Shun Ho Holdings Limited - Proxy Solicitation & Information Statement 2004

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

If you are in any doubt as to any aspect of this circular or as to the action to be taken, you should consult your 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 Shun Ho Resources Holdings Limited , you should at once hand this circular to the purchaser or other transferee or to the bank, stockbroker or other agent through whom the sale was effected for transmission to the purchaser or transferee.

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

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SHUN HO RESOURCES HOLDINGS LIMITED ( )

(incorporated in Hong Kong with limited liability)

(Stock Code: 253)

VERY SUBSTANTIAL ACQUISITION ACQUISITION OF PROPERTY

The notice convening the extraordinary general meeting of Shun Ho Resources Holdings Limited (the “Company”) to be held at 1st Floor, Ramada Hotel Kowloon, 73-75 Chatham Road, Tsimshatsui, Kowloon, Hong Kong at 9:15 a.m. on Monday, 21 June 2004 (the “EGM”) is set out on pages 71 to 72 of this circular. Shareholders are advised to read the notice and to complete and return the accompanying form of proxy for use at the EGM in accordance with the instructions printed thereon to the share registrar of the Company in Hong Kong, Tengis Limited at G/F., BEA Harbour View Centre, 56 Gloucester Road, Wanchai, Hong Kong as soon as possible and in any event, not later than 48 hours before the time appointed for holding such meeting or any adjourned meeting (as the case may be). Completion of the form of proxy will not preclude the shareholders from attending and voting at the meeting if they so wish.

5 June 2004

CONTENTS

		Page
Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		1-3
Letter from the Board
1.	Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	4
2.	Formal Agreement for Acquisition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	5-7
3.	Reasons for the Acquisition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	7-8
4.	Very Substantial Acquisition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	9
5.	Effect of Acquisition on Assets and Liabilities of the Group . . . . . . . . . .	9
6.	Extraordinary General Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	10
7.	Actions to be taken . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	10
8.	Procedure of Demanding a Poll . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	10-11
9.	Recommendation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	11
10.	General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	11
Appendix	I − Financial Information of the Group . . . . . . . . . . . . . . . . .	13-55
Appendix	II – Pro Forma Financial Information of the Group . . . . . . . .	56-59
Appendix	III − Valuation Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	60-64
Appendix	IV − General Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	65-70
Notice of	Extraordinary General Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	71-72

−i −

DEFINITIONS

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

“Acquisition”	the acquisition of the Property by the Purchaser from	the
	Vendor
“associates”	has the meaning ascribed to it under the Listing Rules
“Board” “Company”	the board of Directors of the Company Shun Ho Resources Holdings Limited ( ), a company incorporated in Hong Kong with
	limited liability, the Shares of which are listed on	the
	Stock Exchange
“Completion Date”	23 June 2004
“Conditions of Sale”	the conditions of sale contained in an invitation to tender
	made by the receivers acting as agent of the Vendor in
	respect of the Property, the terms and provisions of which
	have become legally binding between the Vendor and	the
	Purchaser upon the acceptance of the Tender by	the
	Vendor
“Director(s)”	director(s) of the Company
“EGM”	the extraordinary general meeting of the Company to be
	held at 1st Floor, Ramada Hotel Kowloon, 73-75
	Chatham Road, Tsimshatsui, Kowloon at 9:15 a.m.	on
	Monday, 21 June 2004
“Group”	the Company and its subsidiary
“Hong Kong”	the Hong Kong Special Administrative Region of	the
	PRC
“Independent Third Party(ies)”	the independent third party or parties who is/are
	independent of and not connected or acting in concert	(as
	defined in the Takeovers Code) with the Company, any of
	the directors, chief executive or substantial shareholders
	of the Company or its subsidiaries or any of their
	respective associates (as defined in the Listing Rules)

−1 −

DEFINITIONS

“Latest Practicable Date”	3 June 2004, 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
“Magnificent Estates”	Stock Exchange Magnificent Estates Limited ( ), a
	company incorporated in Hong Kong with limited
	liability, the shares of which are listed on the Stock
	Exchange
“Magnificent Estates Group”	Magnificent Estates and its subsidiaries
“Magnificent International” or	Magnificent International Hotel Limited (formerly
“Purchaser”	known as Hotel Royale International Limited), a wholly-
	owned subsidiary of Magnificent Estates and is a
	company incorporated in Hong Kong with limited
	liability
“Memorandum of Agreement”	the memorandum of agreement signed by the Purchaser
	and the Vendor in pursuance to Conditions of Sale and
	dated 6 May 2004
“PRC”	The People’s Republic of China
“Property”	the land registered in the Land Registry as Inland Lot No.
	4499, Inland Lot No. 4500, Inland Lot No. 4501, Section
	A of Inland Lot No. 4502, The Remaining Portion of
	Inland Lot No. 4502, Inland Lot No. 4503 and Inland Lot
	No. 4504 and the buildings thereon known as 304-314
	Des Voeux Road West and 12 Lai On Lane, Hong Kong
“SFO”	Securities and Futures Ordinance, Chapter 571 of the
	laws of Hong Kong
“Shares”	share(s) of HK$0.5 each in the share capital of the
	Company
“Shareholders”	holders of the Shares

−2 −

DEFINITIONS

“Shun Ho Technology”	Shun Ho Technology Holdings Limited , a company incorporated in Hong Kong with	Shun Ho Technology Holdings Limited , a company incorporated in Hong Kong with
	limited liability, the shares of which are listed on the
	Stock Exchange
“Shun Ho Technology Group”	Shun Ho Technology and its subsidiaries
“Stock Exchange”	The Stock Exchange of Hong Kong Limited
“Super Delight” or “Vendor”	Super Delight Enterprises Limited, an Independent Third
	Party
“Takeovers Code”	Hong Kong Code on Takeovers and Mergers
“Tender”	the tender submitted by the Purchaser on 23 April 2004 in
	pursuance to an invitation to tender made by the receivers
	acting as agents of the Vendor in respect of the Property
“Total Market Capitalisation”	the average closing price of the securities as stated in the
	Stock Exchange’s daily quotation sheets for the five
	business days immediately preceding 26 April 2004
	multiplied by the total number of Shares in issue on 26
	April 2004
“HK$” and “cents”	Hong Kong dollars and cents, respectively, the lawful
	currency of Hong Kong
“sq.ft.”	square feet
“%”	per cent.

