Kai Yuan Holdings Limited — Proxy Solicitation & Information Statement 2003

Feb 25, 2003

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

If you are in any doubt about this circular or as to the action to be taken, you should consult a stockbroker, bank manager, solicitor, professional accountant or other professional adviser.

If you have sold or transferred all your shares in Guo Xin Group Limited, you should at once hand this circular with the enclosed form of proxy to the purchaser or transferee or to the bank, stockbroker or other agent through whom the sale was effected for transmission to the purchaser or transferee.

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

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GUO XIN GROUP LIMITED 國新集團有限公司[*]

(Incorporated in Bermuda with limited liability)

MAJOR TRANSACTION PROPOSED ACQUISITION OF TREND GLORY INVESTMENTS LIMITED

A notice convening a special general meeting of Guo Xin Group Limited to be held at Room 4101, 41st Floor, Far East Finance Centre, 16 Harcourt Road, Admiralty, Hong Kong on 13 March 2003 at 10:00 a.m. is set out on pages 46 to 47 of this circular. A form of proxy is also enclosed.

Whether or not you are able to attend the special general meeting, you are requested to complete the enclosed form of proxy in accordance with the instructions printed thereon and return it to the office of the Company’s branch share registrars in Hong Kong, Tengis Limited, G/F, BEA Harbour View Centre, 56 Gloucester Road, Wanchai, Hong Kong as soon as possible but in any event not less than 48 hours before the time appointed for the holding of the special general meeting. Completion and return of the form of proxy will not prevent you from subsequently attending and voting at the special general meeting or any adjourned meetings should you so wish.

24 February 2003

• For identification purpose only

CONTENTS

	Page
Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
Letter from the Board
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	4
The Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	5
Information on Trend Glory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	8
Reason for the Acquisition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	8
Expansion and Diversification of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	9
SGM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	9
Recommendation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	10
Further Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	10
Appendix I – Financial Information on the Group. . . . . . . . . . . . . . . . . . . . . . . . . . .	11
Appendix II – Accountants’ Report of Trend Glory. . . . . . . . . . . . . . . . . . . . . . . . . . .	29
Appendix III – Pro Forma Statement of the Group. . . . . . . . . . . . . . . . . . . . . . . . . . . .	32
Appendix IV – Property Valuation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	33
Appendix V – General Information
Responsibility Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	41
Directors’ Interests in Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	41
Directors’ Interests in Contracts or Arrangements . . . . . . . . . . . . . . . . . . . . . . . . . . .	41
Substantial Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	41
Directors’ Interests in Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	42
Service Contract . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	42
Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	42
Material Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	42
Qualifications of Experts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	43
Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	43
Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	44
Documents Available for Inspection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	44
Notice of SGM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	46

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DEFINITIONS

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

• “Acquisition” the acquisition of the entire issued share capital of Trend Glory

• “Agreement” a conditional sale and purchase agreement entered into between the Company and the Vendor on 13 January 2003 in relation to the Acquisition

• “associates” has the same meaning as ascribed in the Listing Rules

• “Board” the board of Directors

• “Business Day” a day (other than Saturdays) on which banks in Hong Kong are generally open for the transactions of normal banking business

• “Code” the Hong Kong Code on Takeovers and Mergers “Company” Guo Xin Group Limited, a company incorporated in Bermuda with limited liability, which shares are listed on the Stock Exchange

• “Completion” completion of the Acquisition “Consideration” consideration payable to the Vendor under the Agreement

• “Deposit” HK$120,000,000 which has been paid by the Company to the Vendor on the date of the signing of the Agreement as deposit

• “Directors” the executive directors of the Company “Group” the Company and its subsidiaries “Hong Kong” The Hong Kong Special Administrative Region of the PRC

• “Latest Practicable Date” 21 February 2003, being the latest practicable date prior to the printing of this circular for ascertaining certain information in this circular

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DEFINITIONS

• “Listing Rules”

• the Rules Governing the Listing of Securities on the Stock Exchange

• “Ordinary Resolution”

• the ordinary resolution to be proposed and passed at the SGM as set out in the SGM Notice

• “PRC”

The People’s Republic of China

• “Previous Discloseable Transaction”

• the discloseable transaction of the Company as referred to in the Company’s announcements dated 19 November 2002 and 6 January 2003 respectively

• “Properties”

• certain residential units of not less than 80 and not more than 96 in number which situate at No. 1546, Da Lian Road (also known as Nos. 1 and 2, Alley 20, Fu Xin Road), Yangpu District, Shanghai, PRC to be acquired by Trend Glory

• “SGM”

• the special general meeting of the Company to be held at Room 4101, 41st Floor, Far East Finance Centre, 16 Harcourt Road, Admiralty, Hong Kong on 13 March 2003 at 10:00 a.m. to consider and, if appropriate, to approve the Ordinary Resolution or any adjournment thereof

• “SGM Notice”

• the notice of the SGM set out on pages 46 to 47 of this circular

• “Share(s)”

• ordinary share(s) of HK$0.1 each in the capital of the Company

• “Shareholder(s)” registered holder(s) of Share(s)

• “Stock Exchange”

• The Stock Exchange of Hong Kong Limited

• “Trend Glory”

• Trend Glory Investments Limited, a company incorporated in the British Virgin Islands with limited liability, which is wholly owned by the Vendor

• “Valuer”

BMI Appraisals Limited

• “Vendor”

Zheng You Ping (鄭幼平 )

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DEFINITIONS

“Wealth Sea”	Wealth Sea Investment Limited, a company incorporated
	in the British Virgin Islands with limited liability, which
	is wholly owned by the Company
“Wealth Sea Properties”	61 residential units situate at No. 1546, Da Lian Road
	(also known as Nos. 1 and 2, Alley 20, Fu Xin Road),
	Yangpu District, Shanghai, PRC of a total gross area of
	approximately 9,560.05 square meters
“HK$”	Hong Kong dollars
“RMB”	Renminbi
“US$”	United States dollars

Conversion of RMB into HK$ is based on the exchange rate of RMB1.06 = HK$1.00.

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LETTER FROM THE BOARD

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GUO XIN GROUP LIMITED 國新集團有限公司[*]

(Incorporated in Bermuda with limited liability)

Executive Directors:

Mr. Zhang Yang Mr. Lam Cheung Shing, Richard Mr. Yu Rui

Registered Office:

Cedar House 41 Cedar Avenue Hamilton, HM 12 Bermuda

Independent Non-executive Directors:

Mr. Tam Sun Wing Mr. Tso Shiu Kei Vincent

Principal place of business in Hong Kong: Room 4101, 41st Floor Far East Finance Centre 16 Harcourt Road Admiralty Hong Kong

24 February 2003

To the Shareholders

Dear Sir or Madam,

MAJOR TRANSACTION PROPOSED ACQUISITION OF TREND GLORY INVESTMENTS LIMITED

INTRODUCTION

The Company announced on 20 January 2003 that it has entered into an agreement with the Vendor on 13 January 2003 for the acquisition of the entire issued share capital of Trend Glory at a maximum consideration of HK$155,229,406.20.

The Acquisition and the Previous Discloseable Transaction, when aggregated, constitute a major transaction for the Company under the Listing Rules and further details are set out below. The Acquisition will be subject to the approval of the Shareholders at the SGM. The purpose of this circular is to provide you with further information of the Acquisition.

• For identification purpose only

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LETTER FROM THE BOARD

THE AGREEMENT

Date

13 January 2003

Parties

• Vendor : Zheng You Ping, a PRC citizen and businessman, who is not a connected person as defined in the Listing Rules and has no relationship with the controlling shareholders or connected persons of the Company. As at the Latest Practicable Date, the Vendor does not hold any interest in the share capital of the Company; and

Purchaser : the Company.

Assets to be acquired

1 share of US$1.00 in the capital of Trend Glory representing its entire issued share capital.

Consideration

The consideration is calculated on the basis of the total gross floor area of the Properties (in square meters) multiplied by HK$10,230 per square meter.

Under the Agreement, the Vendor warrants that the number of residential units to be acquired by Trend Glory as the Properties shall not be less than 80 and not be more than 96 residential units. The type of the residential units to be acquired by Trend Glory as the Properties will be service apartments in Yangpu District of Shanghai in a luxurious state owned by local residents or corporations and were completed in 1998 and are ready for immediate occupation. According to the information provided by the Vendor, assuming the number of residential units acquired by Trend Glory is 96, it is estimated that the maximum total gross floor area of the Properties will be approximately 15,173.94 square meters and therefore the maximum amount of the Consideration will be HK$155,229,406.20.

