules, which will be taken by poll. So far as the Company is aware, no Shareholder is required to abstain from voting on the ordinary resolution regarding the Agreement and the transactions contemplated thereunder.

The proposed loans of proceeds from sales of the Property by Chengdu Subsidiary to the Purchaser for immediate payment of the Cash Consideration described above has been disclosed by the Company by an announcement dated 1st November, 2004 in accordance with Rule 13.13 of the Listing Rules.

THE INDEPENDENT BOARD COMMITTEE

The Independent Board Committee, comprising Mr. Shek Lai Him, Abraham, Dr. Li Sau Hung, Eddy and Mr. Yau Chi Ming being the independent non-executive Directors, has been formed to advise the Independent Shareholders in respect of the Agreement and the transactions contemplated thereunder. Tai Fook Capital has been appointed as the independent financial adviser to advise the Independent Board Committee and the Independent Shareholders in this regard.

EGM

Set out on page 93 of this circular is a notice convening the EGM which will be held at 10:00 a.m. on Thursday, 9th December, 2004 at 20th Floor, Gloucester Tower, The Landmark, 11 Pedder Street, Central, Hong Kong, at which an ordinary resolution will be proposed to approve the Agreement and the transactions contemplated thereunder by way of poll.

The form of proxy for use by the Shareholders at the EGM is enclosed with this circular. Whether or not you intend to attend the EGM, you are requested to complete the accompanying form of proxy in accordance with the instructions printed thereon and return it as soon as possible to the Company’s registrars in Hong Kong, Computershare Hong Kong Investor Services Limited at 46th Floor, Hopewell Centre, 183 Queen’s Road East, Hong Kong, and in any event not less than 48 hours before the time appointed for the holding of the EGM or any adjourned meeting thereof. Completion and return of a form of proxy will not preclude you from attending and voting in person at the EGM or any adjourned meeting should you so desire.

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LETTER FROM THE BOARD

RECOMMENDATION

Your attention is drawn to the letter from the Independent Board Committee to the Independent Shareholders set out on page 14 of this circular. The Independent Board Committee, taking into account the advice of Tai Fook Capital, the text of which is set out on pages 15 to 24 of this circular, considers that the terms of the Agreement and the transactions contemplated thereunder are fair and reasonable and are in the interests of the Shareholders and the Group as a whole. Accordingly, the Independent Board Committee recommends the Independent Shareholders to vote in favour of the ordinary resolution set out in the notice of the EGM to approve the Agreement and the transactions contemplated thereunder.

FURTHER INFORMATION

Your attention is drawn to the text of the letters from the Independent Board Committee and Tai Fook Capital respectively containing their opinions regarding the Agreement and the transactions contemplated thereunder.

Your attention is also drawn to the financial information on the Group, the Property Valuation and the general information as set out in the appendices to this circular.

Yours faithfully, For and on behalf of the Board of Midas International Holdings Limited CHAN Sheung Chiu

Chairman

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LETTER FROM THE INDEPENDENT BOARD COMMITTEE

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(Stock Code: 1172)

23rd November, 2004

To the Independent Shareholders

Dear Sir or Madam,

MAJOR AND CONNECTED TRANSACTIONS DISPOSAL OF 51% INTEREST IN CHENGDU CHUANG’S CENTRE DEVELOPMENT COMPANY LIMITED

As the Independent Board Committee, we have been appointed to advise you in connection with the Agreement and the transactions contemplated thereunder. Details of the Agreement and the transactions contemplated thereunder are set out in the letter from the Board contained in the circular to the Shareholders dated 23rd November, 2004 (the “Circular”), of which this letter forms part. Terms defined in the Circular shall have the same meanings when used herein unless the context otherwise requires.

Having considered the terms of the Agreement and the transactions contemplated thereunder and the advice of Tai Fook Capital in relation thereto as set out on pages 15 to 24 of the Circular, we are of the opinion that the terms of the Agreement and the transactions contemplated thereunder are fair and reasonable and are in the interests of the Group and the Shareholders (including the Independent Shareholders) as a whole. We therefore recommend that you vote in favour of the ordinary resolution to be proposed at the EGM to approve the Agreement and the transactions contemplated thereunder.

Yours faithfully,

Independent Board Committee

Shek Lai Him, Abraham Li Sau Hung, Eddy Independent Non-Executive Director Independent Non-Executive Director

Yau Chi Ming

Independent Non-Executive Director

* For identification purpose only

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LETTER FROM TAI FOOK CAPITAL

The following is the text of a letter of advice received from Tai Fook Capital in respect of the Agreement, and is prepared for the purpose of inclusion in this circular:–

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25th Floor New World Tower 16-18 Queen’s Road Central Hong Kong 23 November 2004

To the Independent Board Committee and the Independent Shareholders Midas International Holdings Limited

Dear Sirs,

MAJOR AND CONNECTED TRANSACTIONS

INTRODUCTION

We refer to our appointment as the independent financial adviser to advise the Independent Board Committee and the Independent Shareholders in respect of the terms of the Agreement and the transactions contemplated thereunder, details of which are contained in the circular dated 23 November 2004 (the “Circular”) issued by the Company to the Shareholders of which this letter forms part. Terms used in this letter shall have the same respective meanings in the Circular unless the context otherwise requires.

As stated in the letter from the Board contained in the Circular, the Agreement constitutes a major transaction for the Company under Rule 14.06 of the Listing Rules. As Chengdu Subsidiary is a non wholly-owned subsidiary of the Company in which the Vendor and the Purchaser own 51% and 49% of its equity interest respectively, the Purchaser is a connected person of the Company under Rule 14A.11 of the Listing Rules. As such, the Agreement and the transactions contemplated thereunder (including the proposed advances by Chengdu Subsidiary to the Purchaser for the purpose of satisfying the Cash Consideration) constitute connected transactions for the Company under the Listing Rules.

The Agreement and the transactions contemplated thereunder are subject to the approval by the Independent Shareholders at the EGM in accordance with the requirements of the Listing Rules, which will be taken by poll. So far as the Directors are aware, no Shareholder is required to abstain from voting on the resolution regarding the Agreement and the transactions contemplated thereunder.

In our capacity as the independent financial adviser to the Independent Board Committee and the Independent Shareholders, our role is to provide you with an independent opinion and recommendations as to whether the terms of the Agreement and the transactions contemplated thereunder are fair and reasonable and in the interests of the Shareholders and the Group as a whole. The Independent Board Committee, the composition of which is set out in the letter from the Board contained in the Circular, has also been established to advise the Independent Shareholders in respect of the terms of the Agreement and the transactions contemplated thereunder.

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LETTER FROM TAI FOOK CAPITAL

KEY ASSUMPTIONS MADE

In formulating our recommendations, we have relied on the information and facts supplied and representations expressed by the Directors and/or the management of the Group. We have been advised by the Directors and/or the management of the Group that no material facts have been omitted from the information supplied and representations expressed to us and we are not aware of any facts or circumstances which would render such information and representations untrue, inaccurate or misleading. We have assumed that the information contained and representations made or referred to in the Circular were complete, true and accurate at the time they were made and continue to be so at the date of despatch of the Circular. We have also discussed with the Directors and/or the management of the Group with respect to the terms of and reasons for the terms of the Agreement, and considered that we have reviewed sufficient information to reach an informed view and have no reason to doubt the completeness, truth or accuracy of the information and facts provided and representations made to us. We have not, however, conducted an independent investigation into the business and affairs of the Group.

PRINCIPAL FACTORS AND REASONS CONSIDERED

In formulating our opinion in respect of the terms of the Agreement and the transactions contemplated thereunder and their effects on the Group and the Independent Shareholders as a whole, we have considered the following principal factors and reasons:

I. Background and the reasons for the entering into of the Agreement

The Group’s principal business activities

The Group is principally engaged in printing and property investment. The Group’s printing businesses focus on two major sectors: books printing and paper products printing. The Group’s books printing division is the Group’s exporting arm which serves clients in the United States, Europe, Australia and New Zealand. The Group’s paper products printing division provides services to manufacturers in the PRC, greeting cards and paper products printing services to customers overseas and in Hong Kong. The Group’s property investment generates a stable source of rental income to the Group.

Principal terms of the Agreement

The principal terms of the Agreement are as follows:

• (i) the Vendor agreed to dispose of and the Purchaser agreed to acquire the Sale Shares and the Loan. The Sale Shares represent the 51% interest in Chengdu Subsidiary currently held by the Vendor and the principal asset of Chengdu Subsidiary is the Property;

• (ii) the Purchaser has agreed (i) to pay to the Vendor the Cash Consideration, being a sum of RMB100 million (equivalent to approximately HK$93.5 million); and (ii) to procure the transfer of the Consideration Property from Chengdu Subsidiary to the Vendor free from all charges, mortgages, lien, encumbrances or third party rights;

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LETTER FROM TAI FOOK CAPITAL

• (iii) the outstanding balance of the Loan amounted to approximately RMB41.7 million (equivalent to approximately HK$39.0 million), represented the remaining amount of the shareholder’s loan and accrued interest owed by Chengdu Subsidiary to the Vendor as at 30 September 2004 after the partial set-off of RMB21.0 million (equivalent to approximately HK$19.6 million) against the transfer of the Consideration Property to the Vendor. Before such partial set-off, the total outstanding shareholder’s loan and accrued interest owed by Chengdu Subsidiary to the Vendor amounted to approximately RMB62.7 million (equivalent to approximately HK$58.6 million) as at 30 September 2004. Upon Completion, the Loan owed by Chengdu Subsidiary to the Vendor would be assigned by the Vendor to the Purchaser;

• (iv) unless agreed by the parties otherwise, the Vendor and the Purchaser agreed that Chengdu Subsidiary shall not dispose of, mortgage or do any act in a way unsatisfactory to the Vendor on any part of the Property prior to the fulfilment of the conditions precedent to the Agreement;

• (v) following the fulfilment of the conditions precedent to the Agreement, Chengdu Subsidiary cannot sell the Property (other than the Consideration Property) at an aggregate consideration of less than approximately RMB249.2 million (equivalent to approximately HK$232.9 million); and

• (vi) the Vendor and the Purchaser have agreed to procure Chengdu Subsidiary to deposit the proceeds from any sales of the Property into a designated bank account to be operated and controlled by the Vendor. The Vendor and the Purchaser have also agreed to procure Chengdu Subsidiary to lend such proceeds (after deducting relevant taxes and other expenses) as loans to the Purchaser for immediate payment, which amount shall be paid from such bank account directly to the Vendor until the Cash Consideration has been settled in full. Such loans to be advanced by Chengdu Subsidiary to the Purchaser will therefore not exceed the Cash Consideration. The Purchaser shall pay to the Vendor on each payment date any shortfall if such proceeds shall be less than the Cash Consideration as described above.

The Property

The Property is located in Chengdu, Sichuan Province, the PRC and comprises a seven-storey commercial podium and three levels of basement. The aggregate gross floor area of the Property is 41,584 sq. m.. The Consideration Property is the entire 6th floor of the commercial podium with an aggregate floor area of about 4,255 sq. m.. The carparks (which are situated in the basements of the Property) and commercial podium of the Property (including the Consideration Property) are currently leased to an independent third party for tenure ranging from three years to ten years. As informed by the Directors, the tenancies of the carparks and commercial podium of the Property (including the Consideration Property) would continue after Completion.

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LETTER FROM TAI FOOK CAPITAL

Financial performance of the Group’s printing business

As referred to in the Company’s interim report for the six months ended 30 June 2004, the Group’s turnover increased by approximately 12% to approximately HK$307.7 million, whilst the Group’s unaudited consolidated net profit increased by approximately 9.4% to approximately HK$22.2 million for the six months ended 30 June 2004.

As set out in the letter from the Board contained in the Circular, the Group is optimistic about the sales and business environment for its printing business as the export trend to overseas markets is increasing gradually and the domestic growth rate in the PRC market is steadily increasing. In order to enhance its core competence, the Group has monitored the market demand and technological requirements and will continue to invest in new technologies in prepress, additional printing and post-press machines, and expansion of production plants and staff quarters. The Group is exploring the feasibility of investment in printing business and the establishment of new production plants in other areas of the PRC.

Set out below is a summary of the segment results of the Group’s printing business for each of the two years ended 31 December 2003 as extracted from the annual report of the Company for the year ended 31 December 2003:–

	Year ended 31 December	Year ended 31 December
	2002	2003
Figures in HK$’000
Turnover of the Group: (A)	574,090	675,237
Segment revenue: (B)	569,375	660,361
Segment revenue as a percentage of the
Group’s turnover: (B)/(A)	99.2%	97.8%
Segment results before interests and tax: (C)	53,693	54,488
Segment net assets_(Note)_: (D)	228,477	271,403
Return on net assets of the Group’s
printing business: (C)/(D)	23.5%	20.1%

Note: Segment net assets represent the differences between the segment assets and segment liabilities in respect of the Group’s printing business as extracted from the annual report of the Company for the year ended 31 December 2003.

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LETTER FROM TAI FOOK CAPITAL

Financial performance of Chengdu Subsidiary

Set out below are the results of Chengdu Subsidiary for each of the two years ended 31 December 2003 based on its audited financial statements:–

	Year ended 31 December	Year ended 31 December
	2002	2003
Figures in thousands
Turnover of Chengdu Subsidiary	RMB1,993	RMB12,367
	(equivalent to	(equivalent to
	approximately	approximately
	HK$1,863)	HK$11,558)
Net profit before bank interests,	RMB468	RMB4,575
interest charges on the outstanding	(equivalent to	(equivalent to
amount of shareholders’ loans and tax	approximately	approximately
	HK$437)	HK$4,276)
Net assets (adjusted by adding back	RMB134,254	RMB137,213
the outstanding amount of shareholders’	(equivalent to	(equivalent to
loans and accrued interests as at the	approximately	approximately
respective year end dates)(Note)	HK$125,471)	HK$128,236)
Return on net assets of Chengdu Subsidiary	0.35%	3.33%
Note: Without taking into account the revalued amount of the Property as at 30 September 2004.
Indicative return on net assets of Chengdu
Subsidiary if the revalued amount of the
Property as at 30 September 2004 is taken
into account	0.20%	1.94%

In assessing the financial performance of Chengdu Subsidiary, we have noted that Chengdu Subsidiary incurred interest expenses in relation to the loan advanced by its shareholders. In order to determine the financial performance of Chengdu Subsidiary, we have (i) used the net profit before bank interests, interest charges on the outstanding amount of shareholders’ loans and tax of Chengdu Subsidiary; and (ii) adjusted the net asset value of Chengdu Subsidiary by adding back the outstanding amount of shareholders’ loans and accrued interests.

Rationale for the Disposal

The Directors are of the view that the disposal of the Group’s interest in Chengdu Subsidiary could allow the Group to consolidate its resources in the continuing development of the Group’s printing business. The Directors also believe that the disposal of the Group’s interest in Chengdu Subsidiary represents an opportunity that would effectively allow the Group to realise its interest in the Property at a selling price which is comparable to the prevailing market valuation.

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LETTER FROM TAI FOOK CAPITAL

Overall

Given that the redeployment of the proceeds from the Disposal to the Group’s printing business can generate a much better return to the Shareholders in the long run as illustrated by the financial performances of the Group’s printing business and Chengdu Subsidiary set out above, we are of the view that it is desirable for the Group to realise its investment at the Consideration which is fair and reasonable and in the interests of the Shareholders and the Group as a whole (as explained in section II of this letter).

The Directors believe that the Disposal effectively protects the Group from market risk as it would take a considerable amount of effort and time to market and successfully sell all the units of the Property to different purchasers at optimal prices. The Disposal also allows the Group to recognise an immediate gain on disposal of approximately HK$8.2 million after taxation. As such, we concur with the Directors’ view that the one-off disposal of the Group’s 51% equity interest in Chengdu Subsidiary and the Loan to the Purchaser offers the Group a good opportunity to dispose of its entire interest in the Property on a one-off basis.

II. Consideration

Composition of the Consideration

As referred to in the letter from the Board contained in the Circular, the Consideration comprises (i) the Cash Consideration, which amounted to RMB100 million (equivalent to approximately HK$93.5 million); and (ii) the Consideration Property, which was valued by DTZ at approximately RMB21.2 million (equivalent to approximately HK$19.8 million) as at 30 September 2004.

The Consideration

As stated in the letter from the Board contained in the Circular, the aggregate value of the Consideration of RMB121.0 million (equivalent to approximately HK$113.1 million) represents a discount of approximately RMB2.8 million (equivalent to approximately HK$2.6 million) or approximately 2.3% (the “Chengdu Subsidiary Discount”) as compared to the sum of (i) the unaudited adjusted net asset value of Chengdu Subsidiary (as adjusted by the independent valuation of the Property by DTZ of HK$250 million (equivalent to approximately RMB267.5 million) as at 30 September 2004) attributable to the Sale Shares of RMB61.1 million (equivalent to approximately HK$57.1 million) as at 30 September 2004; and (ii) the outstanding amount of the shareholder’s loan of approximately RMB62.7 million (equivalent to approximately HK$58.6 million) owed by Chengdu Subsidiary to the Vendor as at 30 September 2004, which is equivalent to RMB123.8 million (equivalent to approximately HK$115.7 million).

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LETTER FROM TAI FOOK CAPITAL

In evaluating the fairness and reasonableness of the Chengdu Subsidiary Discount, we have identified the following companies whose shares are listed on the Stock Exchange (the “Comparable Companies”) which are principally engaged in property investment or property development in the PRC:

			Premium/(discount)
			of the market
			capitalisation of
			the Comparable
			Company as at the
		Consolidated net	Latest Practicable
	Market	asset value based	Date as compared
	capitalisation as	on the latest	with its audited
	at the Latest	published	consolidated net
Issuer	Practicable Date	audited accounts	asset value
	(HK$’ million)	(HK$’ million)
Beijing North Star Company	3,061.9	4,637.8	(34.0%)
Limited			(Note)
China Resources Land Limited	1,953.5	3,979.3	(50.9%)
Henderson China Holdings Limited	1,941.3	7,036.5	(72.4%)
Hopson Development Holdings
Limited	2,006.0	2,694.4	(25.5%)
New World China Land Limited	4,512.9	16,369.2	(72.4%)
Shanghai Land Holdings Limited	1,052.7	2,088.5	(49.6%)
Shanghai Real Estate Limited	1,097.4	1,076.0	2.0%
Tian An China Investments
Company Limited	1,654.1	4,219.1	(60.8%)

Note: The consolidated net asset value of Beijing North Star Company Limited was originally denominated in RMB and translated into HK$ at the exchange rate of RMB1.07 = HK$1.00 for the purpose of comparison.