−3 −

LETTER FROM THE BOARD

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SHUN HO RESOURCES HOLDINGS LIMITED ( )

(incorporated in Hong Kong with limited liability)

(Stock Code: 253)

Executive Directors: Mr. William CHENG Kai Man (Chairman) Mr. Jim WONG Tin Yue Mr. Albert HUI Wing Ho Mr. FUNG Chi Keung

Registered Office: 3rd Floor, Shun Ho Tower 24-30 Ice House Street Central Hong Kong

Independent Non-Executive Directors:

Madam Mabel LUI Fung Mei Yee Mr. Vincent KWOK Chi Sun

Non-Executive Director:

Mr. David CHENG Kai Ho

5 June 2004

To the Shareholders

Dear Sir or Madam,

VERY SUBSTANTIAL ACQUISITION ACQUISITION OF PROPERTY

INTRODUCTION

The Board announced in a joint announcement with Magnificent Estates and Shun Ho Technology dated 4 May 2004 that the Purchaser, a wholly-owned subsidiary of Magnificent Estates has been informed on 26 April 2004 that it was successful in the Tender for the Property for a consideration of HK$350,000,000. The Tender has been accepted by way of a letter of acceptance by the Vendor, an Independent Third Party. Since the acceptance of the Tender, a legally-binding formal agreement has been formed between the Vendor and the Purchaser who are bound by the terms and provisions of the Conditions of Sale.

The purpose of this circular is to provide you with further details of the Acquisition and other information as required by the Listing Rules and to give you the notice of EGM at which an ordinary resolution will be proposed to seek your approval, ratification and confirmation of the Acquisition.

−4 −

LETTER FROM THE BOARD

FORMAL AGREEMENT FOR ACQUISITION

(1) Date

26 April 2004, the date on which the Tender has been accepted by way of a letter of acceptance by the Vendor in pursuance to the Conditions of Sale and the terms and conditions of the Conditions of Sale have become legally binding between the Vendor and the Purchaser

(2) Parties Vendor

Super Delight Enterprises Limited; to the best of the Directors’ knowledge, information and belief and having made all reasonable enquiries, (i) the Vendor is an Independent Third Party and is a party independent of connected person (as defined in the Listing Rules) of the Company. Each of the connected persons (as defined in the Listing Rules) of the Company has confirmed that he is independent of and not connected with Super Delight; as the tender for the Property was made by an order of the receivers acting as agent of the Vendor and thus the identity of the ultimate owner of the Vendor is not known to the Directors, the Directors have confirmed that, having made all reasonable enquiries, none of them nor their associates have any previous contacts with the Vendor or its directors. Therefore, to the best of the Directors’ knowledge, information and belief , the Vendor and the ultimate beneficial owner of the Vendor are the Independent Third Parties; and (ii) the Vendor is a property holding company.

Purchaser Magnificent International Hotel Limited (formerly known as Hotel Royale International Limited), a wholly-owned subsidiary of Magnificent Estates.

(3) Sale and Purchase

Upon the acceptance of the Tender by the Vendor by way of a letter of acceptance, a legally-binding formal agreement has been formed between the Vendor and the Purchaser who are bound by the terms and provisions of the Conditions of Sale. The Vendor shall sell and the Purchaser shall purchase the Property upon the terms as set out in the Conditions of Sale with no conditions precedent to the Acquisition contained therein.

(4) Property

The Property is situated at Inland Lot No. 4499, Inland Lot No. 4500, Inland Lot No. 4501, Section A of Inland Lot No. 4502, the Remaining Portion of Inland Lot No. 4502, Inland Lot No. 4503 and Inland Lot No. 4504 and the buildings thereon known as 304−314 Des Voeux Road West and 12 Lai On Lane, Hong Kong. The building thereon was constructed for commercial accommodation purpose which was completed in 1996 and was vacant since 1996 until now. The total area of the building is about 155,023 sq.ft. and the plan to construct 289 hotel guest-rooms has been approved by the Building

−5 −

LETTER FROM THE BOARD

Authority on 29 November 2002. The Property is currently subject to an Occupation Permit No.94/96 dated 11 December 1996 for the use of the Property as commercial office purpose. The application for the Occupation Permit for the Property for the use of the Property as hotel purpose will be submitted to the Building Authority upon completion of the renovation of the Property as a hotel. Please refer to page 12 of this circular for the photograph of the Property.

(5) Consideration

The consideration for the Acquisition is HK$350,000,000. It is a price that the Vendor has accepted through the tender procedure in the open market. The decision to submit the Tender at this consideration is made by reference to current average market value per sq.ft. of similar land in comparable areas in Hong Kong, internal resources and future development of the Group. The consideration has been or shall be (as the case may be) paid by cashier order in the following manners:

(a) a non-refundable initial deposit of HK$15,000,000 was paid on 23 April 2004 upon the submission of the Tender to the Vendor’s solicitors;
(b) a non-refundable further deposit of HK$20,000,000 was paid on 5 May 2004 to the Vendor’s solicitors with the signed Memorandum of Agreement by the Purchaser to the Vendor; and
(c) balance of the consideration in the sum of HK$315,000,000 shall be payable on the Completion Date, i.e. on or before 23 June 2004.

The Directors consider the tender price offered by the Purchaser, the terms of the Conditions of Sale and the Acquisition are fair and reasonable and in the best interests of the Group and the Shareholders as a whole.

The initial deposit of HK$15,000,000, further deposit of HK$20,000,000, part of the balance of consideration in the sum of HK$115,000,000 and the stamp duties of HK$13,125,000 in relation to the Acquisition were or will be (as the case may be) financed by a shareholder’s loan provided by Shun Ho Technology to Magnificent Estates Group with an interest charged at 0.75% per annum above the Hong Kong Interbank Offered Rate repayable upon demand. The provision of such shareholder’s loan will be financed by internal resources of Shun Ho Technology Group. Magnificent Estates is not a connected person of the Company by virtue of Rule 14A.11(5), Note 1 of the Listing Rules, as no connected person(s) of the Company (as defined in Rule 14A.11(1) to (4) of the Listing Rules) is/are (individually/together) entitled to exercise, or control the exercise of, 10% or more of the voting power at general meeting of Magnificent Estates. Accordingly, the provision of such loan is not a connected transaction for the Company. The Directors, including the independent non-executive Directors, are of the view that the provision of such shareholder’s loan by Shun Ho Technology to Magnificent Estates is on normal commercial terms.

