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 stockbroker or other registered dealer in securities, bank manager, solicitor, professional accountant or other professional adviser.

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

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.

GR INVESTMENT INTERNATIONAL LIMITED 金源投資國際有限公司

(Incorporated in Bermuda with limited liability)

(Stock Code: 310)

CONNECTED TRANSACTION AND VERY SUBSTANTIAL DISPOSAL AND PROPOSED CHANGE OF COMPANY NAME

Financial adviser to the Company

BARON CAPITAL LIMITED

Independent financial adviser to the independent board committee of the Company

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Hantec Capital Limited

A letter from the independent board committee of GR Investment International Limited is set out on page 11 of this circular. A letter from the independent financial adviser, Hantec Capital Limited, containing its advice to the independent board committee and independent shareholders of GR Investment International Limited is set out on pages 12 to 20 of this circular. A letter from the board of directors of GR Investment International Limited is set out on pages 4 to 10 of this circular.

A notice convening an special general meeting of GR Investment International Limited to be held at World Trade Centre Club Hong Kong at 38th Floor, World Trade Centre, 280 Gloucester Road, Causeway Bay, Hong Kong on Tuesday 15 March 2005 at 10:30 a.m. is set out on pages 77 to 78 of this circular. Whether or not you are able to attend the meeting in person, you are requested to complete and return the accompanying form of proxy in accordance with the instructions printed thereon to the Hong Kong share registrars of GR Investment International Limited in Hong Kong, Secretaries Limited at Ground Floor, Bank of East Asia Harbour View Centre, 56 Gloucester Road, Wan Chai, Hong Kong as soon as practicable but in any event not later than 48 hours before the time appointed for the holding of the meeting or the adjourned meeting (as the case may be). Completion and return of the form of proxy will not preclude you from attending and voting at the meeting or any adjourned meeting thereof (as the case may be) should you so desire.

18 February 2005

	Page
Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
Letter from the Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	4
Letter from the Independent Board Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . .	11
Letter from Independent Financial Adviser. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	12
Appendix I — Financial Information of the Company. . . . . . . . . . . . . . . . . . . .	21
Appendix II — Pro Forma Financial Information of the Remaining Group. .	64
Appendix III — General Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	72
Notice of Special General Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	77

— i —

DEFINITIONS

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

“associate”	the meaning ascribed to it under the Listing Rules
“Board”	the board of directors of the Company, including the
	independent non-executive directors of the Company
“Business Day”	any day (other than Saturday) on which licensed banks
	in Hong Kong are generally open for business throughout
	their normal business hours
“Citydragon Resources”	Citydragon Resources Limited, an indirect wholly owned
	subsidiary of GRD, is principally engaged as an
	investment holding company
“Company”	GR Investment International Limited, a company
	incorporated in Bermuda with limited liability and the
	shares of which are listed on the Stock Exchange
“Completion”	completion of the Sale and Purchase Agreement in
	accordance with its terms
“Completion Date”	the third Business Day after all the conditions of the
	Sale and Purchase Agreement are satisfied
“Consideration”	HK$65,123,371
“Directors”	directors of the Company
“Disposal”	the disposal of the entire paid-up registered capital of
	Sun Kai Yip (excluding its interest in White Cat) by GR
	Investment Holdings pursuant to the Sale and Purchase
	Agreement
“EGT”	上海囱泰紡織品有限公司, a sino-foreign joint equity
	venture incorporated in Shanghai of the PRC
“GAAP”	Generally accepted accounting principles, standards,
	practices and policies
“GR Investment Holdings”	GR Investment Holdings Limited, an indirect wholly-
	owned subsidiary of the Company, is principally engaged
	as an investment holding company

— 1 —

DEFINITIONS

“GRD”	Golden Resources Development International Limited, a
	company incorporated in Bermuda with limited liability
	and the shares of which are listed on the Stock Exchange
“GRD Board”	the board of GRD directors, including the independent
	non-executive directors of GRD
“GRD Shareholders”	holder(s) of share of GRD
“Group”	the Company and its subsidiaries
“Hantec Capital”	Hantec Capital Limited, the independent financial adviser
	to the Independent Board Committee and the Independent
	Shareholders, a licensed corporation for types 1 (dealing
	in securities) and 6 (advising on corporate finance)
	regulated activities under the SFO
“HK$”	Hong Kong dollars, the lawful currency of Hong Kong
“Hong Kong”	the Hong Kong Special Administrative Region of the
	PRC
“Independent Board Committee”	An independent committee of the Board consisting of
	Mr. Yan Mou Keung, Ronald, Mr. Chan Fai Yue, Leo
	and Mr. Chan Siu Wing, Raymond the independent non-
	executive directors
“Independent Shareholders”	the Shareholders, other than GRD
“Latest Practicable Date”	17 February 2005, being the latest practicable date prior
	to the printing of this circular for ascertaining certain
	information contained herein
“Listing Rules”	the Rules governing the Listing of Securities on the Stock
	Exchange
“PRC”	the People’s Republic of China
“Remaining Group”	the Group excluding Sun Kai Yip
“RMB”	Renminbi, the lawful currency of the PRC

— 2 —

DEFINITIONS

“Sale and Purchase Agreement”	the conditional sale and purchase agreement dated 9
	September 2004 entered into between Citydragon
	Resources and GR Investment Holdings in respect of the
	sale and purchase of the entire paid-up registered capital
	of Sun Kai Yip
“SFO”	the Securities and Futures Ordinance
“SGM”	the special general meeting of the Company to be held
	on 15 March 2005, to consider and, if thought fit, inter
	alia, approve the Disposal and the proposed change of
	company name
“Shanghai Light Industries”	上海輕工控股（集團）公司, a company incorporated in
	Shanghai of the PRC and a third party independent of
	and not connected with the directors, chief executive or
	substantial shareholders of the Company and GRD and
	their subsidiaries and associates and any of them
“Shareholders”	holder(s) of the Shares
“Shares”	shares of the Company
“Stock Exchange”	The Stock Exchange of Hong Kong Limited
“Sun Kai Yip”	Sun Kai Yip (Shanghai) Industrial Investments Limited,
	a wholly foreign-owned enterprise incorporated in
	Shanghai of the PRC
“TAB”	Shanghai Tian An Bearing Co., Ltd, a sino-foreign joint
	equity venture incorporated in Shanghai of the PRC
“White Cat Agreement”	the sale and purchase agreement dated 5 May 2000
	entered into between Sun Kai Yip and Shanghai Light
	Industries in respect of the sale and purchase of 26.8%
	of the paid-up registered capital of White Cat
“White Cat”	Shanghai White Cat Company Limited, a sino-foreign
	joint equity venture incorporated in Shanghai of the PRC
	which is principally engaged in the manufacture and
	distribution of household products, Sun Kai Yip held
	26.8% of its equity interest
“%”	per cent

Exchange rate: In this circular, for reference only and unless specified otherwise, the translation between RMB and HK$ is based on the exchange rate of HK$1.00 = RMB1.06

— 3 —

LETTER FROM THE BOARD

GR INVESTMENT INTERNATIONAL LIMITED 金源投資國際有限公司

(Incorporated in Bermuda with limited liability)

(Stock Code: 310)

Executive Directors: LAM Wo (Chairman) CHEUK Yuk Lung

Independent Non-executive Directors: YAN Mou Keung, Ronald CHAN Fai Yue, Leo CHAN Siu Wing, Raymond

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

Head office and principal place of business in Hong Kong: Room A, 11th Floor Fortune House 61 Connaught Road Central Central Hong Kong

18 February 2005

To the Shareholders

Dear Sir or Madam,

CONNECTED TRANSACTION AND VERY SUBSTANTIAL DISPOSAL AND PROPOSED CHANGE OF COMPANY NAME

INTRODUCTION

The Company announced on 14 September 2004 that GR Investment Holdings and Citydragon Resources entered into the Sale and Purchase Agreement dated 9 September 2004 whereby GR Investment Holdings, an indirect wholly-owned subsidiary of the Company, has agreed to sell and Citydragon Resources, an indirect wholly-owned subsidiary of the GRD, has agreed to purchase the entire paid-up registered capital of Sun Kai Yip, a wholly-owned subsidiary of GR Investment Holdings. The Consideration for the Disposal is approximately HK$65 million which is determined with reference to the unaudited management accounts of Sun Kai Yip and is equivalent to the unaudited net asset value of Sun Kai Yip as at 30 June 2004. The Sale

— 4 —

LETTER FROM THE BOARD

and Purchase Agreement is conditional on, amongst others, the approval by the Independent Shareholders. The Consideration will be settled entirely in cash and funded by the internal resources of the GRD.

The Disposal constitutes a very substantial disposal of the Company under Rule 14.06(4) of the Listing Rules. Since the Company is approximately 19.96% owned by GRD and GRD is a substantial shareholder and hence a connected person of the Company as defined in Chapter 14A of the Listing Rules, the Disposal constitutes a connected transaction for the Company, which requires Independent Shareholders’ approval at the SGM by poll. GRD will abstain from voting on the resolutions to approve the Disposal at the SGM.

The Company also announced on 7 February 2005 to propose a change of the name of the Company from “GR Investment International Limited” to “Prosperity Investment Holdings Limited”. The proposed change of name of the Company is subject to the passing of a special resolution at the SGM by the Shareholders and the Registrar of Companies in Bermuda granting approval for the change of name. The Board also proposes that subject to the change of the English name becoming effective, the Company shall change its Chinese name to “嘉進投資國際有限公司 ”.

The purpose of this circular is to provide you with further information on the Disposal and the proposed change of name.

THE SALE AND PURCHASE AGREEMENT

Date: 9 September 2004

Parties: GR Investment Holdings (as vendor) is principally engaged as an investment holding Company

Citydragon Resources (as purchaser) is principally engaged as an investment holding Company

Subject: the entire paid-up registered capital of Sun Kai Yip

Consideration and Payment Terms

The Considerations for the Disposal will be approximately HK$65 million, which is determined with reference to the unaudited management accounts of Sun Kai Yip and is equivalent to the unaudited net asset value of Sun Kai Yip as at 30 June 2004. The Consideration has been determined after arm’s length negotiations and was concluded on normal commercial terms by the Board and the GRD Board.

— 5 —

LETTER FROM THE BOARD

The Consideration will be settled in cash and will be funded by internal resources of GRD. An initial consideration of HK$40 million will be payable to GR Investment Holdings upon Completion. The remaining amount of approximately HK$25 million will be payable to GR Investment Holdings within 6 months after the Completion Date.

Conditions

Completion is conditional on, amongst others, (i) the requisite resolutions being passed by the Independent Shareholders at the SGM in compliance with the Listing Rules and (ii) the obtaining of all necessary consents and approvals (or waivers) by the parties of the Sale and Purchase Agreement for Completion, including but not limited to, GRD being satisfied with the result of the due diligence process on Sun Kai Yip. In the event that any of the conditions will not have been fulfilled within 2 months after the signing of the Sale and Purchase Agreement (or such later date as the parties to the Sale and Purchase Agreement may agree in writing), the Sale and Purchase Agreement will cease to be of any effect save in respect of claims arising out of any antecedent breach of the Sale and Purchase Agreement. Both parties have mutually agreed to extend the long stop date to 31 March 2005.

Exclusion of White Cat

On 5 May 2000, Sun Kai Yip and Shanghai Light Industries executed the White Cat Agreement in a consideration of RMB108 million. Shanghai Light Industries has paid RMB75 million to Sun Kai Yip but failed to pay the balance of the aforesaid consideration in a sum of RMB33 million in accordance with the White Cat Agreement, which was originally due to Sun Kai Yip on October 2000. Sun Kai Yip therefore has not transferred the 26.8% of the paid-up registered capital of White Cat to Shanghai Light Industries.

White Cat is principally engaged in the manufacture and distribution of household products. Sun Kai Yip is still legally holding the 26.8% equity interest in White Cat, and its interest in the outstanding claim of RMB33 million on the White Cat Agreement is completely excluded from the preparation of the unaudited management accounts of Sun Kai Yip, from which the Consideration is based on. Both the Company and GRD understand and agree that the 26.8% of the paid-up registered capital of White Cat is completely excluded from the Disposal. Sun Kai Yip has filed corresponding documents of the outstanding claim on the White Cat Agreement with 中國國際經濟貿易仲裁委員會上海分會 on 16 July 2004. Should Sun Kai Yip receive any compensation under the White Cat Agreement from Shanghai Light Industries, specifically all or part of the outstanding sum of RMB33 million, GR Investment Holdings is entitled to receive the aforesaid sum. Sun Kai Yip will transfer such sum to the Company or any of its nominees upon receipt and such sum will not have any implication on the remaining asset of Sun Kai Yip and Sun Kai Yip will then transfer the legal title of 26.8% equity interest in White Cat to Shanghai Light Industries. Should Shanghai Light Industries fail to pay the aforesaid sum pursuant to the White Cat Agreement, Sun Kai Yip will transfer the paid-up registered capital of White Cat to GR Investment Holdings or its nominees as reasonably

— 6 —

LETTER FROM THE BOARD

requested by GR Investment Holdings. After the Completion Date, GR Investment Holdings will be responsible for all costs and expenses incurred as well as all liabilities that Citydragon Resources and/or Sun Kai Yip may incur in respect of the claim relating to the White Cat Agreement.

Completion

Completion is expected to take place on the third Business Day after all the conditions of the Sale and Purchase Agreement are satisfied. Upon completion of the Sale and Purchase Agreement, Sun Kai Yip will become a wholly-owned subsidiary of Citydragon Resources, and Sun Kai Yip will cease to become a subsidiary of GR Investment Holdings.

FURTHER INFORMATION ABOUT SUN KAI YIP

Sun Kai Yip is a wholly foreign owned enterprise duly incorporated in Shanghai, the PRC. Sun Kai Yip is an indirect wholly-owned subsidiary of the Company and is principally engaged in investments in Shanghai, the PRC. The major holdings of Sun Kai Yip include 35% of the paid-up registered capital of EGT and 30% of the paid-up registered capital of TAB. EGT is principally engaged in the manufacture and distribution of textile products, while TAB is principally engaged in the manufacture and distribution of bearing products. Based on the unaudited management accounts of Sun Kai Yip as at 30 June 2004, Sun Kai Yip was holding cash to the extent of approximately RMB51 million. Based on the unaudited management account of Sun Kai Yip as at 31 December 2004, the cash balances were approximately RMB44.6 million.

The accounts of Sun Kai Yip for the years ended 2002 to 2004 were audited by a PRC auditor based on PRC GAAP, and the unaudited management accounts of Sun Kai Yip were prepared in accordance with Hong Kong GAAP and reviewed by a Hong Kong auditor. For the year ended 31 December 2002, the unaudited loss before tax of Sun Kai Yip was approximately HK$1.8 million, while the unaudited loss after tax of Sun Kai Yip was approximately HK$3.3 million. For the year ended 31 December 2003, the unaudited loss before tax of Sun Kai Yip was approximately HK$6.3 million, while the unaudited loss after tax of Sun Kai Yip was approximately HK$7.1 million. As at 30 June 2004, the accumulated unaudited losses of Sun Kai Yip amounted to approximately HK$18.1 million. Based on the unaudited management accounts of Sun Kai Yip as at 30 June 2004, the unaudited net asset value of Sun Kai Yip (including the shareholder’s loan and the dividends payable to GR Investment Holdings as mentioned below) amounted to approximately HK$65 million. As at 31 December 2004, the accumulated unaudited losses of Sun Kai Yip amounted to approximately HK$16.3 million. Based on the unaudited management accounts of Sun Kai Yip as at 31 December 2004, the unaudited net asset value of Sun Kai Yip prepared in accordance with PRC GAAP (including the shareholder’s loan payable to GR Investment Holdings) amounted to approximately HK$66.8 million.

— 7 —

LETTER FROM THE BOARD

The board of directors of Sun Kai Yip approved and declared a dividend of RMB6,992,355.46 payable to GR Investment Holdings for the year 2003 and such dividend were fully paid off on 24 September 2004. GR Investment Holdings received RMB1,137,260.20 from Sun Kai Yip on 17 January 2005, being the repayment of shareholder’s loan due to GR Investment Holdings.

REASON FOR AND BENEFITS OF THE DISPOSAL

The principal activity of the Company is investment holding which in turn holds equity or equity-related investments and engages in the provision of management services to the investee companies through its subsidiaries. As at 31 December 2004, the audited consolidated net asset value of the Company was approximately HK$234.6 million; hence, the unaudited net asset value of Sun Kai Yip as at 30 June 2004 represents approximately 27.7% of the Company’s net asset value.

The Board considers the Disposal to be an excellent way to retain a substantial amount of cash and invest it in more profitable, high-yielding investments which would provide the greatest value to the Shareholders. The estimated net proceeds from the Disposal will be approximately HK$65 million, which the Board intends to invest in high-quality businesses and securities in Hong Kong and/or the PRC and will disclose those investments as and when required. No particular investment has been identified as at the date of this circular. Unused proceeds will be placed by the Company on deposit with financial institutions in Hong Kong in accordance with the investment policy of the Company.

The Board considers the Disposal to be in the best interest of the Company and the Shareholders. Further, the Board considers the terms of the Sale and Purchase Agreement and the Consideration to be fair and reasonable so far as the Shareholders are concerned.