The price of HK$10,230 per square meter was determined after arm’s length negotiations by reference to the estimated market price per square meter of all the 61 residential units of the Wealth Sea Properties at approximately RMB11,506 (equivalent to approximately HK$10,855) per square meter according to the information set out in the valuation report issued by Shanghai Real Estate Appraisers Co. Ltd, an independent PRC valuer, on 10 January 2003 by reference to the district factor and the transportation facilities of and after taking into account of the market prices of comparable properties during the period from 6 January 2003 to 10

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LETTER FROM THE BOARD

January 2003 in region of Yangpu District of Shanghai. Therefore, the Vendor has given the Company a discount of approximately 5.75% of the said estimated market price per square meter of approximately RMB11,506 (equivalent to approximately HK$10,855).

According to the valuation report prepared by the Valuer set out in Appendix IV, the open market value of the Properties per square meter is approximately HK$10,544.39. Comparing the price of HK$10,230 per square meter and such open market value, a discount of approximately 2.98% has been given to the Company.

The Consideration will be funded by internal resources of the Company and is payable in cash. The Company has sufficient cash reserve for the payment of all the Consideration without the necessity of raising additional fund.

The Company has paid to the Vendor a sum of HK$120,000,000 on the signing of the Agreement as deposit (being approximately 77% of the maximum amount of the Consideration as stated above), which shall be applied to settle the Consideration upon Completion. If the Deposit is not sufficient to settle the Consideration in full, the Company shall pay to the Vendor the balance of the Consideration in cash on Completion. If there is any surplus after settlement of the Consideration with the Deposit, the Vendor shall refund the surplus to the Company upon Completion.

The amount of Deposit was determined by reference to the Vendor agreeing to fix the liquidated damages at the sum of HK$24,000,000. The Directors consider that the basis for fixing the amount of Deposit is similar to the basis for determining the amount of deposit in the Previous Discloseable Transaction, which was by reference to the amount of liquidated damages agreed by the Vendor, and is fair and reasonable and in the best interests of the Company.

Conditions

Completion is conditional on:

• (1) approval of the Acquisition by the Shareholders in the SGM;

• (2) the Vendor has provided the Company with all the title deeds (including but not limited to the land use right certificate, property ownership certificate and relevant approvals) of the Properties to prove Trend Glory is the legal and beneficial owner of the Properties to the full satisfaction of the Company;

• (3) the Company having completed its due diligence (including without limitation, legal, financial and commercial aspects) in respect of Trend Glory and the results of which are satisfactory and acceptable to the Company in all respects;

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LETTER FROM THE BOARD

• (4) the Company having obtained a legal opinion issued by a lawyer (acceptable to the Company) qualified to practice laws in the PRC (which form and contents are satisfactory and acceptable to the Company) to certify that:–

• (a) Trend Glory is the legal and beneficial owner of the Properties and the Properties are not subject to any charge, lien, encumbrance or any other rights or claims from a third party;

• (b) the land use right certificate and all relevant documents are valid and there is not any event or circumstance which will cause cancellation of such title documents; and

• (c) any other issues which the Company shall require to be included in such legal opinion; and

• (5) the Vendor is not in breach of any of the warranties in respect of Trend Glory contained in the Agreement.

The Vendor shall inform the Company in writing the total gross floor of and other particulars of the Properties within 90 days of the signing of the Agreement. If the Vendor shall fail to do so or provide the Company with all the title deeds (including but not limited to the land use right certificate, property ownership certificate and relevant approvals) of the Properties to prove Trend Glory is the legal and beneficial owner of the Properties to the full satisfaction of the Company or the conditions set out above (save and except condition (1)) are not fulfilled or waived by the Company on or before 90 days from the date of signing of the Agreement or such later date as the parties may agree, the Vendor shall return the Deposit to the Company forthwith and pay to the Company a sum of HK$24,000,000 as mutually agreed liquidated damages.

If the conditions set out above are not fulfilled or so waived by the Company within 90 days from the date of signing of the Agreement or such later date as the parties may agree, the Agreement will lapse and be of no further effect and no party to the Agreement will have any claim against or liability to the other party, save in respect of any antecedent breaches of the terms of the Agreement. The conditions set out above are waivable by the Company but the Company has no intention of waiving such conditions.

In addition, the Company shall have the right to terminate the Agreement if approval from the Shareholders in the SGM cannot be obtained and the Vendor shall return the Deposit without interest to the Company forthwith.

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LETTER FROM THE BOARD

Completion

Completion will take place on or before the 3rd Business Day after all the conditions set out in the paragraph headed “Conditions” in this circular are satisfied or waived as the case may be, or such other date as the parties may agree. It is expected that completion of Agreement will take place after 90 days of the date of the signing of the Agreement.

INFORMATION ON TREND GLORY

Trend Glory was incorporated in the British Virgin Island on 1 February 2002. Trend Glory has not engaged in any trading or business activities whatsoever, nor acquired any properties or other assets or incurred any obligations or liabilities since its incorporation up to the date of signing of the Agreement. As informed by the Vendor, Trend Glory is in a process of finalising various sale and purchase agreements for acquisitions of the Properties which are luxurious service apartments in Yangpu District of Shanghai with an aim to acquire legal and beneficial interests of the Properties for the purpose of completing its obligations under the Agreement. Trend Glory has not yet entered into any sale and purchase agreements for acquisition of the Properties. Certain portion of the Properties are presently subject to charges and, based on the information provided by the Vendor, the respective owners of the relevant Properties shall pay off all existing charges of their respective properties prior to completion of the respective sale and purchase agreements which are to be made between Trend Glory and those owners. No further detailed particulars as to which of the 96 units and owners presently in negotiations with Trend Glory have been given by the Vendor to the Company.

Based on information provided by Trend Glory, Trend Glory has no assets nor liabilities as at 31 December 2002 save and except having a paid up share capital of HK$8.

Upon Completion of the Agreement, Trend Glory will be engaged in holding the Properties as service apartments to support the travel related services provided by the Group.

REASON FOR THE ACQUISITION

The Company is principally engaged in the trading of consumer goods in Hong Kong and in the PRC, commodity futures trading in the PRC, the operation of an e-commerce platform offering on-line reservation services of airline tickets and hotels and travel related services.

The Company has recently acquired self-operating service apartments in Shanghai. With the success in the bid for the hosting of the EXPO 2010 in Shanghai, it is expected that the prosperous tourism industry in Shanghai will continue in the coming years. The Company therefore consider it is an appropriate time to further acquire high quality properties at prime locations in Shanghai, such as Yangpu District, so that on the one hand the Company will be able to compliment its existing tourism businesses and further provide full range tourism services in the PRC in future and on the other hand the Company will also be able to appreciate

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LETTER FROM THE BOARD

capital gain from the blooming property market in Shanghai. In addition, as a result of the Acquisition, there will not be any adverse effect on the assets and liabilities of the Company. Details of the adjusted net tangible assets of the Group is set out on pages 27 and 28 of this circular under the section headed “Statement of Pro Forma Unaudited Adjusted Consolidated Net Tangible Assets” in Appendix I. The Directors have no intention to mortgage or sell the Properties upon Completion of the Agreement which will be used for supporting the travel related services provided by the Group. The Directors consider that acquisition of the Properties and Wealth Sea Properties is an expansion of one of the existing business of the Group being the tourist business with a view to maximizing the return on the assets of the Group. In addition, such acquisition and expansion of the Group’s existing tourist business will be subject to the approval of the Shareholders at the SGM. The Company will not proceed with the acquisition of Trend Glory if approval of the Shareholders at the SGM cannot be obtained.

The Directors consider that this indirect mean to acquire the Properties could save the Company from the troubles of going through complex formalities for the acquisition of the Properties directly from the local residents or corporations and believe that the Acquisition is fair and reasonable and in the best interests of the Company and its shareholders.

EXPANSION AND DIVERSIFICATION OF BUSINESS

As published in the paragraph headed “Business Review” under the section headed “Chairman’s Statement” of the Group’s annual report 2001/2002, since the completion of the restructuring the Group during the past year, the Group’s business development strategy and objectives were clarified, and aiming to be a diversified enterprise from a single trading Company, with core businesses of trading and travel related services. With the view to expanding and diversifying the Group’s business operation, it is always the Group’s intention to expand its business operation to full range tourism related business. In addition, in order to optimizing the return on its assets and to provide the Group with the opportunity to capitalize on the robust property market in the PRC, one of the fastest growing country in Asia, the Group intends to explore the feasibility to engage in property related business when suitable opportunity arises. However, the Board has no concrete plan for the future development of the Group’s business. The Board has been advised and confirmed by the ultimate owner of the existing single largest shareholder of the Company that he is aware of the proposed expansion of the Group’s business and will refrain from competition with the Group.

SGM

A notice convening the SGM is set out on pages 46 to 47 of this circular. The Ordinary Resolution will be proposed at the SGM for the purpose of approving the Acquisition and the aforesaid expansion and diversification of the Group’s business.