−6 −

LETTER FROM THE BOARD

The remaining balance of consideration in the sum of HK$200,000,000 will be financed by a loan facility obtained by the Purchaser from an external bank for a loan period of 8 years with an interest charged at 0.75% per annum above the Hong Kong Interbank Offered Rate. The loan is secured by (a) a first legal charge for all monies over the Property; and (b) a deed of corporate guarantee given by Magnificent Estates assuming a liability up to the extent of HK$200,000,000 and interest thereon in favour of the external bank.

(6) Memorandum of Agreement

In pursuance to the Conditions of Sale, the Memorandum of Agreement has been signed and returned by the Purchaser to the Vendor on 5 May 2004 together with a cashier order in the sum of HK$20,000,000, being the further deposit of the consideration enclosed therein. In the Memorandum of Agreement, the Purchaser has agreed to pay the balance of consideration in the sum of HK$315,000,000 to the Vendor on the Completion Date.

(7) Other principal terms of the Conditions of Sale

Since the acceptance of the Tender, a legally-binding formal agreement has been formed between the Vendor and the Purchaser who are bound by the terms and provisions of the Conditions of Sale. Apart from the terms mentioned above, the followings are the other principal terms of the Conditions of Sale:

(a) the Property is sold in its existing physical condition and the Purchaser acknowledged that it has relied solely upon its own inspection and survey of the Property and that it purchases with full knowledge of the physical condition of the Property and takes it as it stands;
(b) the deeds and documents of title to the Property were available for inspection prior to submission of the Tender and the Purchaser was, in making the Tender, be deemed to have accepted the Vendor’s title to the Property and shall raise no requisition or objection to the Vendor’s title; and
(c) all stamp duties payable on the agreement formed by acceptance of the Tender or the Memorandum of Agreement or the assignment of the Property to the Purchaser shall be borne by the Purchaser.

(8) Completion Date : 23 June 2004

REASONS FOR THE ACQUISITION

The Group, through its major subsidiaries, Shun Ho Technology and Magnificent Estates, is principally engaged in the property investment, property development and trading, property leasing, investment in and operation of hotel and furnished suites and investment holding.

−7 −

LETTER FROM THE BOARD

Magnificent Estates Group is principally engaged in property investment, property development and trading, property leasing, investment in and operation of hotel and furnished suites and investment holding. The Magnificent Estates Group’s current hotel operation includes ownership and management of each of the Ramada Hotel Kowloon in Hong Kong and the Magnificent International Hotel of furnished suites in Shanghai of the PRC.

Shun Ho Technology Group, through its major subsidiary, Magnificent Estates, is principally engaged in the property investment, property development and trading, property leasing, investment in and operation of hotel and furnished suites and investment holding.

Taking into account of the closer economic partnership between Hong Kong and the PRC and the gradual relaxation policy of the PRC government allowing residents of certain additional coastal provinces of the PRC to visit Hong Kong on an individual basis as recently announced, it is expected that there will be an influx of visitors from the PRC. The Group intends that upon the completion of the Acquisition, the Property will be renovated and operated as a hotel which is in line with the Group’s business to accommodate the influx of tourists It is expected that the operation of the Property as a hotel will commence in about 6 months.

The development of the renovation project are summarized as follows:

a. Existing stage of According to the Directors’ assessment, the conversion development: work to the proposed hotel development is approximately 85% completed by the Vendor.
b. Estimated completion According to the Directors’ assessment, the conversion date: work is expected to be completed by Magnificent Estates Group within about 6 months after the completion of the Acquisition.
c. Estimated cost of According to the Director’s assessment, the estimated completing the construction cost to be expended by Magnificent Estates development: Group to complete the proposed hotel development is about HK$25,200,000

The Directors also consider that the Acquisition is an opportunity for the Groups to expand its assets base and to generate income to the Groups in respect of its hotel investment in long term perspective.

−8 −

LETTER FROM THE BOARD

VERY SUBSTANTIAL ACQUISITION

The Company, Magnificent Estates and Shun Ho Technology are all listed on the Stock Exchange. The Company controls over 50% of the total voting right of Shun Ho Technology which in turn with its closely allied associates, South Point Investments Limited, Good Taylor Limited and Shun Ho Technology Developments Limited, all of which are wholly-owned subsidiaries of Shun Ho Technology, hold in aggregate approximately 69.2% of the entire issued share capital of Magnificent Estates. As the consideration for the Acquisition amounts to approximately 305.83% of the Total Market Capitalisation of the Company on a consolidated basis, the Acquisition constitutes a very substantial acquisition for the Company under Rule 14.06 of the Listing Rules and therefore is conditional on the approval of the Shareholders at the EGM. At the relevant EGM, no Shareholders are required to abstain from voting. However, written confirmation has already been obtained by the Company from relevant Shareholder, namely Trillion Resources Limited, who controls approximately 50.6% in the nominal value of the securities giving the right to attend and vote at the EGM to approve the Acquisition and the transactions contemplated thereunder. Therefore, at the EGM, the Shareholder who has given such confirmation will exercise its voting rights so as to ensure that any resolutions for approving the Acquisition and the transactions contemplated thereunder will be passed.

EFFECT OF ACQUISITION ON ASSETS AND LIABILITIES OF THE GROUP

The audited consolidated net tangible assets of the Group as at 31 December 2003 was approximately HK$1,406,853,000, there will not be any impact on the net tangible assets of the Group following the Acquisition. The total liabilities of the Group will be increased by an amount in the sum of the external bank borrowings as mentioned in the paragraph headed “Consideration” on page 6 of this Circular after the Acquisition. There will be an increase in the interest expenses following the increase in the external bank borrowings but such an increase in expenses is expected to be offset by the increase in future income from the Property. Please refer to paragraph 1 headed “Pro forma Net Assets Statement of the Group” and paragraph 2 headed “Pro Forma Income Statement of the Group” in Appendix II of this Circular as set out on pages 58 and 59 respectively. As the Property has not been under any operation and no revenues or expenses have been incurred since its completion of construction in 1996, save for the immaterial value of HK$118 of the government rent payable annually in relation to the property, there were no profit and loss statement and valuation prepared on the Property for the 3 preceding financial years as required under Rule 14.69(4)(b)(i) of the Listing Rules.