We have compared the Chengdu Subsidiary Discount against the discounts of the market capitalisation of the Comparable Companies as at the Latest Practicable Date to their audited consolidated net asset values. We noted that the market capitalisation of seven out of eight of the Comparable Companies as at the Latest Practicable Date were traded at a discount to their underlying audited consolidated net asset values, and the discounts of which ranged from approximately 25.5% to 72.4%. As such, we consider that it is not unusual for companies engaged in property investment or property development in the PRC to be valued at a discount to their underlying net asset values.

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LETTER FROM TAI FOOK CAPITAL

Based on the aforesaid, we consider that the Chengdu Subsidiary Discount (which amounted to approximately 2.3%) is not unfavourable as compared with the discounts of the market capitalisations of most of the Comparable Companies to their respective audited consolidated net asset values. As such, we consider that the Cash Consideration is fair and reasonable and in the interests of the Shareholders and the Group as a whole.

Consideration Property

The Consideration Property valued at approximately RMB21.2 million (equivalent to approximately HK$19.8 million) by DTZ will be used to set off RMB21.0 million (equivalent to approximately HK$19.6 million) of the outstanding amount of shareholder’s loan due to the Vendor by Chengdu Subsidiary. As advised by the Directors, the transfer of the Consideration Property from Chengdu Subsidiary to the Vendor was agreed between the parties to the Agreement after arm’s length negotiations and the Vendor has taken into account the fact that the Consideration Property is currently subject to a tenancy with annual rental of approximately RMB0.8 million (equivalent to approximately HK$0.7 million) per annum and will be escalating thereafter for the remaining lease term which will be expired by 2012. As advised by the Directors, the Group intends to hold the Consideration Property for investment purpose. Based on the above, we consider that the Consideration Property, which forms part of the Consideration, is fair and reasonable and is in the interests of the Shareholders and the Group as a whole.

Financial assistance provided by Chengdu Subsidiary to the Purchaser

Pursuant to the Agreement, the Vendor and the Purchaser have agreed to procure Chegndu Subsidiary to lend the proceeds from any sales of the Property (the “Relevant Proceeds”) to the Purchaser for the purpose of satisfying the Cash Consideration. The lending of the Relevant Proceeds, if any, by Chengdu Subsidiary to the Purchaser constitute a financial assistance provided by the Group to a connected person under Chapter 14A of the Listing Rules. However, we consider that such financial assistance provided by Chengdu Subsidiary to the Purchaser before Completion forms an integral part of the Agreement and is fair and reasonable and is in the interests of the Shareholders and the Group as a whole because of the following reasons:

• (i) the Relevant Proceeds shall be deposited into a designated bank account (the “Escrow Account”) to be operated and controlled by the Vendor;

• (ii) the Relevant Proceeds to be advanced to the Purchaser shall be applied for satisfying the Cash Consideration and shall be paid to the Vendor directly from the Escrow Account;

• (iii) additional securities for the payment of the Consideration by the Purchaser are in place (including the pledge of the Purchaser’s 49% equity interest in Chengdu Subsidiary and its shareholder’s loan to Chengdu Subsidiary to the Vendor). Details of which are set out under the sub-section headed “Security for payment of the Consideration” in the section headed “The Agreement” of the letter from the Board contained in the Circular;

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LETTER FROM TAI FOOK CAPITAL

• (iv) the aforesaid loans to be advanced by Chengdu Subsidiary to the Purchaser will not exceed the Cash Consideration; and

• (v) the Purchaser shall pay to the Vendor on each payment date any shortfall if such proceeds shall be less than the Cash Consideration.

Overall

Based on the above analysis, we are of the view that the Consideration is fair and reasonable and is in the interests of the Shareholders and the Group as a whole.

III. Financial effects on the Group as a result of Completion

Earnings

As advised by the Directors, it is expected that Completion will generate a gain on disposal of approximately HK$8.2 million after taxation, representing (i) approximately 15.6% of the audited consolidated net profit of the Group of approximately HK$52.4 million for the year ended 31 December 2003; and (ii) approximately 36.9% of the unaudited consolidated net profit of the Group of approximately HK$22.2 million for the six months ended 30 June 2004 respectively. Such gain on disposal is expected to be reflected in the Group’s financial results for the year ending 31 December 2005. We consider that such expected enhancement to the Group’s results would be in the interests of the Group and the Shareholders as a whole.

Based on the existing tenancy agreements of the Property (excluding the Consideration Property), the annual rental income forgone by the Group as a result of the Disposal amounted to approximately RMB14.8 million (equivalent to approximately HK$13.8 million). However, based on the financial performance of the Group’s printing business and Chengdu Subsidiary as set out in the section headed “Background and the reasons for the entering into of the Agreement” above, we consider that the Disposal could allow the Group to consolidate its resources in the Group’s printing business which can earn a higher yield in the long run.

Net asset value

Notwithstanding the fact that Chengdu Subsidiary will cease to be a subsidiary of the Company upon Completion, the Disposal will increase the consolidated net asset value of the Group by approximately HK$8.2 million, being the immediate gain as a result of the Disposal. Such amount represents an increase in the consolidated net asset value of the Group by approximately 1.6% as compared with the Group’s unaudited consolidated net asset value of approximately HK$526.3 million as at 30 June 2004. Based on 534,290,068 Shares in issue as at the Latest Practicable Date, the unaudited consolidated net asset value per Share will be slightly increased from approximately HK$0.98 to approximately HK$1.00.

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LETTER FROM TAI FOOK CAPITAL

Gearing

As referred to in the Company’s interim report for the six months ended 30 June 2004, the Group’s aggregate bank and cash balances amounted to approximately HK$75.5 million, whilst its aggregate bank borrowings and obligations under finance leases amounted to approximately HK$99.5 million, out of which approximately RMB17.0 million (equivalent to approximately HK$15.9 million) was related to Chengdu Subsidiary. Based on the above, the Group’s net bank borrowings to equity ratio (being all bank and other borrowings less bank and cash balances, expressed as a percentage of net asset value) was approximately 4.6%.

Following Completion, the Group will turn into a net cash position of approximately HK$85.4 million given that (i) the Group’s aggregate bank and cash balances will be increased to approximately HK$169.0 million; and (ii) the Group’s aggregate bank borrowings and obligations under finance leases will be reduced to approximately HK$83.6 million. As such, we consider that the Disposal will have positive impact on the gearing level of the Group.

Overall

Based on the above analysis, we are of the view that the Disposal, if proceeded to Completion, will have positive financial impacts on the Group and are in the interests of the Shareholders and the Group as a whole.

CONCLUSION AND RECOMMENDATION

Having considered the above principal factors and reasons, we consider that the terms of the Agreement and the transactions contemplated thereunder are fair and reasonable and are in the interests of the Shareholders and the Group as a whole. Accordingly, we advise the Independent Board Committee to recommend the Independent Shareholders to vote in favour of the resolution (to be taken by way of poll) to approve the Agreement and the transactions contemplated thereunder to be proposed at the EGM.

Yours faithfully, For and on behalf of Tai Fook Capital Limited Derek C. O. Chan Marcus Ho Deputy Managing Director Director

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FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

1. AUDITED FINANCIAL STATEMENTS

The following is a summary of the audited consolidated income statement of the Group for the two years ended 31st December, 2003, the audited consolidated balance sheet of the Group and the audited balance sheet of the Company as at 31st December, 2002 and 31st December, 2003, the audited statement of changes in equity of the Group and the Company for the year ended 31st December, 2003 and the audited consolidated cash flow statement of the Group for the two years ended 31st December, 2003, together with accompanying notes extracted from the annual report of the Company for the year ended 31st December, 2003:

Consolidated Income Statement

For the year ended 31st December, 2003

Notes Turnover 4 Direct expense Gross profit Other operating income 5 Selling expenses Administrative and operating expenses Profit from operations 6 Finance costs 8 Profit before taxation Income tax expenses 9 Profit before minority interest Minority interest Net profit for the year Dividends 10 Earnings per share 11 Basic Diluted	2003 HK$’000 675,237 (469,857) 205,380 14,457 (18,897) (135,010) 65,930 (6,257) 59,673 (6,704) 52,969 (607) 52,362 24,756 10.5 cents 9.1 cents	2002 HK$’000 (Restated) 574,090 (398,877) 175,213 13,917 (17,531) (115,645) 55,954 (4,104) 51,850 (1,937) 49,913 (141) 49,772 13,928 11.4 cents 8.4 cents

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FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

Consolidated Balance Sheet

At 31st December, 2003

Notes ASSETS AND LIABILITIES Non-current assets Investment properties 12 Property, plant and equipment 13 Contractual reimbursement from related companies 14 Negative goodwill 15 Current assets Inventories 17 Trade receivables 18 Deposits, prepayments and other receivables Taxation recoverable Bank balances and cash Current liabilities Trade payables 19 Accrued charges and other payables Taxation payable Borrowings 20 Amount due to a minority shareholder 21 Obligations under finance leases 22 Net current assets Total assets less current liabilities	2003 HK$’000 382,700 237,591 32,719 – 653,010 61,015 192,609 9,464 – 169,028 432,116 154,915 85,246 9,008 44,969 – 1,537 295,675 136,441 789,451	2002 HK$’000 (Restated) 382,700 197,273 53,720 (647) 633,046 44,534 155,238 14,285 99 182,129 396,285 115,493 85,798 4,454 46,025 32,546 1,788 286,104 110,181 743,227

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FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

Notes Non-current liabilities Borrowings 20 Amount due to a minority shareholder 21 Obligations under finance leases 22 Deferred taxation 23 Retirement benefit obligations 24 MINORITY INTERESTS NET ASSETS CAPITAL AND RESERVES Share capital 25 Ordinary shares Preference shares Share premium Other reserves SHAREHOLDERS’ FUNDS	2003 HK$’000 71,300 54,076 – 50,724 1,013 177,113 40,900 571,438 53,429 2,475 310,798 204,736 571,438	2002 HK$’000 (Restated) 37,350 18,720 1,540 51,159 283
		109,052
		40,293
		593,882
		38,929 4,095 377,728 173,130
		593,882

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FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

Balance Sheet

At 31st December, 2003

Notes ASSETS AND LIABILITIES Non-current assets Interests in subsidiaries 16 Current assets Prepayments and other receivables Bank balances Current liabilities Accrued charges Net current assets NET ASSETS CAPITAL AND RESERVES Share capital 25 Ordinary shares Preference shares Share premium Other reserves SHAREHOLDERS’ FUNDS	2003 HK$’000 393,270 51 67,067 67,118 471 66,647 459,917 53,429 2,475 310,798 93,215 459,917	2002 HK$’000 440,959
		77 66,351
		66,428 1,609
		64,819
		505,778
		38,929 4,095 377,728 85,026
		505,778

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FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

Statement of Changes in Equity

For the year ended 31st December, 2003

THE GROUP At 1st January, 2002 Conversion from Series A preference shares to ordinary shares Realised on disposal of investment in securities Net profit for the year Dividends At 31st December, 2002 Issue of ordinary shares on exercise of share options Conversion from Series A preference shares to ordinary shares Redemption of preference shares Share issue expenses Net profit for the year Dividends At 31st December, 2003 THE COMPANY At 1st January, 2002 Conversion from Series A preference shares to ordinary shares Net loss for the year Dividends At 31st December, 2002 Issue of ordinary shares on exercise of share options Conversion from Series A preference shares to ordinary shares Redemption of preference shares Share issue expenses Net profit for the year Dividends At 31st December, 2003	Ordinary share capital HK$’000 36,529 2,400 – – – 38,929 100 14,400 – – – – 53,429 36,529 2,400 – – 38,929 100 14,400 – – – – 53,429	Preference share capital HK$’000 4,215 (120 ) – – – 4,095 – (720 ) (900 ) – – – 2,475 4,215 (120 ) – – 4,095 – (720 ) (900 ) – – – 2,475	Ordinary share premium HK$’000 131,323 4,800 – – – 136,123 220 28,800 – (370 ) – – 164,773 131,323 4,800 – – 136,123 220 28,800 – (370 ) – – 164,773	Preference share premium HK$’000 248,685 (7,080 ) – – – 241,605 – (42,480 ) (53,100 ) – – – 146,025 248,685 (7,080 ) – – 241,605 – (42,480 ) (53,100 ) – – – 146,025	Other reserve HK$’000 (Note a) – – – – – – – – 4,000 – – – 4,000 – – – – – – – 4,000 – – – 4,000	Merger Contributed reserve surplus HK$’000 HK$’000 (Note b) (Note c) 24,000 – – – – – – – – – 24,000 – – – – – – – – – – – – – 24,000 – – 77,963 – – – – – – – 77,963 – – – – – – – – – – – – – 77,963	Goodwill HK$’000 (33,216 ) – – – – (33,216 ) – – – – – – (33,216 ) – – – – – – – – – – – –	Investments revaluation reserve HK$’000 (2 ) – 2 – – – – – – – – – – – – – – – – – – – – – –	Translation reserve HK$’000 239 – – – – 239 – – – – – – 239 – – – – – – – – – – – –	Retained profits HK$’000 (Restated) 146,263 – – 49,772 (13,928 ) 182,107 – – – – 52,362 (24,756 ) 209,713 22,097 – (1,106 ) (13,928 ) 7,063 – – – – 28,945 (24,756 ) 11,252	Total HK$’000 (Restated) 558,036 – 2 49,772 (13,928 ) 593,882 320 – (50,000 ) (370 ) 52,362 (24,756 ) 571,438 520,812 – (1,106 ) (13,928 ) 505,778 320 – (50,000 ) (370 ) 28,945 (24,756 ) 459,917

– 29 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

Notes:

• (a) The other reserve of the Group represents the difference between the value of redeemable preference shares and the nominal consideration paid in 2003.

• (b) The merger reserve of the Group represents the difference between the nominal value of the shares of the acquired subsidiaries and the nominal value of the Company’s ordinary shares issued for the acquisition at the time of a group reorganisation in 1996 (the “Group Reorganisation”).

• (c) The contributed surplus of the Company represents the difference between the underlying net assets of the subsidiaries which were acquired by the Company at the date of the Group Reorganisation and the nominal amount of the ordinary shares issued by the Company which were issued under the Group Reorganisation.

– 30 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

Consolidated Cash Flow Statement

For the year ended 31st December, 2003

OPERATING ACTIVITIES Profit from operations Adjustments for: Interest income Dividend income Release of negative goodwill to income Depreciation and amortisation Loss on disposal of investments in securities Loss (gain) on disposal of property, plant and equipment Retirement benefit obligations Operating cash flows before movements in working capital Increase in inventories Increase in trade receivables Decrease in deposits, prepayments and other receivables Increase in trade payables (Decrease) increase in accrued charges and other payables Decrease in an amount due to a related company Net cash generated from operations Income Tax paid Income Tax refunded Interest paid Finance charge on obligations under finance leases NET CASH FROM OPERATING ACTIVITIES	2003 HK$’000 65,930 (1,202) – (3,502) 34,608 – 86 730 96,650 (16,481) (37,371) 4,821 39,422 (552) – 86,489 (2,563) 77 (3,371) (76) 80,556	2002 HK$’000 (Restated) 55,954 (2,038) (1) (2,979) 33,390 2 (214) 283 84,397 (11,516) (50,605) 2,533 54,122 44,448 (6,301) 117,078 (1,145) 330 (8,223) (175) 107,865

– 31 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

Consolidated Cash Flow Statement

For the year ended 31st December, 2003

INVESTING ACTIVITIES Purchase of property, plant and equipment Reimbursement of payment for properties under development from related companies Reimbursement of guaranteed rental income from a related company Interest received Proceeds from disposal of property, plant and equipment Payments for properties under development Proceeds from disposal of investments in securities Dividend received from investments in securities NET CASH USED IN INVESTING ACTIVITIES FINANCING ACTIVITIES Repayment of import loans Redemption of preference shares Repayment of bank loans Dividends paid Repayment of obligations under finance leases Share issue expenses New bank loans raised New import loans raised Proceed from shares issued upon exercise of share options Advance from a minority shareholder NET CASH (USED IN) FROM FINANCING ACTIVITIES NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS CASH AND CASH EQUIVALENTS AT BEGINNING OF THE YEAR CASH AND CASH EQUIVALENTS AT END OF THE YEAR, represented by bank balances and cash	2003 HK$’000 (75,102) 21,001 2,855 1,202 90 – – – (49,954) (54,127) (50,000) (26,050) (24,756) (1,791) (370) 70,000 43,071 320 – (43,703) (13,101) 182,129 169,028	2002 HK$’000 (Restated) (11,640) 14,724 – 2,038 892 (72,971) 136 1 (66,820) (93,536) – (36,523) (14,222) (1,863) – 48,692 88,633 – 13,648 4,829 45,874 136,255 182,129

– 32 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

Notes to the Financial Statements

For the year ended 31st December, 2003

1. GENERAL

The Company is incorporated in the Cayman Islands as an exempted company with limited liability under the Companies Law (Revised) of the Cayman Islands (“Companies Law”). Its ordinary shares are listed on The Stock Exchange of Hong Kong Limited (the “Stock Exchange”).

The Company is an investment holding company. The principal activities of its principal subsidiaries are set out in note 33.