A form of proxy for use at the SGM is enclosed. Whether or not you are able to attend the SGM in person, you are requested to complete and return the form of proxy in accordance with

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LETTER FROM THE BOARD

the instructions printed thereon as soon as possible but in any event not later than 48 hours before the time appointed for the holding of the SGM. Completion and return of the form of proxy will not preclude you from attending and voting at the SGM or any adjournment thereof in person if you so wish.

RECOMMENDATION

The Directors consider that the Acquisition is beneficial to the Company and the Shareholders as a whole. Further, although the Group does not currently undertake any property related project, the Directors recommend the Shareholders to vote in favor of the Ordinary Resolution to be proposed at the SGM to implement the Acquisition and in respect of the expansion and diversification of the Group’s business including, amongst others, full range tourism related business, property development and investment if suitable opportunity arises.

The passing of the Ordinary Resolution will not require changes of the existing memorandum of association of the Company.

FURTHER INFORMATION

Your attention is drawn to the additional information set out in the Appendices.

Yours faithfully, For and on behalf of the Board Yip Kar Hang, Raymond Company Secretary

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FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

FINANCIAL STATEMENTS

The following is a summary of the audited consolidated income statement of the Group for the three years ended 30 June 2002.

Turnover Profit/(Loss) before taxation Taxation Net Profit/(Loss) from ordinary activities attributable to shareholders Dividends Net profit/(loss) for the year Earnings/(loss) per share Basic and diluted	2002 HK$’000 19,937 125,032 – 125,032 – 125,032 HK0.95 cent	2001 HK$’000 3,755 (70,327) 9,798 (60,529) – (60,529) (HK1.7 cents)	2000 HK$’000 132,516 (66,508) – (66,508) – (66,508) (HK8.26 cents)

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FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

The following is an extract from the annual report of the Company for the year ended 30 June 2002.

Consolidated Income Statement

For the year ended 30 June 2002

NOTES Turnover 4 Cost of sales Gross profit Other operating income Allowances for bad and doubtful debts Write off of carrying amount of subsidiaries Amounts written off in respect of property, plant and equipment Administrative expenses Loss from operations 6 Finance costs Gain arising from waiver of the creditors’ indebtedness 8 Profit (loss) before taxation Taxation credit 9 Net profit (loss) for the year Earnings (loss) per share Basic and diluted 10

2002 2001 HK$’000 HK$’000 19,937 3,755 (18,207) (2,991) 1,730 764 546 736 – (28,731) – (3,268) – (25,699) (16,141) (12,716) (13,865) (68,914) – (1,413) 138,897 – 125,032 (70,327) – 9,798 125,032 (60,529) HK0.95 cent HK(1.70)cents

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FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

Consolidated Balance Sheet

At 30 June 2002

NOTES Non-current assets Property, plant and equipment 11 Investment securities 12 Current assets Prepayments and other receivables Deposit 13 Bank balances and cash Current liabilities Other payables and accrued charges Borrowings 14 Net current assets (liabilities) Capital and reserves Share capital 15 Reserves 16	2002 HK$’000 766 650 1,416 4,061 150,943 6,677 161,681 876 – 876 160,805 162,221 268,618 (106,397) 162,221	2001 HK$’000 – – – – – 29,877 29,877 9,842 203,003 212,845 (182,968) (182,968) 48,618 (231,586) (182,968)

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FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

Consolidated Statement of Recognised Gains and Losses

For the year ended 30 June 2002

Exchange differences arising on translation of overseas operations Net profit (loss) for the year Total recognised gains (losses)	2002 HK$’000 157 125,032 125,189	2001 HK$’000 – (60,529) (60,529)

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FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

Consolidated Cash Flow Statement

For the year ended 30 June 2002

NOTES NET CASH OUTFLOW FROM OPERATING ACTIVITIES 17 CASH INFLOW FROM RETURNS ON INVESTMENTS Interest received INVESTING ACTIVITIES Increase in deposit Purchase of investment securities Purchase of property, plant and equipment CASH OUTFLOW FROM INVESTING ACTIVITIES NET CASH OUTFLOW BEFORE FINANCING FINANCING 18 Proceeds from issue of shares Exercise of warrants Net borrowings raised Repayment of borrowings NET CASH INFLOW FROM FINANCING (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR Effect of changes in exchange rate CASH AND CASH EQUIVALENTS AT END OF YEAR ANALYSIS OF BALANCES OF CASH AND CASH EQUIVALENTS Bank balances and cash	2002 HK$’000 (26,974) 244 (150,943) (650) (928) (152,521) (179,251) 55,000 165,000 – (64,106) 155,894 (23,357) 29,877 157 6,677 6,677	2001 HK$’000 (77,850) 519 – – (106) (106) (77,437) 75,326 – 24,089 – 99,415 21,978 7,899 – 29,877 29,877

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FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

Notes to the Financial Statements

For the year ended 30 June 2002

1. GENERAL

The Company was incorporated in Bermuda under the Company Act 1981 of Bermuda as an exempted company with limited liability and its shares are listed on the Stock Exchange.

As a result of the Company’s poor financial position, joint and several provisional liquidators of the Company (the “Provisional Liquidators”) were appointed on 20 April 2000 and a financial restructuring of the Company was implemented and completed on 27 October 2000. Details of the restructuring are set out in the circular dated 29 September 2000. Upon successful completion of the restructuring, the winding-up petition was withdrawn and the Provisional Liquidators were released and discharged. However, another winding-up petition was submitted by the trustee for the convertible bondholders of the Company on 15 February 2001. As a result, pursuant to the Order of the Supreme Court of Bermuda dated 16 February 2001, the Provisional Liquidators were appointed on the same date.

On 2 August 2001, the Company entered into the Restructuring Agreements with a new investor, Sourcebase Developments Limited, and with the trustee for the convertible bondholders of the Company respectively. The proposals under the Restructuring Agreements were for debt restructuring involving creditors’ schemes of arrangements, subscription of new shares and warrants, whitewash waiver and creeper authorisation and the details are set out in the circular dated 22 October 2001. After the Restructuring Agreements were approved by the independent shareholders at a special general meeting held by the Company on 13 November 2001 and subsequently completed on 10 December 2001, the winding-up petition was withdrawn and the Provisional Liquidators were released and discharged on 10 December 2001.

2. ADOPTION OF STATEMENTS OF STANDARD ACCOUNTING PRACTICE

In the current year, the Group has adopted, for the first time, a number of new and revised Statements of Standard Accounting Practice (“SSAPs”) issued by the Hong Kong Society of Accountants. Adoption of these SSAPs has led to a number of changes in the Group’s accounting policies.

The adoption of these revised and new SSAPs has not had any effect on the results for the current or prior periods.

3. SIGNIFICANT ACCOUNTING POLICIES

The financial statements have been prepared under the historical cost convention and 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 30 June each year.

All significant intercompany transactions and balances within the Group have been eliminated on consolidation.

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FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

Revenue recognition

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

Service and commission income is recognised when the services are rendered.

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

Property, plant and equipment

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

Depreciation is provided to write off the cost of property, plant and equipment over their estimated useful lives and after taking into account their estimated residual value, using the straight-line method, at the following rates per annum:

Leasehold improvements Over the shorter of the term of the leases, or 5 years Furniture, fixtures and office equipment 15% to 20%

Investments in securities

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

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

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. Impairment losses are 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, and 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.

Convertible bonds

Convertible bonds are regarded as liabilities until conversion actually occurs. The finance cost recognised in the income statement in respect of the convertible bonds, including the premium payable upon the final redemption of the convertible bonds, is calculated so as to produce a constant periodic rate of charge on the remaining balance of the convertible bonds for each accounting period.

– 17 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

Taxation

The charge for taxation is based on the results for the year as adjusted for items which are non-assessable or disallowed. Timing differences arise from the recognitions for tax purposes of certain items of income and expense in a different accounting period from that in which they are recognised in the financial statements. The tax effect of timing differences, computed using the liability method, is recognised as deferred taxation in the financial statements to the extent that it is probable that a liability or asset will crystallise in the foreseeable future.

Foreign currencies

Transactions in foreign currencies are translated at the rates ruling on the dates of the transactions or at the contracted settlement rate. Monetary assets and liabilities denominated in such currencies are re-translated at the rates ruling on the balance sheet date. Profits and losses arising on exchange are dealt with in the income statement.

On consolidation, the financial statements of overseas operations and subsidiaries which are denominated in foreign currencies are translated at the rates on the balance sheet date. All exchange differences arising on consolidation are dealt with in the translation reserve.