No depreciation policy for the property has been confirmed as at the Latest Practicable Date as the renovation of the Property has not yet been completed and the renovated hotel has not yet been in operation. It is nevertheless expected that the impact of the depreciation charges on the profits generated will not be significant.

−9 −

LETTER FROM THE BOARD

EXTRAORDINARY GENERAL MEETING

A notice convening the EGM to be held at 1st Floor, Ramada Hotel Kowloon, 73-75 Chatham Road, Tsimshatsui, Kowloon, Hong Kong at 9:15 a.m. on Monday, 21 June 2004 is set out on pages 71 to 72 of this circular at which an ordinary resolution will be proposed to approve, amongst others, the Acquisition and all incidental transactions contemplated thereunder. However, written confirmation has already been obtained by the Company from relevant Shareholder, namely Trillion Resources Limited, who controls approximately 50.6% in the nominal value of the securities giving the right to attend and vote at the EGM to approve the Acquisition and the transactions contemplated thereunder. Therefore, at the EGM, the Shareholder who has given such confirmation will exercise its voting rights so as to ensure that any resolutions for approving the Acquisition and the transactions contemplated thereunder will be passed.

ACTIONS TO BE TAKEN

A form of proxy for use by the Shareholders at the EGM is enclosed. Whether or not you are able to attend the EGM in person, you are requested to complete and return the form of proxy in accordance with the instructions printed thereon to the share registrars of the Company in Hong Kong, Tengis Limited at G/F., BEA Harbour View Centre, 56 Gloucester Road, Wanchai, Hong Kong, as soon as possible and in any event, not later than 48 hours before the time appointed for holding such meeting or any adjourned meeting (as the case may be). Completion and return of the form of proxy will not preclude you from attending and voting in person at the EGM or any adjourned meeting thereof (as the case may be) should you so wish.

PROCEDURE FOR DEMANDING A POLL

At the EGM, the ordinary resolution put to the vote of the EGM shall be decided on a show of hands unless a poll is (before or on the declaration of the result of the show of hands) demanded:

(i) by the chairman of the EGM; or
(ii) by at least three members present in person or by proxy for the time being entitled to vote at the EGM; or

−10 −

LETTER FROM THE BOARD

(iii) by any member or members present in person or by proxy and representing not less than one tenth of the total voting rights of all the members having the right to vote at the EGM; or
(iv) by a member or members present in person or by proxy and holding shares in the Company conferring a right to vote at the meeting being shares on which an aggregate sum has been paid up equal to not less than one tenth of the total sum paid up on all the shares conferring that right.

RECOMMENDATION

The Directors believe that the Acquisition is in the best interest of the Company and the Shareholders as a whole and the terms and conditions of the Conditions of Sale are fair and reasonable. Accordingly, the Directors recommend the Shareholders to vote in favour of the ordinary resolution as set out in the notice of the EGM.

GENERAL

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

By order of the Board Shun Ho Resources Holdings Limited William CHENG Kai Man Chairman

−11 −

LETTER FROM THE BOARD

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−12 −

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

1. AUDITED FINANCIAL STATEMENTS OF THE GROUP FOR THREE YEARS ENDED 31 DECEMBER 2003

Terms defined herein are applied to this section only.

The following financial information has been extracted from the audited financial statements of the Group for three years ended 31 December 2003 as published in the respective 2002 and 2003 annual reports of the Company.

Consolidated Income Statement

For the year ended 31 December

2003 HK$’000 71,863 (12,999) (23,824)	2002 HK$’000 (Restated) 195,389 (91,629) (28,128)	2001 HK$’000 14,349 (489) (4,567) 9,293 1,785 940 (3,604) − 8,414 (1,300) (240) 6,874 (1,225) 5,649 (5,159) 490 HK Cents 0.17 0.11
35,040 4,125 5,780 (20,531) (26,165) (1,751) (3,071) 4,017 (805) (8,409) (9,214) 6,416	75,632 (2,219) 2,646 (24,817) – 51,242 (4,757) 3,565 50,050 (9,210) 40,840 (29,337)	9,293 1,785 940 (3,604 −
		8,414 (1,300 (240
		6,874 (1,225
		5,649 (5,159
(2,798) HK Cents (1.16) N/A	11,503 HK Cents 4.76 N/A

−13 −

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Consolidated Balance Sheet

At 31 December

2003 HK$’000 588,200 631,535 241,967 93,300 780 (157,333)	2002 HK$’000 (Restated) 643,700 632,434 121,335 93,995 6,977 (127,890)	2001 HK$’000 700,600 633,238 105,733 97,127 7,759 (16,121) 1,528,336 403 70,653 28,627 3,697 2,098 5,617 6,141 117,236 7,442 6,656 52,286 1,526 136,116 1,414 205,440 (88,204) 1,440,132
1,398,449 406 148,972 23,995 2,531 1,954 126 12,209 190,193 16,230 4,654 − 1,242 159,663 − 181,789 8,404	1,370,551 480 – 30,717 3,946 1,692 2,860 9,917 49,612 16,075 6,721 − 6,308 89,607 − 118,711 (69,099)	1,528,336
		403 70,653 28,627 3,697 2,098 5,617 6,141
		117,236
		7,442 6,656 52,286 1,526 136,116 1,414
		205,440
		(88,204
1,406,853	1,301,452

−14 −

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Notes Capital and Reserves Share capital 22 Reserves 23 Minority Interests Non-current Liabilities Convertible bonds 34 Long term bank loans 24 Deferred tax liabilities 25	2003 HK$’000 152,184 276,230 428,414 765,294 − 123,625 89,520 213,145 1,406,853	2002 HK$’000 (Restated) 152,184 273,483 425,667 794,626 − – 81,159 81,159 1,301,452	2001 HK$’000 152,184 307,510
			459,694
			978,152
			2,286 − −
			2,286
			1,440,132