FINANCIAL EFFECTS OF THE DISPOSAL

The audited consolidated net asset value of the Company as at 31 December 2004 was approximately HK$234.6 million. The Disposal will not materially affect the net asset value of the Company as the Consideration was based on the unaudited net asset value of Sun Kai Yip as at 30 June 2004. Upon Completion, the unaudited pro-forma adjusted consolidated net asset of the Group will slightly decrease by approximately HK$1 million to HK$233.6 million. The Disposal will then provide the Company with a cash proceed of approximately HK$65 million. The information regarding the effect of Disposal on the Company can be referred to the details in Appendix II of this circular. Loss on Disposal amounted to approximately HK$1 million, being the unaudited net asset value of Sun Kai Yip as at 31 December 2004 prepared in accordance with Hong Kong GAAP of approximately HK$66 million less the Consideration of approximately HK$65 million. There will be no material impact on earnings since Sun Kai Yip will cease to be subsidiary of the Company and it is a loss making Company.

— 8 —

LETTER FROM THE BOARD

PROPOSED CHANGE OF NAME

The Board proposes to change the name of the Company from “GR Investment International Limited” to “Prosperity Investment Holdings Limited”. The Board believes that the proposed change of name of the Company can better reflect the principal activities of the Company and emphasize its independence from GRD, one of the Company’s substantial shareholders.

The effective date of the change of name will be the date on which the new name is entered by the Registrar of Companies in Bermuda on the register in place of the existing name. Upon the change of name becoming effective, all existing share certificates bearing the existing Shares and the existing name of the Company will continue to be evidence of title to the Shares and will continue to be valid for trading, settlement and registration purposes and the rights of the Shareholders will not be affected as a result of the proposed change of name. Should the change of name become effective, any issue of share certificates thereafter will be in the new company name and the securities of the Company will be traded on the Stock Exchange in the new name. There will not be any free exchange of share certificates upon the change of company name becoming effective. A further announcement will be made should the proposed change of name become effective.

The proposed change of name of the Company is subject to the passing of a special resolution at the SGM by the Shareholders and the Registrar of Companies in Bermuda granting approval for the change of name. The Board also proposes that subject to the change of the English name becoming effective, the Company shall change its Chinese name to “嘉進投資國際有限公司 ”. The Company will carry out the necessary filing procedures with the Registrar of Companies in Hong Kong.

GENERAL

The Disposal constitutes a very substantial disposal of the Company under Rule 14.06(4) of the Listing Rules. Since the Company is approximately 19.95% owned by GRD and GRD is a substantial shareholder and hence a connected person of the Company as defined in Chapter 14A of the Listing Rules, the Disposal constitutes a connected transaction for the Company, which requires Independent Shareholders’ approval at the SGM by poll. GRD will abstain from voting on the resolutions to approve the Disposal at the SGM.

SGM

A notice convening a SGM to be held at World Trade Centre Club Hong Kong at 38th Floor, World Trade Centre, 280 Gloucester Road, Causeway Bay, Hong Kong on Tuesday 15 March 2005 at 10:30 a.m. is set out on pages 77 to 78 of this circular. Whether or not you are able to attend the meeting in person, you are requested to complete and return the accompanying form of proxy in accordance with the instructions printed thereon to the Hong Kong share registrars of the Company, Secretaries Limited at Ground Floor, Bank of East Asia Harbour View Centre, 56 Gloucester Road, Wan Chai, Hong Kong as soon as practicable but in any

— 9 —

LETTER FROM THE BOARD

event not later than 48 hours before the time appointed for the holding of the meeting or the adjourned meeting (as the case may be). Completion and return of the form of proxy will not preclude you from attending and voting at the meeting or any adjourned meeting thereof (as the case may be) should you so desire.

Under the Bye-laws of the Company, at any general meeting of Shareholders, a resolution shall be decided on a show of hands unless a poll is demanded by any of the following persons before or on the declaration of the result of a show of hands:

(1) the chairman of the meeting;
(2) at least 3 Shareholders present in person or by proxy and entitled to vote;
(3) one or more Shareholders in person (or in the case of corporation, by its duly authorised representative) or by proxy and representing in 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
(4) one or more Shareholders present in person (or in the case of a corporation, by its duly authorised 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.

RECOMMENDATION

Your attention is drawn to (a) the letter from the Independent Board Committee set out on page 11 of this circular which contains the recommendation of the Independent Board Committee to the Independent Shareholders regarding the ordinary resolution to approve the Disposal; and (b) the letter from Hantec Capital set out on pages 12 to 20 of this circular which contains its recommendation to the Independent Board Committee and the Independent Shareholders.

The Independent Board Committee, having taken into account the advice of Hantec Capital, considers that the terms of the Disposal are fair and reasonable so far as the Independent Shareholders are concerned. Accordingly, the Independent Board Committee unanimously recommends that the Independent Shareholders to vote in favour of the ordinary resolution to be proposed at the SGM to approve the Disposal.

ADDITIONAL INFORMATION

Your attention is also drawn to the appendices to this circular which contain additional information in relation to the Company.

Yours faithfully, For and on behalf of

GR Investment International Limited Lam Wo Chairman

— 10 —

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

GR INVESTMENT INTERNATIONAL LIMITED 金源投資國際有限公司

(Incorporated in Bermuda with limited liability)

(Stock Code: 310)

18 February 2005

To the Independent Shareholders

Dear Sir or Madam,

CONNECTED TRANSACTION AND VERY SUBSTANTIAL DISPOSAL

We refer to the letter from the Board set out on pages 4 to 10 of the circular issued by the Company on 18 February 2005 (the “Circular”), of which this letter forms a part. Terms defined in the Circular shall have the same meanings when used herein.

We have been appointed by the Board to form the Independent Board Committee to consider the Disposal, to advise you as to whether the terms of the Disposal are fair and reasonable so far as the Independent Shareholders are concerned and to recommend whether or not the Independent Shareholders should vote in favour of the ordinary resolution to be proposed at the SGM to approve the Agreement and the transactions contemplated therein.

Hantec Capital has been appointed to advise us regarding the Disposal. We wish to draw your attention to the letter from Hantec Capital which contains advice to us in relation to the Disposal, together with the principal factors and reasons taken into consideration in arriving at such advice, are set out in the letter from Hantec Capital.

Your attention is also drawn to the letter from the Board and the additional information set out in the appendices to the Circular.

Having considered the terms of the Disposal, and the advice of, and the principal factors and reasons considered by Hantec Capital in relation thereto as stated in its letter, we consider the terms of the Disposal to be in the interests of the Company and the Shareholders as a whole and that the terms of the Agreement to be fair and reasonable so far as the Independent Shareholders are concerned. We therefore recommend you to vote in favour of the ordinary resolution to be proposed at the SGM to approve the Disposal.

Yours faithfully,

For and on behalf of the Independent Board Committee Yan Mou Keung, Ronald Chan Fai Yue, Leo Chan Siu Wing, Raymond

Independent non-executive directors

— 11 —

LETTER FROM INDEPENDENT FINANCIAL ADVISER

The following is the text of a letter from Hantec Capital in connection with the terms of the Disposal which has been prepared for the purpose of inclusion in this circular:

==> picture [35 x 39] intentionally omitted <==

HANTEC CAPITAL LIMITED

45th Floor, COSCO Tower 183 Queen’s Road Central Hong Kong

18 February 2005

To the Independent Board Committee and the Independent Shareholders of

GR Investment International Limited

Dear Sirs and Madams,

CONNECTED TRANSACTION AND VERY SUBSTANTIAL DISPOSAL

INTRODUCTION

We refer to our appointment as the independent financial adviser to the Independent Board Committee and the Independent Shareholders in respect of the terms of the transaction contemplated under the Sale and Purchase Agreement, details of which are set out in the letter from the Board (the “Board’s Letter”) contained in this circular (the “Circular”) dated 18 February 2005 issued by the Company, of which this letter forms part. Capitalised terms used in this letter without definitions shall have the same meanings set out in the Circular unless the context otherwise requires.

On 9 September 2004, GR Investment Holdings and Citydragon Resources entered into the Sale and Purchase Agreement whereby GR Investment Holdings, an indirect wholly-owned subsidiary of the Company, has agreed to sell and Citydragon Resources, an indirect whollyowned subsidiary of GRD, has agreed to purchase the entire paid-up registered capital of Sun Kai Yip, a wholly-owned subsidiary of GR Investment Holdings. The Consideration for the Disposal is approximately HK$65 million. The Sale and Purchase Agreement is conditional on, amongst other things, the approval by Independent Shareholders. The Consideration will be settled entirely in cash and funded by internal resources of the GRD.

— 12 —

LETTER FROM INDEPENDENT FINANCIAL ADVISER

which requires Independent Shareholders’ approval at the SGM by poll. GRD will abstain from voting on the resolutions to approve the Disposal at the SGM.

The Independent Board Committee, comprising the independent non-executive Directors, Mr. Yan Mou Keung, Ronald, Mr. Chan Fai Yue, Leo and Mr. Chan Siu Wing, Raymond, has been formed to consider the terms of the Sale and Purchase Agreement. As the independent financial adviser to the Independent Board Committee, our role is to give an independent opinion to the Independent Board Committee and to advise the Independent Shareholders as to whether or not the terms and conditions of the Sale and Purchase Agreement are fair and reasonable so far as the Independent Shareholders are concerned.

BASIS OF OUR ADVICE

In arriving at our recommendation, we have relied on the statements, information and representations contained in the Circular and the information and representations provided to us by the Directors and management of the Company. We have assumed that all information and representations contained or referred to in the Circular and all information and representations which have been provided by the Directors and management of the Company for which they are solely responsible, are true and accurate at the time they were made and will continue to be accurate at the date of the despatch of the Circular. We have no reason to doubt the truth, accuracy and completeness of the information and presentation provided to us by the Directors.

We consider that we have been provided with sufficient information on which to form a reasonable basis for our opinion. We have no reason to suspect that any relevant information has been withheld, nor are we aware of any fact or circumstance which would render the information provided and representations made to us untrue, inaccurate or misleading. Having made all reasonable enquiries, the Directors have further confirmed that, to the best of their knowledge, they believe there are no other facts or representations the omission of which would make any statement in the Circular, including this letter, misleading. We have not, however, carried out any independent verification of the information provided by the Directors and management of the Company, nor have we conducted an independent investigation into the business and affairs of the Company, the Group, Sun Kai Yip and GRD.

PRINCIPAL FACTORS CONSIDERED

In arriving at our opinion with regard to the Disposal, we have taken into account the following principal factors and reasons into consideration:

(I) Details of the Disposal

On 9 September 2004, GR Investment Holdings and Citydragon Resources entered into the Sale and Purchase Agreement whereby GR Investment Holdings, an indirect wholly-

— 13 —

LETTER FROM INDEPENDENT FINANCIAL ADVISER

owned subsidiary of the Company, has agreed to sell and Citydragon Resources, an indirect wholly-owned subsidiary of GRD, has agreed to purchase the entire paid-up registered capital of Sun Kai Yip (excluding the interests of Sun Kai Yip in White Cat).

As stated in the Board’s Letter, Sun Kai Yip and Shanghai Light Industries executed the White Cat Agreement in a consideration of RMB108 million on 5 May 2000. Shanghai Light Industries has paid RMB75 million to Sun Kai Yip but failed to pay the balance of the aforesaid consideration in a sum of RMB33 million in accordance with the White Cat Agreement, which was originally due to Sun Kai Yip on October 2000. Sun Kai Yip therefore has not transferred the 26.8% of the paid-up registered capital of White Cat to Shanghai Light Industries.

White Cat is principally engaged in the manufacture and distribution of household products. Sun Kai Yip is still legally holding the 26.8% equity interest in White Cat, and its interest in the outstanding claim of RMB33 million on the White Cat Agreement is completely excluded from the preparation of the unaudited management accounts of Sun Kai Yip, from which the Consideration is based on. Both GRD and the Company understand and agree that the 26.8% of the paid-up registered capital of White Cat is completely excluded from the Disposal. Sun Kai Yip has filed corresponding documents of the outstanding claim on the White Cat Agreement with 中國國際經濟貿易仲裁委員會上海分會 on 16 July 2004. Should Sun Kai Yip receive any compensation under the White Cat Agreement from Shanghai Light Industries, specifically all or part of the outstanding sum of RMB33 million, GR Investment Holdings is entitled to receive the aforesaid sum. Sun Kai Yip will transfer such sum to the Company or any of its nominees upon receipt and Sun Kai Yip will then transfer the legal title of 26.8% equity interest in White Cat to Shanghai Light Industries. As advised by the Directors, the claim is still under progress and no compensation was received as at the Latest Practicable Date.

Should Shanghai Light Industries fail to pay the aforesaid sum pursuant to the White Cat Agreement, Sun Kai Yip will transfer the paid-up registered capital of White Cat to GR Investment Holdings or its nominees as reasonably requested by GR Investment Holdings at nil consideration. After the Completion Date, GR Investment Holdings will be responsible for all costs and expenses incurred as well as all liabilities that Citydragon Resources and/or Sun Kai Yip may incur in respect of the claim relating to the White Cat Agreement.

Information of the Group

— 14 —

LETTER FROM INDEPENDENT FINANCIAL ADVISER

For the year ended 31 December 2002, the audited loss before tax of the Group was approximately HK$13.6 million, while the audited loss after tax of the Group was approximately HK$15.4 million. As at 31 December 2002, the audited consolidated net asset value of the Group was approximately HK$217.5 million. For the year ended 31 December 2003, the audited loss before tax of the Group was approximately HK$23.6 million, while the audited loss after tax of the Group was approximately HK$24.8 million. As at 31 December 2003, the audited consolidated net asset value of the Group was approximately HK$236.9 million. According to the 2004 interim report of the Company, for the six months ended 30 June 2004, the unaudited loss before tax of the Group was approximately HK$1.9 million, while the unaudited loss after tax of the Group was approximately HK$2.2 million. As at 30 June 2004, the unaudited consolidated net asset value of the Group was approximately HK$234.7 million, the unaudited net asset value of Sun Kai Yip as at 30 June 2004 represented approximately 27.7% of the Group’s net asset value. For the year ended 31 December 2004, the audited loss before tax of the Group was approximately HK$3.0 million, while the audited loss after tax of the Group was approximately HK$3.8 million. As at 31 December 2004, the audited consolidated net asset value of the Group was approximately HK$234.6 million.

Information of Sun Kai Yip

Sun Kai Yip is a wholly foreign owned enterprise duly incorporated in Shanghai, the PRC. Sun Kai Yip is an indirect wholly-owned subsidiary of the Company and is principally engaged in investments in Shanghai, the PRC. The major holdings of Sun Kai Yip include 35% of the paid-up registered capital of EGT and 30% of the paid-up registered capital of TAB. EGT is principally engaged in the manufacture and distribution of textile products, while TAB is principally engaged in the manufacture and distribution of bearing products. Based on the unaudited management accounts of Sun Kai Yip as at 30 June 2004, Sun Kai Yip was holding cash to the extent of approximately RMB51 million. Based on the unaudited management accounts of Sun Kai Yip as at 31 December 2004, the cash balances were approximately RMB44.6 million.

The accounts of Sun Kai Yip for the years ended 31 December 2002 to 2004 were audited by a PRC auditor based on PRC GAAP, and the unaudited management accounts of Sun Kai Yip were prepared in accordance with Hong Kong GAAP and reviewed by a Hong Kong auditor. For the year ended 31 December 2002, the unaudited loss before tax of Sun Kai Yip prepared in accordance with Hong Kong GAAP was approximately HK$1.8 million, while the unaudited loss after tax of Sun Kai Yip was approximately HK$3.3 million. For the year ended 31 December 2003, the unaudited loss before tax of Sun Kai Yip prepared in accordance with Hong Kong GAAP was approximately HK$6.3 million, while the unaudited loss after tax of Sun Kai Yip prepared in accordance with Hong Kong GAAP was approximately HK$7.1 million. Based on the unaudited management accounts of Sun Kai Yip as at 30 June 2004, the accumulated unaudited losses of Sun Kai Yip prepared in accordance with PRC GAAP amounted to

— 15 —

LETTER FROM INDEPENDENT FINANCIAL ADVISER

approximately HK$18.1 million, while the unaudited net asset value of Sun Kai Yip (including the shareholder’s loan and the dividends payable to GR Investment Holdings) prepared in accordance with PRC GAAP amounted to approximately HK$65 million. As at 31 December 2004, the accumulated unaudited losses of Sun Kai Yip prepared in accordance with PRC GAAP amounted to approximately HK$16.3 million. Based on the unaudited management accounts of Sun Kai Yip as at 31 December 2004, the unaudited net asset value of Sun Kai Yip (including the shareholder’s loan payable to GR Investment Holdings) prepared in accordance with PRC GAAP amounted to approximately HK$66.8 million. As advised by the Directors, the decrease in cash for the year ended 31 December 2004 was attributable to the dividend paid to GR Investment Holding of approximately RMB6.99 million as mentioned in the Letter from the Board and the increase in net asset value as at 31 December 2004 was attributable to the increased profits of TAB.

(II) Reasons of the Disposal

Being an investment company, the performance of Sun Kai Yip to large extent depends on the performance of the companies in its investment portfolio. The Board considers the Disposal to be an excellent way to retain a substantial amount of cash and invest it in more profitable, high-yielding investments which would provide the greatest value to the Shareholders.

Given that (i) the Company may not able to enhance the performance of Sun Kai Yip due to limitation in control over the companies it invested; and (ii) the enriched cashflow position as a results of the Disposal enabled the Company to replenish its general working capital and allow the Company to invest in other high-quality businesses and securities in Hong Kong and/or the PRC which is in line with the business and expectation of the Company as a investment holding company, we consider that the Disposal is in the interests of the Company and the Independent Shareholders as a whole.