4. TURNOVER

Sale of goods Commission income Service income	2002 HK$’000 17,536 1,696 705 19,937	2001 HK$’000 3,575 – 180
		3,755

5. SEGMENT INFORMATION

The Group is principally engaged in trading businesses and operates in Hong Kong. All significant identifiable assets of the Group are located in Hong Kong. Accordingly, no segmental analysis is presented.

6. LOSS FROM OPERATIONS

Loss from operations has been arrived at after charging (crediting): Auditors’ remuneration Depreciation Staff costs Operating lease rentals in respect of office premises Interest income	2002 HK$’000 180 162 3,850 834 (244)	2001 HK$’000 350 – 2,669 – (519

– 18 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

7. EMOLUMENTS OF DIRECTORS AND EMPLOYEES

(i) Directors’ emoluments

Fees Executive directors Independent non-executive directors Other emoluments to executive directors: Salaries and other benefits Retirement benefits scheme contributions Emoluments of the directors were within the following bands: Nil to HK$1,000,000 HK$2,000,001 to HK$2,500,000	2002 HK$’000 – – 2,563 79
	2,642
	2002 Number of directors 10 1

During the year, no emoluments were paid by the Group to the directors as a discretionary bonus or an inducement to join or upon joining the Group or as a compensation for loss of office.

There was no arrangement under which a director had waived or agreed to waive any remuneration during the year.

(ii) Employees’ emoluments

Of the five individuals with the highest emoluments in the Group, three were directors of the Company and their emoluments are set out above. The emoluments of the remaining two individuals are as follows:

Salaries and other benefits Retirement benefits scheme contributions	2002 HK$’000 344 15
	359

– 19 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

8. GAIN ARISING FROM WAIVER OF CREDITORS’ INDEBTEDNESS

Upon the completion of the Restructuring Agreements on 10 December 2001, the creditors’ indebtedness of the Company, including convertible bonds and amounts due to all other creditors of the Company as at 16 February 2001, was discharged in full by way of a cash payment of HK$72,500,000 on a pro-rata basis, which resulted in a profit of approximately HK$138,897,000.

9. TAXATION CREDIT

No provision for Hong Kong Profits Tax has been made in the financial statements as the Group had no assessable profit for the year.

The amount of taxation credit for the year ended 30 June 2001 represented overprovision for taxation in prior years.

No provision for deferred taxation has been recognised in the financial statements as the amount involved is insignificant.

10. EARNINGS (LOSS) PER SHARE

The calculation of the basic earnings (loss) per share is based on the net profit for the year of approximately HK$125,032,000 (2001: loss of approximately HK$60,529,000) and weighted average number of 13,135,804,000 (2001: 3,569,305,000) shares in issue during the year.

The computation of diluted earnings (loss) per share for the years ended 30 June 2002 and 2001 does not assume the exercise of the potential ordinary shares since their exercise would result in a reduction in loss per share from continuing ordinary operation.

11. PROPERTY, PLANT AND EQUIPMENT

Leasehold improvements HK$’000 COST Additions during the year ended 30 June 2002 and balance at 30 June 2002 539 DEPRECIATION Provided for the year ended 30 June 2002 and balance at 30 June 2002 130 NET BOOK VALUE At 30 June 2002 409	Furniture, fixtures and office equipment HK$’000 389 32 357	Total HK$’000 928 162
		766

– 20 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

12. INVESTMENT SECURITIES

The amount represents equity interests in an unlisted company incorporated in Hong Kong.

13. DEPOSIT

The deposit represents monies (the “Trust Monies”) placed with a company incorporated in the PRC (the “Assets Management Company”), which is an independent third party, and is engaged in the business of assets management. Pursuant to a trust agreement entered into between Guo Chin International Trading (Shanghai) Company Limited （國欽國際貿易（上海）有限公司）(Guo Chin), a wholly-owned subsidiary of the Company, and the Assets Management Company on 19 June 2002, the Asset Management Company guaranteed Guo Chin a return of at least 6 percent per annum from the Trust Monies placed with it during the period from 19 June 2002 to 18 July 2002.

Subsequent to the balance sheet date, the Trust Monies were received by the Company with an investment return of 6 percent per annum.

14. BORROWINGS

Borrowings comprise the following: Convertible bonds Other borrowings	2002 HK$’000 – – –	2001 HK$’000 202,053 950
		203,003

Pursuant to the compromise agreement dated 12 July 2000 entered into between the Company, the subsidiaries of the Company, the financial creditors and the non-financial creditors of the Group, the Provisional Liquidators and the investor, Liuzhou Wuling Holding Limited (“Liuzhou”), series A and series B convertible bonds (“Convertible Bonds”) with an aggregate principal amount of HK$205,000,000 were issued on 27 October 2000 to the financial creditors of the Group as partial settlement of the unsecured indebtedness of the Group, as described more fully in the section headed “Debt Restructuring” in the circular dated 29 September 2000. The Convertible Bonds are secured by a first charge over all the assets of the Company.

The interest bearing series A convertible bonds at 6% per annum of HK$150,000,000 were due to mature on 27 October 2003 and the non-interest bearing series B convertible bonds of HK$55,000,000 were due to mature on 29 January 2001. Under the Restructuring Agreements, these amounts were discharged in full on a pro-rata basis on 10 December 2001.

– 21 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

15. SHARE CAPITAL

Ordinary shares

NOTES Balance at 1 July 2000, shares of HK$0.10 each Capital reduction, shares of HK$0.005 each (1a) Cancellation of authorised share capital (1b) Share consolidation, shares of HK$0.01 each (1c) Increase in authorised share capital (1d) Issue of shares Balance at 1 July 2001, shares of HK$0.01 each Issue of shares (2) Exercise of warrants (3) Balance at 30 June 2002, shares of HK$0.01 each	Authorised HK$’000 300,000 (285,000) (6,955) – 491,955 – 500,000 – – 500,000	Issued and fully paid HK$’000 160,906 (152,861) – – – 40,573 48,618 55,000 165,000 268,618

Notes:

(1) Restructuring proposals

Pursuant to the circular dated 29 September 2000, the Company has entered into restructuring proposals (the “Restructuring Proposals”) with Liuzhou, the Provisional Liquidators, the financial creditors and the nonfinancial creditors of the Group. The Restructuring Proposals are for capital restructuring, debt restructuring, cash subscription of new shares, and issue of convertible bonds and new shares, which have been approved by shareholders of the Company on 27 October 2000. Details of the Restructuring Proposals were as follows:

(a) Capital reduction

The nominal value of every issued share was reduced from HK$0.10 to HK$0.005 upon the capital reduction (the “Capital Reduction”). On the basis of approximately 1,609,063,000 issued share of HK$0.10 each, the issued share capital of the Company was reduced from approximately HK$160,906,000 to HK$8,045,000 by cancelling the paid-up capital of approximately HK$152,861,000.

The surplus of the amount of approximately HK$152,861,000 arising from the Capital Reduction together with the credit balance of HK$790,000 standing in the share premium account as at 31 July 2000 were transferred to the accumulated losses of the Company.

(b) Share cancellation

Upon the Capital Reduction, on the basis of the authorised issued share capital of HK$15,000,000 divided into 3,000,000,000 shares of HK$0.005 each, the unissued share capital of approximately HK$6,955,000 were cancelled and diminished to approximately HK$8,045,000 for both authorised and issued share capital.

– 22 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

(c) Share consolidation

Upon the Capital Reduction, every two issued shares of HK$0.005 each in the capital of the Company were consolidated into one new share of HK$0.01 each. Accordingly, on the basis of approximately HK$8,045,000 divided into approximately 804,531,000 shares of HK$0.01 each upon the share consolidation (the “Share Consolidation”).

(d) Increase in authorised share capital

Upon the Share Consolidation, the Company increased its authorised share capital from approximately HK$8,045,000 to HK$500,000,000 divided into 50,000,000,000 shares of HK$0.01 each.

(2) Issue of shares

On 10 December 2001, the Company issued 5,500,000,000 new shares of HK$0.01 each to Sourcebase Developments Limited at a price of HK$0.01 per share pursuant to the Restructuring Agreements set out in the circular dated 22 October 2001. The net proceeds of the placing were used as the settlement of the creditors’ indebtedness and as working capital of the Group.

These shares ranked pari passu with all other shares in issue in all respects.

(3) Exercise of warrants

During the year, warrants with aggregate issue proceeds of HK$165,000,000 were exercised by Sourcebase Developments Limited to subscribe for 16,500,000,000 ordinary shares in the Company at a subscription price of HK$0.01 per share. The net proceeds were used to provide general working capital for the Group.

These shares ranked pari passu with all other shares in issue in all respects.