−15 −

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Company Balance Sheet

At 31 December

2003 HK$’000 – 253,234	2002 HK$’000 – 253,222	2001 HK$’000 − 281,577 281,577 − 148 − 92 − 240 279 17,394 10,210 222 28,105 (27,865) 253,712 152,184 101,528 253,712
253,234 201 5 17,557 3 65 17,831 390 17,679 − − 18,069 (238)	253,222 192 146 17,677 95 5 18,115 378 17,500 − − 17,878 237	281,577
		− 148 − 92 −
		240
		279 17,394 10,210 222
		28,105
		(27,865
252,996	253,459
152,184 100,812	152,184 101,275	152,184 101,528
252,996	253,459

−16 −

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Consolidated Statement of Changes in Equity

At 1 January 2001
Share of reserve movements of associates
Increase on revaluation of securities
Net losses not recognised in the income statement
Net profit for the year
Own shares held by a subsidiary
At 31 December 2001
At 1 January 2002
−as originally stated
−adjustment on adoption of SSAP 12 (Revised) (Note 2)
−as restated
Net decrease on revaluation less minority interests
−properties
−securities
Deferred tax liability arising on revaluation of properties,
net of minority interests
Net losses not recognised in the income statement
Net profit for the year
Unrealised loss on securities charged to income
At 31 December 2002
Increase on revaluation of properties less minority interests
Deferred tax liability arising on a change in tax rate,
net of minority interests
Net gains not recognised in the income statement
Net loss for the year
Investment property revaluation reserve released to income
on disposal of property
At 31 December 2003

Total equity
HK$’000
491,097
(19,259)
199
(19,060)
490
(12,833)
459,694
459,694
(20,658)
439,036
(24,501)
(198)
(371)
(25,070)
11,503
198
425,667
6,539
(846)
5,693
(2,798)
(148)
428,414

−17 −

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Consolidated Cash Flow Statement

For the year ended 31 December

2003 HK$’000 (1,751) (3,579) (279) (1,124) (3,001) – (4,206) 26,165 1,659 −	2002 HK$’000 51,242 (4,179) (744) 1,437 – 782 (1,559) – 3,206 −	2001 HK$’000 (Restated) 8,415 (2,440) (688) (1,923) − 138 − − 1,033 (88) 4,447 17 − (117) 1,510 (65,027) (4,335) (63,505) (2,620) 2,441 688 (62,996)
13,884 74 – 7,846 1,153 (1,912) − 21,045 (6,569) 3,579 279 18,334	50,185 (76) 70,653 (3,526) 157 8,699 − 126,092 (2,326) 4,179 744 128,689	4,447 17 − (117 1,510 (65,027 (4,335
		(63,505 (2,620 2,441 688
		(62,996

−18 −

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

2003 HK$’000 (3,477) (760) − 51,402 9,198 (269,367) 1,100 2,800 2,734 − − −	2002 HK$’000 – (12,633) − – – (15,602) – 6,300 2,757 − − −	2001 HK$’000 (Restated) − (5,162) 90 − − (1,082) − 1,175 9,186 (750) 6,708 (292) 9,873 58,717 − 659 (1,493) − 57,883 4,760 (33) 4,727 6,141 (1,414) 4,727
(206,370) 194,624 (943) – (3,307) (46) 190,328 2,292 9,917	(19,178) – (46,509) (52,286) (5,526) – (104,321) 5,190 4,727	9,873
		58,717 − 659 (1,493 −
		57,883
		4,760 (33
12,209	9,917
12,209 −	9,917 −	6,141 (1,414
12,209	9,917

−19 −

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Notes to the Financial Statements

1. GENERAL

The Company is a public limited company incorporated in Hong Kong and its shares are listed on The Stock Exchange of Hong Kong Limited (the “Hong Kong Stock Exchange”).

The principal activities of the Group are investment and operation of hotel and furnished suites, property investment, property development and trading, securities investment and trading, and treasury investment.

The directors consider the Company’s ultimate holding company to be Trillion Resources Limited, an international business company incorporated in the British Virgin Islands.

2. ADOPTION OF REVISED STATEMENT OF STANDARD ACCOUNTING PRACTICE

In the current year, the Group has adopted, for the first time, the revised Statement of Standard Accounting Practice (“SSAP”) No. 12 “Income Taxes” (“SSAP 12 (Revised)”) issued by the Hong Kong Society of Accountants.

The principal effect of the implementation of SSAP12 (Revised) is in relation to deferred tax. SSAP 12 (Revised) requires the adoption of a balance sheet liability method, whereby deferred tax is recognised in respect of all temporary differences between the carrying amount of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, with limited exceptions. In the absence of any specific transitional requirements in SSAP 12 (Revised), the new accounting policy has been applied retrospectively. Comparative amounts for the prior year have been restated accordingly.

The financial effects of the change in accounting policy on the consolidated balance sheet are summarised below:

Reserves Retained profits Investment property revaluation reserve Other property revaluation reserve (Goodwill) negative goodwill on consolidation dealt with in reserves Negative goodwill Minority interests Deferred tax liabilities	At 1 January 2003 As originally stated Prior period adjustments As restated HK$’000 HK$’000 HK$’000 196,675 (1,543) 195,132 75,001 (3,382) 71,619 24,480 (5,739) 18,741 3,869 (10,860) (6,991)	At 1 January 2003 As originally stated Prior period adjustments As restated HK$’000 HK$’000 HK$’000 196,675 (1,543) 195,132 75,001 (3,382) 71,619 24,480 (5,739) 18,741 3,869 (10,860) (6,991)	At 1 January 2003 As originally stated Prior period adjustments As restated HK$’000 HK$’000 HK$’000 196,675 (1,543) 195,132 75,001 (3,382) 71,619 24,480 (5,739) 18,741 3,869 (10,860) (6,991)	At 1 January 2002 As stated originally Prior period adjustments As restated HK$’000 HK$’000 HK$’000 184,677 (1,048) 183,629 96,713 (3,382) 93,331 27,269 (5,368) 21,901 3,869 (10,860) (6,991)	At 1 January 2002 As stated originally Prior period adjustments As restated HK$’000 HK$’000 HK$’000 184,677 (1,048) 183,629 96,713 (3,382) 93,331 27,269 (5,368) 21,901 3,869 (10,860) (6,991)	At 1 January 2002 As stated originally Prior period adjustments As restated HK$’000 HK$’000 HK$’000 184,677 (1,048) 183,629 96,713 (3,382) 93,331 27,269 (5,368) 21,901 3,869 (10,860) (6,991)
	300,025 137,188 844,963	(21,524) (9,298) (50,337)	278,501 127,890 794,626	312,528 16,121 978,152	(20,658) (809) (56,520)	291,870 15,312 921,632
	1,282,176 –	(81,159) 81,159	1,201,017 81,159	1,306,801 –	(77,987) 77,987	1,228,814 77,987