(III) Basis of the Consideration

As stated in the Board’s Letter, the Consideration for the Disposal will be approximately HK$65 million, which is determined after arm’s length negotiations with reference to the unaudited net asset value of Sun Kai Yip as at 30 June 2004 and was concluded on normal commercial terms by the GRD Board and the Board. An initial consideration of HK$40 million will be payable to GR Investment Holdings upon Completion. The remaining amount of approximately HK$25 million will be payable to GR Investment Holdings within 6 months after the Completion Date.

— 16 —

LETTER FROM INDEPENDENT FINANCIAL ADVISER

Price to earning approach

Since Sun Kai Yip recorded unaudited loss for the two years ended 31 December 2002 and 2003, the use of price to earning multiple as reference to assess the consideration of Sun Kai Yip would not be applicable.

Dividend approach

The Company has not declared any dividends to the Shareholders during the three years ended 31 December 2004. As such, there is no basis to assess the consideration of Sun Kai Yip based on historical dividend yield of the Company, and the dividend approach would not be applicable.

On the basis that the price to earning multiples and dividends of the Company are not available, we consider that we should focus on the net asset value approach in the determination of the reasonableness and fairness of the consideration of Sun Kai Yip.

Net asset approach

As at 30 June 2004, the unaudited net asset value of Sun Kai Yip (including the shareholder’s loan and the dividends payable to GR Investment Holdings) prepared in accordance with PRC GAAP amounted to approximately HK$65.1 million and the unaudited net asset value of Sun Kai Yip prepared in accordance with Hong Kong GAAP amounted to HK$64.9 million. The Consideration of approximately HK$65.1 million is determined and equivalent to the unaudited net asset value of Sun Kai Yip as at 30 June 2004 prepared in accordance with PRC GAAP of approximately HK$65.1 million. While comparing the Consideration with the unaudited net asset value of Sun Kai Yip as at 30 June 2004 prepared in accordance with Hong Kong GAAP of approximately HK$64.9 million, the Consideration represents a premium of approximately HK$0.2 million. Since 31 December 2004, the Directors have confirmed that there is no substantial changes in the financial position of Sun Kai Yip.

In addition, in view of Sun Kai Yip is a private company which is lack of marketability and non-liquidity in nature, the Directors consider that the Disposal at the Consideration is in the interest of the Company and the Independent Shareholders.

Given that (i) the Consideration is equivalent to the unaudited net asset value of Sun Kai Yip as at 30 June 2004 prepared in accordance with PRC GAAP and represent a premium of approximately HK$0.2 million to the unaudited net asset value of Sun Kai Yip as at 30 June 2004 prepared in accordance with Hong Kong GAAP; (ii) the Directors have confirmed that there is no substantial changes in the financial position of Sun Kai Yip since 30 June 2004; and (iii) Sun Kai Yip is a private company which is lack of marketability and non-liquidity in nature, we concur with the Directors’ opinion that the

— 17 —

LETTER FROM INDEPENDENT FINANCIAL ADVISER

basis for determination of the total consideration to be fair and reasonable in the context of the transaction contemplated under the Sale and Purchase Agreement and is in the interests of the Company and the Independent Shareholders as a whole.

(IV) Use of proceeds

The estimated net proceeds from the Disposal will be approximately HK$65 million, which the Board intends to invest in high-quality businesses and securities in Hong Kong and/or the PRC such as participation in the investment of land development in Hong Kong under positive recovery of the property market in Hong Kong. No particular investment has been identified as at the Latest Practicable Date. Unused proceeds will be placed by the Company on deposit with financial institutions in Hong Kong in accordance with the investment policy of the Company.

(V) Financial effects on the Group

Cashflow

According to the unaudited pro-forma adjusted consolidated balance sheet of the Group as set out in Appendix II to the Circular, the Disposal would further improve the cashflow position of the Group from approximately HK$67.6 million before Completion to approximately HK$91.2 million upon Completion, representing an increase of approximately 34.9%. In view of the improvement, we are of the opinion that the Disposal is favourable to the cash position of the Group.

Earnings

At the time when the Company invested in Sun Kai Yip, the initial investment cost of the Company was USD10 million (equivalent to approximately HK$78 million). During the period from 1998 to 2002, the Company received total dividends of approximately RMB53.7 million (equivalent to approximately HK$50.7 million) from Sun Kai Yip. Furthermore, as disclosed in the Board’s Letter, the Company entitled to receive a dividends of approximately RMB7.0 million (equivalent to approximately HK$6.6 million) for the year 2003 from Sun Kai Yip.

Given the Consideration of approximately HK$65 million, after Completion, the Company would record a return since its initial investment to the completion of the Disposal of approximately HK$44.3 million (calculated based on the Consideration of approximately HK$65 million plus total dividends received from 1998 to 2002 of approximately RMB53.7 million (equivalent to approximately HK$50.7 million) plus dividends for the year 2003 payable to the Company of approximately RMB7.0 million (equivalent to approximately HK$6.6 million) minus the initial investment cost of USD10 million (equivalent to approximately HK$78 million)). As advised by the Directors, a loss on

— 18 —

LETTER FROM INDEPENDENT FINANCIAL ADVISER

Disposal amounted to approximately HK$1 million (being the unaudited net asset value of Sun Kai Yip as at 31 December 2004 prepared in accordance with Hong Kong GAAP of approximately HK$66 million less the Consideration of approximately HK$65 million) was recorded for the year ended 31 December 2004. However, in view of the overall return mentioned above, we consider that the Disposal is in the interests of the Company and the Independent Shareholders as a whole.

Net asset value

As set out in Appendix II to the Circular, the unaudited pro-forma adjusted consolidated net asset value of the Group before the Disposal was approximately HK$234.6 million. After Completion, the unaudited pro-forma adjusted consolidated net asset value of the Group will be approximately HK$233.6 million, represents a slight decrease of about HK$1.0 million which was attributable to the increase of the net asset value of Sun Kai Yip based on the PRC GAAP as a result of the increased profits of TAB. Having considered that (i) such amount of decrease represents approximately 1.5% of the unaudited net asset value of Sun Kai Yip as at 31 December 2004 of approximately HK$66.8 million and represents approximately 0.4% of the audited consolidated net asset value of the Group as at 31 December 2004 of approximately HK$234.6 million; and (ii) the quick cash inflow of the initial consideration of HK$40 million to be received upon Completion allows the Group to apply the proceeds for the intended uses shortly after the Completion, we concur with the Directors that the Disposal will not materially affect the net asset value of the Group.

Gearing

According to the unaudited pro-forma adjusted consolidated balance sheet of the Group as set out in Appendix II to the Circular, the Group recorded an other borrowing amount of approximately HK$5.46 million before and after the Completion. With the slight decrease of net asset value of the Group after the Completion, the gearing ratio (total outstanding borrowings over net assets) of the Group then slightly change from approximately 2.33% to approximately 2.34% after the Completion. We consider that such slight increase of gearing ratio is acceptable and will not have material impact to the Group’s financial position.

Based on the above financial analysis, it indicated that the Disposal will record return since its initial investment to the completion of the Disposal and the Disposal will contribute to an improvement in the cash position of the Group with no material adverse impact to the Group’s net asset value and gearing ratio, we consider that the Disposal is favourable to the Company and the Independent Shareholders. Given that the Disposal enables the Company to realise its investment in TAB and EGT and will raise additional funds to replenish the Group’s general working capital and enabled the Company to have a viable chance to invest in other high-quality businesses and securities in Hong Kong and/or the PRC such as participation in the investment of land development in

— 19 —

LETTER FROM INDEPENDENT FINANCIAL ADVISER

Hong Kong under positive recovery of the property market in Hong Kong, we concur with the opinion of the Board that the Disposal is in the interests of the Company and Independent Shareholders as a whole.

CONCLUSION AND OPINION

Taking into consideration of the above principal factors and reasons, we are of the view that terms of the Sale and Purchase Agreement and the transactions contemplated thereunder are fair and reasonable so far as the Independent Shareholders are concerned and are in the interests of the Company and the Independent Shareholders as a whole. Accordingly, we recommend the Independent Shareholders, as well as the Independent Board Committee to advise the Independent Shareholders, to vote in favour of the ordinary resolution to be proposed at the SGM to approve the Sale and Purchase Agreement and the transactions contemplated thereunder.

Yours faithfully, For and on behalf of Hantec Capital Limited Andrew Tang Director

— 20 —

FINANCIAL INFORMATION OF THE COMPANY

APPENDIX I

1. ACCOUNTANTS’ REPORT

The following is the text of a report, prepared for the sole purpose of inclusion in this circular from the reporting accountants of GR Investment International Limited, RSM Nelson Wheeler, Certified Public Accountants, Hong Kong.

==> picture [154 x 55] intentionally omitted <==

18 February 2005

The Directors

GR Investment International Limited Room A, 11th Floor, Fortune House 61 Connaught Road Central

Central

Hong Kong

Dear Sirs,

We set out below our report on the financial information regarding GR Investment International Limited (the “Company”) and its subsidiaries (hereinafter collectively referred to as the “Group”) for each of the three years ended 31 December 2002, 2003 and 2004 (the “Relevant Periods”), for inclusion in the circular of the Company dated 18 February 2005 in connection with the proposed disposal of the entire paid-up registered capital of Sun Kai Yip (Shanghai) Industrial Investments Limited (the “Circular”).

The Company was incorporated in Bermuda with limited liability on 15 June 2001 and is engaged in investment holding. As at the date of this report, the Company had direct and indirect interests in the principal subsidiaries set out in note 12 below.

All companies comprising the Group have adopted 31 December as their financial year end date.

We have acted as auditors of the Company and all the companies comprising the Group for the two years ended 31 December 2003 and 2004. The auditors of the Group for the year ended 31 December 2002 were HLM & Co., Certified Public Accountants.

— 21 —

APPENDIX I

FINANCIAL INFORMATION OF THE COMPANY

For the purpose of this report, we have examined the audited consolidated financial statements of the Group for the Relevant Periods and have carried out such additional procedures as are necessary in accordance with Auditing Guideline 3.340 “Prospectuses and the Reporting Accountant” issued by the Hong Kong Institute of Certified Public Accountants (“HKICPA”).

The consolidated results, cash flows and statements of changes in equity of the Group for the Relevant Periods and the balance sheets and consolidated balance sheets of the Company and the Group, respectively as at 31 December 2002, 2003 and 2004 together with the notes thereon set out in this report (collectively the “Financial Information”) have been prepared based on the audited consolidated financial statements of the Group in accordance with the accounting principles generally accepted in Hong Kong. The Directors of the Company are responsible for preparing the audited consolidated financial statements of the Group for the Relevant Periods, which give a true and fair view. In preparing the audited consolidated financial statements for the Relevant Periods, it is fundamental that appropriate accounting policies are selected and applied consistently.

The Directors of the Company are responsible for the Financial Information. It is our responsibility to form an independent opinion, based on our examination, on the Financial Information and to report our opinion.

In our opinion, the Financial Information prepared on the basis as explained above gives, for the purpose of this report, a true and fair view of the state of affairs of the Company and of the Group as at 31 December 2002, 2003 and 2004 and of the Group’s results and cash flows for the Relevant Periods.

— 22 —

FINANCIAL INFORMATION OF THE COMPANY

APPENDIX I

Consolidated Income Statements

Note
Turnover
4
Other revenue
4
Investment management fees
Staff costs
Depreciation
Bad debts written off
Other operating expenses
Total operating expenses
Loss from operations
5
Finance costs
6
Share of net (losses)/profits
of associates
Share of net (losses)/profits of
jointly controlled entities
Gain on disposal of a jointly
controlled entity
Gain on disposal of an associate
Loss before taxation
Taxation
8
Loss attributable to shareholders
9, 26
Loss per share
10

Year ended 31 December
2002
2003
2004
HK$
HK$
HK$
3,944,254
2,491,274
2,679,393
1,106,796
1,151,592
2,192,999
5,051,050
3,642,866
4,872,392
(3,499,604)
(3,549,588)
(3,633,413)
(1,101,614)
(964,209)
(880,685)
(87,359)
(89,210)
(77,475)
(46,485)
—
—
(2,280,540)
(35,614,275)
(9,918,956)
(7,015,602)
(40,217,282)
(14,510,529)
(1,964,552)
(36,574,416)
(9,638,137)
(23,331)
(11,593)
(1,080,711)
(5,478,519)
3,171,032
1,765,702
(6,115,690)
2,554,436
2,924,093
—
5,583,473
3,050,344
—
1,719,702
—
(13,582,092)
(23,557,366)
(2,978,709)
(1,768,802)
(1,224,499)
(805,385)
(15,350,894)
(24,781,865)
(3,784,094)
(17.06)cents
(9.00)cents
(0.88)cent

— 23 —

FINANCIAL INFORMATION OF THE COMPANY

APPENDIX I

Consolidated Balance Sheets

Note Non-current assets Property, plant and equipment 11 Interests in associates 13 Interests in jointly controlled entities 14 Investment securities 15 Held-to-maturity debt securities 16 Other investments 17 Other asset 18 Current assets Held-to-maturity debt securities 16 Other investments 17 Other receivables 19 Due from Sinox Fund Management Limited 22 Cash with brokers Cash and bank balances 20, 33 Less:Current liabilities Other payables 21 Due to Sinox Fund Management Limited 22 Other borrowing 23 Provision for taxation Net current assets NET ASSETS Capital and reserves Share capital 25 Reserves 26 SHAREHOLDERS’ FUNDS Net asset value per share 27	2002 HK$ 198,797 19,962,530 58,421,732 84,978,712 5,040,000 — 150,000 168,751,771 — — 35,325,358 — 4,556 42,494,118 77,824,032 13,175,784 2,463,061 — 13,390,053 29,028,898 48,795,134 217,546,905 8,999,000 208,547,905 217,546,905 242 cents	At 31 December 2003 2004 HK$ HK$ 123,904 57,399 19,032,227 17,562,305 31,568,928 27,656,219 98,222,947 84,770,859 — — — 7,800,000 150,000 150,000 149,098,006 137,996,782 5,040,000 — — 27,473,668 20,741,917 20,005,238 2,547,897 885,724 190,138 767,841 97,544,558 66,861,770 126,064,510 115,994,241 24,839,426 525,784 — — — 5,460,000 13,390,053 13,390,053 38,229,479 19,375,837 87,835,031 96,618,404 236,933,037 234,615,186 43,195,200 43,195,200 193,737,837 191,419,986 236,933,037 234,615,186 55 cents 54 cents	At 31 December 2003 2004 HK$ HK$ 123,904 57,399 19,032,227 17,562,305 31,568,928 27,656,219 98,222,947 84,770,859 — — — 7,800,000 150,000 150,000 149,098,006 137,996,782 5,040,000 — — 27,473,668 20,741,917 20,005,238 2,547,897 885,724 190,138 767,841 97,544,558 66,861,770 126,064,510 115,994,241 24,839,426 525,784 — — — 5,460,000 13,390,053 13,390,053 38,229,479 19,375,837 87,835,031 96,618,404 236,933,037 234,615,186 43,195,200 43,195,200 193,737,837 191,419,986 236,933,037 234,615,186 55 cents 54 cents
			137,996,782 — 27,473,668 20,005,238 885,724 767,841 66,861,770
			115,994,241
			525,784 — 5,460,000 13,390,053
			19,375,837
			96,618,404
			234,615,186

			43,195,200 191,419,986
			234,615,186

			54 cents

— 24 —

FINANCIAL INFORMATION OF THE COMPANY

APPENDIX I

Balance Sheets

Note Non-current assets Interests in subsidiaries 12 Investment securities 15 Current assets Other investments 17 Other receivables 19 Due from Sinox Fund Management Limited 22 Bank balances 33 _Less:_Current liabilities Other payables 21 Due to Sinox Fund Management Limited 22 Due to a subsidiary 24 Net current (liabilities)/assets NET ASSETS Capital and reserves Share capital 25 Reserves 26 SHAREHOLDERS’ FUNDS	2002 HK$ 89,990,000 — 89,990,000 — 244,237 — — 244,237 68,617 2,463,061 1,726,207 4,257,885 (4,013,648) 85,976,352 8,999,000 76,977,352 85,976,352	At 31 December 2003 2004 HK$ HK$ 89,993,900 89,997,800 13,487,442 11,747,442 103,481,342 101,745,242 — 1,740,000 203,737 217,891 2,547,897 885,724 24,217,510 18,419,981 26,969,144 21,263,596 1,050,360 227,000 — — 6,356,310 5,281,319 7,406,670 5,508,319 19,562,474 15,755,277 123,043,816 117,500,519 43,195,200 43,195,200 79,848,616 74,305,319 123,043,816 117,500,519	At 31 December 2003 2004 HK$ HK$ 89,993,900 89,997,800 13,487,442 11,747,442 103,481,342 101,745,242 — 1,740,000 203,737 217,891 2,547,897 885,724 24,217,510 18,419,981 26,969,144 21,263,596 1,050,360 227,000 — — 6,356,310 5,281,319 7,406,670 5,508,319 19,562,474 15,755,277 123,043,816 117,500,519 43,195,200 43,195,200 79,848,616 74,305,319 123,043,816 117,500,519
			101,745,242 1,740,000 217,891 885,724 18,419,981
			21,263,596
			227,000 — 5,281,319
			5,508,319
			15,755,277
			117,500,519