16. RESERVES

At 1 July 2000 Reduction of share premium transferred to accumulated losses Reduction of share capital transferred to accumulated losses Issue of shares Loss for the year At 1 July 2001 Profit for the year Exchange differences arising on translation of overseas operations At 30 June 2002	Share premium HK$’000 790 (790) – 114,223 – 114,223 – – 114,223	Translation Accumulated reserve losses HK$’000 HK$’000 – (438,931) – 790 – 152,861 – – – (60,529) – (345,809) – 125,032 157 – 157 (220,777)	Total HK$’000 (438,141) – 152,861 114,223 (60,529) (231,586) 125,032 157 (106,397)

– 23 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

17. RECONCILIATION OF PROFIT (LOSS) BEFORE TAXATION TO NET CASH OUTFLOW FROM OPERATING ACTIVITIES

Profit (loss) before taxation Interest income Interest expenses Depreciation Amounts written off in respect of property, plant and equipment Allowances for bad and doubtful debts Gain arising from waiver of the creditors’ indebtedness Increase in prepayments and other receivables Decrease in inventories Decrease in other payables and accrued charges Net cash outflow from operating activities	2002 HK$’000 125,032 (244) – 162 – – (138,897) (4,061) – (8,966) (26,974)	2001 HK$’000 (70,327) (519) 1,413 – 25,699 28,731 – (23,472) 1,315 (40,690) (77,850)

18. ANALYSIS OF CHANGES IN FINANCING DURING THE YEAR

At 1 July 2000 Net cash inflow from financing Proceeds from issue of shares Other movements not involving cash flows: Reduction of share capital and share premium transferred to accumulated losses Issue of shares Realisation of investment property At 1 July 2001 Net cash outflow from financing Exercise of warrants Proceeds from issue of shares Other movement not involving cash flows: Waiver of the creditors’ indebtedness At 30 June 2002

Share capital and share Borrowings premium HK$’000 HK$’000 273,984 161,696 24,089 – – 75,326 – (153,651) (79,470) 79,470 (15,600) – 203,003 162,841 (64,106) – – 165,000 – 55,000 (138,897) – – 382,841

– 24 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

19. MAJOR NON-CASH TRANSACTIONS

• (a) During the year ended 30 June 2001, investment property of HK$15,600,000 was assigned to the financial creditors of the Group as the partial settlement of the secured indebtedness of the Group.

• (b) During the year ended 30 June 2001, 500,000,000 new shares of HK$0.01 each were issued and allotted at par to Liuzhou to capitalise its claims against the Company up to a maximum amount of HK$5,000,000 in respect of the Restructuring Proposals completed on 27 October 2000.

• (c) During the year ended 30 June 2001, 744,700,000 new shares of HK$0.01 each were issued and allotted to the non-financial creditors of the Group at a price of HK$0.10 per share as the full settlement of the amounts due by the Company.

• (d) During the year ended 30 June 2001, Convertible Bonds with an aggregate principal amount of HK$205,000,000 were issued to the financial creditors of the Group as partial settlement of the unsecured indebtedness due by the Group.

20. OPERATING LEASE COMMITMENTS

At the balance sheet date, the Group had commitments for future minimum lease payments under non-cancellable operating leases in respect of office premises which fall due as follows:

Within one year In the second to fifth year inclusive	2002 HK$’000 1,100 504 1,604	2001 HK$’000 – –
		–

Operating lease payments represent rental payable by the Group for its office premises. Leases are mainly negotiated for an average term of three years and rentals are fixed for an average of three years.

21. RETIREMENT BENEFITS SCHEME

The Group operates a Mandatory Provident Fund Scheme (the “MPF Scheme”) and a defined contribution retirement benefits scheme (the “Benefit Scheme”) for all qualifying employees. The assets of the MPF Scheme and the Benefit Scheme are held separately from those of the Group, in funds under the control of trustees. The retirement benefits cost charged to income statement represents contributions payable to the MPF Scheme and the Benefit Scheme by the Group at rates specified in the rules of the Scheme. Where there are employees joined the Benefit Scheme who leave the Benefit Scheme prior to vesting fully in the contributions, the contributions payable by the Group are reduced by the amount of forfeited contributions. For the year ended 30 June 2002, no forfeit voluntary contributions of the Benefit Scheme credited to the income statement.

– 25 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

MATERIAL ADVERSE CHANGES

The Directors are not aware of any material adverse change in the financial or trading position of the Group since 30 June 2002, the date to which the latest audited financial statements of the Group were made up.

INDEBTEDNESS

At the close of business on 31 December 2002, being the latest practicable date for the purpose of this indebtedness statement prior to the printing of this circular, the Group had outstanding borrowings of approximately HK$26 million comprising unsecured other borrowing of approximately HK$20 million and unsecured amount due to a director of the Group of HK$6 million.

Save as aforesaid and apart from intra-group liabilities, the Group did not have any outstanding mortgages, charges, debentures, or other loan capital or bank overdrafts, loans or other similar indebtedness or acceptance credits or hire purchase commitments or any guarantees or other material contingent liabilities as at the close of business on 31 December 2002.

The Directors confirm that as at the Latest Practicable Date, there is no material change in the Group’s indebtedness and contingent liabilities since 31 December 2002 save and except that the Group has repaid the aforesaid unsecured other borrowing of approximately HK$20 million in full and unsecured amount due to the director of the Group has increased to approximately HK$9 million.

WORKING CAPITAL

Taking into account the internal resources of the Group and the Acquisition, the Directors are of the opinion that the Group will have sufficient working capital for its present requirements.

– 26 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

STATEMENT OF PRO FORMA UNAUDITED ADJUSTED CONSOLIDATED NET TANGIBLE ASSETS

The following statement of pro forma unaudited adjusted consolidated net tangible assets of the Group is based on the audited consolidated net tangible assets of the Group as at 30 June 2002, the effect of the placing transactions thereafter and the adjustments to reflect the effects of the Previous Discloseable Transaction and the Acquisition:

Audited consolidated net tangible assets of the Group as at 30 June 2002 Add: Net proceeds from placement and subscription of new shares during the period from 1 July 2002 to the Latest Practicable Date_(Note 1) Add: Cost of the Wealth Sea Properties acquired by the Group(Note 2) Less: Cash consideration paid for the acquisition of Wealth Sea Properties Pro forma unaudited adjusted consolidated net tangible assets of the Group immediately prior to the Acquisition Add: Cost of the Properties to be acquired by the Group(Note 3) Less: Estimated cash consideration to be paid for the Acquisition(Note 4) Pro forma unaudited adjusted consolidated net tangible assets immediately following the completion of the Acquisition Pro forma unaudited adjusted consolidated net tangible assets per Share immediately prior to the completion of the Acquisition(Note 5) Pro forma unaudited adjusted consolidated net tangible assets per Share immediately following the completion of the Acquisition(Note 6)_

HK$’000 162,221 109,396 97,371 (97,371) 271,617 155,229 (155,229) 271,617 HK$0.072 HK$0.072

– 27 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

Notes:

1. The amount represents net proceeds from placing of 4,370,000,000 new shares of HK$0.01 each and 624,000,000 new shares of HK$0.1 each in October 2002 and December 2002 respectively. Details are set out in the announcements dated 18 October 2002 and 11 December 2002 respectively.

2. The acquisition of Wealth Sea by the Company was completed on 3 January 2003.

Pursuant to the valuation report issued by an independent PRC valuer, Shanghai Real Estate Appraisers Co. Limited, dated 10 January 2003, the open market value of the Wealth Sea Properties is HK$103,774,000. They will be stated in the next financial statements of the Group at cost in accordance with the Group’s accounting policies.

1. Pursuant to the valuation report issued by an independent valuer, BMI Appraisals Limited, dated 20 January 2003, which is set out in Appendix IV to this circular, the open market value of the Properties, which comprising a total of 96 residential units with total gross floor area of approximately 15,174 square meters, is HK$160,000,000. Following the completion of the Acquisition, they will be stated in the next financial statements of the Group at cost in accordance with the Group’s accounting policies.

2. The estimated cash consideration is calculated on the basis of all the 96 residential units with total gross floor area of approximately 15,173.94 square meters to be acquired pursuant to the Agreement.

3. The pro forma unaudited adjusted consolidated net tangible assets per Share immediately prior to the Acquisition is calculated based on 3,747,183,140 shares in issue as at the Latest Practicable Date.

4. The pro forma unaudited adjusted consolidated net tangible assets per Share immediately following the Acquisition is calculated based on 3,747,183,140 shares in issue as at the Latest Practicable Date.

– 28 –

ACCOUNTANTS’ REPORT OF TREND GLORY

APPENDIX II

The following is the text of a report of Trend Glory for the purpose of incorporation in this circular, from the reporting accountants, Terence Tang & Partners, Certified Public Accountants, Hong Kong.