This change in accounting policy has resulted in an increase in the loss of the Group for the year ended 31 December 2003 by HK$2,187,000 (2002: decrease in profit of HK$495,000) and decreases in the Group’s investment property revaluation reserve and other property revaluation reserve in respect of that year by HK$319,000 (2002: Nil) and HK$527,000 (2002: HK$371,000) respectively.

−20 −

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

3. SIGNIFICANT ACCOUNTING POLICIES

The financial statements have been prepared under the historical cost convention as modified for the revaluation of certain properties and investments in securities.

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

Basis of consolidation

The consolidated financial statements incorporate the financial statements of the Company and its subsidiaries made up to the balance sheet date.

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

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

Magnificent Estates Limited (“Magnificent Estates”) became a subsidiary of the Company on 22 October 2001. On consolidation of Magnificent Estates, the shares in the Company held by a subsidiary of Magnificent Estates have been accounted for using the treasury stock method whereby consolidated shareholders’ equity is reduced by the carrying amount of the shares in the Company held by the said subsidiary at the date when Magnificent Estates became a subsidiary of the Company. The shares in a listed subsidiary, Shun Ho Technology Holdings Limited (“Shun Ho Technology”), held by Magnificent Estates’s subsidiary have been accounted for by Shun Ho Technology on the same basis.

Goodwill/negative goodwill

Goodwill/negative goodwill arising on consolidation represents the excess/shortfall of the cost of acquisition over the Group’s interest in the fair value of the identifiable assets and liabilities of a subsidiary or an associate at the date of acquisition.

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

Goodwill arising on acquisitions on or after 1 January 2001 is capitalised and amortised on a straight-line basis over its useful economic life. Goodwill arising on the acquisition of an associate is included within the carrying amount of the associate. Goodwill arising on the acquisition of subsidiaries is presented separately in the balance sheet. On disposal of a subsidiary or an associate, the attributable amount of unamortised goodwill is included in the determination of the profit or loss on disposal.

Negative goodwill arising on acquisitions on or after 1 January 2001 is presented as a deduction from assets and will be released to income based on an analysis of the circumstances from which the balance resulted.

To the extent that the negative goodwill is attributable to losses or expenses anticipated at the date of acquisition, it is released to income in the year in which those losses or expenses arise. The remaining negative goodwill is recognised as income over the expected useful life of the identified assets acquired. Negative goodwill arising on the acquisition of an associate is deducted from the carrying amount of that associate.

Negative goodwill arising on the acquisition of subsidiaries is presented separately in the balance sheet as a deduction from assets.

Investments in subsidiaries

Investments in subsidiaries are included in the Company’s balance sheet at cost less any identified impairment loss. The results of subsidiaries are accounted for by the Company on the basis of dividends received and receivable.

−21 −

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Interests in associates

The consolidated income statement includes the Group’s share of the post-acquisition results of its associates for the year. In the consolidated balance sheet, interests in associates are stated at the Group’s share of the net assets of the associates.

When the Group transacts with its associates, unrealised profits or losses are eliminated to the extent of the Group’s interest in the relevant associate except where unrealised losses provide evidence of an impairment of the asset transferred.

Investments in securities

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

All securities are measured at subsequent reporting dates at fair value.

Where securities are held for trading purposes, unrealised gains and losses are included in net profit or loss for the period. For other securities, unrealised gains and losses are dealt with in equity until the security is disposed of or is determined to be impaired, at which time the cumulative gain or loss is included in net profit or loss for the period.

Investment properties

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

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

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

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

Property, plant and equipment

Hotel property and furnished suites

Hotel property and furnished suites for short-term lease purposes are stated at their open market value based on independent professional valuations at the balance sheet date. Any revaluation increase arising on the revaluation of these properties is credited to other property revaluation reserve except that it reverses a revaluation decrease of the same asset previously recognised as an expense, in which case the increase is credited to the income statement to the extent of the decrease previously charged. A decrease in the net carrying amount arising on revaluation of the hotel property or the furnished suites is dealt with as an expense to the extent that it exceeds the balance on reserve relating to a previous revaluation of the same asset.

On disposal of the hotel property or the furnished suites, the balance on other property revaluation reserve attributable to that property is transferred to retained profits.

It is the Group’s practice to maintain its hotel property and furnished suites in a continual state of sound repairs and to make improvements from time to time, accordingly the directors consider that depreciation is not necessary as the properties maintain a residual value at least equal to their carrying value. Repairs and maintenance expenditures are charged to the income statement in the year in which they are incurred.

−22 −

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Other property, plant and equipment

Other property, plant and equipment are stated at cost or valuation less depreciation where appropriate and any identified impairment loss. Land and buildings reclassified from investment properties are stated at the carrying amount at the time when the reclassification took place, less subsequent depreciation and any identified impairment loss.

No depreciation is provided on hotel operating equipment which is included in furniture, fixtures and equipment at historical cost and all subsequent replacements are expensed in the period in which they are incurred. Depreciation is provided to write off the cost or valuation of other property, plant and equipment over their estimated useful lives from the date on which they become fully operational and after taking into account their estimated residual value, using the straight line method, at the following rates per annum:

Leasehold land Over the term of the lease Buildings 2% per annum Furniture, fixtures and equipment 20%-33[1] ⁄3% per annum Motor vehicles and vessels 20% per annum

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

Properties under development

Properties under development are stated at cost less any identified impairment loss. Cost includes the cost of land, development expenditure, borrowing costs capitalised and other attributable expenses.