2. ADOPTION OF HONG KONG FINANCIAL REPORTING STANDARDS

In the current year, the Group has adopted, for the first time, the following Hong Kong Financial Reporting Standards (the “HKFRS(s)”) issued by the Hong Kong Society of Accountants (the “HKSA”), the term of HKFRSs is inclusive of Statements of Standard Accounting Practice (“SSAP(s)”) and Interpretations approved by the HKSA:

SSAP 12 (Revised) “Income Taxes”

SSAP 12 (Revised) “Income Taxes” comes into effect for the accounting period beginning on or after 1st January, 2003. The principal effect of the implementation of SSAP 12 (Revised) is in relation to deferred tax. In previous years, a liability was recognised in respect of timing differences arising, except where those timing differences were not expected to reverse in the foreseeable future, i.e. partial provision was made for deferred tax using the income statement liability method. 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 amount 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. Comparative amounts for 2002 have been restated accordingly. As a result of the change in policy, the balance on the negative goodwill and minority interest at 1st January, 2002 has been reduced by approximately HK$6,556,000 and HK$8,160,000 respectively, representing the additional deferred tax liability arising on the acquisition of subsidiaries in previous years. The balance on the contractual reimbursement from related companies at 1st January, 2002 has been increased by approximately HK$17,821,000 accordingly. The aggregate effect of the balance on the deferred tax liability has been increased by approximately HK$32,537,000 as at 1st January, 2002. The effect of the change is a decrease in the profit of approximately HK$901,000 for the year ended 31st December, 2002.

3. SIGNIFICANT ACCOUNTING POLICIES

The financial statements have been prepared under the historical cost convention as modified for the revaluation of investment properties.

The financial statements have been prepared in accordance with accounting principles generally accepted in Hong Kong. The principal accounting policies adopted are as follows:

Basis of consolidation

The consolidated financial statements incorporate the financial statements of the Company and its subsidiaries made up to 31st December each year.

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.

Goodwill

Goodwill arising on consolidation represents the excess of the cost of acquisition over the Group’s interest in fair value of the identifiable assets and liabilities of a subsidiary at the date of acquisition.

– 33 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

Goodwill arising on acquisitions of subsidiaries prior to 1st January, 2001 continues to be held in reserves, and will be charged to the income statement at the time of disposal of the relevant subsidiary, or at such time as the goodwill is determined to be impaired.

Goodwill arising on acquisitions of subsidiaries after 1st January, 2001 is capitalised as a separate asset on the balance sheet and amortised on a straight-line basis over its useful economic life.

Negative goodwill

Negative goodwill represents the excess of the Group’s interest in the fair value of the identifiable assets and liabilities of a subsidiary at the date of acquisition over the cost of acquisition.

Negative goodwill arising on acquisitions of subsidiaries is presented as a deduction from assets. To the extent that such negative goodwill is attributable to losses or expenses anticipated at the date of acquisition, it is released to income in the period in which those losses or expenses arise. The remaining negative goodwill is recognised as income on a straight-line basis over the remaining average useful life of the identifiable acquired depreciable assets. To the extent that such negative goodwill exceeds the aggregate fair value of the acquired identifiable non-monetary assets, it is recognised as income immediately.

Investment properties

Investment properties are completed properties which are held for their investment potential, any rental income being negotiated at arm’s length.

Investment properties are stated at their open market value. Any revaluation increase or decrease arising on the revaluation of investment properties is credited or charged to the investment property revaluation reserve unless the balance on this reserve is insufficient to cover a revaluation decrease, in which case the excess of the revaluation decrease over the balance on the investment property revaluation reserve is charged to the income statement. Where a decrease has previously been charged to the income statement and a revaluation increase subsequently arises, this increase is credited to the income statement to the extent of the decrease previously charged.

On disposal of an investment property, the balance on the investment property revaluation reserve attributable to that property is transferred to the income statement.

No depreciation is provided on investment properties except where the unexpired term of the relevant lease is 20 years or less.

Property, plant and equipment

Property, plant and equipment are stated at cost less depreciation and amortisation and accumulated impairment losses.

Depreciation and amortisation are provided to write off the cost of items of property, plant and equipment over their estimated useful lives, from the date on which they become fully operational, using the straight-line method, as follows:

Leasehold land	50 years or, if shorter, over the term of
	the relevant lease
Buildings	20 – 30 years
Leasehold improvements	Over the term of the relevant lease
Plant and machinery	3 – 15 years
Furniture and fixtures	3 – 5 years
Motor vehicles	3 – 5 years

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

– 34 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

The gain or loss arising on the disposal or retirement of an asset is determined as the difference between the sale proceeds and the carrying amount of the asset and is recognised in the income statement.

Assets held under finance leases

Leases are classified as finance leases when the terms of the leases transfer substantially all the risks and rewards of ownership of the assets concerned to the Group.

Assets held under finance leases are capitalised at their fair values at the date of acquisition. The corresponding liability to the lessor, net of interest charges, is included in the balance sheet as obligations under finance leases. Finance costs, which represent the difference between the total finance lease and the original outstanding principal at the inception of the finance lease, are charged to the income statement over the period of the respective leases so as to produce a constant periodic rate of charge on the remaining balance of the obligations for each accounting period.

All other leases are classified as operating leases and the rentals payable are charged to the income statement on a straight-line basis over the term of the relevant lease.

Investments in subsidiaries

Investments in subsidiaries are included in the Company’s balance sheet at cost less any identified impairment loss.

Inventories

Inventories are stated at the lower of cost and net realisable value. Cost is calculated using the weighted average cost method. Net realisable value represents the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale.

Impairment

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.

Revenue recognition

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

Interest income is accrued on a time basis, by reference to the principal outstanding and at the interest rate applicable.

Rental income, including rentals invoiced in advance from properties let under operating leases, is recognised on a straight-line basis over the term of the relevant lease.

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 net profit as reported in the income statement because it excludes items of income and expense that are taxable or deductible in other years, and it further excludes income statement items that are never taxable or deductible.

– 35 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amount of assets and liabilities in the financial statements 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 profits 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 negative goodwill) or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the tax profit nor the accounting profit.

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 in the income statement, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity.

Foreign currencies

Transactions in currencies other than Hong Kong dollars are translated into Hong Kong dollars at the rates ruling on the dates of the transactions or at the contracted settlement rate. Monetary assets and liabilities denominated in currencies other than Hong Kong dollars are re-translated into Hong Kong dollars at the rates ruling on the balance sheet date. Gains and losses arising on exchange are dealt with in the income statement.

On consolidation, the assets and liabilities of subsidiaries which are denominated in currencies other than Hong Kong dollar and which operate outside Hong Kong are translated into Hong Kong dollars at the approximate rates ruling on the balance sheet date. Income and expense items are translated at the average exchange rates for the period. Exchange differences arising, if any, are classified as equity and are recognised as income or as expenses in the period in which the operations are disposed of.

Borrowing costs

Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, are capitalised as part of the cost of those assets. Capitalisation of such borrowing costs ceases when the assets are substantially ready for their intended use or sale.

All other borrowing costs are recognised as an expense in the period in which they are incurred.

Retirement benefit costs

Payments to the Mandatory Provident Fund Scheme (the “MPF Scheme”) are charged as an expense as they fall due.

For defined benefit retirement plans, the cost of providing benefits is determined using the projected unit credit method, with actuarial valuations being carried out at each balance sheet date. Actuarial gains and losses which exceed 10 per cent of the greater of the present value of the Group’s defined benefit obligations and the fair value of plan assets are amortised over the expected average remaining working lives of the employees participating in the plan. Past service cost is recognised immediately to the extent that the benefits are already vested, and otherwise is amortised on a straight-line basis over the average period until the amended benefits become vested.

The amount recognised in the balance sheet represents the present value of the defined benefit obligation as adjusted for unrecognised actuarial gains and losses and unrecognised transitional liability on initial adoption of SSAP 34 “Employee Benefits”, and as reduced by the fair value of plan assets. Any asset resulting from this calculation is limited to unrecognised actuarial losses and past service cost, plus the present value of available refunds and reductions in future contributions to the plan.

– 36 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

4. SEGMENT INFORMATION

During the year, the management have reassessed the primary source of the Group’s risks and return and redesignated business segments as the Group’s primary reporting format.

Business segments

The Group is currently operating in two business segments, namely printing and property investment. Turnover of the Group represents net amounts received and receivable for goods sold by the Group to outside customers, less returns and allowances and property rental income during the year. Segmental information about these businesses is presented below.

2003

CONSOLIDATED INCOME STATEMENT

TURNOVER – external SEGMENT RESULTS Unallocated corporate income Unallocated corporate expenses Profit from operations Finance costs Profit before taxation Income tax expenses Profit before minority interest	Printing HK$’000 660,361 54,488	Property investment Consolidated HK$’000 HK$’000 14,876 675,237 11,860 66,348 1,202 (1,620 65,930 (6,257 59,673 (6,704 52,969	Property investment Consolidated HK$’000 HK$’000 14,876 675,237 11,860 66,348 1,202 (1,620 65,930 (6,257 59,673 (6,704 52,969
			66,348 1,202 (1,620
			65,930 (6,257
			59,673 (6,704
			52,969

CONSOLIDATED BALANCE SHEET

		Property
	Printing	investment	Consolidated
	HK$’000	HK$’000	HK$’000
ASSETS
Segment assets	495,847	420,251	916,098
Unallocated corporate assets			169,028
Consolidated total assets			1,085,126
LIABILITIES
Segment liabilities	224,444	130,538	354,982
Unallocated corporate liabilities			117,806
Consolidated total liabilities			472,788

– 37 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

OTHER INFORMATION

		Property
	Printing	investment	Consolidated
	HK$’000	HK$’000	HK$’000
Capital expenditure	74,387	715	75,102
Depreciation and amortisation	34,401	207	34,608
Loss on disposal of property, plant
and equipment	86	–	86
2002

CONSOLIDATED INCOME STATEMENT

TURNOVER – external SEGMENT RESULTS Unallocated corporate income Unallocated corporate expenses Profit from operations Finance costs Profit before taxation Income tax expenses Profit before minority interest	Printing HK$’000 569,375 53,693	Property investment Consolidated HK$’000 HK$’000 4,715 574,090 4,868 58,561 2,504 (5,111 55,954 (4,104 51,850 (1,937 49,913	Property investment Consolidated HK$’000 HK$’000 4,715 574,090 4,868 58,561 2,504 (5,111 55,954 (4,104 51,850 (1,937 49,913
			58,561 2,504 (5,111
			55,954 (4,104
			51,850 (1,937
			49,913

CONSOLIDATED BALANCE SHEET

		Property
	Printing	investment	Consolidated
	HK$’000	HK$’000	HK$’000
ASSETS
Segment assets	403,257	443,945	847,202
Unallocated corporate assets			182,129
Consolidated total assets			1,029,331
LIABILITIES
Segment liabilities	174,780	133,673	308,453
Unallocated corporate liabilities			86,703
Consolidated total liabilities			395,156

– 38 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

OTHER INFORMATION

		Property
	Printing	investment	Consolidated
	HK$’000	HK$’000	HK$’000
Capital expenditure	11,472	73,278	84,750
Depreciation and amortisation	33,366	163	33,529
Gain on disposal of property,
plant and equipment	214	–	214

Geographical segments

The Group’s printing business is located in both Hong Kong and the People’s Republic of China (the “PRC”), while the property business is located in the PRC.

The following table provides an analysis of the Group’s turnover by geographical market, irrespective of the origin of the goods and the services.

Hong Kong Europe North America Australia and New Zealand The PRC Others	Turnover by geographical market 2003 2002 HK$’000 HK$’000 193,540 180,636 176,018 151,023 167,381 131,592 92,444 88,776 45,060 21,587 794 476 675,237 574,090	Turnover by geographical market 2003 2002 HK$’000 HK$’000 193,540 180,636 176,018 151,023 167,381 131,592 92,444 88,776 45,060 21,587 794 476 675,237 574,090
		574,090

– 39 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

The following is an analysis of the carrying amount of segment assets and capital expenditure, analysed by the geographical area in which the assets are located:

Hong Kong The PRC	Carrying amount of segment assets 2003 2002 HK$’000 HK$’000 (restated) 346,983 382,808 738,143 646,523 1,085,126 1,029,331	Capital expenditure 2003 2002 HK$’000 HK$’000 2,352 528 72,750 88,516 75,102 89,044	Capital expenditure 2003 2002 HK$’000 HK$’000 2,352 528 72,750 88,516 75,102 89,044
			89,044

5. OTHER OPERATING INCOME

Included in other operating income is investment income as follows:

	2003	2002
	HK$’000	HK$’000
Dividend from investments in securities	–	1
Interest earned on bank deposits	1,202	2,038

– 40 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

6. PROFIT FROM OPERATIONS

Profit from operations has been arrived at after charging: Directors’ remuneration_(note 7)_ Other staff costs Pension scheme contribution, excluding contributions for directors Total staff costs Auditors’ remuneration: Current year Overprovision in prior year Cost of inventories recognised as an expense Depreciation and amortisation _Less:_Amount capitalised in properties under development Loss on disposal property, plant and equipment Loss on disposal of investments in securities Rental of premises under operating leases and after crediting: Gain on disposal of property, plant and equipment Release of negative goodwill Rental income from investment properties, net of outgoings of HK$3,277,000 (2002: HK$2,612,000)	2003 HK$’000 5,531 81,888 2,358 89,777 830 – 830 466,580 34,608 – 34,608 86 – 5,604 – 3,502 11,599	2002 HK$’000 (restated) 6,077 81,228 2,206 89,511 798 (150) 648 396,265 33,529 (139) 33,390 – 2 4,217 214 2,979 2,103

– 41 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

7. DIRECTORS’ AND EMPLOYEES’ EMOLUMENTS

Particulars of the emoluments of directors and the five highest paid employees are as follows:

(a) Directors’ emoluments

Fees: Executive Non-executive Independent non-executive Other emoluments: Executive Salaries and other benefits Bonus Pension scheme contributions	2003 HK$’000 110 20 160 290 2,580 2,625 36 5,241 5,531	2002 HK$’000 110 20 160
		290
		2,340 3,411 36
		5,787
		6,077

Emoluments of the directors are within the following bands:

HK$1,000,000 or below HK$1,000,001 to HK$1,500,000 HK$1,500,001 to HK$2,000,000	Number of directors 2003 2002 5 6 – – 3 3 8 9	Number of directors 2003 2002 5 6 – – 3 3 8 9
		9

(b) Employees’ emoluments

During the year, the five highest paid individuals included three directors (2002: three directors), details of whose emoluments are set out in note 7(a) above.

The emoluments of the remaining two individuals (2002: two individuals) are as follows:

Salaries and other benefits Bonus Pension scheme contributions	2003 HK$’000 1,594 2,350 24 3,968	2002 HK$’000 1,594 1,909 24
		3,527

– 42 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

Emoluments of the employees are within the following bands:

HK$1,000,001 to HK$1,500,000 HK$2,000,001 to HK$2,500,000	Number of employees 2003 2002 1 1 1 1 2 2	Number of employees 2003 2002 1 1 1 1 2 2
		2

During the years ended 31st December, 2003 and 2002, no emoluments were paid by the Group to the five highest paid individuals, including directors, as an inducement to join or upon joining the Group or as compensation for loss of office. In addition, during the years ended 31st December, 2003 and 2002, no director waived any emoluments.

8. FINANCE COSTS

Finance charge on obligations under finance leases Interest on borrowings wholly repayable within five years: Bank borrowings Amount due to a minority shareholder Less:_Interest capitalised in properties under development 9. INCOME TAX EXPENSES The charge (credit) represents: Current tax: Hong Kong Profits Tax PRC income tax Under(over)provision in prior years: Hong Kong Profits Tax PRC income tax Deferred tax(note 23)_: Current year Overprovision in prior years Attributable to a change in tax rate	2003 HK$’000 76 3,371 2,810 6,257 – 6,257 2003 HK$’000 5,572 1,459 7,031 324 (216) 108 (747) – 312 (435) 6,704	2002 HK$’000 175 3,901 4,322
		8,398 (4,294
		4,104
		2002 HK$’000 3,900 1,173
		5,073
		(165 –
		(165
		(1,120 (1,851 –
		(2,971
		1,937

– 43 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

Hong Kong Profits Tax is calculated at 17.5% (2002: 16%) on the estimated assessable profit for the year. In June 2003, the Hong Kong Profits Tax rate was increased from 16% to 17.5% with effect from the year of assessment of 2003/2004. The effect of this increase has been reflected in the calculation of current and deferred tax balances at 31st December, 2003.

PRC income tax is calculated at the applicable rates relevant to the PRC subsidiaries.

The income tax expenses for the year can be reconciled to the profit per consolidated income statement as follows:

Profit before taxation Tax at the domestic income tax rate of 17.5% (2002: 16%) Tax effect of expenses not deductible for tax purpose Tax effect of income not taxable for tax purpose Under(over)provision in prior years Tax effect of additional tax losses not recognised Utilisation of tax losses previously not recognised Effect of tax holidays granted to a PRC subsidiary Increase in opening deferred tax liability resulting from an increase in applicable tax rate Effect of different tax rates of subsidiaries operating in other jurisdictions Income tax expenses for the year 10. DIVIDENDS Dividends paid to ordinary shareholders: 2001 final dividend of HK2.0 cents per share 2002 final dividend of HK2.8 cents per share 2003 special dividend of HK1.2 cents per share 2003 interim dividend of HK1.0 cent per share Dividends paid to preference shareholders: Dividends to Series A preference shareholders Dividends to Series B preference shareholders Total dividends paid during the year	2003 HK$’000 59,673 10,443 825 (1,427) 108 – (181) (219) 312 (3,157) 6,704 2003 HK$’000 – 10,928 4,684 5,343 – 3,801 24,756	2002 HK$’000 51,850 8,296 1,517 (878) (2,016) 1,346 (329) (267) – (5,732) 1,937 2002 HK$’000 7,786 – – – 1,128 5,014 13,928

The final dividend of HK3.0 cents (2002: HK2.8 cents) per share to ordinary shareholders on the register of members on 20th May, 2004 amounting to approximately HK$16,029,000 (2002: HK$10,928,000), has been proposed by the directors and is subject to approval by shareholders in general meeting.

Subject to the Companies Law, the holders of preference shares are entitled to receive dividends semi-annually at 2.5 percent per annum on the issue price of HK$0.60 per preference share in arrears on a daily basis.