==> picture [171 x 35] intentionally omitted <==

15D, Entertainment Building, 30 Queen’s Road Central, Hong Kong

24 February 2003

The Director

Trend Glory Investments Limited

and

The Directors Guo Xin Group Limited

Dear Sirs,

We set out below our report on the financial information (the “Financial Information”) regarding Trend Glory Investments Limited (the “Company”) for the period from 2 January 2002 (date of incorporation) to 31 December 2002 (the “Relevant Period”) for inclusion in the circular of Guo Xin Group Limited dated 24 February 2003 in connection with the proposed acquisition of the entire issued share capital of the Company.

The Company was incorporated as a limited liability in the British Virgin Islands under the International Business Companies Act on 2 January 2002. The Company did not commence business during the Relevant Period.

We have acted as auditors of the Company for the Relevant Period. We have examined the audited financial statements of the Company for the Relevant Period and carried out such additional procedures as are necessary in accordance with the Auditing Guideline “Prospectuses and the Reporting Accountant” issued by the Hong Kong Society of Accountants.

The Financial Information has been prepared based on the audited financial statements of the Company. The director of the Company is responsible for preparing the financial statements, which give a true and fair view. In preparing these financial statements, it is fundamental that appropriate accounting policies are selected and applied consistently.

The director of the Company is responsible for the Financial Information. It is our responsibility to form an independent opinion on the Financial Information.

– 29 –

ACCOUNTANTS’ REPORT OF TREND GLORY

APPENDIX II

In our opinion, the Financial Information, for the purpose of this report, gives a true and fair view of the result of the Company for the Relevant Period and of the state of affairs of the Company as at 31 December 2002.

FINANCIAL INFORMATION

Income Statement

For the period from 2 January 2002 (date of incorporation) to 31 December 2002

HK$

Profit/loss for the Relevant Period Balance Sheet At 31 December 2002	–

Note Current assets Amount due from director 2 Capital Share capital 3	HK$ 8
	8

Statement of Changes in Equity

For the period from 2 January 2002 (date of incorporation) to 31 December 2002

	Share capital
	HK$
Issue of new share	8
At 31 December 2002	8

Notes:

1. Principal accounting policies

The principal accounting policies adopted in the preparation of the financial information set out in this report, which conform with accounting principles generally accepted in Hong Kong, are as follows:

(a) Translation of foreign currencies

Foreign currency transactions are translated into Hong Kong dollars during the period at the rates of exchange ruling at the transaction dates. Monetary assets and liabilities expressed in foreign currencies at the balance sheet date are translated into Hong Kong dollars at rates of exchange ruling at the balance sheet date. Exchange differences are dealt with in the income statement.

– 30 –

ACCOUNTANTS’ REPORT OF TREND GLORY

APPENDIX II

(b) Related Parties

Parties are considered to be related if one party has the ability, directly or indirectly, to control the other party or exercise significant influence over the other party in making financial and operating decisions. Parties are also considered to be related if they are subject to common control or common significant influence. Related parties may be individuals or corporate entities.

2. Amount due from director

The amount due from director, Mr. Zheng You Ping, is unsecured, interest free and has no fixed terms of repayment. The maximum amount outstanding during the Relevant Period was HK$8.

3. Share capital

Authorised:

50,000 ordinary shares of US$1 each Translated into Hong Kong dollars Issued and fully paid-up: 1 ordinary share of US$1 each Translated into Hong Kong dollars	US$50,000
	HK$390,000
	US$1
	HK$8

4. Director’s remuneration

During the Relevant Period, no remuneration has been paid or is payable to the Company’s director.

5. Subsequent events

Subsequent to the period ended 31 December 2002, the Company was in a process of finalising various contracts with various unrelated third parties to acquire certain properties located in Shanghai, the People’s Republic of China. Up to the date of this report, the aggregated consideration of the aforesaid contracts to be finalised is expected to be approximately RMB90 million. The Company’s director has confirmed his intention to provide fund to the Company to complete the aforesaid acquisitions.

6. Subsequent financial statements

No audited financial statements have been prepared for the Company in respect of any period subsequent to 31 December 2002.

Yours faithfully, Terence Tang & Partners Certified Public Accountants Hong Kong

– 31 –

PRO FORMA STATEMENT OF THE GROUP

APPENDIX III

PRO FORMA STATEMENT OF UNAUDITED ASSETS AND LIABILITIES OF THE GROUP

The pro forma statement of unaudited assets and liabilities of the Group as set out below is based on the audited consolidated net assets of Guo Xin Group as at 30 June 2002 (as set out in Appendix I to this circular), the effect of the placing transactions thereafter and the adjustments to reflect the effects of the Previous Discloseable Transaction and the Acquisition.

Net proceeds from placement and subscription of new Audited shares from consolidated 1 July 2002 net assets of up to the the Group as at Latest 30 June Practicable 2002 Date HK$’000 HK$’000 Non-current assets Property, plant and equipment 766 – Investment properties – – Other investment 650 – 1,416 – Current assets 161,681 109,396 Current liabilities 876 – Net current assets (liabilities) 160,805 109,396 Net Assets 162,221 109,396	Purchase of the Wealth Sea Properties HK$’000 – 97,371 – 97,371 (97,371) – (97,371) –	Unaudited Pro forma adjusted consolidated net assets of the Group upon Purchase completion of the of the Properties Acquisition HK$’000 HK$’000 (Note) – 766 155,229 252,600 – 650 155,229 254,016 (155,229) 18,477 – 876 (155,229) 17,601 – 271,617	Unaudited Pro forma adjusted consolidated net assets of the Group upon Purchase completion of the of the Properties Acquisition HK$’000 HK$’000 (Note) – 766 155,229 252,600 – 650 155,229 254,016 (155,229) 18,477 – 876 (155,229) 17,601 – 271,617
			254,016
			18,477 876
			17,601
			271,617

Note: The amount represents the estimated cash consideration will be paid by the Group for all the 96 residential units to be acquired pursuant to the Agreement.

– 32 –

PROPERTY VALUATION

APPENDIX IV

The following is the text of a letter, a summary of value and a valuation certificate, prepared for the purpose of incorporation in this circular received from BMI Appraisals Limited, an independent valuer, in connection with its valuation as at 20 January 2003 of the property interests which the Group intends to purchase.

==> picture [281 x 77] intentionally omitted <==

24 February 2003

The Directors Guo Xin Group Limited 4101 Far East Finance Centre 16 Harcourt Road Admiralty Hong Kong

Dear Sirs,

Re: A total of 96 units of Blocks A and B within a composite development located at No. 1546 Da Lian Road (also known as Nos. 1 and 2, Alley 20, Fu Xin Road), Yangpu District, Shanghai, the People’s Republic of China (the “property interests”)

We refer to the instructions from Guo Xin Group Limited (referred to as the “Company”) for us to value the property interests located in the People’s Republic of China (referred to as the “PRC”). We confirm that we have carried out inspections, 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 such property interests as at 20 January 2003.

BASIS OF VALUATION

Our valuation of the property interests is our opinion of the open market value which we would define as intended to mean “the best price at which the sale of an interest in the property would have been completed unconditionally for cash consideration on the date of valuation, assuming:

• (a) a willing seller;

• (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 the price and terms and for the completion of the sale;

– 33 –

PROPERTY VALUATION

APPENDIX IV

• (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 prospective purchaser with a special interest; and

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

VALUATION METHODOLOGY

We have valued the property interests on the open market basis by the Comparison Approach assuming sale in the existing state with the benefit of vacant possession and by making reference to comparable sales evidence as available in the relevant market.

Comparison based on actual prices realized on sales of comparable properties is made. Comparable properties of similar size, character and location are analyzed and weighted against all the respective advantages and disadvantages of the property interests being valued in order to arrive at a fair comparison of value.

TITLE INVESTIGATION

We have been provided with copies of title documents of the property interests and have been advised that no further relevant documents have been produced. Moreover, due to the nature of the land registration system in the PRC, we have not been able to examine the original documents to verify ownership or to ascertain the existence of any amendment documents, which may not appear on the copies handed to us. Therefore, in the course of our valuation, we have relied on the advice and information given by Trend Glory and the legal opinion from the PRC legal adviser of Trend Glory to confirm the legality of the titles of such PRC property interests.

VALUATION ASSUMPTIONS

Our valuation has also been made on the assumption that the property interests are sold in the open market without the benefit of a deferred terms contract, leaseback, joint venture, management agreement or any similar arrangement which would serve to affect the value of the property interests.

In addition, no account has been taken of any option or right of pre-emption concerning or effecting the sale of the property interests and no forced sale situation in any manner is assumed in our valuation.

– 34 –

PROPERTY VALUATION

APPENDIX IV

In valuing the property interests, we have assumed that the owners of those property interests have valid and enforceable title to the property interests which are freely transferable, and have free and uninterrupted right to use the same, for the whole of the unexpired term granted subject to the payment of annual Government rent payable has been fully settled.