Properties for sale

Properties for sale are carried at the lower of cost and net realisable value. Cost includes the cost of land, development expenditure, borrowing costs capitalised and other attributable expenses. Net realisable value is determined by management based on prevailing market conditions.

Inventories

Inventories, representing stocks of food, beverages and general stores, are stated at the lower of cost and net realisable value. Cost is calculated using the first-in, first-out method.

Operating leases

Leases where substantially all the risks and rewards of ownership of assets remain with the lessors are accounted for as operating leases.

Rentals payable (receivable) under operating leases are charged (credited) to income statement on a straight line basis over their respective lease terms.

Impairment

At each balance sheet date, the Group reviews the carrying amounts of its assets to determine whether there is any indication that those assets have suffered an impairment loss. If the recoverable amount of an asset is estimated to be less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount. Impairment losses are recognised as an expense immediately, unless the relevant asset is carried at a revalued amount under another SSAP, in which case the impairment loss is treated as a revaluation decrease under that SSAP.

Where an impairment loss subsequently reverses, the carrying amount of the asset is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset in prior years. A reversal of an impairment loss is recognised as income immediately, unless the relevant asset is carried at a revalued amount under another SSAP, in which case the reversal of the impairment loss is treated as a revaluation increase under that SSAP.

−23 −

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Foreign currencies

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

On consolidation, the assets and liabilities of overseas operations are translated at the exchange rates ruling on the balance sheet date. Income and expense items are translated at the average exchange rates for the year. Exchange differences arising, if any, are classified as equity and transferred to the Group’s translation reserve. Such translation differences are recognised as income or as expenses in the period in which the operation is disposed of.

Taxation

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

The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the income statement because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible.

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

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

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

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

Capitalisation of borrowing costs

Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are capitalised as part of the cost of those assets. Capitalisation of such borrowing costs ceases when the assets are substantially ready for their intended use or sale. Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs capitalised.

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

Retirement benefit costs

Payments to defined contribution retirement benefit plans are charged as an expense as they fall due.

Revenue recognition

Income from the operation of hotel and furnished suites is recognised when services are rendered.

−24 −

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Rental income in respect of properties under operating leases is recognised and credited to the income statement on a straight line basis over the relevant lease term.

Sales of properties are recognised on the execution of a binding sales agreement.

Sales of investments are recognised when the sale becomes unconditional.

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

Dividend income from investments is recognised when the Group’s rights to receive payment have been established.

4. TURNOVER

Turnover represents the aggregate of income from operation of hotel and furnished suites, property rentals, proceeds from sale of properties and trading securities, interest and dividend income, and is analysed as follows:

Income from operation of hotel and furnished suites Property rentals Proceeds from sale of trading securities Proceeds from sale of properties Interest income from a property owning associate from debt securities Dividend income Income from portal site operation	THE GROUP 2003 2002 HK$’000 HK$’000 32,851 41,189 20,480 24,864 14,674 7,166 – 117,247 2,400 3,000 1,179 1,179 279 744 − − 71,863 195,389	2001 HK$’000 6,500 4,700 − − 2,441 688 20
		14,349

5. BUSINESS AND GEOGRAPHICAL SEGMENTS

Business Segments

For management purposes, the Group is mainly organised into four operations. Those operations based on which the Group reports its primary segment information are as follows:

Hospitality services

investment and operation of hotel and furnished suites

Property investment – property letting Property development and trading – development and trading of properties Securities investment and trading – investment and trading of listed securities

−25 −

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Segment information about these businesses is presented below:

Revenue and Results

Year ended 31 December 2003

TURNOVER External RESULTS Segment results Other income Unallocated corporate expenses Loss from operations Finance costs Share of profits of associates Loss before taxation Income tax expense Loss before minority interests Minority interests Net loss for the year	Hospitality services HK$’000 32,851 9,413 –	Property investment Property development and trading HK$’000 HK$’000 22,880 – (1,506) – 4,017 –	Securities investment and trading HK$’000 16,132 8,290 –	Other operations Consolidated HK$’000 HK$’000 – 71,863 (141) 16,056	Other operations Consolidated HK$’000 HK$’000 – 71,863 (141) 16,056

					16,056
				–	158 (17,965)
					(1,751) (3,071) 4,017
					(805) (8,409)
					(9,214) 6,416
					(2,798)

−26 −

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Balance Sheet

At 31 December 2003

			Property	Securities
			development	investment
	Hospitality	Property	and	and	Other
	services	investment	trading	trading	operations	Consolidated
	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000
ASSETS
Segment assets	809,820	590,162	149,067	25,258	129	1,574,436
Interests in associates	–	93,300	–	–	–	93,300
Unallocated corporate assets						78,239
Negative goodwill	(62,193)	(77,642)	(17,498)	–	–	(157,333)
Consolidated total assets						1,588,642

LIABILITIES
Segment liabilities	7,819	4,905	2,723	448	–	15,895
Unallocated corporate
liabilities						379,039
Consolidated total liabilities						394,934

Other Information
_Year ended 31 December _	2003
				Hospitality	Property	Other
				services	investment	operations
				HK$’000	HK$’000	HK$’000
Capital additions
−investment properties				–	3,477	–
−property, plant and
equipment				380	375	–
−properties under
development				241,967	–	–
Depreciation and
amortisation				471	114	108
Loss on disposal of an
investment property				–	26,165	–

−27 −

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Revenue and Results

Year ended 31 December 2002

TURNOVER External RESULTS Segment results Other income Unallocated corporate expenses Profit from operations Finance costs Share of profits of associates Profit before taxation Income tax expense Profit before minority interests Minority interests Net profit for the year	Hospitality services HK$’000 41,189 11,310 –	Property investment Property development and trading HK$’000 HK$’000 27,864 117,247 26,556 32,552 3,565 –	Securities investment and trading HK$’000 9,089 (220) –	Other operations Consolidated HK$’000 HK$’000 – 195,389 (157) 70,041	Other operations Consolidated HK$’000 HK$’000 – 195,389 (157) 70,041

					70,041
				–	276 (19,075)
					51,242 (4,757) 3,565
					50,050 (9,210)
					40,840 (29,337)
					11,503