			43,195,200 74,305,319
			117,500,519

— 25 —

FINANCIAL INFORMATION OF THE COMPANY

APPENDIX I

Consolidated Statements of Changes in Equity

		Reserves
Share premium HK$ 166,327,220 — 166,327,220 3,237,490 — — 169,564,710 — — 169,564,710	Capital reserve on consolidation HK$ 468,163 — 468,163 — — — 468,163 — — 468,163	Contributed surplus HK$ 80,991,000 — 80,991,000 5,761,510 — — 86,752,510 — — 86,752,510	Exchange fluctuation reserve HK$ (4,194,214) — (4,194,214) — 972,797 — (3,221,417) 1,466,243 — (1,755,174)	Accumulated losses HK$ (19,693,370) (15,350,894) (35,044,264) — — (24,781,865) (59,826,129) — (3,784,094) (63,610,223)

— 26 —

FINANCIAL INFORMATION OF THE COMPANY

APPENDIX I

Consolidated Cash Flow Statements

	Year ended 31 December	Year ended 31 December	Year ended 31 December
	2002	2003	2004
	HK$	HK$	HK$
CASH FLOWS FROM
OPERATING ACTIVITIES
Loss before taxation	(13,582,092)	(23,557,366)	(2,978,709)
Adjustments for:
Amortisation of goodwill	365,977	91,494	—
Depreciation	87,359	89,210	77,475
Dividend income from investment
securities and other investments	(2,453,015)	(1,970,538)	(2,163,409)
Gain on disposal of a jointly controlled entity	—	(5,583,473)	(3,050,344)
Gain on disposal of an associate	—	(1,719,702)	—
Gain on disposal of investment securities
and other investments	—	(117,749)	(371,389)
Interest expenses	—	—	1,066,688
Interests in associates written off	—	—	1,407,961
Interest income	(548,796)	(615,689)	(1,412,622)
Investment income from held-to-maturity
debt securities	(378,000)	(378,000)	—
Other payable written back	—	(3,817,960)	—
Property, plant and equipment written off	966	—	—
Provision for impairment
in investment securities	—	—	1,470,130
Provision for impairment of interests
in jointly controlled entities	—	—	3,600,000
Provision for non-recovery of amount due
from a jointly controlled entity	—	—	1,199,313
Provision for non-recovery of other loan	—	4,230,135	—
Provision for non-recovery of receivable
arising from disposal of interest
in a jointly controlled entity	—	30,680,100	—
Share of net (losses)/profits of associates	5,478,519	(3,171,032)	(1,765,702)
Share of net (losses)/profits of
jointly controlled entities	6,115,690	(2,554,436)	(2,924,093)

— 27 —

FINANCIAL INFORMATION OF THE COMPANY

APPENDIX I

Operating loss before working capital changes
(Increase)/decrease in other receivables
Decrease/(increase) in amount due
from Sinox Fund Management Limited
Decrease in amounts due from
jointly controlled entities
(Increase)/decrease in amounts
due from associates
(Decrease)/increase in other payables
Net cash used in operations
Hong Kong tax paid
Overseas tax paid
Net cash used in operating activities
CASH FLOWS FROM
INVESTING ACTIVITIES
Dividends received from
jointly controlled entities
Dividends received from investment
securities and other investments
Investment income received from
held-to-maturity debt securities
Interest received
Additions of property, plant and equipment
Acquisition of associates
Acquisition of investment securities
and other investments
Loan to an investee company
Proceeds from sale of interest in an associate
Proceeds from sale of interest
in a jointly controlled entity
Proceeds from sale of investment
securities and other investments
Interest paid
Proceeds from redemption of
held-to-maturity debt securities

Year ended 31 December
2002
2003
2004
HK$
HK$
HK$
(4,913,392)
(8,395,006)
(5,844,701)
(4,145,726)
(20,326,794)
2,776,679
1,445,850
(5,010,958)
1,662,173
1,710,182
2,403,909
648,519
(1,889,588)
(310,168)
1,925,163
(843,834)
15,481,602
(24,313,642)
(8,636,508)
(16,157,415)
(23,145,809)
(125,782)
—
—
(192,805)
(4,692,348)
—
(8,955,095)
(20,849,763)
(23,145,809)
856,269
—
583,585
2,453,015
1,970,538
2,163,409
378,000
378,000
—
548,796
615,689
1,412,622
(2,789)
(14,317)
(10,970)
(135,002)
—
(97,500)
—
(13,918,611)
(42,937,008)
(9,000,000)
—
—
—
5,693,221
—
—
37,373,940
4,516,587
—
792,125
20,016,687
—
—
(1,066,688)
—
—
3,000,000

— 28 —

FINANCIAL INFORMATION OF THE COMPANY

APPENDIX I

Net cash (used in)/generated
from investing activities
CASH FLOWS FROM
FINANCING ACTIVITIES
Other borrowing obtained
Proceeds from issue of shares
Net cash generated from financing activities
NET (DECREASE)/INCREASE IN CASH
AND CASH EQUIVALENTS
CASH AND CASH EQUIVALENTS
AT 1 JANUARY
CASH AND CASH EQUIVALENTS
AT 31 DECEMBER
ANALYSIS OF THE BALANCES OF
CASH AND CASH EQUIVALENTS
Cash with brokers
Cash and bank balances

Year ended 31 December
2002
2003
2004
HK$
HK$
HK$
(4,901,711)
32,890,585
(12,419,276)
—
—
5,460,000
—
43,195,200
—
—
43,195,200
5,460,000
(13,856,806)
55,236,022
(30,105,085)
56,355,480
42,498,674
97,734,696
42,498,674
97,734,696
67,629,611
4,556
190,138
767,841
42,494,118
97,544,558
66,861,770
42,498,674
97,734,696
67,629,611

— 29 —

FINANCIAL INFORMATION OF THE COMPANY

APPENDIX I

Notes to the Financial Statements

1. Basis of Preparation of Financial Statements

The financial statements are prepared under the historical cost convention as modified by the revaluation of other investments as further explained below.

The Hong Kong Institute of Certified Public Accountants (“HKICPA”) has issued a number of new and revised Hong Kong Financial Reporting Standards and Hong Kong Accounting Standards (“new HKFRSs”) which are effective for accounting periods beginning on or after 1 January 2005.

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

2. Principal Accounting Policies

The financial statements have been prepared in accordance with generally accepted accounting principles in Hong Kong and with accounting standards issued by HKICPA.

(a) Revenue recognition

Management fee income is recognised when service is rendered.

Dividend income is recognised when the right to receive payment is established.

Interest income is recognised on a time proportion basis, taking into account the principal amounts outstanding and the interest rates applicable.

(b) Basis of consolidation

The consolidated financial statements incorporate the financial statements of the Company and its subsidiaries made up to 31 December 2002, 2003 and 2004 respectively.

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

(c) Subsidiaries

A subsidiary is an entity in which the Company, directly or indirectly, controls more than one half of the voting power; has the power to govern the financial and operating policies; to appoint or remove the majority of the members of the board of directors; or to cast majority of votes at the meetings of the board of directors.

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

— 30 —

FINANCIAL INFORMATION OF THE COMPANY

APPENDIX I

(d) Associates

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

The Group’s interests in associates include the Group’s share of the net assets of the associates. The Group’s share of post-acquisition profits or losses of associates is included in the consolidated income statement.

Unrealised profits and losses resulting from transactions between the Group and its associates are eliminated to the extent of the Group’s interest in the associate, except where unrealised losses provide evidence of an impairment of the asset transferred, in which case they are recognised in the consolidated income statement.

(e) Jointly controlled entities

A joint venture is a contractual arrangement whereby the Group and other parties undertake an economic activity which is subject to joint control and over which none of the participating parties has unilateral control.

Joint venture arrangements which involve the establishment of a separate entity in which each venturer has an interest are referred to as jointly controlled entities. The Group’s interests in jointly controlled entities include the Group’s share of the net assets of the jointly controlled entities. The Group’s share of post-acquisition profits or losses of jointly controlled entities is included in the consolidated income statement.

Unrealised profits and losses resulting from transactions between the Group and its jointly controlled entities are eliminated to the extent of the Group’s interest in the jointly controlled entity, except where unrealised losses provide evidence of an impairment of the asset transferred, in which case they are recognised in the consolidated income statement.

(f) Capital reserve or goodwill on consolidation

According to the principal accounting policies of the Group, goodwill arising on acquisition of subsidiaries, jointly controlled entities or associates is amortised over twenty years from initial recognition in order to reflect the best estimate of the period during which future economic benefits are expected to flow to the Group.

On disposal of subsidiaries, jointly controlled entities or associates, the gain or loss on disposal is calculated by reference to the net assets or share of net assets at the state of disposal, including the attributable amount of goodwill which remains unamortised and any relevant consolidated reserves as appropriate.

(g) Investment in securities

Held-to-maturity debt securities are stated at amortised costs less any impairment loss recognised to reflect irrecoverable amounts.

Investment securities include the Group’s equity interest in companies in which the Group has no significant influence on their financial and operating decisions and which are intended to be held on a continuing basis for an identified long-term purpose. Investment securities are stated at cost less impairment losses, if any.

— 31 —

FINANCIAL INFORMATION OF THE COMPANY

APPENDIX I

The carrying amounts of individual investment securities are reviewed at each balance sheet date to assess whether the fair values have declined below the carrying amounts. When a decline other than temporary has occurred, the carrying amount of such investment securities is reduced to its fair value. The amount of reduction is recognised as an expense in the consolidated income statement. The reduction is written back to consolidated income statement when the circumstances and events that led to the write-downs or write-offs cease to exist and there is persuasive evidence that the new circumstances and events will persist for the foreseeable future.

(h) Other investments

Securities not classified as held-to-maturity debt securities nor as investment securities are classified as other investments. Other investments are carried at fair value. At each balance sheet date the net unrealised gains or losses arising from the changes in fair value of other investments are recognised in the consolidated income statement. Profits or losses on disposal of other investments, representing the difference between the net sales proceeds and the carrying amounts, are recognised in the consolidated income statement as they arise.

Other investments which are intended to be held on a long term basis are classified as noncurrent assets while those which are held for trading purposes are classified as current assets.

(i) Property, plant and equipment

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

Property, plant and equipment are depreciated at rates sufficient to write off their costs over their estimated useful lives on a straight line basis. The principal annual rates are as follows:

Office equipment	20%
Computer equipment	20%
Motor vehicle	20%

Major costs incurred in restoring property, plant and equipment to their normal working condition are charged to the consolidated income statement. Improvements are capitalised and depreciated over their expected useful lives to the Group.

The gain or loss on disposal or retirement of a property, plant and equipment recognised in the consolidated income statement is the difference between the net sales proceeds and the carrying amount of the relevant asset.

(j) Club membership

Club membership is stated at cost less impairment losses, if any. The carrying amount of individual club membership is reviewed at each balance sheet date to assess whether the fair value has declined below the carrying amount. When a decline other than temporary has occurred, the carrying amount of such club membership is reduced to its fair value. The amount of the reduction is recognised as an expense in the consolidated income statement.

— 32 —

FINANCIAL INFORMATION OF THE COMPANY

APPENDIX I

(k) Cash and cash equivalents

Cash and cash equivalents represent cash at bank and on hand, demand deposits with banks and other financial institutions, and short-term highly liquid investments which are readily convertible into known amounts of cash and subject to an insignificant risk of change in value, having been within three months of maturity, at acquisition. For the purpose of the consolidated cash flow statement, bank overdrafts, if any, which are repayable on demand and form an integral part of an enterprise’s cash management are also included as a component of cash and cash equivalents.

(l) Operating leases

Leases where substantially all the risks and rewards of ownership of assets remain with the leasing company are accounted for as operating leases. Rentals applicable to such operating leases are charged to the consolidated income statement on a straight line basis over the lease term.

(m) Impairment of assets

The carrying amounts of assets are reviewed at each balance sheet date to assess whether there is any indication of impairment. If any such indication exists, the recoverable amount of the asset is estimated and where relevant, an impairment loss is recognised to reduce the asset to its recoverable amount. Such impairment losses are recognised in the consolidated income statement.

(n) Foreign currency translation

Transactions in foreign currencies are translated into Hong Kong dollars at the approximate rates of exchange ruling on the transaction dates. Monetary assets and liabilities in foreign currencies are translated at the rates ruling on the balance sheet date. Profits and losses resulting from this translation policy are included in the consolidated income statement.

The balance sheets of subsidiaries, associates and jointly controlled entities expressed in foreign currencies are translated at the rates of exchange ruling at the balance sheet date whilst income statements’ items are translated at average rates. Exchange differences are dealt with as a movement in reserves. Upon the disposal of an overseas subsidiary, associate or a jointly controlled entity, the related cumulative exchange difference is included in the consolidated income statement as part of the gain or loss on disposal.

(o) Employee benefits

Obligations for contributions to defined contribution retirement plans, including contributions payable under the Hong Kong Mandatory Provident Fund Schemes Ordinance, are recognised as expenses in the consolidated income statement as incurred.

Pursuant to the People’s Republic of China (“PRC”) laws and regulations, contributions to the retirement benefit scheme for the staff of the Company’s subsidiary operating in the PRC are to be made monthly to a government agency at a certain percentage of the basic salaries of the employees. The government agency is responsible for the pension liabilities relating to such staff on their retirement. The contributions are charged to the consolidated income statement as they become payable.

— 33 —

FINANCIAL INFORMATION OF THE COMPANY

APPENDIX I

(p) Related parties

Two 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.

(q) Provisions and contingent liabilities

Provisions are recognised for liabilities of uncertain timing or amount when the Group has a present legal or constructive obligation arising as a result of a past event, it is probable that an outflow of economic benefits will be required to settle the obligation and a reliable estimate can be made. Where the time value of money is material, provisions are stated at the present value of the expenditures expected to settle the obligation.

Where it is not probable that an outflow of economic benefits will be required, or the amount cannot be estimated reliably, the obligation is disclosed as a contingent liability, unless the probability of outflow is remote. Possible obligations, whose existence will only be confirmed by the occurrence or non-occurrence of one or more future events are also disclosed as contingent liabilities unless the probability of outflow is remote.

(r) Taxation

The charge for taxation is based on the results for the year as adjusted for items which are non-assessable or disallowable. Hong Kong profits tax is provided at the rate prevailing for the year based on the assessable profit for the year less allowable losses, if any, brought forward.

Deferred taxation is provided in full, using the balance sheet liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. Taxation rates enacted or substantively enacted by the balance sheet date are used to determine deferred taxation. Deferred tax assets are recognised to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised.

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

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

(s) Borrowing costs

All borrowing costs are charged to the consolidated income statement in the year in which they are incurred.

(t) Events after the balance sheet date

Post-year-end events that provide additional information about the Group’s position at the balance sheet date or those that indicate the going concern assumption is not appropriate are adjusting events and are reflected in the financial statements. Post-year-end events that are not adjusting events are disclosed in the notes when material.

— 34 —

FINANCIAL INFORMATION OF THE COMPANY

APPENDIX I

3. Segmental Information

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

An analysis of the Group’s turnover and operating loss by business segment and geographical segment for the Relevant Periods is as follows:

By business segment: Management fees from jointly controlled entities Dividend income from investment securities and other investments Finance costs Share of net (losses)/profits of associates Share of net (losses)/profits of jointly controlled entities Gain on disposal of a jointly controlled entity Gain on disposal of an associate Loss before taxation Total assets (unallocated) Total liabilities (unallocated) Other segment information: Capital expenditure Depreciation Amortisation of goodwill Provision for doubtful debts Provision for impairment loss	2002 HK$ 1,491,239 2,453,015 3,944,254	Turnover 2003 2004 HK$ HK$ 520,736 515,984 1,970,538 2,163,409 2,491,274 2,679,393	2002 HK$ (4,417,567) 2,453,015 (1,964,552) (23,331) (5,478,519) (6,115,690) — — (13,582,092) 246,575,803 29,028,898 2,789 87,359 365,977 — —	Operating loss 2003 2004 HK$ HK$ (38,544,954) (11,801,546) 1,970,538 2,163,409 (36,574,416) (9,638,137) (11,593) (1,080,711) 3,171,032 1,765,702 2,554,436 2,924,093 5,583,473 3,050,344 1,719,702 — (23,557,366) (2,978,709) 275,162,516 253,991,023 38,229,479 19,375,837 14,317 10,970 89,210 77,475 91,494 — 34,910,235 1,199,313 — 5,070,130

— 35 —

FINANCIAL INFORMATION OF THE COMPANY

APPENDIX I

Given the nature of the Group’s operations is investment holding, segment assets and segment liabilities are unallocated.

By geographical segment: Hong Kong The PRC	2002 HK$ 2,453,015 1,491,239 3,944,254	Turnover 2003 HK$ 1,970,538 520,736 2,491,274	2004 HK$ 2,163,409 515,984
			2,679,393

Given the nature of the Group’s operations is investment holding and the way in which costs are allocated, it is not considered meaningful to provide geographical analysis of operating loss and segment assets.