VALUATION CONSIDERATIONS

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

We have relied to a considerable extent on the information provided by the Company and have accepted advice on such matters as planning approvals, statutory notices, easements, tenures, particulars of occupancy, site/floor areas, identification of the property interests and all other relevant matters.

We have had no reason to doubt the truth and accuracy of the information provided to us by the Company. The Company has also advised us that no material facts have been omitted from the information to reach an informed view, and we have no reason to suspect that any material information has been withheld.

We have not carried out detailed on-site measurements to verify the correctness of the site/floor areas in respect of the property interests but have assumed that the site/floor areas shown on the documents handed to us are correct. Dimensions, measurements and areas included in the valuation certificate are based on information contained in the documents provided to us by the Company and are therefore only approximations.

No allowance has been made in our valuation for any charges, mortgages or amounts owing on the property interests or for any expenses or taxation, which may be incurred in effecting a sale. Unless otherwise stated, it is assumed that the property interests are free from encumbrances, restrictions and outgoings of any onerous nature, which could affect their value.

Our valuation has been prepared in accordance with the Hong Kong Guidance Notes on the Valuation of Property Assets (2nd Edition) published by the Hong Kong Institute of Surveyors in March 2000.

Our valuation has been prepared under the generally accepted valuation procedures and is in compliance with the Listing Rules of The Stock Exchange of Hong Kong Limited.

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PROPERTY VALUATION

APPENDIX IV

REMARKS

Unless otherwise stated, all money amounts stated are in Hong Kong Dollars and no allowances have been made for exchange transfers. The exchange rate adopted is the average rate as at 20 January 2003 being HK$1=RMB1.06. There has been no significant fluctuation in the exchange rate between that date and the date of this letter.

Our Summary of Value and Valuation Certificate are attached herewith.

Yours faithfully, For and on behalf of

BMI APPRAISALS LIMITED

Tony C.H. Cheng

BSc. MUD MRICS MHKIS MCIArb AFA MIIM

Director

Note: Tony C.H. Cheng is a Chartered Surveyor who has about 11 years’ experience in valuations of properties in Hong Kong, the People’s Republic of China and the Asia-Pacific region.

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PROPERTY VALUATION

APPENDIX IV

SUMMARY OF VALUE

No. Property

Open Market Value in existing state as at 20 January 2003 HK$

1. A total of 96 apartment units of Blocks A and B within a composite development located at No. 1546 Da Lian Road (also known as Nos. 1 and 2, Alley 20, Fu Xin Road), Yangpu District, Shanghai, the PRC 160,000,000

Total: 160,000,000

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PROPERTY VALUATION

APPENDIX IV

VALUATION CERTIFICATE

No. Property

Description and tenure

Open Market Value in existing state as at Particulars of 20 January 2003 occupancy HK$

160,000,000

1. A total of 96 units of Blocks A and B within a composite development located at No. 1546 Da Lian Road (also known as Nos. 1 and 2, Alley 20, Fu Xin Road), Yangpu District, Shanghai, the PRC

2. The subject development comprises two blocks of high-rise composite buildings (namely Block A and Block B) and clubhouse facilities completed in about 1998.

3. The subject property consists of 63 units in Block A with a total gross floor area of approximately 10,024.95 sq.m. and 33 apartment units in Block B with a total gross floor area of approximately 5,148.99 sq.m.. The aggregate total gross floor area of the property is approximately 15,173.94 sq.m..

4. We are instructed by the Company to value the property on vacant possession basis.

The land use rights of the property have been granted for a term expiring on 23 October 2042 for composite use (including commercial, office and residential uses).

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PROPERTY VALUATION

APPENDIX IV

Notes:

1. The property interests comprise the following units within the development:

Block	Floor Level	Unit Nos.	No. of Units	Gross Floor Area
				(sq.m.)
A	3	A, B, C, D, E and F	6	951.86
A	4	A, B, C, D, E and F	6	962.71
A	6	A, B, C, E and F	5	766.76
A	7	A, B, C, D and F	5	828.73
A	8	A, B, C, D, E and F	6	962.71
A	9	A, B, C, D and E	5	806.09
A	10	A, B, C, D and F	5	828.73
A	11	A, B, C and F	4	632.78
A	12	B, C, E and F	4	569.76
A	13	A, B, C, E and F	5	766.76
A	14	A, B, C, D, E and F	6	962.71
A	15	A, B, C and F	4	632.78
A	21	D only	1	195.95
A	23	F only	1	156.62
Sub-total:			63	10,024.95
B	6	E only	1	143.91
B	9	A only	1	198.51
B	11	A, B, C, D, E and F	6	962.22
B	12	C, D, E and F	4	613.20
B	13	B and C	2	293.52
B	14	B, C, D and F	4	619.80
B	15	D only	1	165.33
B	20	B, C, D, E and F	5	763.71
B	21	B, C, D and E	4	602.76
B	22	B and D	2	315.84
B	24	D, E and F	3	470.19
Sub-total:			33	5,148.99
Total:				15,173.94

1. Pursuant to 81 Real Estate Title Certificates (“上海市房地產權證 ”) issued by Shanghai City Building and Land Administration Bureau, 81 units of the property interests having a total gross floor area of 12,828.21 sq.m. are owned by 33 individual owners for various terms commonly expiring on 23 October 2042.

2. Pursuant to the Encumbrance Rights Summaries (“房地產其他權利摘要 ”) attached to the above 81 Real Estate Title Certificates, the above 81 units are subject to existing mortgages.

3. Pursuant to 15 Commodity Unit Pre-sale Contracts (“上海市外銷商品房預售合同 ”) entered into between the property developer of the subject development and 15 individual purchasers, the former has agreed to sell 15 units of the property interests having a total gross floor area of 2,345.73 sq.m. to the latter.

4. The opinion given by the PRC legal adviser of Trend Glory contains, inter alia, the following:-

5. a. The 81 units of the property interests being held under the 81 Real Estate Title Certificates are legally owned by the 33 individual owners.

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PROPERTY VALUATION

APPENDIX IV

• b. The 81 units of the property interests are not subject to any other mortgages or material encumbrances except for the existing mortgages.

• c. Trend Glory will become legal and beneficial owner of the 81 units of the property interests from the 33 individual owners by complying with the requisite conveyance and registration procedures under the relevant PRC laws.

• d. The 33 individual owners can legally and validly transfer their interests in the 81 units of the property interests to Trend Glory by settling the existing mortgages and by complying with the requisite conveyance and registration procedures under the relevant PRC laws.

• e. The 15 Commodity Unit Pre-sale Contracts for the 15 units of the property interests are legally valid and enforceable under the relevant PRC laws.

• f. With the consent from the property developer of the subject development, the 15 individual purchasers can legally and validly transfer their interests in the 15 units of the property interests to Trend Glory by entering into respective Sale and Purchase Agreements（“上海市房屋買賣合同 ”）with Trend Glory. Trend Glory can then attend to the registration formalities for the transfer with the relevant PRC property administration authorities together with the notarized Sale and Purchase Agreements so that Trend Glory can become legal and beneficial owner of the property interests.

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GENERAL INFORMATION

APPENDIX V

1. RESPONSIBILITY STATEMENT

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

2. DIRECTORS’ INTERESTS IN SECURITIES

As at the Latest Practicable Date, the interests of the Directors and chief executives of the Company in the equity and debt securities of the Company and its associated corporations (within the meaning of the SDI Ordinance) which require notification to the Company and the Stock Exchange pursuant to Section 28 of the SDI Ordinance (including interests which any such Director is deemed or taken to have under Section 31 or Part I of the Schedule to the SDI Ordinance) or which are required to be entered into the register maintained by the Company under Section 29 of the SDI Ordinance or which are required, pursuant to the Model Code for Securities Transactions by Directors of Listed Companies, to be notified to the Company and the Stock Exchange were as follows:

Name of Directors	Nature of interests	Number of Shares
Zhang Yang	Corporate	750,000,000_(Note)_

Note: Mr. Zhang Yang is deemed to be interested in 750,000,000 Shares held by Sourcebase Developments Limited which is beneficially owned by him.

Save as disclosed above, none of the Directors and chief executives of the Company or their associates had or deemed to have any interests in the equity and debt securities of the Company or any of its associated corporations as defined in the SDI Ordinance as at the Latest Practicable Date.

3. DIRECTORS’ INTERESTS IN CONTRACTS OR ARRANGEMENTS

None of the Directors is materially interested in any contract or arrangement entered into by any member of the Group subsisting at the date of this circular and which is significant in relation to the business of the Group.