On 22nd May, 2003, the Company and Gold Throne Finance Limited (“Gold Throne”), a substantial shareholder of the Company and the holder of Series A and Series B preference shares, entered into an agreement (the “Concession Agreement”) pursuant to which Gold Throne, among other things, would exercise the conversion right of converting 72,000,000 Series A preference shares of HK$0.01 each into 144,000,000 new ordinary shares in the Company of HK$0.10 each and waive any dividend payable on Series A preference shares for the period

– 44 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

from 1st January, 2003 to 30th June, 2003. In addition, a special dividend of HK1.2 cents per share to ordinary shareholders on the register of members on 30th June, 2003 (the date of an extraordinary general meeting of shareholders of the Company approving the aforesaid transactions, “EGM”) had been proposed by the directors pursuant to the Concession Agreement. The Concession Agreement became unconditional upon approval by independent shareholders of the Company at the EGM, and accordingly the special dividend based on an aggregate of 390,290,068 ordinary shares, amounting to approximately HK$4,684,000, was distributed in July 2003.

11. EARNINGS PER SHARE

The calculation of the basic and diluted earnings per share is based on the following data:

Net profit for the year Dividends on preference shares Earnings for the purposes of basic earnings per share Effect of dilutive potential ordinary shares: – Dividends on convertible preference shares Earnings for the purposes of diluted earnings per share Weighted average number of ordinary shares for the purposes of basic earnings per share Effect of dilutive potential ordinary shares: – Convertible preference shares – Share options Weighted average number of ordinary shares for the purposes of diluted earnings per share

2003 2002 HK$’000 HK$’000 (restated) 52,362 49,772 (3,801) (6,142) 48,561 43,630 – 1,128 48,561 44,758 Number of shares 2003 2002 462,821,575 382,780,479 71,408,219 150,509,589 10,818 6,292 534,240,612 533,296,360

12. INVESTMENT PROPERTIES

The Group’s investment properties are held under long leases in the PRC for rental income under operating leases. There were no movements in the investment properties of the Group during the year.

Legal title to certain investment properties amounting to approximately HK$143,700,000 (2002: HK$143,700,000) still rests in the name of the vendor even though the Group has the right to execute the transfer at anytime at their discretion. As substantially all the risks and rewards of ownership of the properties have been transferred to the Group upon execution of sales agreement, the Group has recognised the properties as its assets.

At 31st December, 2003, these investment properties were revalued by DTZ Debenham Tie Leung Limited, a firm of independent professional valuers, on an open market value basis. There was no surplus or deficit arising on the revaluation.

– 45 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

13. PROPERTY, PLANT AND EQUIPMENT

Leasehold Leasehold land and improve- buildings ments HK$’000 HK$’000 THE GROUP COST At 1st January, 2003 57,214 1,083 Additions 7,219 2,074 Disposals – – At 31st December, 2003 64,433 3,157 DEPRECIATION AND AMORTISATION At 1st January, 2003 5,831 1,083 Provided for the year 2,367 276 Eliminated on disposals – – At 31st December, 2003 8,198 1,359 NET BOOK VALUES At 31st December, 2003 56,235 1,798 At 31st December, 2002 51,383 – The net book value of the properties comprises: Leasehold land and buildings situated in: – the PRC under medium-term land use right – Hong Kong under long leases	Plant and machinery HK$’000 301,563 58,217 (95) 359,685 164,350 27,592 (42) 191,900 167,785 137,213	Furniture and Motor fixtures vehicles Total HK$’000 HK$’000 HK$’000 31,697 4,906 396,463 6,093 1,499 75,102 (25) (390) (510) 37,765 6,015 471,055 24,429 3,497 199,190 3,593 780 34,608 (17) (275) (334) 28,005 4,002 233,464 9,760 2,013 237,591 7,268 1,409 197,273 THE GROUP 2003 2002 HK$’000 HK$’000 55,684 50,782 551 601 56,235 51,383

The net book value of property, plant and equipment of the Group at 31st December, 2003 included an amount of approximately HK$5,623,000 (2002: HK$6,387,000) in respect of assets held under finance leases.

– 46 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

14. CONTRACTUAL REIMBURSEMENT FROM RELATED COMPANIES

Reimbursement of construction costs of properties under development_(note a) _Less:_Reimbursement entitled up to the balance sheet date Reimbursement of deferred taxation liabilities(note b)_	THE GROUP 2003 2002 HK$’000 HK$’000 (restated) 41,718 41,718 (37,967) (16,966) 3,751 24,752 28,968 28,968 32,719 53,720

Notes:

• (a) Pursuant to a sale and purchase agreement dated 29th October, 2001 entered into with Chuang’s China Commercial Limited (“CCC”) in respect of the acquisition of the entire issued share capital of, and shareholder’s loan to, AsianWisdom.Com Limited (“Acquisition Agreement”), CCC had agreed and undertaken in favour of the Company to bear 51% of all the construction costs from the date of completion of the Acquisition Agreement up to completion of the construction works of the properties under development (“Completion Costs”). Accordingly, the relevant portion of the estimated Completion Costs amounting to approximately HK$41,718,000 had been presented as a reimbursement of outstanding construction costs due from CCC and Chuang’s China Investments Limited (“Chuang’s China”) at the time of acquisition of the properties under development by the Group. CCC is a wholly owned subsidiary of Chuang’s China, a substantial shareholder of the Company, of which Mr. CHAN Sheung Chiu, Ms. LI Mee Sum, Ann and Mr. LEE Sai Wai are also directors. Chuang’s China also joined as a party to the Acquisition Agreement in order to guarantee the due and full performance of the obligations of CCC under the Acquisition Agreement.

• (b) The amount represents a reimbursement due from CCC and Chuang’s China in respect of certain deferred taxation liabilities arising from the properties of subsidiaries at the date of acquisition by the Group pursuant to the Acquisition Agreement.

– 47 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

15. NEGATIVE GOODWILL

	THE GROUP
	HK$’000
GROSS AMOUNT
At 1st January, 2002
– as previously reported	8,477
– adjustment on adoption of SSAP 12 (Revised)	(6,556)
– as restated	1,921
Adjustments to fair values of net assets acquired and
estimated guaranteed rental income	1,705
At 31st December, 2002	3,626
Adjustment to estimated guaranteed rental income	2,855
At 31st December, 2003	6,481
RELEASED TO INCOME
Released in the year ended 31st December, 2002
– as previously reported	3,880
– adjustment on adoption of SSAP 12 (Revised)	(901)
– as restated and balance at 31st December, 2002	2,979
Released in the year ended 31st December, 2003	3,502
At 31st December, 2003	6,481
CARRYING AMOUNT
At 31st December, 2003	–
At 31st December, 2002	647

16. INTERESTS IN SUBSIDIARIES

Unlisted shares, at cost Amounts due from subsidiaries	THE COMPANY 2003 2002 HK$’000 HK$’000 92,963 92,963 300,307 347,996 393,270 440,959	THE COMPANY 2003 2002 HK$’000 HK$’000 92,963 92,963 300,307 347,996 393,270 440,959
		440,959

The amounts due from subsidiaries are unsecured, interest-free and have no fixed repayment terms. The amounts will not be repayable within twelve months from the balance sheet date and are therefore shown as a non-current asset.

Particulars of the Company’s principal subsidiaries at 31st December, 2003 are set out in note 33.

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FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

17. INVENTORIES

Raw materials Work in progress Finished goods	THE GROUP 2003 2002 HK$’000 HK$’000 41,256 30,728 13,863 10,251 5,896 3,555 61,015 44,534	THE GROUP 2003 2002 HK$’000 HK$’000 41,256 30,728 13,863 10,251 5,896 3,555 61,015 44,534
		44,534

Included above are raw materials of approximately HK$962,000 (2002: HK$275,000) which are carried at net realisable value.

18. TRADE RECEIVABLES

The Group has a policy of allowing credit periods ranging from 30 days to 180 days (2002: 30 days to 120 days) to its trade customers. The aged analysis of trade receivables prepared on the basis of sales invoice date is stated as follows:

0 to 30 days 31 to 60 days 61 to 90 days 91 to 120 days More than 120 days	THE GROUP 2003 2002 HK$’000 HK$’000 46,350 43,072 35,925 34,502 46,185 33,100 28,986 28,270 35,163 16,294 192,609 155,238	THE GROUP 2003 2002 HK$’000 HK$’000 46,350 43,072 35,925 34,502 46,185 33,100 28,986 28,270 35,163 16,294 192,609 155,238
		155,238

19. TRADE PAYABLES

The aged analysis of trade payables prepared on the basis of supplier invoice date is stated as follows:

0 to 30 days 31 to 60 days 61 to 90 days 91 to 120 days More than 120 days	THE GROUP 2003 2002 HK$’000 HK$’000 23,226 26,831 28,125 19,968 28,222 20,421 22,372 22,771 52,970 25,502 154,915 115,493	THE GROUP 2003 2002 HK$’000 HK$’000 23,226 26,831 28,125 19,968 28,222 20,421 22,372 22,771 52,970 25,502 154,915 115,493
		115,493

– 49 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

20. BORROWINGS

Borrowings comprise: Bank loans Import loans Analysed as: Secured Unsecured Bank borrowings are repayable as follows: Within one year or on demand More than one year but not exceeding two years More than two years but not exceeding five years Total _Less:_Amount repayable within one year or on demand and shown under current liabilities Amount due after one year 21. AMOUNT DUE TO A MINORITY SHAREHOLDER The amount is unsecured and repayable as follows: Within one year More than one year but not exceeding two years More than two years but not exceeding five years Total _Less:_Amount repayable within one year and shown under current liabilities Analysed as: Interest bearing at approximately 0.6% (2002: 0.6%) per month Interest-free

THE GROUP 2003 2002 HK$’000 HK$’000 110,492 66,542 5,777 16,833 116,269 83,375 38,192 59,942 78,077 23,433 116,269 83,375 44,969 46,025 22,500 14,950 48,800 22,400 116,269 83,375 (44,969) (46,025) 71,300 37,350 THE GROUP 2003 2002 HK$’000 HK$’000 – 32,546 54,076 3,381 – 15,339 54,076 51,266 – (32,546) 54,076 18,720 40,724 40,724 13,352 10,542 54,076 51,266

– 50 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

22. OBLIGATIONS UNDER FINANCE LEASES

The maturity of obligations under finance leases is as follows: Within one year In the second to fifth year inclusive _Less:_Future finance charges Present value of lease obligations _Less:_Amount due for settlement within one year and shown under current liabilities Amount due after one year	THE GROUP Present value of Minimum minimum lease payments lease payments 2003 2002 2003 2002 HK$’000 HK$’000 HK$’000 HK$’000 1,553 1,878 1,537 1,788 – 1,565 – 1,540 1,553 3,443 (16) (115) 1,537 3,328 1,537 3,328 (1,537) (1,788) – 1,540

It is the Group’s policy to lease certain of its plant and machinery under finance leases. The average lease term is 3 years. All leases are on a fixed repayment basis in Hong Kong dollars and no arrangement has been entered into for contingent rental payments.

The Group’s obligations under finance leases are secured by the lessor’s charge over the leased assets.

– 51 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

23. DEFERRED TAXATION

The major deferred tax liabilities (assets) recognised and movements thereon during the current and prior years are summarised below:

THE GROUP Balance at 1st January, 2002 – as previously reported – adjustment on adoption of SSAP 12 (Revised) – as restated Credit to income statement for the year Balance at 31st December, 2002 (Credit) charge to income statement for the year Effect of change in tax rate charged to income Balance at 31st December, 2003	Tax losses HK$’000 – – – – – (2,406) – (2,406)	Excess of fair value over historical cost of assets of certain subsidiaries Accelerated at the date tax of acquisition depreciation by the Group HK$’000 HK$’000 6,200 15,304 – 32,537 6,200 47,841 (2,900) – 3,300 47,841 1,679 – 310 – 5,289 47,841	Others HK$’000 89 – 89 (71) 18 (20) 2 –	Total HK$’000 21,593 32,537
				54,130 (2,971
				51,159 (747 312
				50,724

For the purposes of balance sheet presentation, certain deferred tax assets and liabilities have been offset in accordance with the conditions set out in SSAP 12 (Revised). The following is the analysis of the deferred tax balances for financial reporting purposes:

Deferred tax liabilities Deferred tax assets	2003 HK$’000 53,130 (2,406) 50,724	2002 HK$’000 51,159 –
		51,159

At 31st December, 2003, the Group has unused tax losses of HK$31.5 million (2002: HK$16.6 million) available for offset against future profits. A deferred tax asset amounting to HK$2,406,000 (2002: Nil) has been recognised in respect such losses of HK$15.4 million (2002: Nil). No deferred tax asset has been recognised in respect of the remaining HK$16.1 million (2002: HK$16.6 million) due to the unpredictability of future profit streams.

– 52 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

24. RETIREMENT BENEFITS PLANS

Defined contribution plan

The Group operates a Mandatory Provident Fund Scheme (“MPF Scheme”) for its qualifying employees. The assets of the MPF Scheme are held separately from those of the Group, in funds under the control of trustees. The Group contributes at the lower of HK$1,000 or 5% of relevant payroll costs to the MPF Scheme, which contribution is matched by employees.

The total cost charged to the consolidated income statement of approximately HK$909,000 (2002: HK$756,000) represents contributions payable to the MPF Scheme by the Group in respect of the current accounting period. As at 31st December, 2003, contributions of approximately HK$79,000 (2002: HK$66,000) due in respect of the reporting period had not been paid over to the MPF Scheme.

Defined benefit plan

The Group also operates a defined benefit plan (the “Plan”) for its qualifying employees in Hong Kong. Under the Plan, the employees are entitled to retirement benefits varying between 30% and 170% of final salary multiplied by the pensionable service on attainment of a retirement age of 60. No other post-retirement benefits are provided.

SSAP 34 Accounting Valuation

Actuarial valuation has been conducted as of 31st December, 2003 based on requirements of SSAP 34 by Watson Wyatt Hong Kong Limited. The present value of the defined benefit obligation, the related current service costs and past service costs were measured using the Projected Unit Credit method.

	2003	2002
	per annum	per annum
The main actuarial assumptions used were as follows:
Discount rate	5.50%	5.25%
Expected return on plan assets	6.00%	7.00%
Expected rate of salary increases	3.00%	3.00%

The actuarial valuation showed that the market value of plan assets was approximately HK$516,000 (2002: HK$4,160,000) and that the actuarial value of these assets represented 18% (2002: 57%) of the benefits that had accrued to members. The shortfall of approximately HK$2,251,000 (2002: HK$3,175,000) is to be cleared over the estimated remaining service period of the current membership of approximately 15 years.

The Group has adopted SSAP 34 with effect from 1st January, 2002. At the date of transition, the Group determined the transitional liability for the Plan at 1st January, 2002 as approximately HK$1,417,000 more than the liability that would have been recognised at the same date using the previous accounting policy. This amount is being recognised on a straight line basis over five years from 1st January, 2002. A charge of approximately HK$283,000 (2002: HK$283,000) was recognised in the current year. As at 31st December, 2003, approximately HK$361,000 remained unrecognised.

In May 2003, the Group closed down a factory in Hong Kong and 37 members had been affected and all of them left the Plan on 1st May, 2003. Hence, a curtailment arose and resulting in a curtailment loss of approximately HK$831,000.

– 53 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

Total expenses recognised in the consolidated income statement in respect of the Plan are as

follows:

Current service cost Interest cost Expected return on plan assets Amortisation of the transitional liability upon first adoption of SSAP 34 Net actuarial loss recognised Loss on curtailment and settlement Total, included in staff costs	2003 HK$’000 207 380 (310) 283 94 831 1,485	2002 HK$’000 1,155 386 (374) 283 – – 1,450

The actual return on plan assets was approximately HK$329,000 (2002: loss of HK$837,000).

The amount included in the balance sheet arising from the Group’s obligation in respect of the Plan is as follows:

Present value of funded obligations Fair value of plan assets Unrecognised actuarial losses Unrecognised transitional liability on initial adoption of SSAP 34 Total, included in non-current liabilities	2003 HK$’000 2,767 (516) (877) (361) 1,013	2002 HK$’000 7,335 (4,160) (1,758) (1,134) 283

No equity shares of the Group and property occupied by the Group were included in the fair value of plan assets.

Movements in the net liability in the current year were as follows:

At 1st January Amounts charged to income statement Contributions At 31st December	2003 HK$’000 283 1,485 (755) 1,013	2002 HK$’000 – 1,450 (1,167) 283

– 54 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

25. SHARE CAPITAL

Authorised: Ordinary shares of HK$0.10 each Balance at 1st January, 2002, 31st December, 2002 and 2003 Preference shares of HK$0.01 each Series A preference shares Balance at 1st January, 2002, 31st December, 2002 and 2003 Series B preference shares Balance at 1st January, 2002, 31st December, 2002 and 2003 Issued and fully paid: Ordinary shares of HK$0.10 each Balance at 1st January, 2002 Conversion from Series A preference shares Balance at 31st December, 2002 Issue of shares on exercise of share options Conversion from Series A preference shares Balance at 31st December, 2003 Preference shares of HK$0.01 each_(note)_ Series A preference shares Balance at 1st January, 2002 Conversion to ordinary shares Balance at 31st December, 2002 Conversion to ordinary shares Balance at 31st December, 2003 Series B preference shares Balance at 1st January, 2002 and 31st December, 2002 Redemption of shares Balance at 31st December, 2003	Number of shares 1,000,000,000 1,000,000,000 1,000,000,000 2,000,000,000 365,290,068 24,000,000 389,290,068 1,000,000 144,000,000 534,290,068 84,000,000 (12,000,000) 72,000,000 (72,000,000) – 337,500,000 (90,000,000) 247,500,000	Amount HK$’000 100,000 10,000 10,000 20,000 36,529 2,400 38,929 100 14,400 53,429 840 (120) 720 (720) – 3,375 (900) 2,475

Note: On 14th December, 2001, the Company issued 84 million Series A preference shares and 337.5 million Series B preference shares at a subscription price of HK$0.60 per share. The preference shares are non-voting, redeemable and their holders are entitled to a fixed cumulative preferential dividend payable semi-annually at a rate of 2.5% per annum on the issue price of HK$0.60 of each preference share. In addition, the preference shares rank in priority to the ordinary shares in the Company as to dividend and return of capital. Subject to adjustment in accordance with the

– 55 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

terms of Series A preference shares, each of the Series A preference shares is convertible into two ordinary shares in the Company of HK$0.10 each (“Conversion Shares”) at the option of the holders at any time from 14th December, 2001 prior to the fifth anniversary from the date of their issue. The Conversion Shares shall, when issued, rank pari passu in all respects with the then existing ordinary shares of the Company. Subject to the Companies Law, unless previously converted, the preference shares are redeemable by the Company at any time prior to the fifth anniversary from 14th December, 2001 at their outstanding subscription amount together with any unpaid dividend in cash. Further, the Company shall redeem all outstanding preference shares which have not been previously redeemed or converted on the fifth anniversary from 14th December, 2001 at their outstanding subscription amount together with any unpaid dividend in cash.