4. Turnover and Other Revenue

Turnover Management fees from jointly controlled entities Dividend income from investment securities and other investments Other revenue Interest on bank deposits Investment income from held-to-maturity debt securities Gain on disposal of investment securities and other investments Other income Total revenue	2002 HK$ 1,491,239 2,453,015 3,944,254 548,796 378,000 — 180,000 1,106,796 5,051,050	Group 2003 HK$ 520,736 1,970,538 2,491,274 615,689 378,000 117,749 40,154 1,151,592 3,642,866	2004 HK$ 515,984 2,163,409
			2,679,393 1,412,622 — 371,389 408,988
			2,192,999
			4,872,392

— 36 —

FINANCIAL INFORMATION OF THE COMPANY

APPENDIX I

5. Loss From Operations

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

Amortisation of goodwill Auditors’ remuneration Depreciation Operating lease payments on land and buildings Property, plant and equipment written off Provision for non-recovery of other loan Provision for non-recovery of amount due from a jointly controlled entity Interests in associates written off Provision for non-recovery of receivable arising from disposal of interest in a jointly controlled entity Provision for impairment of interests in jointly controlled entities Provision for impairment in investment securities Exchange losses/(gains), net Retirement benefit cost 6. Finance Costs	2002 HK$ 365,977 180,000 87,359 258,101 966 — — — — — — — 133,595	Group 2003 HK$ 91,494 180,000 89,210 246,816 — 4,230,135 — — 30,680,100 — — 16,215 114,807	2004 HK$ — 180,000 77,475 281,479 — — 1,199,313 1,407,961 — 3,600,000 1,470,130 (443,024 83,631

Bank charges Interest on other borrowing wholly repayable within five years Interest on amount due to a related company	2002 HK$ 23,331 — — 23,331	Group 2003 HK$ 11,593 — — 11,593	2004 HK$ 14,023 138,189 928,499
			1,080,711

7. Directors’ and Senior Management’s Emoluments

(a) Directors’ emoluments

The aggregate amounts of fees payable to directors of the Company during the Relevant Periods are as follows:

Fees: Executive directors Non-executive directors Other emoluments Retirement benefits scheme contributions: Executive directors Non-executive directors	2002 HK$ 320,000 100,000 — — — 420,000	2003 HK$ 160,000 100,000 — — — 260,000	2004 HK$ 140,000 115,000 — 1,500 —
			256,500

— 37 —

FINANCIAL INFORMATION OF THE COMPANY

APPENDIX I

There was no arrangement under which a director of the Company waived or agreed to waive any emoluments during the Relevant Periods.

During the Relevant Periods, no share option was granted to the directors.

The number of directors of the Company whose emoluments fell within the following band is as follows:

	2002	2003	2004
	Number of	Number of	Number of
	directors	directors	directors
HK$Nil — HK$1,000,000	6	7	6

(b) Five highest paid individuals

Details of the fees and emoluments paid during the Relevant Periods to the five highest paid individuals (including directors and other employees) of the Group are as follows:

Fees, basic salaries and other benefits in kind Retirement benefits scheme contributions Number of directors Number of employees	2002 HK$ 727,195 — 727,195 2 3	2003 HK$ 607,704 — 607,704 2 3	2004 HK$ 477,016 1,500
			478,516

			3 2

The annual fees and emoluments paid during the Relevant Periods to all the five highest paid individuals (including directors and other employees) fall within the band of HK$Nil — HK$1,000,000.

During the Relevant Periods, no emoluments were paid by the Group to the directors of the Company or any of the five highest paid individuals as an inducement to join or upon joining the Group or as compensation for loss of office.

— 38 —

FINANCIAL INFORMATION OF THE COMPANY

APPENDIX I

8. Taxation

Company and subsidiaries — Hong Kong profits tax — Overseas income tax Share of taxation attributable to associates Share of taxation attributable to jointly controlled entities	2002 HK$ — 192,805 — 1,575,997 1,768,802	Group 2003 HK$ — 208,295 437,984 578,220 1,224,499	2004 HK$ — — — 805,385
			805,385

Hong Kong profits tax has not been provided as the individual companies comprising the Group do not have assessable profit arising in Hong Kong for the Relevant Periods.

Taxation for other jurisdiction is calculated at the rates prevailing in the relevant jurisdictions.

Reconciliation between taxation and tax at the applicable rate:

Loss before taxation Tax at the applicable tax rate Tax effect of income that is not taxable in determining taxable profit Tax effect of expenses that are not deductible in determining taxable profit Tax effect of utilisation of tax losses not previously recognised Tax effect of unused tax losses not recognised Underprovision in prior year Taxation charge	2002 HK$ (13,582,092) (3,233,843) (511,047) 2,975,157 — 1,737,687 800,848 1,768,802	Group 2003 HK$ (23,557,366) (5,885,512) (10,577,692) 16,229,622 (8,955) 1,258,741 208,295 1,224,499	2004 HK$ (2,978,709
			(715,792) (1,891,127 2,349,553 (360 1,063,111 —
			805,385

The applicable tax rate represents the weighted average of the rates of taxation prevailing in the relevant jurisdictions in which the Group operates.

— 39 —

FINANCIAL INFORMATION OF THE COMPANY

APPENDIX I

9. Loss Attributable To Shareholders

The loss attributable to shareholders is dealt with in the financial statements of the Company to the extent of HK$3,925,844, HK$6,127,736 and HK$5,543,297 for the years ended 31 December 2002, 2003 and 2004 respectively.

10. Loss Per Share

The calculation of loss per share is based on:

Loss attributable to shareholders Weighted average number of ordinary shares	2002 HK$ 15,350,894 89,990,000	2003 HK$ 24,781,865 275,295,436	2004 HK$ 3,784,094

			431,952,000

For the purpose of calculation of the loss per share for the year ended 31 December 2002, the number of ordinary shares was adjusted to reflect the share consolidation detailed in note 25(b) to this report as if it had occurred as at 1 January 2002.

— 40 —

FINANCIAL INFORMATION OF THE COMPANY

APPENDIX I

11. Property, Plant and Equipment

Group

Cost At 1 January 2002 Additions Disposals/write-off At 31 December 2002 Additions At 31 December 2003 Additions At 31 December 2004 Accumulated depreciation At 1 January 2002 Charge for the year Disposals/write back At 31 December 2002 Charge for the year At 31 December 2003 Charge for the year At 31 December 2004 Net book value At 31 December 2002 At 31 December 2003 At 31 December 2004	Office equipment HK$ 82,401 2,789 (4,370) 80,820 14,317 95,137 — 95,137 5,518 14,415 (3,933) 16,000 19,018 35,018 17,125 52,143 64,820 60,119 42,994	Computer equipment HK$ 33,931 — (11,156) 22,775 — 22,775 10,970 33,745 11,193 7,307 (10,627) 7,873 4,555 12,428 6,912 19,340 14,902 10,347 14,405	Motor vehicle HK$ 253,084 — — 253,084 — 253,084 — 253,084 68,372 65,637 — 134,009 65,637 199,646 53,438 253,084 119,075 53,438 —	Total HK$ 369,416 2,789 (15,526) 356,679 14,317 370,996 10,970 381,966 85,083 87,359 (14,560) 157,882 89,210 247,092 77,475 324,567 198,797 123,904 57,399

— 41 —

FINANCIAL INFORMATION OF THE COMPANY

APPENDIX I

12. Interests in Subsidiaries

Unlisted shares, at cost Due from a subsidiary	2002 HK$ 780 89,989,220 89,990,000	Company 2003 2004 HK$ HK$ 780 780 89,993,120 89,997,020 89,993,900 89,997,800	Company 2003 2004 HK$ HK$ 780 780 89,993,120 89,997,020 89,993,900 89,997,800
			89,997,800

The amount due from a subsidiary is unsecured, interest free and not repayable within the next twelve months.

Details of the principal subsidiaries are as follows:

			Percentage of
		Particulars of	issued share
	Place of	issued share	capital/
	incorporation/	capital/registered	registered	Principal
Name	operation	capital	capital held	activities
Directly held by the Company:
Accufocus Investments	British Virgin	100 shares of	100%	Investment
Limited	Islands/	US$1 each		holding
	Hong Kong
Indirectly held by the Company:
Attentive Investments	British Virgin	1 share of	100%	Investment
Limited	Islands/	US$1 each		holding
	Hong Kong
B2C E-Commerce Group Limited	British Virgin	1 share of	100%	Investment
	Islands/	US$1 each		holding
	Hong Kong
Best Policy Management Limited	British Virgin	1 share of	100%	Investment
	Islands/	US$1 each		holding
	Hong Kong
Chief Success Management Limited	British Virgin	1 share of	100%	Investment
	Islands/	US$1 each		holding
	Hong Kong
Ever Honest Investments Limited	British Virgin	1 share of	100%	Investment
	Islands/	US$1 each		holding
	Hong Kong

— 42 —

FINANCIAL INFORMATION OF THE COMPANY

APPENDIX I

			Percentage of
		Particulars of	issued share
	Place of	issued share	capital/
	incorporation/	capital/registered	registered	Principal
Name	operation	capital	capital held	activities
Founder China Industrial	Hong Kong	2 ordinary shares	100%	Investment
Investments Company Limited		of HK$1 each		holding and
				provision of
				management
				services
Founder Industrial Investments	Hong Kong	10,000,000 ordinary	100%	Investment
(Holdings) Company Limited		shares of HK$1 each		holding
GR Investment Holdings Limited	Hong Kong	899,900,000 ordinary	100%	Investment
		shares of HK$0.1 each		holding
Glorious Bright Limited	Hong Kong	2 ordinary shares of	100%	Money lending
		HK$1 each
Genius Choice Investments Limited	British Virgin	1 share of US$1 each	100%	Investment
	Islands/			holding
	Hong Kong
Home Growth Assets Limited	British Virgin	1 share of US$1 each	100%	Investment
	Islands/			holding
	Hong Kong
Prosperity Investment	Hong Kong	2 ordinary shares	100%	Dormant
Holdings Limited		of HK$1 each
Rich Concept Investments Limited	British Virgin	1 share of US$1 each	100%	Investment
	Islands/			holding
	Hong Kong
Rich Profits International Limited	British Virgin	1 share of US$1 each	100%	Investment
	Islands/			holding
	Hong Kong
Sun Kai Yip (Shanghai) Industrial	The PRC	US$10,000,000	100%	Investment
Investments Limited *				holding and
				provision of
				management
				and advisory
				services

Pursuant to a sale and purchase agreement dated 9 September 2004, the Group has committed to dispose its entire equity interest in Sun Kai Yip (Shanghai) Industrial Investments Limited (“Sun Kai Yip”) for a consideration of approximately HK$65 million. Details of which are included in note 35(a) to this report. The loss attributable to shareholders and net assets of Sun Kai Yip (after taking into account the effect of equity accounting for the interests in jointly controlled entities) for the year ended 31 December 2004 and as at 31 December 2004 amounted to approximately HK$512,000 and HK$66 million respectively.

— 43 —

FINANCIAL INFORMATION OF THE COMPANY

APPENDIX I

The above summary lists only the principal subsidiaries of the Group which, in the opinion of the Company’s directors, principally affected the results or formed a substantial portion of the net assets of the Group. To give details of other subsidiaries would, in the opinion of the directors, result in particulars of excessive length.

13. Interests in Associates

Share of net assets Due from associates	2002 HK$ 771,144 19,191,386 19,962,530	Group 2003 HK$ — 19,032,227 19,032,227	2004 HK$ — 17,562,305
			17,562,305

The amounts due from associates are unsecured, interest free and not repayable within the next twelve months.

Details of the principal associates and those of which the carrying amounts of interests exceeded 5% of total assets of the Group are as follows:

						Dividend
						income		Net assets		Principal
		Proportion	Cost and			received		attributable	Accumulated	activities/
	Place of	of associate’s	advances		Directors’	during	Dividend	to the	unrealised	place of
Name	incorporation	capital owned	thereto		valuation*	the year	cover	investment	loss	operation
			HK$		HK$	HK$		HK$	HK$
			million		million	million		million	million
At 31 December 2002
Luck Point	British Virgin	35%		5	3	—	—	3	(2)	Investment
Investments	Islands									holding/
Limited										Hong Kong
Happy Online	British Virgin	33.75%	2		2	—	—	2	—	Investment
Group	Islands									holding/
Limited										Hong Kong
Market Choice	British Virgin	20%	13		10	—	—	10	(3)	Investment
Investments	Islands									holding/
Limited										Hong Kong
Victory Faith	Hong Kong	25%	4		4	—	—	4	—	Land
Investment										development/
Limited										Hong Kong

— 44 —

FINANCIAL INFORMATION OF THE COMPANY

APPENDIX I

					Dividend
					income		Net assets		Principal
		Proportion	Cost and		received		attributable	Accumulated	activities/
	Place of	of associate’s	advances	Directors’	during	Dividend	to the	unrealised	place of
Name	incorporation	capital owned	thereto	valuation*	the year	cover	investment	loss	operation
			HK$	HK$	HK$		HK$	HK$
			million	million	million		million	million
At 31 December 2003
Luck Point	British Virgin	35%	5	3	—	—	3	(2)	Investment
Investments	Islands								holding/
Limited									Hong Kong
Happy Online	British Virgin	33.75%	2	2	—	—	2	—	Investment
Group	Islands								holding/
Limited									Hong Kong
Market Choice	British Virgin	20%	14	13	—	—	13	(1)	Investment
Investments	Islands								holding/
Limited									Hong Kong
At 31 December 2004
Luck Point	British Virgin	35%	5	3	—	—	3	(2)	Investment
Investments	Islands								holding/
Limited									Hong Kong
Happy Online	British Virgin	33.75%	2	2	—	—	2	—	Investment
Group Limited	Islands								holding/
									Hong Kong
Bright Honest	British Virgin	25%	12	12	—	—	12	—	Investment
Limited	Islands								holding/
									Hong Kong

The above summary lists only the principal associates of the Group which, in the opinion of the Company’s directors, principally affected the results or formed a substantial portion of the net assets of the Group. To give details of other associates would, in the opinion of the directors, result in particulars of excessive length.

Directors’ valuation represents the aggregate of the cost of investment, post-acquisition results and loan to associates. The directors consider that the carrying values of the interests in the associates approximate their fair values.

— 45 —

FINANCIAL INFORMATION OF THE COMPANY

APPENDIX I

14. Interests in Jointly Controlled Entities

Share of net assets other than goodwill _Less:_Impairment Goodwill on acquisition of a jointly controlled entity Due from jointly controlled entities _Less:_Provision	2002 HK$ 50,540,722 — 3,629,269 54,169,991 4,251,741 — 4,251,741 58,421,732	Group 2003 HK$ 29,721,096 — — 29,721,096 1,847,832 — 1,847,832 31,568,928	2004 HK$ 31,256,219 (3,600,000) — 27,656,219 1,199,313 (1,199,313) — 27,656,219

The amounts due from jointly controlled entities are unsecured, interest free and not repayable within the next twelve months. Dividends declared by the jointly controlled entities amounted to HK$856,269, HK$Nil and HK$2,006,026 for the years ended 31 December 2002, 2003 and 2004 respectively.

Details of the principal jointly controlled entities and those of which the carrying amounts of interests exceeded 5% of total assets of the Group are as follows:

					Dividend
					income		Net assets		Principal
		Proportion	Cost and		received		attributable	Accumulated	activities/
	Place of	of investee’s	advances	Directors’	during	Dividend	to the	unrealised	place of
Name	incorporation	capital owned	thereto	valuation*	the year	cover	investment	profit/(loss)	operation
			HK$	HK$	HK$		HK$	HK$
			million	million	million		million	million
At 31 December 2002
Shanghai Sine	The PRC	30%	30	28	—	—	28	(2)	Manufacture
Pharmaceutical									and
Corporation									distribution
Limited									of
									pharmaceutical
									products/
									The PRC
Shanghai Yong An	The PRC	25%	5	5	0.6	13%	5	—	Production and
Dairy Company									distribution of
Limited									dairy products/
									The PRC
Shanghai Tian An	The PRC	30%	28	24	0.2	0.77%	24	(4)	Manufacture and
Bearing Company									distribution of
Limited									bearing products/
									The PRC

— 46 —

FINANCIAL INFORMATION OF THE COMPANY

APPENDIX I

					Dividend
					income		Net assets		Principal
		Proportion	Cost and		received		attributable	Accumulated	activities/
	Place of	of investee’s	advances	Directors’	during	Dividend	to the	unrealised	place of
Name	incorporation	capital owned	thereto	valuation*	the year	cover	investment	profit/(loss)	operation
			HK$	HK$	HK$		HK$	HK$
			million	million	million		million	million
At 31 December 2003
Shanghai Yong An	The PRC	25%	5	6	—	—	6	1	Production and
Dairy Company									distribution of
Limited									dairy products/
									The PRC
Shanghai Tian	The PRC	30%	29	25	—	—	25	(4)	Manufacture and
An Bearing									distribution of
Company									bearing products/
Limited									The PRC
At 31 December 2004
Shanghai Yong	The PRC	25%	5	3	0.6	12%	5	—	Production and
An Dairy									distribution of
Company									dairy products/
Limited									The PRC
Shanghai Tian	The PRC	30%	29	25	1.4	4.8%	26	(3)	Manufacture and
An Bearing									distribution of
Company									bearing products/
Limited									The PRC
Particulars of impairment in interests in				jointly controlled		entities	at 31 December 2004 are as
follows:
		Net assets
		attributable to		Impairment			Directors’		Reason for
Name		the investment			loss		valuation		impairment
			HK$		HK$		HK$
			million		million		million
Shanghai Yong An Dairy			5		2			3	Decrease in
Company Limited									share of
									net assets
Shanghai Tian An Bearing			26		1			25	Decrease in
Company Limited									share of
									net assets

The above summary lists only the principal jointly controlled entities of the Group which, in the opinion of the Company’s directors, principally affected the results or formed a substantial portion of the net assets of the Group. To give details of other jointly controlled entities would, in the opinion of the directors, result in particulars of excessive length.