4. SUBSTANTIAL SHAREHOLDERS

As at the Latest Practicable Date, according to the register kept by the Company pursuant to section 16(1) of the SDI Ordinance, and so far as is known to the Directors, the shareholders who were directly or indirectly interested in 10 per cent. or more of the issued share capital of

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GENERAL INFORMATION

APPENDIX V

the Company carrying rights to vote in all circumstances at general meetings of the Company together with the number of shares in which they were deemed to be interested were:

Name	Number of Shares	Percentage of holding
Sourcebase Developments Limited_(Note)_	750,000,000	20.02%

Note: Sourcebase Developments Limited is beneficially owned by Mr. Zhang Yang.

5. DIRECTORS’ INTERESTS IN ASSETS

None of the Directors has or has had any direct or indirect material interest in any assets which have been acquired or disposed of by or leased to any member of the Group or are proposed to be acquired or disposed of by or leased to any member of the Group since 30 June 2002, being the date to which the latest published audited consolidated financial statements of the Company were made up.

6. SERVICE CONTRACT

Save and except Mr. Zhang Yang had entered into a service contract with the Company for a fixed term of three years from 10 December 2001, there is no service contract between the Directors and members of the Group which does not expire or is not determinable by the employer within one year without payment of compensation other than statutory compensation.

7. LITIGATION

No member of the Group is engaged in any litigation or arbitration of material importance and the Directors are not aware of any litigation or claims of material importance pending or threatened by or against any member of the Group.

8. MATERIAL CONTRACTS

The following contracts, not being contracts in the ordinary course of business, have been entered into by members of the Group, within the two years preceding the Latest Practicable Date and are or may be material:

• (a) a restructuring agreement dated 2 August 2001 entered into between the Company, Messrs. Nicholas Timothy Cornforth Hill and Wong Tak Ming, Stephen of RSM Nelson Wheeler Corporate Advisory Services Limited and Mr. R. Craig Christensen of Arthur Morris and Co, being the joint and several provisional liquidators of the Company, Sourcebase Developments Limited and The Law Debenture Company (H.K.) Limited to restructure the indebtedness and liabilities of the Company;

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GENERAL INFORMATION

APPENDIX V

• (b) a subscription agreement dated 2 August 2001 entered into between the Company, Messrs. Nicholas Timothy Cornforth Hill and Wong Tak Ming, Stephen of RSM Nelson Wheeler Corporate Advisory Services Limited and Mr. R. Craig Christensen of Arthur Morris and Co, being the joint and several provisional liquidators of the Company and Sourcebase Developments Limited in relation to subscription of 5,500,000,000 new Shares by Sourcebase Developments Limited for HK$55,000,000;

• (c) a placing agreement dated 18 October 2002 entered into by the Company to place 4,370,000,000 new Shares at the placing price of HK$0.011 per placing Share on a best effort basis;

• (d) an agreement dated 15 November 2002 entered into between the Company and Zheng You Ping, as supplemented by an agreement dated 3 January 2003 entered between the same parties, for the acquisition of the entire issued share capital of Wealth Sea Investment Limited at a consideration of HK$97,370,926;

• (e) a placing agreement dated 11 December 2002 entered into by the Company to place 624,000,000 new Shares at the placing price of HK$0.10 per placing Share on a best effort basis; and

• (f) the Agreement.

9. QUALIFICATIONS OF EXPERTS

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

Name	Qualification
Terence Tang & Partners	Certified Public Accountants
BMI Appraisals Limited	Professional surveyors and valuers

10. CONSENTS

Terence Tang & Partners and BMI Appraisals Limited have given and have not withdrawn their respective consents to the issue of this circular with the inclusion herein of their respective letters and references to their respective names, in the forms and contexts on which they respectively appear.

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GENERAL INFORMATION

APPENDIX V

11. MISCELLANEOUS

• (a) The registered office of the Company is at Room 4101, 41st Floor, Far East Finance Centre, 16 Harcourt Road, Admiralty, Hong Kong.

• (b) The Share Registrars is Tengis Limited at G/F, BEA Harbour View Centre, 56 Gloucester Road, Wanchai, Hong Kong.

• (c) The secretary of the Company is Mr. Yip Kar Hang, Raymond, who is a member of the American Institute of Certified Public Accountants and the Hong Kong Society of Accountants.

• (d) The English text of this circular shall prevail over the Chinese text.

• (e) As at the Latest Practicable Date, none of the experts named in the paragraph headed “Qualifications of experts” in this Appendix has:

• (i) any shareholding in any member in the Group or the right (whether legally enforceable or not) to subscribe for or to nominate persons to subscribe for securities in any member in the Group or is an officer or servant, or a partner of or in the employment of an officer or servant of the Group; or

• (ii) any direct or indirect in the promotion of the Company or in any assets acquired or disposed of by or leased to any member of the Group or is proposed to be acquired or disposed of by or leased to any member of the Group since 30 June 2002, being the date of latest published audited accounts of the Company were made up.

12. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents are available for inspection during normal business hours at the principal place of business of the Company in Hong Kong, Room 4101, 41st Floor, Far East Finance Centre, 16 Harcourt Road, Admiralty, Hong Kong up to 10:00 a.m. on 13 March 2003:

• (a) the memorandum of association and Bye-laws of the Company;

• (b) the annual reports of the Company for each of the two years ended 30 June 2001 and 30 June 2002;

• (c) the accountants’ report of Trend Glory set out in Appendix II to this circular;

• (d) the audited accounts of Trend Glory for the period from 2 January 2002 (date of incorporation) to 31 December 2002;

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GENERAL INFORMATION

APPENDIX V

• (e) the letter and valuation certificate on the Properties set out in Appendix IV to this circular;

• (f) the consent letters referred to in the section headed “Consents” in this Appendix;

• (g) the service contract referred to in the paragraph headed “Service Contract” in this Appendix;

• (h) the material contracts referred to in the paragraph headed “Material Contracts” in this Appendix; and

• (i) the circular of the Company dated 10 December 2002.

– 45 –

NOTICE OF SGM

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GUO XIN GROUP LIMITED 國新集團有限公司[*]

(Incorporated in Bermuda with limited liability)

NOTICE IS HEREBY GIVEN that a special general meeting of the Company will be held at Room 4101, 41st Floor, Far East Finance Centre, 16 Harcourt Road, Admiralty, Hong Kong on 13 March 2003 at 10:00 a.m. for the purpose of considering and, if thought fit, passing, with or without modification, the following resolution as ordinary resolution of the Company:

ORDINARY RESOLUTION

“ THAT (1) the agreement dated 13 January 2003 (“ Agreement ”) made between Zheng You Ping (鄭幼平 ) and the Company for the acquisition of the entire issued share capital of Trend Glory Investments Limited, a copy of which has been produced to the meeting marked “A” and has been signed by the Chairman of the meeting for the purpose of identification, and the transactions contemplated under the Agreement be and are hereby approved and one or more of the directors of the Company be and is and are hereby authorised on behalf of the Company to do all such deeds, acts, matters and things as they may in their discretion consider necessary or desirable for the purpose of or in connection with effecting and implementing any of the foregoing matters in accordance with the terms of the Agreement and (2) expansion and diversification of the Company’s business including, amongst others, full range tourist related business, property development and investment if suitable opportunity arises be and is hereby approved.”

By order of the Board Yip Kar Hang, Raymond Company Secretary

Hong Kong, 24 February 2003

• For identification purpose only

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NOTICE OF SGM

Registered Office:

Cedar House 41 Cedar Avenue Hamilton, HM 12 Bermuda

Principal place of business in Hong Kong:

Room 4101, 41st Floor Far East Finance Centre 16 Harcourt Road Admiralty Hong Kong

Notes:

1. A shareholder entitled to attend and vote at the above meeting may appoint another person as his proxy to attend and to vote in his stead. A member who is the holder of two or more shares may appoint more than one proxy to attend in the same occasion. A proxy need not be a shareholder of the Company.

2. Where there are joint registered holders of any Share, any one such persons may vote at the meeting, either personally or by proxy, in respect of such Share as if he were solely entitled thereto; but if more than one of such joint holders is 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 Shares shall alone be entitled to vote in respect thereof.

3. In order to be valid, the form of proxy duly completed and signed in accordance with the instructions printed thereon together with the power of attorney or other authority, if any, under which it is signed or a notarially certified copy thereof must be delivered to the office of the Company’s branch registrars in Hong Kong, Tengis Limited, G/F, BEA Harbour View Centre, 56 Gloucester Road, Wanchai, Hong Kong not less than 48 hours before the time appointed for holding the meeting or any adjournment thereof.

4. Completion and return of the form of proxy will not preclude members from attending and voting in person at the meeting thereof (as the case may be) should they so wish, and in such event, the form of proxy shall be deemed to be revoked.

– 47 –