During the year, the following changes in the ordinary and preference share capital of the Company took

place:

• (a) Pursuant to a resolution in writing of all the directors of the Company passed on 6th January, 2003, a written request was made by the Company to the holder of Series B preference shares of the Company to redeem 83,333,333 Series B preference shares at a redemption price of HK$0.60 each with an aggregate value of HK$50,000,000. The redemption of the shares took place on 27th January, 2003.

• (b) Pursuant to the Concession Agreement, 72,000,000 Series A preference shares of HK$0.01 each, which were originally issued at a price of HK$0.60 per preference share, were deemed to have been converted into 144,000,000 new ordinary shares in the Company of HK$0.10 each on the same date. The new ordinary shares rank pari passu in all respects with the then existing issued ordinary shares of the Company. In addition, 6,666,667 Series B preference shares with an aggregate value of HK$4,000,000 were redeemed at a nominal consideration of HK$1 during the year, resulting in recognition of a reserve in the Company of approximately HK$4,000,000.

• (c) 1,000,000 ordinary shares of HK$0.10 each in the Company were issued at HK$0.32 per share upon the exercise of share options granted under the share option scheme of the Company. The ordinary shares issued rank pari passu in all respects with the then existing issued ordinary shares of the Company.

26. SHARE OPTION SCHEME

The share option scheme of the Company adopted on 22nd May, 1996 (the “1996 Scheme”) was for the primary purpose of providing incentives to directors and eligible employees, and would be valid and effective for a period of ten years from the date of its adoption. Under the 1996 Scheme, the directors of the Company might grant options to any executive director or employee of the Company and its subsidiaries (the “Group”) to subscribe for ordinary shares in the Company at a price notified by the directors and should not be less than 80% of the average of the closing prices of the Company’s ordinary shares as stated in the daily quotation sheets issued by the Stock Exchange (“Daily Quotation Sheets”) for the five trading days immediately preceding the date of the offer of the option or the nominal value of the ordinary shares, whichever is the higher. The number of ordinary shares in respect of which options might be granted to any individual at any time was not permitted to exceed 2.5% of the issued ordinary share capital of the Company at any point in time and the maximum number of ordinary shares in respect of which options might be granted under the 1996 Scheme should not exceed 10% of the issued ordinary share capital of the Company from time to time.

Options granted under the 1996 Scheme should be taken up within 28 days from the date of grant of share options and were exercisable at any time after the date of options were accepted (“Acceptance Date”) to the third anniversary of the Acceptance Date, subject to certain restrictions contained in the offer letters. Consideration received by the Company for the options granted was nominal.

– 56 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

A summary of the movements during the years ended 31st December, 2002 and 2003 in the share options granted under the 1996 Scheme, which were all granted to employees of the Group, is as follows:

				Number of ordinary shares to be	Number of ordinary shares to be	Number of ordinary shares to be
				issued upon exercise of the share options
	Exercise			Lapsed		Exercised
	price per		Balance	during the	Balance	during the	Balance
	ordinary		at	year ended	at	year ended	at
Date of grant	share	Exercisable period	1.1.2002	31.12.2002	31.12.2002	31.12.2003	31.12.2003
	HK$			(Note a)		(Note b)
1.3.1999	0.175	1.3.1999 to 28.2.2002	500,000	500,000	–	–	–
3.2.2000	0.320	3.2.2000 to 2.2.2003	1,000,000	–	1,000,000	1,000,000	–

Notes:

• (a) These options lapsed upon expiration of the exercisable period.

• (b) The closing price of the Company’s ordinary shares immediately before the date on which the options were exercised was HK$0.40 per share.

The financial impact of share options granted is not recorded in the Company’s or the Group’s balance sheet until such time as the options are exercised, and no charge is recognised in the income statement in respect of the value of options granted in the year. Upon the exercise of the share options, the resulting shares issued are recorded by the Company as additional share capital at the nominal value of the shares, and the excess of the exercise price per share over the nominal value of the shares is recorded by the Company in the share premium account. Options which lapsed or cancelled prior to their exercise date are deleted from the register of outstanding options.

Pursuant to an extraordinary general meeting held on 13th December, 2001, a new share option scheme (the “2001 Scheme”) was adopted by the Company in place of the 1996 Scheme. The termination of the 1996 Scheme did not affect the rights of the holders of the share options granted prior thereto and such options granted continue to remain valid and exercisable in accordance with the 1996 Scheme.

The purpose of the 2001 Scheme is to recognise the significant contribution of the employees of the Group, including directors of the Company (the “Eligible Persons”), to the growth of the Group and to further motivate the Eligible Persons to continue to contribute to the Group’s long term prosperity.

Under the 2001 Scheme which is valid and effective for a term of ten years from the date of its adoption, the directors of the Company may grant options to the Eligible Persons to subscribe for ordinary shares in the Company at a price to be notified by the directors and to be no less than the higher of: (i) the closing price of the Company’s ordinary shares as stated in the Daily Quotation Sheets on the day of offer; (ii) the average of the closing prices of the Company’s ordinary shares as stated in the Daily Quotation Sheets for the five trading days immediately preceding the date of offer; and (iii) the nominal value of the Company’s ordinary shares. The number of ordinary shares in respect of which options may be granted to any individual in any one year is not permitted to exceed 1% of the issued ordinary share capital of the Company at any point in time, without prior approval from the Company’s shareholders. The maximum number of ordinary shares in respect of which options may be granted under the 2001 Scheme shall not exceed 10% of the issued ordinary share capital of the Company from time to time.

Options granted under the 2001 Scheme must be taken up within 28 days from the date of grant, upon payment of a nominal price. Options may be exercised at any time after the Acceptance Date, but none of them can be exercised later than ten years from the Acceptance Date.

No options have been granted under the 2001 Scheme since its adoption.

– 57 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

27. CAPITAL COMMITMENTS

At 31st December, 2003, the Group had commitments of approximately HK$2,160,000 (2002: HK$43,890,000) for capital expenditure contracted for but not provided in the financial statements in respect of the acquisition of property, plant and equipment.

The Company had no significant capital commitments at the balance sheet date.

28. OPERATING LEASES

(a) Operating lease commitments

At the balance sheet date, the Group was committed to make minimum lease payments under non-cancellable operating leases for land and buildings which fall due as follows:

Within one year More than one year but within five years	THE GROUP 2003 2002 HK$’000 HK$’000 4,254 5,607 9,355 11,543 13,609 17,150	THE GROUP 2003 2002 HK$’000 HK$’000 4,254 5,607 9,355 11,543 13,609 17,150
		17,150

Operating lease payments represent rental payable by the Group for certain of its office and warehouse properties with fixed monthly rentals for an average term of three years.

The Company had no operating lease commitment at the balance sheet date.

(b) Operating lease arrangements

Property rental income earned during the year was HK$14,876,000 (2002: HK$4,715,000).

At 31st December, 2003, the Group had contracted with tenants for the following future minimum lease payments in respect of its investment properties:

Within one year More than one year but within five years More than five years	THE GROUP 2003 2002 HK$’000 HK$’000 17,059 14,557 69,235 66,309 71,286 84,154 157,580 165,020	THE GROUP 2003 2002 HK$’000 HK$’000 17,059 14,557 69,235 66,309 71,286 84,154 157,580 165,020
		165,020

The Company had no operating lease arrangement at the balance sheet date.

– 58 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

29. CONTINGENT LIABILITIES

Guarantees given to banks and other financial institutions on facilities utilised by subsidiaries in respect of – credit facilities – finance leases	THE GROUP 2003 2002 HK$’000 HK$’000 – – – – – –	THE COMPANY 2003 2002 HK$’000 HK$’000 97,577 64,684 1,537 3,328 99,114 68,012

30. PLEDGE OF ASSETS

At the balance sheet date, certain assets of the Group with the following net book values had been pledged to secure borrowings granted to the Group:

Investment properties Leasehold land and buildings Plant and machinery	THE GROUP 2003 2002 HK$’000 HK$’000 71,562 71,562 29,086 30,573 5,623 6,387 106,271 108,522	THE GROUP 2003 2002 HK$’000 HK$’000 71,562 71,562 29,086 30,573 5,623 6,387 106,271 108,522
		108,522

31. RELATED PARTY TRANSACTIONS

During the year, the Group entered into the following related party transactions:

• (a) Pursuant to the Acquisition Agreement, CCC has given an undertaking in favour of the Group that in the event the annual rental income of certain of the investment properties acquired by the Group under the Acquisition Agreement for each of the two years after the date of completion of the Acquisition Agreement shall be less than HK$3,880,000, CCC and Chuang’s China will indemnify the Group for an amount of the shortfall on a dollar for dollar basis. Such guaranteed income received for the year ended 31st December, 2003 was approximately HK$3,502,000 (2002: HK$3,880,000).

The Group also leased certain of the acquired properties to Yuen Sang Hardware Co. (1988) Limited, a wholly owned subsidiary of Chuang’s China, at an aggregate annual rental of approximately HK$1,067,000 which is based on market rate of similar properties. The lease agreement is for a duration of 2 years expiring on 31st March, 2003 with an option to renew for an additional term of 2 years and such option to renew has been exercised by Yuen Sang Hardware Co. (1988) Limited during the year. Rental income received by the Group under this agreement for the year ended 31st December, 2003 was approximately HK$1,067,000 (2002: HK$1,067,000).

Details of other transactions entered into in association with the Acquisition Agreement are set out in note 14.

• (b) During the year, the Group paid building management fee amounting to approximately HK$802,000 (2002: HK$841,000) to Chuang’s Development (China) Limited, a wholly owned subsidiary of Chuang’s China. This transaction was carried out in accordance with market rate of similar properties.

– 59 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

32. POST BALANCE SHEET EVENTS

Pursuant to two resolutions in writing of all the directors of the Company passed on 7th January, 2004 and 2nd February, 2004 respectively, written requests were made by the Company to the holder of Series B preference shares of the Company to redeem an aggregate of 83,333,332 Series B preference shares at a redemption price of HK$0.60 each with an aggregate value of approximately HK$50,000,000. The redemption of the shares were completed by February 2004.

33. SUBSIDIARIES

Particulars of the principal subsidiaries of the Company as at 31st December, 2003 are as follows:

			Proportion
			of equity
		Issued and	interest
	Place of	fully paid	indirectly
	incorporation	share capital/	held by
Name of subsidiary	or registration	registered capital	the Company	Principal activities
				(note a)
成都莊士中心開發有限公司	PRC	RMB20,000,000	51%	Properties investment
Chengdu Chuang’s Centre	(note b)
Development Company
Limited
Dah Hua International Printing	Hong Kong	HK$1,600,000	100%	Trading of printed
Press Company Limited		ordinary shares		products
Dah Hua Printing Press	Hong Kong	HK$600,000	100%	Investment holding
Company Limited		ordinary shares
東莞勤達印刷有限公司	PRC	HK$112,150,000	100%	Manufacturing and
Dongguan Midas Printing	(note c)			trading of packaging
Company Limited				printed products
Lever Printing Factory	Hong Kong	HK$150,000	100%	Manufacturing and
Limited		founders’ shares		trading of packaging
		HK$350,000		printed products
		ordinary shares
Midas Packaging Printing	Hong Kong	HK$2	100%	Trading of packaging
Limited		ordinary shares		printed products
Midas Printing (Asia) Limited	Hong Kong	HK$100	100%	Trading of printed
		ordinary shares		products
Midas Printing (HK) Limited	Hong Kong	HK$2	100%	Trading of printed
		ordinary shares		products
Midas Printing International	Hong Kong	HK$7,000	100%	Trading of printed
Limited		ordinary shares		products
Midas Printing Limited	Hong Kong	HK$100	100%	Investment holding
		ordinary shares
		HK$10,000,000
		non-voting deferred
		shares_(note d)_
Riverside Trinity Limited	Hong Kong	HK$2	100%	Property investment
		ordinary shares

– 60 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

				Proportion
				of equity
			Issued and	interest
		Place of	fully paid	indirectly
	incorporation		share capital/	held by
Name of subsidiary	or registration		registered capital	the Company	Principal activities
					(note a)
Sino Stream Limited		Hong Kong	HK$2	100%	Property investment
			ordinary shares
廣東省博羅縣圓洲勤達印務		PRC	US$7,500,000	100%	Book binding and
有限公司		(note c)			printing

Notes:

• a. All subsidiaries carry out their operations principally in their respective place of incorporation or registration.

• b. The company is registered in the form of an equity joint venture.

• c. The company is registered in the form of a wholly owned foreign investment enterprises.

• d. The deferred shares practically carry no rights to dividends or to receive notice of attend or vote at any general meeting of the company or to participate in any distribution on winding up.

The above table lists the subsidiaries of the Group which, in the opinion of the directors, principally affected the results of the Group for the year or formed a substantial portion of the net assets of the Group at the end of the year. To give details of other subsidiaries would, in the opinion of the directors, result in particulars of excessive length.

None of the subsidiaries had any debt securities subsisting at the end of the year or at any time during the

year.

– 61 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

2. UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The following is a summary of the unaudited condensed consolidated income statement of the Group for the six months ended 30th June, 2003 and 30th June, 2004, the audited condensed consolidated balance sheet of the Group as at 31st December, 2003, the unaudited condensed consolidated balance sheet of the Group as at 30th June, 2004, the unaudited condensed consolidated statement of changes in equity for the six months ended 30th June, 2004 and unaudited condensed consolidated cash flow statement for the six months ended 30th June, 2003 and 30th June, 2004, together with accompanying notes extracted from the interim report of the Company for the six months ended 30th June, 2004:

Condensed Consolidated Income Statement

For the six months ended 30th June, 2004

NOTES Turnover 3 Direct expenses Gross profit Other operating income Selling expenses Administrative and operating expenses Profit from operations 4 Finance costs Profit before taxation Income tax expenses 5 Profit before minority interest Minority interest Net profit for the period Dividends 6 Earnings per share 7 – Basic – Diluted	For the six months ended 30th June, 2004 2003 HK$’000 HK$’000 (unaudited) (unaudited) 307,662 274,634 (206,943) (190,846) 100,719 83,788 3,614 9,499 (11,555) (8,136) (64,263) (57,548) 28,515 27,603 (2,832) (3,231) 25,683 24,372 (2,853) (3,954) 22,830 20,418 (605) (121) 22,225 20,297 17,390 17,542 HK3.9 cents HK4.7 cents HK3.9 cents HK3.4 cents

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FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

Condensed Consolidated Balance Sheet

At 30th June, 2004

NOTES ASSETS AND LIABILITIES Non-current assets Investment properties 8 Property, plant and equipment 8 Contractual reimbursement from related companies Current assets Inventories Trade receivables 9 Deposits, prepayments and other receivables Bank balances and cash Current liabilities Trade payables 10 Accrued charges and other payables Taxation payable Borrowings 11 Obligations under finance leases Net current assets Total assets less current liabilities	30th June, 31st December, 2004 2003 HK$’000 HK$’000 (unaudited) (audited) 382,700 382,700 228,941 237,591 32,719 32,719 644,360 653,010 107,916 61,015 192,683 192,609 14,504 9,464 75,512 169,028 390,615 432,116 170,593 154,915 82,494 85,246 7,294 9,008 38,560 44,969 618 1,537 299,559 295,675 91,056 136,441 735,416 789,451	30th June, 31st December, 2004 2003 HK$’000 HK$’000 (unaudited) (audited) 382,700 382,700 228,941 237,591 32,719 32,719 644,360 653,010 107,916 61,015 192,683 192,609 14,504 9,464 75,512 169,028 390,615 432,116 170,593 154,915 82,494 85,246 7,294 9,008 38,560 44,969 618 1,537 299,559 295,675 91,056 136,441 735,416 789,451
		653,010
		61,015 192,609 9,464 169,028
		432,116
		154,915 85,246 9,008 44,969 1,537
		295,675
		136,441
		789,451

– 63 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

NOTES Non-current liabilities Borrowings 11 Amount due to a minority shareholder 12 Deferred taxation Retirement benefit obligations MINORITY INTEREST NET ASSETS CAPITAL AND RESERVES Share capital 13 Ordinary shares Preference shares Share premium Other reserves SHAREHOLDERS’ FUNDS	30th June, 31st December, 2004 2003 HK$’000 HK$’000 (unaudited) (audited) 60,300 71,300 55,482 54,076 50,701 50,724 1,155 1,013 167,638 177,113 41,505 40,900 526,273 571,438 53,429 53,429 1,642 2,475 261,631 310,798 209,571 204,736 526,273 571,438	30th June, 31st December, 2004 2003 HK$’000 HK$’000 (unaudited) (audited) 60,300 71,300 55,482 54,076 50,701 50,724 1,155 1,013 167,638 177,113 41,505 40,900 526,273 571,438 53,429 53,429 1,642 2,475 261,631 310,798 209,571 204,736 526,273 571,438
		177,113
		40,900
		571,438
		53,429 2,475 310,798 204,736
		571,438

– 64 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

Condensed Consolidated Statement of Changes in Equity

For the six months ended 30th June, 2004

At 1st January, 2003 (audited) Issue of ordinary shares on exercise of share options Conversion from Series A preference shares to ordinary shares Redemption of preference shares Net profit for the period Dividends At 30th June, 2003 (unaudited) Share issue expenses Net profit for the period Dividends At 31st December, 2003 (audited) Redemption of preference shares Net profit for the period Dividends At 30th June, 2004 (unaudited)	Ordinary share capital HK$’000 38,929 100 14,400 – – – 53,429 – – – 53,429 – – – 53,429	Preference share capital HK$’000 4,095 – (720) (900) – – 2,475 – – – 2,475 (833) – – 1,642	Ordinary share premium HK$’000 136,123 220 28,800 – – – 165,143 (370) – – 164,773 – – – 164,773	Preference share premium HK$’000 241,605 – (42,480) (53,100) – – 146,025 – – – 146,025 (49,167) – – 96,858	Other reserve HK$’000 – – – 4,000 – – 4,000 – – – 4,000 – – – 4,000	Merger reserve HK$’000 24,000 – – – – – 24,000 – – – 24,000 – – – 24,000	Translation Goodwill reserve HK$’000 HK$’000 (33,216) 239 – – – – – – – – – – (33,216) 239 – – – – – – (33,216) 239 – – – – – – (33,216) 239	Retained profits HK$’000 182,107 – – – 20,297 (17,542) 184,862 – 32,065 (7,214) 209,713 – 22,225 (17,390) 214,548	Total HK$’000 593,882 320 – (50,000) 20,297 (17,542) 546,957 (370) 32,065 (7,214) 571,438 (50,000) 22,225 (17,390) 526,273

– 65 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

Condensed Consolidated Cash Flow Statement

For the six months ended 30th June, 2004

Net cash generated from (used in) operating activities Net cash used in investing activities Net cash used in financing activities Net decrease in cash and cash equivalents Cash and cash equivalents at 1st January Cash and cash equivalents at 30th June	For the six months ended 30th June, 2004 2003 HK$’000 HK$’000 (unaudited) (unaudited) 835 (2,166) (8,633) (8,301) (85,718) (57,082) (93,516) (67,549) 169,028 182,129 75,512 114,580

– 66 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

Notes to the Condensed Financial Statements

For the six months ended 30th June, 2004

1. BASIS OF PREPARATION

The condensed financial statements have been prepared in accordance with the applicable disclosure requirements of Appendix 16 to the Rules Governing the Listing of Securities (the “Listing Rules”) on The Stock Exchange of Hong Kong Limited (the “Stock Exchange”) and with Statement of Standard Accounting Practice No. 25 “Interim financial reporting” issued by the Hong Kong Institute of Certified Public Accountants.