— 47 —

FINANCIAL INFORMATION OF THE COMPANY

APPENDIX I

Directors’ valuation represents the aggregate of the cost of investment, post-acquisition results and loan to jointly controlled entities less impairment loss, if any. The directors consider that the carrying values of the interests in the jointly controlled entities approximate their fair values.

The tenure of the above companies can be extended by agreements with the joint venture partners after obtaining the necessary approval from the relevant government bodies.

Pursuant to the terms of the joint venture agreements for the above jointly controlled entities, the Group is entitled to receive its attributable share of the net assets upon liquidation of the jointly controlled entities.

15. Investment Securities

Overseas unlisted equity securities, at cost _Less:_Impairment Loans to an investee company Listed equity securities, at cost Listed in Hong Kong Total investment securities Market value of listed equity securities	2002 HK$ 12,855,246 (7,709,402) 5,145,844 48,139,674 31,693,194 84,978,712 27,115,505	Group 2003 HK$ 12,855,246 (7,709,402) 5,145,844 48,139,674 44,937,429 98,222,947 52,940,775	2004 HK$ 12,855,246 (9,179,532) 3,675,714 48,139,674 32,955,471 84,770,859 33,508,555	2002 HK$ — — — — — — —	Company 2003 HK$ — — — — 13,487,442 13,487,442 13,327,635	2004 HK$ — —
						— — 11,747,442
						11,747,442

						13,693,175

Loans to an investee company are unsecured, interest free and not repayable within the next twelve months.

— 48 —

FINANCIAL INFORMATION OF THE COMPANY

APPENDIX I

The carrying amounts of interests in the following investment securities exceeded 5% of total assets of the Group and the Company respectively:

						Dividend
Name of investee		Proportion of			Directors’	income		Net assets			Unrealised
company/		investee’s	Cost and		valuation/	received		attributable			gain/loss
listed equity	Place of	capital	advances		market	during	Dividend		to the		taken in the		Principal
securities	incorporation	owned	thereto		value	the year	cover	investment			accounts		activities
				HK$	HK$	HK$				HK$		HK$
			million		million	million			million		million
At 31 December 2002
Dragon Fortune	British Virgin	18%		52	52	—	—			45		—	Investment
Limited	Islands												holding
Golden Resources	Bermuda	5%		21	19	2	9.5%			46		—	Wholesaling
Development													and
International													distribution
Limited													of consumer
													goods
EVI Education	Cayman Islands	3%		5	4	—	—			1		—	Providing
Asia Limited													internet
													education
													services
At 31 December 2003
Dragon Fortune	British Virgin	18%		52	52	—	—			46		—	Investment
Limited	Islands												holding
Golden Resources	Bermuda	5%		21	23	2	9%			46		—	Wholesaling
Development													and
International													distribution
Limited													of consumer
													goods
At 31 December 2004
Dragon Fortune	British Virgin	18%		52	52	—	—			48		—	Investment
Limited	Islands												holding
Golden Resources	Bermuda	5%		21	22	2	7.8%			43		—	Wholesaling
Development													and
International													distribution
Limited													of consumer
													goods
Cosmopolitan	Cayman	10%		12	11	—	—			10		—	Investment
International	Islands												holding
Holdings
Limited

— 49 —

FINANCIAL INFORMATION OF THE COMPANY

APPENDIX I

Particulars of impairment in investment securities at 31 December 2002, 2003 and 2004 are as follows:

		Impairment	Share of net
Name	Cost	loss	assets	Reason for impairment
	HK$	HK$	HK$
	million	million	million
At 31 December 2002
Beijing Tian An	4	3	1	Decrease in share of net assets
Stevio Sugar
Product Company
Limited
Anhui Wanhong	4	4	—	Decrease in share of net assets
Plastics Company
Limited
At 31 December 2003
Beijing Tian An	4	3	1	Decrease in share of net assets
Stevio Sugar
Product Company
Limited
Anhui Wanhong	4	4	—	Decrease in share of net assets
Plastics Company
Limited
At 31 December 2004
Beijing Tian An	4	4	—	Decrease in share of net assets
Stevio Sugar
Product Company
Limited
Anhui Wanhong	4	4	—	Decrease in share of net assets
Plastics Company
Limited

— 50 —

FINANCIAL INFORMATION OF THE COMPANY

APPENDIX I

16. Held-To-Maturity Debt Securities

Group 2002 2003 HK$ HK$ Convertible redeemable note maturing in July 2004 5,040,000 5,040,000 17. Other Investments Group Company 2002 2003 2004 2002 2003 HK$ HK$ HK$ HK$ HK$ Non-current assets Market linked deposits — — 7,800,000 — — Current assets Listed equity securities, at market value Listed in Hong Kong — — 25,999,780 — — Listed outside Hong Kong — — 1,473,888 — — — — 27,473,668 — — — — 35,273,668 — —	2002 HK$ 5,040,000	2002 HK$ 5,040,000	Group 2003 HK$ 5,040,000	Group 2003 HK$ 5,040,000		2004 HK$ —

						2004 HK$ —
						1,740,000 —
						1,740,000
						1,740,000

The carrying amounts of interests in the following other investment exceeded 5% of total assets of the Group:

					Dividend
					income		Net assets		Principal
		Proportion	Cost and		received		attributable	Accumulated	activities/
	Place of	of investee’s	advances	Market	during the	Dividend	to the	unrealised	place of
Name	incorporation	capital owned	thereto	value	year	cover	investment	gain/(loss)	operation
			HK$	HK$	HK$		HK$	HK$
			million	million	million		million	million
At 31 December 2004
Tracker Fund	Hong Kong	—	14	16	0.47	3.26%	—	—	Unit trust/
of Hong Kong									Hong Kong

18. Other Asset

Golf club membership, at cost	2002 HK$ 150,000	Group 2003 2004 HK$ HK$ 150,000 150,000

— 51 —

FINANCIAL INFORMATION OF THE COMPANY

APPENDIX I

19. Other Receivables

Prepayments and deposits_(note (a)) Receivables arising from disposal of interest in a jointly controlled entity and an associate (note (b)) Other loans (notes (b) and (c))_ Others	2002 HK$ 336,223 30,680,100 4,230,135 78,900 35,325,358	Group 2003 HK$ 2,794,796 1,924,743 16,000,000 22,378 20,741,917	2004 HK$ 4,153,593 — 13,811,645 2,040,000 20,005,238	2002 HK$ 244,237 — — — 244,237	Company 2003 HK$ 203,737 — — — 203,737	2004 HK$ 217,891 — — —
						217,891

Notes:

(a) Included in the Group’s prepayments and deposits is an amount of HK$2,734,200 and HK$3,648,156 advanced to an ex-independent non-executive director of a substantial shareholder of the Company as at 31 December 2003 and 2004 respectively.
(b) The ageing analysis of the receivables other than the prepayments and deposits and others was as follows:

2002 HK$ Within 3 months 4,230,135 3 to 6 months — 6 to 12 months — Over 1 year 30,680,100 34,910,235	Group 2003 HK$ 1,924,743 — 16,000,000 — 17,924,743	2004 HK$ 500,000 — — 13,311,645 13,811,645	2002 HK$ — — — — —	Company 2003 HK$ — — — — —	2004 HK$ — — — —
					—

(c) The Group advanced a loan of HK$16,000,000 to a related company on 10 March 2003. An amount of HK$2,688,355 was repaid by the related company during the year ended 31 December 2004. The outstanding amount due from the related company was HK$13,311,645 as at 31 December 2004. The loan is unsecured, interest bearing at prime rate and is repayable on 9 March 2005.

Also included in other loans as at 31 December 2004 is a loan of HK$500,000 advanced to a third party. This loan is secured, interest bearing at 16% per annum and is repayable on 24 March 2005.

— 52 —

FINANCIAL INFORMATION OF THE COMPANY

APPENDIX I

20. Cash and Bank Balances

The cash and bank balances of the Group denominated in Renminbi (“RMB”) amounted to approximately HK$37,846,000, HK$70,741,000 and HK$41,512,000 as at 31 December 2002, 2003 and 2004 respectively. RMB is not freely convertible into foreign currencies. Subject to the PRC’s Foreign Exchange Control Regulations and Administration of Settlement, Sale and Payment of Foreign Exchange Regulations, the Group is permitted to exchange RMB for foreign currencies through banks authorised to conduct foreign exchange business.

21. Other Payables

Accruals Due to related companies (note (a)) Other payables_(note (b))_	2002 HK$ 735,504 8,622,320 3,817,960	Group 2003 HK$ 1,789,426 23,050,000 —	2004 HK$ 525,784 — —	2002 HK$ 68,617 — —	Company 2003 2004 HK$ HK$ 1,050,360 227,000 — — — —	Company 2003 2004 HK$ HK$ 1,050,360 227,000 — — — —
	13,175,784	24,839,426	525,784	68,617	1,050,360	227,000

Notes:

(a) The amounts due to related companies are unsecured, interest free and have no fixed terms of repayment except for an amount of HK$16,000,000 as at 31 December 2003 which was interest bearing at prime rate.
(b) The ageing analysis of the other payables was as follows:

Within 3 months 3 to 6 months 6 to 12 months Over 1 year	2002 HK$ — — — 3,817,960	Group 2003 2004 HK$ HK$ — — — — — — — —	Group 2003 2004 HK$ HK$ — — — — — — — —	2002 HK$ — — — —	Company 2003 2004 HK$ HK$ — — — — — — — —	Company 2003 2004 HK$ HK$ — — — — — — — —
	3,817,960	—	—	—	—	—

22. Due from/(to) Sinox Fund Management Limited

The amount due from Sinox Fund Management Limited (“SINOX”) represents investment management fees prepaid at the year end. The amount due to SINOX represents investment management fees payable at the year end. The amount due is unsecured, interest free and repayable on demand.

Mr. Lam Sai Ho, Anthony, an ex-director of the Company who resigned on 22 March 2004, had an indirect equity interest of approximately 66.67% in SINOX.

SINOX is the Investment Manager of the Group and provides administrative and investment management services to the Group in relation to the investment of the Group’s assets (note 31(a)).

— 53 —

FINANCIAL INFORMATION OF THE COMPANY

APPENDIX I

23. Other Borrowing

Other borrowing is secured, interest bearing at 2.01% per annum and repayable on 14 February 2005.

24. Due to a Subsidiary

The amount due to a subsidiary is unsecured, interest free and repayable on demand.

25. Share Capital

2002 30,000,000,000	Number of shares 2003 2004 3,000,000,000 3,000,000,000	Number of shares 2003 2004 3,000,000,000 3,000,000,000	2002 HK$ 300,000,000	Share capital 2003 2004 HK$ HK$ 300,000,000 300,000,000	Share capital 2003 2004 HK$ HK$ 300,000,000 300,000,000

899,900,000 — — —	899,900,000 431,952,000 179,980,000 — (971,892,000) — 323,964,000 —		8,999,000 — — —	8,999,000 1,799,800 — 32,396,400	43,195,200 — — —
899,900,000	431,952,000	431,952,000	8,999,000	43,195,200	43,195,200

Notes:

(a) On 26 March 2003, a subscription agreement was entered into between Cosmopolitan International Holdings Limited (“Cosmopolitan”), Baron Asset Management Limited (“Baron”) and the Company pursuant to which the Company agreed to issue a total of 179,980,000 shares of par value of HK$0.01 each and Cosmopolitan and Baron agreed to subscribe for 115,230,210 and 64,749,790 shares respectively at HK$0.06 per share, amounting to HK$6,913,813 and HK$3,884,987 respectively. The transaction was completed on 29 April 2003.
(b) Pursuant to the ordinary resolutions passed at the special general meeting held on 17 June 2003, every ten ordinary shares of HK$0.01 each in the entire share capital of the Company were consolidated into one share of HK$0.10 each (“consolidated share”) with effect from 18 June 2003 and that 323,964,000 consolidated shares of HK$0.10 each in the share capital of the Company were issued on 16 July 2003 by way of an Open Offer to qualifying shareholders on the basis of three offer shares for every one consolidated share held.

— 54 —

FINANCIAL INFORMATION OF THE COMPANY

APPENDIX I

(c) The Company adopted an Employee Share Option Scheme under which the Board may grant to eligible employees, including the executive directors, the officers and the full or parttime employees of the Company or its subsidiaries, options to subscribe for shares in the Company.

The exercise price is set at not less than the highest of:

(i) the closing prices of the shares as stated in the daily quotations sheet of the Stock Exchange on the date of grant;
(ii) the average of the closing prices of the shares as stated in the daily quotations sheet of the Stock Exchange for the 5 business days immediately preceding the date of grant; and
(iii) the nominal value of a share.

During the Relevant Periods, no option was granted.

26. Reserves

Share premium HK$ Group 1 January 2002 166,327,220 Loss for the year — 31 December 2002 166,327,220 Retained by: Company and subsidiaries 166,327,220 Associates — Jointly controlled entities — 166,327,220 Company 1 January 2002 — Loss for the year — 31 December 2002 —	Capital reserve on consolidation HK$ 468,163 — 468,163 468,163 — — 468,163 — — —	Contributed surplus HK$ 80,991,000 — 80,991,000 80,991,000 — — 80,991,000 80,991,000 — 80,991,000	Exchange fluctuation reserve HK$ (4,194,214) — (4,194,214) (4,194,214) — — (4,194,214) — — —	Accumulated losses HK$ (19,693,370) (15,350,894) (35,044,264) (3,441,802) (5,119,560) (26,482,902) (35,044,264) (87,804) (3,925,844) (4,013,648)	Total HK$ 223,898,799 (15,350,894) 208,547,905 240,150,367 (5,119,560) (26,482,902) 208,547,905 80,903,196 (3,925,844) 76,977,352

— 55 —

APPENDIX I

FINANCIAL INFORMATION OF THE COMPANY

Share premium HK$ Group 1 January 2003 166,327,220 Shares issued during the year 3,237,490 Realisation of exchange fluctuation on disposal of a jointly controlled entity — Loss for the year — 31 December 2003 169,564,710 Retained by: Company and subsidiaries 169,564,710 Associates — Jointly controlled entities — 169,564,710 Company 1 January 2003 — Shares issued during the year 3,237,490 Loss for the year — 31 December 2003 3,237,490	Capital reserve on consolidation HK$ 468,163 — — — 468,163 468,163 — — 468,163 — — — —	Contributed surplus HK$ 80,991,000 5,761,510 — — 86,752,510 86,752,510 — — 86,752,510 80,991,000 5,761,510 — 86,752,510	Exchange fluctuation reserve HK$ (4,194,214) — 972,797 — (3,221,417) (3,221,417) — — (3,221,417) — — — —	Accumulated losses HK$ (35,044,264) — — (24,781,865) (59,826,129) (33,949,135) (1,948,528) (23,928,466) (59,826,129) (4,013,648) — (6,127,736) (10,141,384)	Total HK$ 208,547,905 8,999,000 972,797 (24,781,865) 193,737,837 219,614,831 (1,948,528) (23,928,466) 193,737,837 76,977,352 8,999,000 (6,127,736) 79,848,616

— 56 —

APPENDIX I

FINANCIAL INFORMATION OF THE COMPANY

Share premium HK$ Group 1 January 2004 169,564,710 Realisation of exchange fluctuation on disposal of a jointly controlled entity — Loss for the year — 31 December 2004 169,564,710 Retained by: Company and subsidiaries 169,564,710 Associates — Jointly controlled entities — 169,564,710 Company 1 January 2004 3,237,490 Loss for the year — 31 December 2004 3,237,490	Capital reserve on consolidation HK$ 468,163 — — 468,163 468,163 — — 468,163 — — —	Contributed surplus HK$ 86,752,510 — — 86,752,510 86,752,510 — — 86,752,510 86,752,510 — 86,752,510	Exchange fluctuation reserve HK$ (3,221,417) 1,466,243 — (1,755,174) (1,755,174) — — (1,755,174) — — —	Accumulated losses HK$ (59,826,129) — (3,784,094) (63,610,223) (41,617,639) (182,826) (21,809,758) (63,610,223) (10,141,384) (5,543,297) (15,684,681)	Total HK$ 193,737,837 1,466,243 (3,784,094) 191,419,986 213,412,570 (182,826) (21,809,758) 191,419,986 79,848,616 (5,543,297) 74,305,319

The contributed surplus of the Group and the Company represents the difference between the nominal value of the shares of the subsidiaries acquired pursuant to the Group’s reorganisation scheme completed on 12 December 2001 over the nominal value of the Company’s shares issued in exchange. Movement during the year ended 31 December 2003 represents an exchange of shares in which the value of the Company’s shares issued to a listed investee company exceeds the nominal value of the Company’s shares.

Under the Companies Act (1981) of Bermuda (as amended), the contributed surplus is distributable to the shareholders, provided that the Company is, after the payment of dividends out of the contributed surplus, able to pay its liabilities as they become due; or the realisable value of the Company’s assets would thereby not be less than the aggregate of its liabilities, issued share capital and reserves.

— 57 —

FINANCIAL INFORMATION OF THE COMPANY

APPENDIX I

27. Net Asset Value per Share

Net asset value per share is computed based on:

Net assets Number of ordinary shares	2002 HK$ 217,546,905 89,990,000	Group 2003 HK$ 236,933,037 431,952,000	2004 HK$ 234,615,186

			431,952,000

For the purpose of calculation of the net asset value per share as at 31 December 2002, the number of ordinary shares was adjusted to reflect the share consolidation detailed in note 25(b) to this report as if it had occurred as at 31 December 2002.

28. Deferred Taxation

No provision for deferred taxation has been made in the financial statements as the tax effect of temporary differences is immaterial to the Group.