2. PRINCIPAL ACCOUNTING POLICIES

The condensed financial statements have been prepared under the historical cost convention as modified for the revaluation of investment properties.

In the opinion of the directors, the accounting policies adopted are consistent with those followed in the preparation of the Group’s annual financial statements for the year ended 31st December, 2003.

3. SEGMENT INFORMATION

Business segments

The Group is currently operating in two business segments, namely printing and property investment. Turnover of the Group represents net amounts received and receivable for goods sold by the Group to outside customers, less returns and allowances and property rental income during the period. Segmental information about these businesses is presented below.

Six months ended 30th June, 2004

TURNOVER – external SEGMENT RESULTS Unallocated corporate income Unallocated corporate expenses PROFIT FROM OPERATIONS Six months ended 30th June, 2003	Printing HK$’000 299,066 23,369	Property investment HK$’000 8,596 5,304	Total HK$’000 307,662 28,673 466 (624) 28,515

TURNOVER – external SEGMENT RESULTS Unallocated corporate income Unallocated corporate expenses PROFIT FROM OPERATIONS	Printing HK$’000 267,462 22,597	Property investment HK$’000 7,172 6,082	Total HK$’000 274,634 28,679 909 (1,985) 27,603

– 67 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

4. PROFIT FROM OPERATIONS

Profit from operations has been arrived at after charging (crediting):

Depreciation and amortisation Interest earned on bank deposits 5. INCOME TAX EXPENSES The charge (credit) comprises: Hong Kong Profits Tax The People’s Republic of China (the “PRC”) income tax Deferred taxation	For the six months ended 30th June, 2004 2003 HK$’000 HK$’000 17,348 16,389 (466) (909 For the six months ended 30th June, 2004 2003 HK$’000 HK$’000 2,210 2,812 666 1,114 (23) 28 2,853 3,954	For the six months ended 30th June, 2004 2003 HK$’000 HK$’000 17,348 16,389 (466) (909 For the six months ended 30th June, 2004 2003 HK$’000 HK$’000 2,210 2,812 666 1,114 (23) 28 2,853 3,954
		3,954

Hong Kong Profits Tax is calculated at 17.5% of the estimated assessable profit for the six months ended 30th June, 2003 and 2004.

Income tax in the PRC is calculated at the applicable rates relevant to the PRC subsidiaries.

The Group had no significant unprovided deferred taxation for the period or at the balance sheet date.

6. DIVIDENDS

2002 final dividend of HK2.8 cents per share paid to ordinary shareholders 2003 final dividend of HK3.0 cents per share paid to ordinary shareholders 2003 special dividend of HK1.2 cents per share paid to ordinary shareholders_(note a) Dividend to Series B preference shareholders(note b)_	For the six months ended 30th June, 2004 2003 HK$’000 HK$’000 – 10,928 16,029 – – 4,684 1,361 1,930 17,390 17,542	For the six months ended 30th June, 2004 2003 HK$’000 HK$’000 – 10,928 16,029 – – 4,684 1,361 1,930 17,390 17,542
		17,542

– 68 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

Notes:

• a. On 22nd May, 2003, the Company and Gold Throne Finance Limited (“Gold Throne”), a substantial shareholder of the Company and the holder of Series A and Series B preference shares, entered into an agreement (the “Concession Agreement”) pursuant to which Gold Throne, among other things, would exercise the conversion right of converting 72,000,000 Series A preference shares of HK$0.01 each into 144,000,000 new ordinary shares in the Company of HK$0.10 each and waive any dividend payable on Series A preference shares for the period from 1st January, 2003 to 30th June, 2003. In addition, a special dividend of HK1.2 cents per share to the ordinary shareholders on the register of members on 30th June, 2003 (the date of an extraordinary general meeting of the shareholders of the Company in approving the aforesaid transaction “EGM”) had been proposed by the directors pursuant to the Concession Agreement. The Concession Agreement became unconditional upon approval by the independent shareholders of the Company at the EGM and accordingly the special dividend based on an aggregate of 390,290,068 ordinary shares, amounting to approximately HK$4,684,000 was distributed in July 2003.

• b. Subject to the Companies Law (Revised) of the Cayman Islands, the holders of Series B preference shares are entitled to receive dividends semi-annually at 2.5 percent per annum on the issue price of HK$0.60 per preference share in arrears on a daily basis.

7. EARNINGS PER SHARE

The calculation of the basic and diluted earnings per share for the period is based on the following data:

Net profit for the period Dividend on preference shares Earnings for the purposes of basic earnings per share and diluted earnings per share Weighted average number of ordinary shares for the purposes of basic earnings per share Effect of dilutive potential ordinary shares: – Convertible preference shares – Share options Weighted average number of ordinary shares for the purposes of diluted earnings per share

For the six months ended 30th June, 2004 2003 HK$’000 HK$’000 22,225 20,297 (1,361) (1,930) 20,864 18,367 Number of shares For the six months ended 30th June, 2004 2003 534,290,068 390,168,521 – 144,000,000 – 21,816 534,290,068 534,190,337

8. MOVEMENTS IN INVESTMENT PROPERTIES AND PROPERTY, PLANT AND EQUIPMENT

All investment properties of the Group are held for rental purposes under operating leases and were revalued at 31st December, 2003 on an open market value basis by DTZ Debenham Tie Leung Limited, a firm of independent professional valuers.

At 30th June, 2004, the directors have considered that the carrying amount of the Group’s investment properties would not differ significantly from the professional valuation made as at 31st December, 2003. Accordingly, no revaluation surplus or deficit has been recognised in the current period.

During the six months ended 30th June, 2004, the Group acquired property, plant and equipment at a cost of approximately HK$10,059,000.

– 69 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

9. TRADE RECEIVABLES

The Group has a policy of allowing credit periods ranging from 30 days to 180 days to its trade customers. The aged analysis of trade receivables prepared on the basis of sales invoice date is stated as follows:

0 to 30 days 31 to 60 days 61 to 90 days 91 to 120 days More than 120 days	30th June, 31st December, 2004 2003 HK$’000 HK$’000 68,641 46,350 43,168 35,925 36,501 46,185 27,311 28,986 17,062 35,163 192,683 192,609	30th June, 31st December, 2004 2003 HK$’000 HK$’000 68,641 46,350 43,168 35,925 36,501 46,185 27,311 28,986 17,062 35,163 192,683 192,609
		192,609

10. TRADE PAYABLES

The aged analysis of trade payables prepared on the basis of supplier invoice date is stated as follows:

0 to 30 days 31 to 60 days 61 to 90 days 91 to 120 days More than 120 days	30th June, 31st December, 2004 2003 HK$’000 HK$’000 51,261 23,226 44,063 28,125 35,049 28,222 19,541 22,372 20,679 52,970 170,593 154,915	30th June, 31st December, 2004 2003 HK$’000 HK$’000 51,261 23,226 44,063 28,125 35,049 28,222 19,541 22,372 20,679 52,970 170,593 154,915
		154,915

11. BORROWINGS

During the period, the Group obtained new bank and import loans in the amount of approximately HK$6,307,000 and made repayment of approximately HK$23,716,000. The new loans bear interest at prevailing market rates and are repayable in one to five years.

12. AMOUNT DUE TO A MINORITY SHAREHOLDER

The amount is unsecured and repayable more than one year but not exceeding two years.

Interest bearing at approximately 0.6 percent (31st December, 2003: 0.6 percent) per month Interest-free	30th June, 31st December, 2004 2003 HK$’000 HK$’000 40,724 40,724 14,758 13,352 55,482 54,076	30th June, 31st December, 2004 2003 HK$’000 HK$’000 40,724 40,724 14,758 13,352 55,482 54,076
		54,076

– 70 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

13. SHARE CAPITAL

Number of shares Authorised: Ordinary shares of HK$0.10 each – balance at 1st January, 2003, 30th June, 2003, 31st December, 2003 and 30th June, 2004 1,000,000,000 Preference shares of HK$0.01 each Series A preference shares – balance at 1st January, 2003, 30th June, 2003, 31st December, 2003 and 30th June, 2004 1,000,000,000 Series B preference shares – balance at 1st January, 2003, 30th June, 2003, 31st December, 2003 and 30th June, 2004 1,000,000,000 2,000,000,000 Issued and fully paid: Ordinary shares of HK$0.10 each – balance at 1st January, 2003 389,290,068 – issue of shares on exercise of share options 1,000,000 – conversion from Series A preference shares during the period 144,000,000 – balance at 30th June, 2003, 31st December, 2003 and 30th June, 2004 534,290,068 Preference shares of HK$0.01 each Series A preference shares – balance at 1st January, 2003 72,000,000 – conversion to ordinary shares during the period (72,000,000) – balance at 30th June, 2003, 31st December, 2003 and 30th June, 2004 – Series B preference shares – balance at 1st January, 2003 337,500,000 – redemption of shares during the period (90,000,000) – balance at 30th June, 2003 and 31st December, 2003 247,500,000 – redemption of shares during the period (83,333,332) – balance at 30th June, 2004 164,166,668

Amount HK$’000 100,000 10,000 10,000 20,000 38,929 100 14,400 53,429 720 (720) – 3,375 (900) 2,475 (833) 1,642

On 14th December, 2001, the Company issued 84 million Series A preference shares and 337.5 million Series B preference shares at a subscription price of HK$0.60 per share. The preference shares are non-voting, redeemable and their holders are entitled to a fixed cumulative preferential dividend payable semi-annually at a rate of 2.5% per annum on the issue price of HK$0.60 of each preference share. In addition, the preference shares rank in priority to the ordinary shares in the Company as to dividend and return of capital. Subject to adjustment in accordance with the terms of Series A preference shares, each of the Series A preference shares is convertible into two ordinary shares in the Company of HK$0.10 each (“Conversion Shares”) at the option of the holders at

– 71 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

any time from 14th December, 2001 prior to the fifth anniversary from the date of their issue. The Conversion Shares shall, when issued, rank pari passu in all respects with the then existing ordinary shares of the Company. Subject to the Companies Law, unless previously converted, the preference shares are redeemable by the Company at any time prior to the fifth anniversary from 14th December, 2001 at their outstanding subscription amount together with any unpaid dividend in cash. Further, the Company shall redeem all outstanding preference shares which have not been previously redeemed or converted on the fifth anniversary from 14th December, 2001 at their outstanding subscription amount together with any unpaid dividend in cash.

Pursuant to two resolutions in writing of all the directors of the Company passed on 7th January, 2004 and 2nd February, 2004 respectively, written requests were made by the Company to the holder of Series B preference shares of the Company to redeem 83,333,332 Series B preference shares at a redemption price of HK$0.60 each with an aggregate value of HK$50,000,000. The redemption of the shares were completed in February 2004.

14. CAPITAL COMMITMENTS

At 30th June, 2004, the Group had commitments of approximately HK$18,124,000 (31st December, 2003: HK$2,160,000) for capital expenditure contracted for but not provided in the financial statements in respect of the acquisition of property, plant and equipment.

15. PLEDGE OF ASSETS

At the balance sheet date, certain assets of the Group with the following net book values have been pledged to secure borrowings granted to the Group:

Investment properties Leasehold land and buildings Plant and machinery	30th June, 31st December, 2004 2003 HK$’000 HK$’000 71,562 71,562 28,343 29,086 5,207 5,623 105,112 106,271	30th June, 31st December, 2004 2003 HK$’000 HK$’000 71,562 71,562 28,343 29,086 5,207 5,623 105,112 106,271
		106,271

16. CONNECTED AND RELATED PARTIES TRANSACTIONS

During the six months ended 30th June, 2004, the Group entered into the following material transactions with connected and related parties:

• (a) Property rental income amounting to approximately HK$534,000 (six months ended 30th June, 2003: HK$534,000) was received from Yuen Sang Hardware Co. (1988) Limited, a wholly owned subsidiary of Chuang’s China Investments Limited (“Chuang’s China”). Chuang’s China is a substantial shareholder of the Company in which Mr. Chan Sheung Chiu, Ms. Li Mee Sum, Ann and Mr. Lee Sai Wai, directors of the Company, are also directors of Chuang’s China.

• (b) Interest amounting to approximately HK$1,406,000 (six months ended 30th June, 2003: HK$1,406,000) was charged on amount due to a minority shareholder.

• (c) Building management fee amounting to approximately HK$401,000 (six months ended 30th June, 2003: HK$401,000) was paid to Chuang’s Development (China) Limited (“CDC”), a wholly owned subsidiary of Chuang’s China.

• (d) Guaranteed rental income amounting to approximately HK$1,913,000 for the six months ended 30th June, 2003 was received from Chuang’s China Commercial Limited (“CCC”) and Chuang’s China pursuant to an agreement entered into in 2001. CCC is a wholly owned subsidiary of Chuang’s China.

• (e) Certain plant and machinery amounting to approximately HK$849,000 for the six months ended 30th June, 2003 were acquired from CDC.

– 72 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

3. MATERIAL ADVERSE CHANGE

The Directors are not aware of any material adverse change in the financial or trading position of the Group since 31st December, 2003, the date to which the latest audited financial statements of the Company were made up.

4. LIQUIDITY AND FINANCIAL POSITIONS

As at 30th June, 2004, the Group’s bank and cash balances amounted to HK$75,512,000 while bank borrowings and obligations under finance leases amounted to HK$99,478,000, of which HK$60,300,000 are due from the second to fifth year. The Group’s net borrowings to equity ratio (being all bank and other borrowings less bank and cash balances as a ratio to shareholders’ funds) is 4.6%. Most of the Group’s bank balances and borrowings were dominated in Hong Kong dollars, U.S. dollars and Renminbi, risk in exchange fluctuation would not be material. Interest on bank borrowings is charged at variable commercial rates prevailing in Hong Kong and the PRC. As at 30th June, 2004, certain assets of the Group with an aggregate net book value of HK$105,112,000 had been pledged to secure borrowings granted to the Group.

Pursuant to resolution in writing of all the Directors passed on 9th September, 2004, written request was made by the Company to the holder of the Series B Preference Shares of the Company to redeem 83,333,334 Series B Preference Shares at a redemption price of HK$0.60 each with an aggregate value of HK$50,000,000. The redemption of the Series B Preference Shares was completed in September 2004.

As at the Latest Practicable Date, the Group had in issue HK$48.5 million Series B Preference Shares.

5. INDEBTEDNESS

At the close of business on 30th September, 2004, being the latest practicable date of this indebtedness statement prior to the printing of this circular, the Group had outstanding bank borrowings of approximately HK$156 million and obligations under finance leases of approximately HK$0.2 million. In addition, there was an advance from a minority shareholder of a subsidiary of approximately HK$56 million which was unsecured and repayable within five years, of which approximately HK$15 million is interest-free, and the rest of the balance bears interest at prevailing market rates.

At the close of business on 30th September, 2004, the Group’s bank borrowings of approximately HK$24 million were secured by a charge over the Group’s investment properties, leasehold land and building and plant and machinery with carrying values of approximately HK$72 million, HK$28 million and HK$5 million, respectively and corporate guarantees given by the Company.

As at 30th September, 2004, the Company had bills of exchange which amounted to approximately HK$1.6 million discounted to a bank with recourse.

Save as aforesaid, and apart from the Series B Preference Shares, dividend payable, intragroup liabilities and normal trade debts payable, none of the companies in the Group had outstanding at the close of business on 30th September, 2004, any loan capital issued and outstanding or agreed to be issued, bank overdrafts, loans or other similar indebtedness, mortgages, charges, any guarantees or other material contingent liabilities.