29. Employee Benefits

The contributions to the retirement benefit scheme for the staff of the Company and a subsidiary operating in the PRC are charged to the consolidated income statement as they become payable. The only obligation of the Group with respect to the schemes is to make the specified contributions.

30. Operating Lease Commitments

At the balance sheet dates, the total future minimum lease payments under non-cancellable operating leases are payable as follows:

Within one year In the second to fifth year inclusive	2002 HK$ 162,680 112,596 275,276	Group 2003 HK$ 125,147 — 125,147	2004 HK$ 156,533 —
			156,533

— 58 —

FINANCIAL INFORMATION OF THE COMPANY

APPENDIX I

31. Related Party Transactions

(a) Investment management fees paid and payable to SINOX	2002 HK$ 3,499,604	Group 2003 HK$ 3,549,588	2004 HK$ 957,713

Investment management fees to SINOX for administrative and investment management services were calculated at 1.5% per annum on the net asset value of the Group calculated on a quarterly basis.

Mr. Lam Sai Ho, Anthony, an ex-director of the Company who resigned on 22 March 2004, had an indirect equity interest of approximately 66.67% in SINOX.

(b) Management fees received from jointly controlled entities amounted to HK$1,491,239, HK$520,736 and HK$515,984 for the year ended 31 December 2002, 2003 and 2004 respectively.
(c) Interest paid to a related company amounted to HK$928,499 for the year ended 31 December 2004.
(d) The amount advanced to an ex-independent non-executive director of a substantial shareholder of the Company amounted to HK$2,734,200 and HK$3,648,156 as at 31 December 2003 and 2004 respectively, is set out in note 19(a).
(e) The amount due from a related company amounted to HK$16,000,000 and HK$13,311,645 as at 31 December 2003 and 2004 respectively, is set out in note 19(c).
(f) The amounts due to related companies amounted to HK$8,622,320 and HK$23,050,000 as at 31 December 2002 and 2003 respectively, is set out in note 21(a).
(g) Details of guarantees issued by the Company in favour of banks to the indirect subsidiaries of an investee company and a direct subsidiary of an associate are set out in note 34.

32. Connected Transaction

As Mr. Lam Sai Ho, Anthony, the ex-director of the Company who resigned on 22 March 2004, had an indirect equity interest of approximately 66.67% in SlNOX, which is regarded as a connected person of the Company and, accordingly, the existing investment management agreement constitutes a connected transaction for the Group under the Listing Rules. As the total consideration for the investment management agreement is approximately HK$3.5 million, HK$3.5 million and HK$3.6 million for the Relevant Periods during the duration of the investment management agreement, the investment management agreement is subject to disclosure requirement pursuant to Rule 14A.37 of the Listing Rules.

The abovementioned connected transaction has been conducted on normal commercial terms and in the ordinary course of business of the Group and the consideration paid by the Group to SlNOX in each financial year under the investment agreements constituted less than 3% of the net tangible assets of the Group, it is expected that such transaction will continue in the future and will constitute ongoing connected transactions for the Group under the Listing Rules. On 24 September 2001, the Listing Division of the Stock Exchange granted a waiver to the Company that the ongoing connected transactions arising from renewal of the investment management agreement need only be disclosed in the next published annual report and no press notice would be required.

— 59 —

FINANCIAL INFORMATION OF THE COMPANY

APPENDIX I

33. Banking Facilities

The Group had banking facilities totalling HK$10 million and HK$10 million as at 31 December 2003 and 2004 respectively. These banking facilities were secured by a floating charge over the Company’s fixed deposits of HK$10 million and HK$10 million as at 31 December 2003 and 2004 respectively.

34. Contingent Liabilities

There were contingent liabilities in respect of letters of guarantee issued by the Company, as guarantor, in favour of a bank in respect of banking facilities granted by the bank to the indirect subsidiaries of an investee company and a direct subsidiary of an associate. The banking facilities granted to the investee company’s indirect subsidiaries are also secured by the mortgage of the investment properties of the investee company’s indirect subsidiaries. The banking facilities granted to the associate’s direct subsidiary is also secured by the mortgage of the investment properties of the associate’s direct subsidiaries.

2002 HK$ Indirect subsidiaries of an investee company: — Fortune Leader Overseas Chinese (Daiyawan) Real Estate Development Company Limited 5,913,000 — Fortune Leader Overseas Chinese (Daiyawan) Investment Company Limited — Direct subsidiary of an associate: — Great Fidelity Limited — 5,913,000	Group 2003 HK$ 13,573,000 9,855,000 — 23,428,000	2004 HK$ 13,573,000 9,855,000 4,750,000
		28,178,000

35. Events After the Balance Sheet Date

(a) Pursuant to a sale and purchase agreement dated 9 September 2004, the Group has committed to dispose its entire equity interest in Sun Kai Yip for a consideration of approximately HK$65 million. The major investments of Sun Kai Yip include 35% equity interest in the paid-up registered capital of 上海囱泰紡織品有限公司 and 30% equity interest in the paidup registered capital of Shanghai Tian An Bearing Company Limited. Both companies are sino-foreign joint equity ventures established in the PRC. The consideration was determined with reference to the unaudited net assets of Sun Kai Yip (after taking into account the effect of equity accounting for the interests in jointly controlled entities, including 上海囱泰紡織品有限公司 and Shanghai Tian An Bearing Company Limited) as at 30 June 2004. The sale and purchase agreement is conditional on, amongst other things, the approval by shareholders of the Company except Golden Resources Development International Limited, being shareholder of the purchaser. Upon completion of the sale, the consideration will be received in two instalments, the first instalment being a sum of HK$40 million will be received upon completion of the sale and the second instalment being a sum of approximately HK$25 million to be received within six months after the completion of the sale.

— 60 —

FINANCIAL INFORMATION OF THE COMPANY

APPENDIX I

(b) Pursuant to an agreement dated 29 December 2004, the Group has committed to dispose its 25% equity interests in a jointly controlled entity namely Shanghai Yong An Dairy Company Limited, a sino-foreign joint equity venture established in the PRC, to a third party for a consideration of RMB2.8 million (approximately HK$2.6 million) resulting in an estimated loss on disposal of HK$0.2 million. The completion of the disposal is subject to the approval of the relevant government bodies.

36. Subsequent Financial Statements

No audited financial statements for the Company or any of its subsidiaries have been prepared in respect of any period subsequent to 31 December 2004.

Yours faithfully, RSM Nelson Wheeler Certified Public Accountants Hong Kong

— 61 —

FINANCIAL INFORMATION OF THE COMPANY

APPENDIX I

2. INDEBTEDNESS

As at the close of business on 31 December 2004, being the latest practicable date for ascertaining information contained in this indebtedness statement prior to the printing of this circular, the Group had:

Outstanding borrowing from a financial institution of HK$5,460,000;
Banking facilities totaling HK$10 million granted by a bank and secured by a floating charge over the Company’s fixed deposits of HK$10 million as at 31 December 2004; and
Contingent liabilities in respect of letters of guarantee issued by the Company, as guarantor, in favour of a bank in respect of banking facilities granted by the bank to the indirect subsidiaries of an investee company and a direct subsidiary of an associate. The banking facilities granted to the investee company’s indirect subsidiaries are also secured by the mortgage of the investment properties of the investee company’s indirect subsidiaries. The banking facilities granted to the associate’s direct subsidiary is also secured by the mortgage of the investment properties of the associate’s direct subsidiaries.

Indirect subsidiaries of an investee company: — Fortune Leader Overseas Chinese (Daiyawan) Real Estate Development Company Limited — Fortune Leader Overseas Chinese (Daiyawan) Investment Company Limited Direct subsidiary of an associate: — Great Fidelity Limited	HK$ 13,573,000 9,855,000 4,750,000
	28,178,000

Save as aforesaid or otherwise disclosed herein, and apart from intra-group liabilities, the Group did not have, at the close of business on 31 December 2004, any outstanding mortgages, charges, debentures, bank loans and overdrafts, debt securities or loan notes or other similar indebtedness, loan capital issued or outstanding or agreed to be issued, finance leases, liabilities under acceptances or acceptance credits or any finance leases commitments, or any guarantees or other material contingent liabilities.

The Directors are not aware of any material adverse changes in the Group’s indebtedness position and contingent liabilities since 31 December 2004.

— 62 —

FINANCIAL INFORMATION OF THE COMPANY

APPENDIX I

3. FINANCIAL AND TRADING PROSPECT OF THE GROUP

The Global and Hong Kong economies seem to be growing steadily in 2004. Result from the macro economic measures implemented for adjusting the Mainland economy begins to show and the likelihood of increasing in interest rates in the United States has also become obvious. These are the factors that have been putting much concern to investors over 2004. Looking ahead, the Board believes that the business environment is going to remain challenging and highly competitive and both the Global and Hong Kong economies will be blooming steadily.

The Group has continued to focus its efforts in rationalizing its investment portfolio. Pursuant to an agreement dated 11 September 2003, the Group committed to dispose its 35% equity interest in Shanghai Foodstuffs Factory Company Limited to a third party for a consideration of RMB4.8 million (approximately HK$4.5 million). Approval for the sale from relevant government authorities have been issued and the said consideration has been fully received in early September 2004.

As at 31 December 2004, the Group holds approximately HK$84.7 million in investment securities and approximately HK$27.6 million in interests in jointly controlled entities in the PRC. The Group maintained a diversified portfolio which included investments in different sectors such as distribution of consumer products, investment holdings and manufacturing of bearing products. During the year, the Group participated in the investment of land development in Hong Kong for residential or non-residential purposes and it is expected that this will provide significant investment returns to the Group in the foreseeable future under positive recovery of property market in Hong Kong.

With our strong cash flow and solid financial position, the Group will continue to evaluate potential investments with a view of gaining high investment returns and yields for our shareholders.

4. WORKING CAPITAL

The Directors are of the opinion that, taking into account its internal resources and the present available banking facilities, the Group will, immediately following the completion of the Disposal, have sufficient working capital for its present requirements.

5. LIQUIDITY AND FINANCIAL RESOURCES

Operations of the Group are generally financed through internal cash resources. As at 31 December 2004, cash and bank balances of the Group were approximately HK$68 million. With cash and other current assets of approximately HK$116 million as at 31 December 2004, the Group has sufficient financial resources to satisfy its commitments and working capital requirements. As at 31 December 2004, the Group has a current ratio of 5.99 and a gearing ratio of 0.023 (defined as borrowing over net assets).

6. EMPLOYEES

Total number of employees for the Group is about 8. Remuneration policies are reviewed by the Group from time to time.

— 63 —

PRO FORMA FINANCIAL INFORMATION OF THE REMAINING GROUP

APPENDIX II

==> picture [154 x 55] intentionally omitted <==

18 February 2005

The Board of Directors GR Investment International Limited Room A, 11/F., Fortune House 61 Connaught Road Central Central Hong Kong

Dear Sirs,

We report on the unaudited pro forma financial information (the “Pro Forma Financial Information”) of GR Investment International Limited (the “Company”) and its subsidiaries (collectively referred to as the “Group”) set out in Appendix II of the circular of the Company dated 18 February 2005 (the “Circular”) in connection with the proposed disposal by the Group of the entire paid-up registered capital of Sun Kai Yip (Shanghai) Industrial Investments Limited (the “Disposal”). The Pro Forma Financial Information has been prepared by the directors of the Company, for illustrative purpose only, to provide information about how the Disposal might have affected the relevant information presented.

Responsibilities

It is the sole responsibility of the directors of the Company to prepare the Pro Forma Financial Information in accordance with paragraph 29 of Chapter 4 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the “Listing Rules”).

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

— 64 —

PRO FORMA FINANCIAL INFORMATION OF THE REMAINING GROUP

APPENDIX II

Basis of opinion

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

Our work did not constitute an audit or a review in accordance with Statements of Auditing Standards issued by the Hong Kong Institute of Certified Public Accountants and, accordingly, we do not express any such assurance on the Pro Forma Financial Information.

The Pro Forma Financial Information has been compiled in accordance with the basis set out in Appendix II of the Circular for illustrative purposes only and, because of its nature, it does not provide any assurance or indication that any event will take place in the future and may not be indicative of:

(a) the financial position of the Group at 31 December 2004 or any future date had the Disposal been completed at 31 December 2004; or
(b) the results and cash flows of the Group for the year ended 31 December 2004 or any future period had the Disposal been completed at 1 January 2004.

Opinion

In our opinion:

(a) the Pro Forma Financial Information has been properly compiled on the basis stated;
(b) such basis is consistent with the accounting policies of the Group; and
(c) the adjustments are appropriate for the purposes of the Pro Forma Financial Information as disclosed pursuant to paragraph 29(1) of Chapter 4 of the Listing Rules.

Yours faithfully,

RSM Nelson Wheeler Certified Public Accountants Hong Kong

— 65 —

PRO FORMA FINANCIAL INFORMATION OF THE REMAINING GROUP

APPENDIX II

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE REMAINING GROUP

Introduction

The unaudited pro forma financial information comprises unaudited pro forma consolidated balance sheet of the Group as at 31 December 2004, unaudited pro forma consolidated income statement and unaudited pro forma consolidated cash flow statement of the Group for the year ended 31 December 2004 and the accompanying notes (collectively referred to as the “Pro Forma Financial Information”).

For illustrative purposes only, the Pro Forma Financial Information prepared in accordance with paragraph 29 of Chapter 4 of the Listing Rules is set out below to illustrate the effect of the proposed disposal of the entire paid-up registered capital of Sun Kai Yip (Shanghai) Industrial Investments Limited (the “Disposal”) by the Group on (i) the consolidated balance sheet of the Group as at 31 December 2004 as if the Disposal had taken place on 31 December 2004; and (ii) the consolidated income statement and consolidated cash flow statement of the Group for the year ended 31 December 2004 as if the Disposal had taken place on 1 January 2004.

The Pro Forma Financial Information has been prepared based on the audited consolidated financial information of the Group for the year ended 31 December 2004 as set out in the Accountants’ Report in Appendix I of this circular after giving effect to the pro forma adjustments described in the accompanying notes.

The Pro Forma Financial Information has been prepared for illustrative purposes only and, because of its nature, may not give a true picture of the actual financial position, results of operations or cash flows of the Group that would have been attained had the Disposal actually occurred on the dates indicated herein. In addition, the Pro Forma Financial Information does not purport to predict the Group’s future financial position, results of operations or cash flows.

The Pro Forma Financial Information should be read in conjunction with the Accountants’ Report on the Group as set out in Appendix I and other financial information included elsewhere in this circular.

— 66 —

PRO FORMA FINANCIAL INFORMATION OF THE REMAINING GROUP

APPENDIX II

I. Unaudited Pro Forma Consolidated Balance Sheet of the Remaining Group

As at 31 December 2004

	Audited			Unaudited
	consolidated			pro forma
	balance sheet			consolidated
	as at			balance sheet
	31 December	Pro	Forma	after the
	2004	adjustments		Disposal
	HK$	HK$	HK$	HK$
		Note 1	Note 2
Non-current assets
Property, plant and equipment	57,399	(57,399)		—
Interests in associates	17,562,305			17,562,305
Interests in jointly controlled entities	27,656,219	(24,659,119)		2,997,100
Investment securities	84,770,859			84,770,859
Other investments	7,800,000			7,800,000
Other asset	150,000			150,000
	137,996,782			113,280,264
Current assets
Other investments	27,473,668			27,473,668
Other receivables	20,005,238	(89,489)		19,915,749
Due from Sinox Fund
Management Limited	885,724			885,724
Cash with brokers	767,841			767,841
Cash and bank balances	66,861,770	(41,512,393)	65,123,371	90,472,748
	115,994,241			139,515,730
*Less: Current liabilities*
Other payables	525,784	(178,784)		347,000
Other borrowing	5,460,000			5,460,000
Provision for taxation	13,390,053			13,390,053
	19,375,837			19,197,053
Net current assets	96,618,404			120,318,677
NET ASSETS	234,615,186			233,598,941
Capital and reserves
Share capital	43,195,200			43,195,200
Reserves	191,419,986	(66,139,616)	65,123,371	190,403,741
SHAREHOLDERS’ FUNDS	234,615,186			233,598,941

— 67 —

PRO FORMA FINANCIAL INFORMATION OF THE REMAINING GROUP

APPENDIX II

II. Unaudited Pro Forma Consolidated Income Statement of the Remaining Group

For the year ended 31 December 2004

Audited
consolidated
income statement
for the
year ended
31 December
Pro Forma
2004
adjustments
HK$
HK$
HK$
Note 1
Note 2
Turnover
2,679,393
(278,910)
Other revenue
2,192,999
(1,417,366)
4,872,392
Investment management fees
(3,633,413)
Staff costs
(880,685)
353,396
Depreciation
(77,475)
77,475
Other operating expenses
(9,918,956)
3,843,888
Total operating expenses
(14,510,529)
Loss from operations
(9,638,137)
Finance costs
(1,080,711)
Share of net profits of associates
1,765,702
Share of net profits of jointly
controlled entities
2,924,093
(2,830,620)
Gain on disposal of a jointly
controlled entity
3,050,344
Loss before taxation
(2,978,709)
Taxation
(805,385)
764,267
Loss for the year attributable
to shareholders
(3,784,094)

Unaudited
pro forma
consolidated
income
statement
after the
Disposal
HK$
2,400,483
775,633
3,176,116
(3,633,413)
(527,289)
—
(6,075,068)
(10,235,770)
(7,059,654)
(1,080,711)
1,765,702
93,473
3,050,344
(3,230,846)
(41,118)
(3,271,964)