– 73 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

Foreign currency amounts have for these purposes been translated into HK$ at the approximate rates prevailing at the close of business on 30th September, 2004.

6. BUSINESS REVIEW FOR THE SIX MONTHS ENDED 30TH JUNE, 2004

During the first half of the year, the Group met with challenges in rise in paper costs, insufficient labor and unstable electricity supply in the Guangdong province. Despite all these, with the growing momentum of book printing and paper product printing, the Group was able to achieve an increase in both turnover and net profit.

During the period under review, the Group recorded a growth in turnover by 12% to about HK$308 million and increase in gross profit by 20% to about HK$101 million. As a result of increase in sales, selling expenses rose to about HK$12 million from HK$8 million. Furthermore, administrative and operating expenses increased by 10% to HK$64 million which was principally due to rise in freight and logistics expenses whereas finance costs reduced in light of lower interest rate. Taking all these into account, net profit of the Group increased by 10% to HK$22 million. EBITDA for the six months ended 30th June, 2004 amounted to HK$45 million.

(a) Printing Division

During the period under review, the Group’s printing business climbed by 12% and attained a turnover of HK$299 million, accounted for 97% of the Group’s turnover. The core business of the Group comprises book printing and paper product printing. For the first six months of the year, the Group improved its utilization of production capacity and resources to cope with the strong demand for printing products.

(1) Book Printing

Book printing business focused on multinational publishers and conglomerates in the United States, Europe, Australia and New Zealand. During the period under review, book printing division achieved a growth in sales by 20% under the proactive sales and marketing strategy.

Consistent high quality standard and reputation is of paramount importance to the Group in the printing industry, and great emphasis on product and service quality had been put to uplift corporate image on the international platform. This year, the Group won 16 awards in 2004 Premier Print Awards in the United States of America, of which we are honored to be awarded 2 Benny awards in the Trade Book and Special Finishing Technique categories. Being winners of Benny award are appraised as the highest honor in the global printing industry. Besides, the Group participated in several international trade fairs namely the Bologna Children’s Book Fair and the Book Expo of America to promote its corporate awareness and to expand new business.

The book printing production of the Group is carried out in the following plants:–

• (i) Yuanzhou plant

– 74 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

The Yuanzhou plant occupied a gross floor area of about 410,000 sq.ft., which is well equipped primarily for book printing business. To cater for the growing demand for book printing business during the period under review, the Group installed two new 5-color printing presses and an additional hard cover binding and other auxiliary post press facilities. Besides, the Group is in progress to upgrade its prepress capabilities and CTP systems in order to maintain its pioneering position in providing advanced printing services to clients.

(ii) Processing plant in Dongguan

The processing plant in Dongguan occupied a four-storey leased premises with over 250,000 sq.ft. and has been providing strong back-up support to the book printing business. With the realignment of the operational team and the strengthening of production flow, efficiency of this plant has improved during the period under review. The processing plant is able to provide the Group with an additional printing capacity to cater for the growth in book printing business.

(2) Paper Product Printing

Paper product business provides a diversified range of products including packaging products, commercial printing products, premium gift products, greeting cards, stationery items and paper gift bags. The division is supported by the Dongguan plant which has a total gross area of 410,000 sq.ft. and is fully equipped to provide full fledged services for paper products.

During the period under review, paper product division achieved a small growth in turnover with its strategy to adjust its product mix and to improve its profit margin. In view of the keen competition in paper product business, the Group has implemented prudent pricing strategy to maintain an appropriate balance among its sales volume, gross profit and market share. To improve its competitiveness, the Group has been providing value added services by promoting a series of paper product designs and concepts to cope with the more sophisticated market demand. This direction won positive feedback from customers.

The Group had implemented proactive strategy in new business development in local and overseas markets and had invested substantial efforts in expanding its product ranges. In early 2004, the Group had actively participated in the Frankfurt Paper World 2004 and the Total Processing and Packaging Fair to develop new customers and exploring additional sales revenue.

(b) Property Division

The Group holds a total attributable gross floor area of 920,500 sq.ft. in the PRC through the entire interest in Lambda Building, Yuen Sang Building and Chuang’s Garden in Huiyang and 51% interests in the commercial podium and basements of Chengdu Chuang’s Centre in Sichuan.

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APPENDIX I FINANCIAL INFORMATION ON THE GROUP

During the first six months of the year, rental income of the property division amounted to HK$9 million.

7. WORKING CAPITAL

Barring unforeseeable circumstances, taking into account the available banking facilities and internal resources of the Group, the Directors are of the opinion that the Group will have sufficient working capital for its present requirements.

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PROPERTY VALUATION

APPENDIX II

Set out below are the texts of a letter, summary of valuations and valuation certificates received from DTZ, an independent property valuer, in connection with their valuations as at 30th September, 2004 of the Property and the Consideration Property, and prepared for the purpose of inclusion in this circular:–

==> picture [160 x 59] intentionally omitted <==

National Grade A Real Estate Valuation Company in China National Land Valuation Company in China

23rd November, 2004

The Directors Midas International Holdings Limited 1st Floor, 100 Texaco Road Tsuen Wan New Territories Hong Kong

Dear Sirs,

• Re: (1) The whole 7-storey commercial podium and basements of Chengdu Chuang’s Centre, No. 1 Renmin South Road Section 4, Wuhou District, Chengdu, Sichuan Province, the People’s Republic of China

• (2) The 6th Floor of the commercial podium of Chengdu Chuang’s Centre, No. 1 Renmin South Road Section 4, Wuhou District, Chengdu, Sichuan Province, the People’s Republic of China

• Instructions, Purpose In accordance with the instructions of Midas International Holdings & Date of Valuation Limited (the “Company”) for us to value the interest held by the Company and its subsidiaries (hereinafter together referred to as the “Group”) in the captioned property situated in the People’s Republic of China (the “PRC”), we confirm that we have carried out inspection, made relevant enquiries and obtained such further information as we consider necessary for the purpose of providing you with our opinion of the open market value of the captioned property as at 30th September, 2004 (the “date of valuation”) for the purpose of incorporating into a circular issued by the Group.

• Definition of Open Our valuation of the property represents our opinion of its open market Market Value value which we would define as intended to mean “the best price at which the sale of an interest in property would have been completed unconditionally for cash consideration on the date of valuation, assuming:–

  • (a) a willing seller;

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PROPERTY VALUATION

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• (b) that, prior to the date of valuation, there had been a reasonable period (having regard to the nature of the property and the state of the market) for the proper marketing of the interest, for the agreement of price and terms and for the completion of the sale;

• (c) that the state of the market, level of values and other circumstances were, on any earlier assumed date of exchange of contracts, the same as on the date of valuation;

• (d) that no account is taken of any additional bid by a purchaser with a special interest; and

• (e) that both parties to the transaction had acted knowledgeably, prudently and without compulsion.”

Valuation Bases & Assumption

Our valuation has been made on the assumption that the Group sells the property interests on the open market without the benefit of a deferred terms contract, leaseback, management agreement, or any similar arrangement which would serve to increase the value of the such property interests.

In undertaking our valuation of the property which is situated in the PRC, we have assumed that transferable land use rights in respect of the property for a specific term at nominal annual land use fees have been granted and that, unless otherwise stated, any premium payable has already been fully paid. We have also assumed that the Group has free and uninterrupted rights to use or to assign the property for the whole of the unexpired terms as granted.

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

Method of Valuation

• In valuing the property which are held by the Group for investment purposes, we have valued it by investment method by capitalizing the net rental income derived from the existing tenancies with due allowance for the reversionary potential of the property.

• Source of Information We have relied to a very considerable extent on the information given by the Group and have accepted advice given to us on such matters as planning approval or statutory notices, easements, tenure, particulars of occupancy and tenancy, site and floor areas and all other relevant matters.

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Dimension, measurements and areas included in the valuation certificates attached are based on information provided to us and are therefore only approximation. We have had no reason to doubt the truth and accuracy of the information provided to us by the Group which is material to the valuation. We were also advised by the Group that no material facts have been omitted from the information provided.

• Title Investigation We have been provided with copies of documents relating to the titles to the property. However, we have not been able to conduct searches to verify the ownership or to ascertain any amendment which may not appear on the copies supplied to us.

• Site Inspection We have inspected exterior and, where possible, the interior of the property. However, no structural survey has been made, but in the course of our inspection, we did not note any serious defect. We are not, however, able to report whether the property are free of rot, infestation or other structural defects. Unless otherwise stated, we have not been able to carry out detailed on-site measurements to verify the site and floor areas of the property and we have assumed that the areas shown on the documents handed to us are correct.

• Currency & Exchange Unless otherwise stated, all money amounts stated herein are in Hong Rates Kong dollars. The exchange rate adopted in our valuation is HK$1=RMB1.06 which was the approximate exchange rate prevailing as at the date of valuation and there has been no significant fluctuation in such rate between that date and the date of this letter.

Our valuations are summarized below and the valuation certificates are attached.

Yours faithfully, for and on behalf of

DTZ Debenham Tie Leung Limited

Andrew K. F. Chan

China Real Estate Appraiser MSc., R.P.S.(GP), M.H.K.I.S., M.R.I.C.S.

Director

Note: Mr. Andrew Chan is a Registered Professional Surveyor and has over 17 years of experience in valuation of properties situated in Hong Kong and the PRC.

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SUMMARY OF VALUATIONS

				Capital value
				in existing state
		Capital value in	Interest	attributable to
		existing state as at	attributable to	the Group as at
	Property	30th September, 2004	the Group	30th September, 2004
		HK$		HK$
1.	The whole 7-storey commercial	250,000,000	51%	127,500,000
	podium and basements of
	Chengdu Chuang’s Centre,
	No. 1 Renmin South Road
	Section 4, Wuhou District,
	Chengdu, Sichuan Province,
	the PRC
2.	The 6th Floor of the	19,820,000	51%	10,108,200
	commercial podium of
	Chengdu Chuang’s Centre,
	No. 1 Renmin South Road
	Section 4, Wuhou District,
	Chengdu, Sichuan Province,
	the PRC

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VALUATION CERTIFICATES

Capital value in Particulars of existing state as at Property Description and tenure occupancy 30th September, 2004 1. The whole 7-storey Chengdu Chuang’s Centre occupies The various portions of HK$250,000,000 commercial podium an irregular-shaped site having an the property are and basements of area of 6,344.50 sq.m. (68,292 sq.ft.). currently leased on (51% interest Chengdu Chuang’s various terms of attributable to Centre at No. 1 Chengdu Chuang’s Centre comprises tenancies. the Group: Renmin South Road a 23-storey commercial/residential HK$127,500,000) Section 4, Wuhou tower erected upon a 7-storey District, Chengdu, commercial podium and a 3-level Sichuan Province, basement and was completed in 2002. the PRC The property comprises the whole commercial podium and the basements of Chengdu Chuang’s Centre. The commercial podium of the property has a total gross floor area of 28,011 sq.m. (301,510 sq.ft.) whilst the basements have a total area of 13,573 sq.m. (146,100 sq.ft.) and accommodate approximately 220 car parking spaces. The land use rights of the property have been granted for a term of 70 years from the date of issue of the Certificate for the Use of Stateowned Land.

Notes:–

• (1) According to Certificate for the Use of State-owned Land No. (1993) 026 issued by the People’s Government of Chengdu on 12th July, 1993, the land use rights of Chengdu Chuang’s Centre, comprising a site area of 6,344.50 sq.m., have been granted to Chengdu Chuang’s Centre Development Co. Limited, a 51% owned subsidiary of the Company, for a term of 70 years for “Commercial/Residential” use.

• (2) According to Grant Contract of Land Use Rights No. (1993) 57 entered into between the Land Administrative Bureau of Chengdu (“Party A”) and Chengdu Chuang’s Centre Development Co. Limited (“Party B”) on 30th April, 1993, Party A had agreed to grant the land use rights of Chengdu Chuang’s Centre to Party B at a land premium in the sum of RMB33,000,000 which is inclusive of land grant fee, composite development fee and resettlement fee.

• (3) According to Business Licence No. 00341, Chengdu Chuang’s Centre Development Co. Limited has been incorporated as a sino-foreign joint-venture enterprise with a registered capital of RMB20,000,000 and an operation period of 70 years from 16th November, 1992 to 15th November, 2062.

• (4) The opinion of the Group’s legal adviser on PRC law states, inter alia, that:–

• (i) Chengdu Chuang’s Centre Development Co. Limited is duly incorporated under the PRC law as a sino-foreign joint-venture enterprise with a registered capital of RMB20,000,000 and an operation period of 70 years from 16th November, 1992 to 15th November, 2062.

• (ii) The land use rights of the property have been granted to Chengdu Chuang’s Centre Development Co. Limited by virtue of obtaining the Certificate for the Use of State-owned Land.

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• (iii) Chengdu Chuang’s Centre Development Co. Limited has settled in full the land premium.

• (iv) Levels 1 to 3 of the commercial podium of Chengdu Chuang’s Centre are subject to a mortgage in favour of China Construction Bank Chengdu Third Branch.

• (v) Chengdu Chuang’s Centre Development Co. Limited is entitled to occupy, transfer and mortgage the property.

• (5) As advised by the Group, the various portions of the property are leased on various terms of tenancies. The rental schedules, after deducting the rental rebates, are summarized as follows:–

	Date of	Approximate
Portion	Commencement	Gross floor area	Year	Net annual rent
Levels 1 – 5	2002/10/25	21,323 sq.m.	1	RMB10,000,000
			2	RMB10,370,000
			3	RMB11,570,000
			4	RMB12,760,000
			5	RMB14,800,000
			6-10 (each)	RMB16,000,000
Level 6	2003/10/25	4,255 sq.m.	1	RMB390,833
			2	RMB814,000
			3	RMB838,000
			4	RMB922,000
			5	RMB1,006,000
			6-10 (each)	RMB1,090,000
Level 7	2003/10/25	2,433 sq.m.	1	RMB470,000
			2	RMB1,000,000
			3	RMB1,150,000
			4	RMB1,250,000
			5	RMB1,300,000
			6-10 (each)	RMB1,400,000
Basement 1	2002/10/25	2,648 sq.m.	1	RMB700,000
commercial portion			2	RMB786,000
			3	RMB868,000
			4	RMB952,000
			5	RMB1,036,000
			6-10 (each)	RMB1,120,000
Basements 1 to 3	2003/3/11	10,925 sq.m.	1-3	RMB712,000
car parks portion

(6) We have based on the aforesaid legal opinion and prepared our valuation on the following assumptions:–

• (i) Chengdu Chuang’s Centre Development Co. Limited is in possession of a proper legal title to the property and is entitled to transfer the property with the residual term of its land use rights with no extra land premium or other onerous payment payable to the government;

• (ii) all land premium and other costs of ancillary utilities services have been settled in full;

• (iii) the design and construction of the development are in compliance with the local planning regulations and have been approved by the relevant authorities; and

• (iv) the property may be disposed of freely to third parties.

• (7) The status of title and grant of major approvals and licences in accordance with the information provided by the Group are as follows:–

Real Estate Certificate/Building Ownership Certificate N/A Certificate for the Use of State-owned Land Yes Grant Contract of State-owned Land Use Rights Yes Business Licence Yes

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				Capital value in
			Particulars of	existing state as at
	Property	Description and tenure	occupancy	30th September, 2004
2.	The 6th Floor of the	Chengdu Chuang’s Centre occupies	The property is subject	HK$19,820,000
	commercial podium	an irregular-shaped site having an	to a tenancy for a term
	of Chengdu	area of 6,344.50 sq.m. (68,292 sq.ft.).	of 10 years from 25th	(51% interest
	Chuang’s Centre at		October, 2003 at a	attributable to
	No. 1 Renmin South	Chengdu Chuang’s Centre comprises	current passing rent of	the Group:
	Road Section 4,	a 23-storey commercial/residential	RMB814,000.	HK$10,108,200)
	Wuhou District,	tower erected upon a 7-storey
	Chengdu, Sichuan	commercial podium and a 3-level
	Province, the PRC	basement and was completed in 2002.
		The property comprises the 6th floor
		in the commercial podium of
		Chengdu Chuang’s Centre.
		The property has a total gross floor
		area of 4,255 sq.m. (45,801 sq.ft.).
		The land use rights of the property
		have been granted for a term of 70
		years from the date of issue of the
		Certificate for the Use of State-
		owned Land.

Notes:–

• (1) According to Certificate for the Use of State-owned Land No. (1993) 026 issued by the People’s Government of Chengdu on 12th July, 1993, the land use rights of Chengdu Chuang’s Centre, comprising a site area of 6,344.50 sq.m., have been granted to Chengdu Chuang’s Centre Development Co. Limited for a term of 70 years for “Commercial/Residential” use.

• (2) According to Grant Contract of Land Use Rights No. (1993) 57 entered into between the Land Administrative Bureau of Chengdu (“Party A”) and Chengdu Chuang’s Centre Development Co. Limited (“Party B”) on 30th April, 1993, Party A had agreed to grant the land use rights of Chengdu Chuang’s Centre to Party B at a land premium in the sum of RMB33,000,000 which is inclusive of land grant fee, composite development fee and resettlement fee.

• (3) According to Business Licence No. 00341, Chengdu Chuang’s Centre Development Co. Limited has been incorporated as a sino-foreign joint-venture enterprise with a registered capital of RMB20,000,000 and an operation period of 70 years from 16th November, 1992 to 15th November, 2062.

• (4) The opinion of the Group’s legal adviser on PRC law states, inter alia, that:–

• (i) Chengdu Chuang’s Centre Development Co. Limited is duly incorporated under the PRC law as a sinoforeign joint-venture enterprise with a registered capital of RMB20,000,000 and an operation period of 70 years from 16th November, 1992 to 15th November, 2062.

• (ii) The land use rights of the property have been granted to Chengdu Chuang’s Centre Development Co. Limited by virtue of obtaining the Certificate for the Use of State-owned Land.

• (iii) Chengdu Chuang’s Centre Development Co. Limited has settled in full the land premium.