— 68 —

PRO FORMA FINANCIAL INFORMATION OF THE REMAINING GROUP

APPENDIX II

III. Unaudited Pro Forma Consolidated Cash Flow Statement of the Remaining Group For the year ended 31 December 2004

Audited
consolidated
cash flow
statement
for the
year ended 31
Pro Forma
December 2004
adjustments
HK$
HK$
HK$
Note 1
Note 2
CASH FLOWS FROM
OPERATING ACTIVITIES
Loss before taxation
(2,978,709)
(252,137)
Adjustments for:
Depreciation
77,475
(77,475)
Dividend income from investment
securities and other investments
(2,163,409)
Gain on disposal of a jointly controlled entity
(3,050,344)
Gain on disposal of investment
securities and other investments
(371,389)
Interest expenses
1,066,688
Interests in associates written off
1,407,961
Interest income
(1,412,622)
1,027,419
Provision for impairment in
investment securities
1,470,130
Provision for impairment of interests
in jointly controlled entities
3,600,000
(1,500,000)
Provision for non-recovery of amount
due from a jointly controlled entity
1,199,313
(1,199,313)
Share of net profits of associates
(1,765,702)
Share of net profits of jointly
controlled entities
(2,924,093)
2,830,620
Operating loss before working capital changes
(5,844,701)
Decrease in other receivables
2,776,679
236,530
Decrease in receivable from Sun Kai Yip
—
30,962,840
Decrease in amount due from Sinox Fund
Management Limited
1,662,173
Decrease in amounts due from jointly
controlled entities
648,519
(648,519)
Decrease in amounts due from associates
1,925,163
Decrease in other payables
(24,313,642)
(1,134,586)
Net cash (used in)/generated from
operating activities
(23,145,809)

Unaudited
pro forma
consolidated
cash flow
statement
after the
Disposal
HK$
(3,230,846)
—
(2,163,409)
(3,050,344)
(371,389)
1,066,688
1,407,961
(385,203)
1,470,130
2,100,000
—
(1,765,702)
(93,473)
(5,015,587)
3,013,209
30,962,840
1,662,173
—
1,925,163
(25,448,228)
7,099,570

— 69 —

PRO FORMA FINANCIAL INFORMATION OF THE REMAINING GROUP

APPENDIX II

Unaudited Pro Forma Consolidated Cash Flow Statement of the Remaining Group For the year ended 31 December 2004

CASH FLOWS FROM INVESTING ACTIVITIES Dividends received from jointly controlled entities Dividends received from investment securities and other investments Interest received Additions of property, plant and equipment Acquisition of associates Acquisition of investment securities and other investments Proceeds from sale of interest in a jointly controlled entity Proceeds from sale of investment securities and other investments Interest paid Proceeds from redemption of held-to-maturity debt securities Net cash used in investing activities CASH FLOWS FROM FINANCING ACTIVITIES Other borrowing obtained Net cash generated from financing activities NET DECREASE IN CASH AND CASH EQUIVALENTS CASH AND CASH EQUIVALENTS AT 1 JANUARY CASH AND CASH EQUIVALENTS AT 31 DECEMBER ANALYSIS OF THE BALANCES OF CASH AND CASH EQUIVALENTS Cash with brokers Cash and bank balances	Audited consolidated cash flow statement for the year ended 31 Pro Forma December 2004 adjustments HK$ HK$ HK$ Note 1 Note 2 583,585 2,163,409 1,412,622 (1,027,419) (10,970) 10,970 (97,500) (42,937,008) 4,516,587 20,016,687 (1,066,688) 3,000,000 (12,419,276) 5,460,000 5,460,000 (30,105,085) 97,734,696 (70,741,323) 65,123,371 67,629,611 767,841 66,861,770 (41,512,393) 65,123,371 67,629,611	Unaudited pro forma consolidated cash flow statement after the Disposal HK$ 583,585 2,163,409 385,203 — (97,500) (42,937,008) 4,516,587 20,016,687 (1,066,688) 3,000,000 (13,435,725) 5,460,000 5,460,000 (876,155) 92,116,744 91,240,589 767,841 90,472,748 91,240,589

— 70 —

PRO FORMA FINANCIAL INFORMATION OF THE REMAINING GROUP

APPENDIX II

IV. Notes to Unaudited Pro Forma Financial Information of the Remaining Group For the year ended 31 December 2004

To reflect transfer out of the equity interests in Sun Kai Yip (Shanghai) Industrial Investments Limited as if the Disposal actually occurred on the dates indicated herein.
To reflect cash consideration (before expenses directly attributable to the Disposal) received from Disposal.

— 71 —

GENERAL INFORMATION

APPENDIX III

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 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.

DISCLOSURE OF INTERESTS

Directors’ Interests and Short Position

As at the Latest Practicable Date, none of the Directors nor any of their associates had any interest and short positions in the shares, underlying shares and debentures of the Company or any of its associated corporations (within the meaning of part XV of the SFO) as recorded in the register required to be kept by the Company pursuant to Section 352 of the SFO.

Interests of Substantial Shareholders

As at the Latest Practicable Date, the following persons had interests and short positions in the shares and underlying shares of the Company as recorded in the register required to be kept by the Company pursuant to Section 336 of the SFO:

Long positions in shares of the Company

					Percentage of
					issued share
	Personal*	Family+	Corporate#	Total	capital of the
Name	Interests	Interests	Interests	Interests	Company	Notes
Golden Resources Development
International Limited (“GRD”)	—	—	86,202,000	86,202,000	19.95%	1
Baron Strategic Holdings Limited	—	—	78,261,016	78,261,016	18.12%	2
Wan Chuen Chung, Joseph	—	—	78,261,016	78,261,016	18.12%	2
Aimstar Investments Limited	—	—	34,000,000	34,000,000	7.87%	3
Sze Sun Sun, Tony	—	—	34,000,000	34,000,000	7.87%	3
Cosmopolitan International Holdings Limited	—	—	29,092,084	29,092,084	6.74%

Beneficial owner
Interests of spouse

Interests beneficially held by the company itself or through companies controlled by it

— 72 —

GENERAL INFORMATION

APPENDIX III

Notes:

The corporate interests of GRD were attributable on account through a number of its wholly-owned subsidiaries. Ringo Resources Limited held 86,202,000 shares and was a wholly-owned subsidiary of Better Choice Investments Limited which in turn was a wholly-owned subsidiary of Reo Developments Limited. Reo Developments Limited was a wholly-owned subsidiary of GRD. Accordingly, Better Choice Investments Limited, Reo Developments Limited and GRD were all deemed to be interested in the 86,202,000 shares held by Ringo Resources Limited.
International Securities Investments Limited held 78,261,016 shares and was a wholly-owned subsidiary of Baron Capital Limited. Baron Capital Limited was a wholly-owned subsidiary of Baron Strategic Holdings Limited which in turn was wholly-owned by Mr. Wan Chuen Chung, Joseph. Accordingly, Baron Capital Limited, Baron Strategic Holdings Limited and Mr. Wan Chuen Chung, Joseph were all deemed to be interested in the 78,261,016 shares held by International Securities Investments Limited.
Aimstar Investments Limited was wholly-owned by Mr. Sze Sun Sun, Tony. Mr. Sze Sun Sun, Tony was therefore deemed to be interested in the 34,000,000 shares held by Aimstar Investments Limited.

Save as disclosed above, as at the Latest Practicable Date, the directors were not aware of any other person who had an interest or short position in the shares or underlying shares of the Company as recorded in the register that required to be kept by the Company pursuant to Section 336 of the SFO and/or were directly or indirectly interested in 5% or more of the nominal value of the share capital carrying rights to vote in all circumstances at general meetings of any other members of the Group.

MATERIAL CONTRACTS

Within the two years immediately preceding the issue of this circular, the following contracts, not being contracts entered into in the ordinary course of business, have been entered into by the Company or its subsidiaries and are or may be material:

a subscription agreement dated 26 March 2003 entered into between Cosmopolitan International Holdings Limited (“Cosmopolitan”), Baron Asset Management Limited (“Baron Asset”) and the Company pursuant to which the Company agreed to allot and issue and Cosmopolitan and Baron Asset agreed to subscribe for 115,230,210 Shares and 64,749,790 Shares respectively at HK$0.06 per Share;
an underwriting agreement dated 2 May 2003 entered into between, among others, Baron Capital Limited, Ping On Securities Limited, Ringo Resources Limited and the Company in relation to the underwriting of the proposed open offer of 3 offer shares for every 1 share or 1 consolidated share, respectively, to qualifying shareholders of the Company; and
the Sale and Purchase Agreement.

— 73 —

GENERAL INFORMATION

APPENDIX III

COMPETING INTERESTS

None of the Directors and their respective associates have any interests in a business, which competes or may compete with the business of the Company or any of its subsidiaries.

SERVICE CONTRACTS

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

LITIGATION

As at the Latest Practicable Date, save as the arbitration in relation to the outstanding claim on White Cat Agreement as disclosed in the circular, no member of the Group was engaged in any litigation or arbitration of material importance and no litigation or claim of material importance was known to the Directors to be pending or threatened by or against any member of the Group.

EXPERTS AND CONSENTS

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

Name	Qualification
RSM Nelson Wheeler	Certified Public Accountants
Hantec Capital Limited (“Hantec Capital”)	a licensed corporation for types 1 (dealing
	in securities) and 6 (advising on corporate
	finance) regulated activities under the SFO

Neither RSM Nelson Wheeler or Hantec Capital has any shareholding, directly or indirectly, in any member of the Group or any right (whether legally enforceable or not) to subscribe for or to nominate persons to subscribe for securities in any member of the Group.

Each of RSM Nelson Wheeler and Hantec Capital has given and have not withdrawn its written consent to the issue of this circular, with the inclusion of its letter or references to its name in the form and context in which they are included.

Neither RSM Nelson Wheeler or Hantec Capital has any direct or indirect interest in any assets which have been, since 31 December 2004 (being the date to which the latest published audited 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.

— 74 —

GENERAL INFORMATION

APPENDIX III

MISCELLANEOUS INFORMATION

The registered office of the Company is situated at Clarendon House, 2 Church Street, Hamilton HM11, Bermuda. The head office and principal place of business in Hong Kong of the Company is situated at Room A, 11th Floor, Fortune House, 61 Connaught Road Central, Central, Hong Kong.
The company secretary of the Company is Mr. Lee Yip Wah, Peter, Hong Kong lawyer.
The auditor of the Company is RSM Nelson Wheeler. The qualified accountant of the Company is Mr. Cheuk Yuk Lung, 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.
The share registrars of the Company in Hong Kong is Secretaries Limited situated at Ground Floor, Bank of East Asia Harbour View Centre, 56 Gloucester Road, Wan Chai, Hong Kong.
The English version of this circular shall prevail over the Chinese text.

DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents are available for inspection during normal business hours at the Hong Kong principal office of the Company at Room A, 11th Floor, Fortune House, 61 Connaught Road Central, Central, Hong Kong, up to and including 18 February 2005:

(a) the memorandum and articles of association of the Company;
(b) the audited consolidated financial statements of the Company and its subsidiaries for the three years ended 31 December 2004;
(c) the Accountants’ Report prepared by RSM Nelson Wheeler, the text of which is set out in Appendix I to this circular;
(d) the letter from the Independent Board Committee, the text of which is set out on page 11 of this circular;
(e) the letter of advice from Hantec Capital, the text of which is set out on pages 12 to 20 of this circular;
(f) the letter of consents referred to under the section headed “Experts and Consents” in this appendix;

— 75 —

GENERAL INFORMATION

APPENDIX III

(g) the Sales and Purchase Agreement dated 9 September 2004;
(h) the material contracts referred to in the paragraph headed “Material Contracts” in this appendix; and
(i) the letter signed by RSM Nelson Wheeler setting out their opinion on the adjustment made on the Pro Forma Financial Information of the Remaining Group as set out in Appendix II to this circular.

— 76 —

NOTICE OF SPECIAL GENERAL MEETING

GR INVESTMENT INTERNATIONAL LIMITED 金源投資國際有限公司

(Incorporated in Bermuda with limited liability)

(Stock Code: 310)

NOTICE IS HEREBY GIVEN that a special general meeting of GR Investment International Limited (the “ Company ”) will be held at World Trade Centre Club Hong Kong at 38th Floor, World Trade Centre, 280 Gloucester Road, Causeway Bay, Hong Kong on Tuesday, 15 March 2005 at 10:30 a.m. for the purpose of considering and, if thought fit, passing the following resolutions of the Company:

ORDINARY RESOLUTIONS

“ THAT

The sale of the entire paid-up registered capital of Sun Kai Yip (Shanghai) Industrial Investment Co., Ltd (the “Disposal”), particulars of which are set out in a sale and purchase agreement dated 9 September 2004 (the “Agreement”) entered into between GR Investment Holdings and Citydragon Resources in relation to such Disposal, be and is hereby approved and confirmed; and
the director(s) of the Company be and is hereby authorized to do all things and acts and sign all documents which they consider necessary, desirable or expedient in connection with the transactions contemplated under the Agreement.”

SPECIAL RESOLUTION

“ THAT

The Company name be changed to “Prosperity Investment Holdings Limited” and subject to the change of the English name becoming effective, the Company shall change its Chinese name to “嘉進投資國際有限公司 ”.”

By order of the Board GR Investment International Limited Lam Wo Chairman

Hong Kong, 18 February 2005

— 77 —

NOTICE OF SPECIAL GENERAL MEETING

Notes:

A form of proxy for use at the meeting is enclosed herewith.
A shareholder entitled to attend and vote at the special general meeting is entitled to appoint one or more proxies to attend and vote instead of him/her. A proxy need not be a shareholder of the Company.
To be valid, a form of proxy, together with the power of attorney (if any) or other authority (if any) under which it is signed or a notarially certified copy of the power of attorney or authority, must be completed, signed and deposited with the Hong Kong share registrars of the Company, Secretaries Limited at Ground Floor, Bank of East Asia Harbour View Centre, 56 Gloucester Road, Wanchai, Hong Kong as soon as practicable but in any event not later than 48 hours before the time appointed for the holding of the meeting or the adjourned meeting (as the case may be).
Delivery of an instrument appointing a proxy shall not preclude a shareholder from attending and voting in person at the meeting or at any adjourned meeting therefore (as the case may be) should you so wish, and in such event, the instrument appointing a proxy shall be deemed to be revoked.

— 78 —

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Pacific Online Limited — Proxy Solicitation & Information Statement 2005

49284_rns_2005-02-18_3c3e0613-d3c5-4387-9c16-a7824948588b.pdf

GR INVESTMENT INTERNATIONAL LIMITED 金源投資國際有限公司

CONNECTED TRANSACTION AND VERY SUBSTANTIAL DISPOSAL AND PROPOSED CHANGE OF COMPANY NAME

Financial adviser to the Company

BARON CAPITAL LIMITED

Hantec Capital Limited

CONTENTS

DEFINITIONS

DEFINITIONS

DEFINITIONS

GR INVESTMENT INTERNATIONAL LIMITED 金源投資國際有限公司

CONNECTED TRANSACTION AND VERY SUBSTANTIAL DISPOSAL AND PROPOSED CHANGE OF COMPANY NAME

INTRODUCTION

THE SALE AND PURCHASE AGREEMENT

Consideration and Payment Terms

LETTER FROM THE BOARD

Conditions

Exclusion of White Cat

LETTER FROM THE BOARD

Completion

FURTHER INFORMATION ABOUT SUN KAI YIP

LETTER FROM THE BOARD

REASON FOR AND BENEFITS OF THE DISPOSAL

FINANCIAL EFFECTS OF THE DISPOSAL

PROPOSED CHANGE OF NAME

GENERAL

SGM

LETTER FROM THE BOARD

RECOMMENDATION

ADDITIONAL INFORMATION

GR INVESTMENT INTERNATIONAL LIMITED 金源投資國際有限公司

CONNECTED TRANSACTION AND VERY SUBSTANTIAL DISPOSAL

HANTEC CAPITAL LIMITED

GR Investment International Limited

CONNECTED TRANSACTION AND VERY SUBSTANTIAL DISPOSAL

INTRODUCTION

BASIS OF OUR ADVICE

PRINCIPAL FACTORS CONSIDERED

(I) Details of the Disposal

Information of the Group

LETTER FROM INDEPENDENT FINANCIAL ADVISER

Information of Sun Kai Yip

LETTER FROM INDEPENDENT FINANCIAL ADVISER

(II) Reasons of the Disposal

(III) Basis of the Consideration

Price to earning approach

Dividend approach

Net asset approach

(IV) Use of proceeds

(V) Financial effects on the Group

Cashflow

Earnings

LETTER FROM INDEPENDENT FINANCIAL ADVISER

Net asset value

Gearing

CONCLUSION AND OPINION

1. ACCOUNTANTS’ REPORT

APPENDIX I

FINANCIAL INFORMATION OF THE COMPANY

Consolidated Income Statements

Consolidated Balance Sheets

Balance Sheets

Consolidated Statements of Changes in Equity

Consolidated Cash Flow Statements

Notes to the Financial Statements

1. Basis of Preparation of Financial Statements

2. Principal Accounting Policies

(a) Revenue recognition

(b) Basis of consolidation

(c) Subsidiaries

(d) Associates

(e) Jointly controlled entities

(f) Capital reserve or goodwill on consolidation

(g) Investment in securities

(h) Other investments

(i) Property, plant and equipment

(j) Club membership

(k) Cash and cash equivalents

Pacific Online Limited Proxy Solicitation & Information Statement 2005