• (iv) Chengdu Chuang’s Centre Development Co. Limited is entitled to occupy, transfer and mortgage the property.

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• (5) As advised by the Group, the property is leased for a term of 10 years. The rental schedule, after deducting the rental rebates, is summarized as follows:–

	Date of
Portion	Commencement	Gross floor area	Year	Net annual rent
Level 6	2003/10/25	4,255 sq.m.	1	RMB390,833
			2	RMB814,000
			3	RMB838,000
			4	RMB922,000
			5	RMB1,006,000
			6-10 (each)	RMB1,090,000

• (6) We have based on the aforesaid legal opinion and prepared our valuation on the following assumptions:–

• (i) Chengdu Chuang’s Centre Development Co. Limited is in possession of a proper legal title to the property and is entitled to transfer the property with the residual term of its land use rights with no extra land premium or other onerous payment payable to the government;

• (ii) all land premium and other costs of ancillary utilities services have been settled in full;

• (iii) the design and construction of the development are in compliance with the local planning regulations and have been approved by the relevant authorities; and

• (iv) the property may be disposed of freely to third parties.

• (7) The status of title and grant of major approvals and licences in accordance with the information provided by the Group are as follows:–

Real Estate Certificate/Building Ownership Certificate N/A Certificate for the Use of State-owned Land Yes Grant Contract of State-owned Land Use Rights Yes Business Licence Yes

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GENERAL INFORMATION

APPENDIX III

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 and short positions of Directors

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

	Number of Shares held	Number of Shares held
	Personal	Corporate
Name of Director	interests	interests	Percentage
Mr. Shek Lai Him, Abraham	10,000	–	0.002%

Save as disclosed herein, as at the Latest Practicable Date, none of the Directors nor the chief executive of the Company had or was deemed to have any interests or short positions in the shares, underlying shares or debentures of the Company and its associated corporations (within the meaning of Part XV of the SFO) (a) which were required to be notified to the Company and the Stock Exchange pursuant to the provisions of Divisions 7 and 8 of Part XV of the SFO (including interests or short positions which they were taken or deemed to have under such provisions of the SFO); or (b) which were required, pursuant to section 352 of Part XV of the SFO, to be entered in the register referred to therein; or (c) which were required to be notified to the Company and the Stock Exchange pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers.

(b) Directors’ rights to acquire Shares

The Company had adopted the Share Option Scheme under which the Directors may, on or before 12th December, 2011, invite, inter alia, any employee or director of the Group to take up options to subscribe for Shares.

As at the Latest Practicable Date, no options had been granted.

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GENERAL INFORMATION

APPENDIX III

(c) Interests of substantial Shareholders

So far as is known to the Directors and the chief executive of the Company, as at the Latest Practicable Date, the following persons (not being Directors or chief executive of the Company) had, or were deemed to have, interests or short positions in the Shares or underlying Shares which would fall to be disclosed to the Company and the Stock Exchange 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 meetings of any member of the Group:

	Number of Shares
Name of Shareholder	interested in
Gold Throne	229,000,000_(note 1)_
Chuang’s China	229,000,000_(notes 1&2)_
Profit Stability Investments Limited (“PSI”)	229,000,000_(notes 1&2)_
CCIL	229,000,000_(notes 1&2)_
Value Partners Limited (“VPL”)	38,582,000_(note 3)_
Cheah Cheng Hye (“Mr. Cheah”)	38,582,000_(notes 3&4)_

Notes:

1. Such interests represented 42.86% of the issued ordinary share capital.

2. Such interests arose through the interests in the relevant Shares owned by Gold Throne, a wholly owned subsidiary of Chuang’s China in which CCIL is entitled to exercise or control the exercise of one third or more of the voting power in general meetings through its wholly owned subsidiary, PSI. As at the Latest Practicable Date, CCIL held approximately 60.0% shareholding interests in Chuang’s China.

3. Such interests represented approximately 7.22% of the issued ordinary share capital.

4. Such interests arose through the interests in the relevant Shares owned by VPL, a funds management company, in which Mr. Cheah held approximately 31.82% shareholding interests.

Save as disclosed above, as at the Latest Practicable Date, the Directors and the chief executive of the Company were not aware of any other person (including the Directors and the chief executive of the Company) who had, or was deemed to have, interests or short positions in the Shares or underlying Shares (including options) which would fall to be disclosed to the Company and the Stock Exchange under the provisions of Divisions 2 and 3 of Part XV of the SFO, or who was directly or indirectly interested in 10% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of any member of the Group.

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GENERAL INFORMATION

APPENDIX III

3. EXPERTS

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

Name Qualification Tai Fook Capital

a licensed corporation under the SFO to carry out the Type 6 regulated activity (advising on corporate finance)

DTZ

a global real estate services group, which provides a full range of services at local, regional and international levels with a professional valuation team comprising Members of Royal Institution of Chartered Surveyors, Members of Hong Kong Institute of Surveyors and Registered Professional Surveyors in Hong Kong and PRC Registered Real Estate Appraisers, PRC Registered Land Appraisers and PRC Registered Asset Appraisers in the PRC

Tai Fook Capital and DTZ have given and have not withdrawn their respective written consents to the issue of this circular with the inclusion of their respective letters and reports and references to their respective names in the form and context in which they respectively appear.

As at the Latest Practicable Date, Tai Fook Capital and DTZ were not beneficially interested in the share capital of any member of the Group nor did they 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 or any interest, either direct or indirect, in any assets which have been, since 31st December, 2003, the date to which the latest published audited consolidated financial statements of the Group were made up, acquired or disposed of by or leased to or are proposed to be acquired or disposed of by or leased to any member of the Group.

4. COMPETING INTERESTS

As at the Latest Practicable Date, none of the Directors and their respective associates are considered to have interests (as would be required to be disclosed under Rule 8.10 of the Listing Rules if each of them were a controlling shareholder) in businesses which compete or are likely to compete, either directly or indirectly, with the businesses of the Group, other than those businesses where the Directors were appointed as directors to represent the interests of the Company and/or the Group.

5. PROCEDURES FOR DEMANDING A POLL

The procedures by which a poll may be demanded at the EGM are set out below.

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GENERAL INFORMATION

APPENDIX III

Pursuant to the articles of association of the Company, a poll may be demanded in relation to any resolution put to the vote of the EGM before or on the declaration of the result of the show of hands or on the withdrawal of any other demand for a poll by:

• (a) the chairman of the meeting; or

• (b) at least five Shareholders present in person (or, in the case of a Shareholder being a corporation by its duly authorized representative) or by proxy and entitled to vote; or

• (c) any Shareholder or Shareholders present in person (or, in the case of a Shareholder being a corporation by its duly authorized representative) or by proxy and representing in the aggregate not less than one-tenth of the total voting rights of all Shareholders having the right to attend and vote at the meeting; or

• (d) any Shareholder or Shareholders present in person (or, in the case of a Shareholder being a corporation by its duly authorized representative) or by proxy and holding shares conferring a right to attend and vote at the meeting on which there have been paid up sums in the aggregate equal to not less than one-tenth of the total sum paid up on all shares conferring that right.

In compliance with the Listing Rules, the Company will procure the chairman of the EGM to demand a poll for the resolution to be proposed at the EGM.

6. LITIGATION

As at the Latest Practicable Date, neither the Company nor any of its subsidiaries are engaged in any litigation, arbitration or claim of material importance and no litigation, arbitration or claim of material importance is known to the Directors to be pending or threatened against the Company or any of its subsidiaries.

7. MATERIAL CONTRACTS

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

• (a) As announced on 22nd May, 2003, the Company and Gold Throne entered into an agreement (the “Concession Agreement”) pursuant to which Gold Throne, among other things, would exercise the conversion right of converting 72,000,000 convertible preference shares into 144,000,000 new Shares and waive any dividend payable on such convertible preference shares for the period from 1st January, 2003 to 30th June, 2003. In addition, the Company would redeem 6,666,667 Series B Preference Shares with an aggregate value of HK$4,000,000 at a nominal consideration of HK$1.0. The Concession Agreement became unconditional upon approval by independent shareholders of the Company at an extraordinary general meeting held on 30th June, 2003; and

• (b) the Agreement.

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APPENDIX III

8. INFORMATION ABOUT THE MANAGEMENT OF THE COMPANY

Executive Directors

Mr. CHAN Sheung Chiu , aged 65, the Chairman of the Group, is responsible for the formulation and development of the Group’s corporate policies and business strategies. He has over 29 years of experience in general management in the manufacturing industry and trade and real estate business in the PRC. Mr. CHAN is the Deputy Chairman of Chuang’s China, a company listed on the Stock Exchange, a director of the Chinese Manufacturers’ Association of Hong Kong, the Fukien Chamber of Commerce, the Fukien Chamber of Commerce Education Fund Limited and the General Association of Xiamen (Hong Kong). He is also the registered manager of Fukien Secondary School, Fukien Secondary School (Siu Sai Wan), Fukien Middle School (North Point) and Fukien Education Centre (Evening). He is a brother-in-law of Mr. LEE Sai Wai and Mr. CHUANG Shaw Swee, Alan. He joined the Group in 2000.

Mr. KWONG Tin Lap , aged 40, the Managing Director of the Group, is responsible for the overall management of the Group, and in particular the development of the book printing business. He has over 17 years of experience in finance and general management. He holds a Master degree in Information System. He is a fellow member of the Association of Chartered Certified Accountants and an associate member of the Hong Kong Institute of Certified Public Accountants. He joined the Group in 2000.

Mr. KWOK Chi Fai , aged 43, the Deputy Managing Director of the Group, is responsible for the development of the paper products printing business besides the finance and accounting functions of the Group. He has over 20 years of experience in financial and general management. He holds a Master degree in Business Administration. Mr. KWOK is a fellow member of the Association of Chartered Certified Accountants, an associate member of the Hong Kong Institute of Certified Public Accountants and a Certified Management Accountant of Canada. He joined the Group in 2001.

Ms. Ll Mee Sum, Ann , aged 43, joined the Group in 2000. She has over 18 years of experience in finance and investment banking. Ms. LI is the Managing Director of Chuang’s China, a company listed on the Stock Exchange. She holds a Master degree in Business Administration and is a fellow member of the Hong Kong Institute of Certified Public Accountants and an associate member of the Chartered Institute of Management Accountants.

Mr. TANG Chow Ming, Paul , aged 56, is responsible for the formulation and implementation of the Group’s book printing sales and marketing strategies, joined the Group in 2001. He has extensive experience in business development and sales management in the manufacturing industry.

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GENERAL INFORMATION

APPENDIX III

Mr. WONG Chi Sing , aged 33, was appointed as an Executive Director of the Company in 2004. He has over 11 years of experience in finance, accounting and auditing. He graduated from the Chinese University of Hong Kong with a bachelor degree in business administration and worked in an international accountancy firm for over 3 years.

Non-Executive Directors

Mr. LEE Sai Wai , aged 67, was appointed as a Non-Executive Director of the Company in 2000. He has over 18 years of experience in the manufacturing and property sectors. Mr. LEE is an Executive Director of Chuang’s China, a company listed on the Stock Exchange, Vice President of the Hong Kong Sichuan Friendship Association Company Limited and a director of the Hong Kong Factory Owners Association. He is a graduate of Shanghai Fudan University. He is a brother-in-law of Mr. CHAN Sheung Chiu and Mr. CHUANG Shaw Swee, Alan.

Mr. Dominic LAI , aged 57, was an Independent Non-Executive Director of the Company from 20th March, 2000 until his re-designation as a Non-Executive Director of the Company on 5th August, 2004. He is a practising solicitor in Hong Kong and is admitted as a solicitor in England and Wales, the Republic of Singapore and the States for New South Wales and Victoria, Australia. He is currently a Non-Executive Director of NWS Holdings Limited, New World TMT Limited and Oriental Press Group Limited, an Independent NonExecutive Director of Winfoong International Limited, all are listed on the Stock Exchange.

Independent Non-Executive Directors

Mr. SHEK Lai Him, Abraham, J.P. aged 59, was appointed as an Independent NonExecutive Director of the Company in 2001. He is also an Independent Non-Executive Director of Paliburg Holdings Limited and Lifestyle International Holdings Limited, both are listed on the Stock Exchange. He holds a Bachelor Degree of Arts. Mr. SHEK is currently a member of the Legislative Council for the HKSAR and a member of the Managing Board of Kowloon-Canton Railway Corporation.

Dr. LI Sau Hung, Eddy , aged 50, was appointed as an Independent Non-Executive Director of the Company in 2004. He has over 20 years’ experience in the manufacturing business. He is a member of the Chinese People’s Political Consultative Committee, the president of Hong Kong Economic & Trade Association and a member of the TDC Watch Trade Advisory Committee. Dr. Li holds a Master degree of business administration and a PhD degree in economics. He was a 1991 awardee of The Ten Outstanding Young Persons and the 1993 awardee of Young Industrialists of Hong Kong. He is currently an Independent Non-Executive Director of Jackin International Holdings Limited, Oriental Watch Holdings Limited and Man Yue International Holdings Limited, all are listed on the Stock Exchange.

Mr. YAU Chi Ming , aged 51, was appointed as an Independent Non-Executive Director of the Company in 2004. He is a practising certified public accountant in the United Kingdom and an associate member of the Hong Kong Institute of Certified Public Accountants, the Institute of Chartered Secretaries and Administrators in the United Kingdom and the Certified General Accountants’ Association in Canada.

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GENERAL INFORMATION

APPENDIX III

9. MISCELLANEOUS

• (a) None of the Directors has any existing or proposed service contract with any member of the Group which does not expire or is not terminable by the Group within one year without payment of compensation (other than statutory compensation).

• (b) There is no contract or arrangement entered into by any member of the Group subsisting at the Latest Practicable Date in which any Director is materially interested and which is significant in relation to the business of the Group.

• (c) None of the Directors has, or has had, any direct or indirect interest in any assets which have been acquired or disposed of by or leased to, or which are proposed to be acquired or disposed of by or leased to, the Company or any of its subsidiaries since 31st December, 2003, the date to which the latest published audited consolidated financial statements of the Group were made up.

• (d) The registrars of the Company in Hong Kong are Computershare Hong Kong Investor Services Limited whose registered office is situate at 46th Floor, Hopewell Centre, 183 Queen’s Road East, Hong Kong.

• (e) The secretary of the Company is Ms. Lee Wai Ching, Winky who is a fellow of the Institute of Chartered Secretaries and Administrators in the United Kingdom. The qualified accountant of the Company is Mr. Kwok Chi Fai, who is a fellow member of the Association of Chartered Certified Accountants and an associate member of the Hong Kong Institute of Certified Public Accountants.

• (f) The English texts of this circular (save and except for the Chinese names of the PRC entities which shall prevail over their respective English translations) and the accompanying form of proxy shall prevail over their respective Chinese texts.

10. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents will be available for inspection during normal business hours (Saturdays and public holidays excepted) at Deacons at 5th Floor, Alexandra House, 16-20 Chater Road, Central, Hong Kong from the date of this circular up to and including 9th December, 2004:

• (a) the memorandum and articles of association of the Company;

• (b) the annual reports of the Company for the two years ended 31st December, 2003;

• (c) the letter of advice from Tai Fook Capital to the Independent Board Committee and the Independent Shareholders dated 23rd November, 2004, the text of which is set out on pages 15 to 24 of this circular;

• (d) the letter from the Independent Board Committee to the Independent Shareholders dated 23rd November, 2004, the text of which is set out on page 14 of this circular;

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GENERAL INFORMATION

APPENDIX III

• (e) the letter, summary of valuations and valuation certificates prepared by DTZ relating to the Property Valuation, the texts of which are set out in Appendix II to this circular;

• (f) the material contracts referred to in the paragraph headed “Material contracts” in this appendix, including the Agreement; and

• (g) the written consents referred to in the paragraph headed “Experts” in this appendix.

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NOTICE OF EGM

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(Stock Code: 1172)

NOTICE IS HEREBY GIVEN that an extraordinary general meeting of Midas International Holdings Limited (the “Company”) will be held at 20th Floor, Gloucester Tower, The Landmark, 11 Pedder Street, Central, Hong Kong on Thursday, 9th December, 2004 at 10:00 a.m. for the purpose of considering and, if thought fit, passing with or without modifications the following resolution as an ordinary resolution of the Company:

“ THAT the Agreement (as defined in the circular dated 23rd November, 2004 despatched to the shareholders of the Company (a copy of which has been produced to the meeting and marked “A” and initialled by the chairman of the meeting for the purpose of identification) and a copy of which has been produced to the meeting and marked “B” and initialled by the chairman of the meeting for the purpose of identification) and the transactions contemplated thereunder be and are hereby approved, ratified and confirmed.”

By Order of the Board of Midas International Holdings Limited LEE Wai Ching, Winky Company Secretary

Hong Kong, 23rd November, 2004

Head office and principal place of business: Registered office: 1st Floor Century Yard, Cricket Square 100 Texaco Road Hutchins Drive Tsuen Wan PO Box 2681GT, George Town New Territories Grand Cayman Hong Kong Cayman Islands British West Indies

Notes:

1. Any member entitled to attend and vote at the meeting convened by the above notice is entitled to appoint another person as his proxy to attend and vote instead of him. A proxy need not be a member of the Company.

2. In order to be valid, the form of proxy must be deposited at the Company’s registrars in Hong Kong, Computershare Hong Kong Investor Services Limited at 46th Floor, Hopewell Centre, 183 Queen’s Road East, Hong Kong together with the power of attorney or other authority, if any, under which it is signed, or a notarially certified copy of such power of attorney or authority, not less than 48 hours before the time appointed for holding the meeting or any adjournment thereof.

3. Completion and return of the proxy form 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.

4. Where there are joint registered holders of any share, any one of the such persons may vote at the meeting either personally or by proxy, in respect of such shares as if he were solely entitled thereto, but if more than one of such joint holders be present at the meeting personally or by proxy, that one of the said persons so present 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.

5. A form of proxy for use in connection with the meeting is enclosed.

6. The ordinary resolution will be determined by way of poll.

7. For identification purpose only

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