−28 −

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Balance Sheet

At 31 December 2002

			Property	Securities
			development	investment
	Hospitality	Property	and	and	Other
	services	investment	trading	trading	operations	Consolidated
	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000
ASSETS
Segment assets	568,868	645,303	121,336	38,176	239	1,373,922
Interests in associates	–	93,995	–	–	–	93,995
Unallocated corporate assets						80,136
Negative goodwill	(52,310)	(62,530)	(13,050)	–	–	(127,890)
Consolidated total assets						1,420,163

LIABILITIES
Segment liabilities	5,028	7,953	4,486	474	6	17,947
Unallocated corporate
liabilities						181,923
Consolidated total liabilities						199,870

−29 −

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Other Information

Year ended 31 December 2002

			Securities
	Hospitality	Property	investment	Other
	services	investment	and trading	operations
	HK$’000	HK$’000	HK$’000	HK$’000
Capital additions
Property, plant and equipment	13,333	75	–	–
Depreciation and amortisation	524	106	–	108
Unrealised loss on
Trading securities	–	–	1,437	–
Other securities	–	–	782	–

Revenue and Results

Year ended 31 December 2001

TURNOVER External sales RESULTS Segment results Interest and other income Unallocated corporate expenses Profit from operations Finance costs Share of profits of associates Segment results Unallocated income less expenses Profit before taxation Taxation Profit before minority interests Minority interests Net profit for the year	Hospitality services HK$’000 6,500 2,216 1,463	Property investment Property development and trading HK$’000 HK$’000 5,271 − 4,624 − 9,493 −	Securities investment and trading HK$’000 985 2,770 (4,898)	Other operations Consolidated HK$’000 HK$’000 20 12,776 (105) 9,505	Other operations Consolidated HK$’000 HK$’000 20 12,776 (105) 9,505

					9,505
				(23)	2,513 (3,604
					8,414 (1,300
					7,114
					6,035 (6,275
					(240
					6,874 (1,225
					5,649 (5,159
					490

−30 −

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Balance Sheet

At 31 December 2001

			Property	Securities
	Hospitality	Property	development	investment	Other
	services	investment	and trading	and trading	operations	Consolidated
	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000
ASSETS
Segment assets	486,188	783,155	176,386	36,869	354	1,482,952
Interests in associates	–	97,127	–	–	–	97,127
Unallocated corporate assets						81,615
Negative goodwill	(6,837)	(7,250)	(2,034)	–	–	(16,121)
Consolidated total assets						1,645,573

LIABILITIES
Segment liabilities	2,815	7,722	170	8	−	10,715
Unallocated corporate
liabilities						197,011
Consolidated total liabilities						207,726

Other Information

Year ended 31 December 2001

			Securities
	Hospitality	Property	investment	Other
	services	investment	and trading	operations
	HK$’000	HK$’000	HK$’000	HK$’000
Capital additions to property, plant
and equipment	209	5,148	–	–
Depreciation of property, plant
and equipment	103	42	–	54
Impairment loss on other securities	−	−	138	−

Geographical Segments

The following is an analysis of the Group’s turnover by geographical market:

Hong Kong Other regions in the People’s Republic of China (the “PRC”)	THE GROUP 2003 2002 HK$’000 HK$’000 60,203 186,022 11,660 9,367 71,863 195,389	2001 HK$’000 12,776 −
		12,776

−31 −

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

The following is an analysis of the carrying amount of assets and additions to investment properties, property, plant and equipment and properties under development, analysed by the geographical areas in which the assets are located:

Segment assets Hong Kong The PRC Unallocated	Carrying amount of 2003 2002 HK$’000 HK$’000 1,390,362 1,220,687 104,980 105,481 93,300 93,995 1,588,642 1,420,163	assets 2001 HK$’000 1,565,309 80,264 − 1,645,573	Additions to investment properties, property, plant and equipment and properties under development 2003 2002 HK$’000 HK$’000 273,461 15,696 380 13,321 – – 273,841 29,017	Additions to property, plant and equipment 2001 HK$’000 5,104 253 −
				5,357

Following the exercise of the warrants issued by Magnificent Estates by Shun Ho Technology and its subsidiary during the year, the beneficial interest in Magnificent Estates held by Shun Ho Technology and its subsidiaries has increased from 65.23% to 69.23%, which gave rise to a negative goodwill on consolidation of HK$33,649,000. For the purpose of presenting the Group’s segment assets by geographical areas, the negative goodwill has been allocated to Magnificent Estates group’s assets located in Hong Kong and the PRC in the respective amounts of HK$31,271,000 and HK$2,378,000.

6. GAIN (LOSS) ON INVESTMENTS IN SECURITIES

Unrealised gain (loss) on trading securities Realised gain on other securities Unrealised loss on other securities	THE GROUP 2003 2002 HK$’000 HK$’000 1,124 (1,437) 3,001 – – (782) 4,125 (2,219)	2001 HK$’000 1,923 − (138)
		1,785

7. OTHER OPERATING INCOME

Included in other operating income for the year is negative goodwill amounted to HK$4,206,000 (2002: HK$1,559,000; 2001: Nil) released.

−32 −

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

8. (LOSS) PROFIT FROM OPERATIONS

(Loss) profit from operations has been arrived at after charging (crediting): Auditors’ remuneration Staff costs including directors’ emoluments Repairs and maintenance Depreciation of property, plant and equipment Realised (gain) loss on trading securities Rental income from investment properties, less outgoings of HK$1,285,000 (2002: HK$2,045,000; 2001: HK$646,000) Dividends from Listed securities Unlisted investments FINANCE COSTS Interests on: Bank loans and overdrafts wholly repayable within five years Other borrowings wholly repayable within five years Convertible bonds Bond issue expenses amortised Less: Amount capitalised on properties under development	2003 HK$’000 1,039 24,116 613 1,659 (2,708) (19,195) (279) – 2003 HK$’000 3,307 – – –	THE GROUP 2002 HK$’000 1,006 24,645 821 3,206 75 (22,819) (704) (40) THE GROUP 2002 HK$’000 4,841 585 100 13	2001 HK$’000 530 6,994 726 1,033 − (4,053) (688) − 2001 HK$’000 842 629 22 3 1,496 (196) 1,300
	3,307 (236)	5,539 (782)	1,496 (196
	3,071	4,757

9. FINANCE COSTS

Borrowing costs capitalised during the year were calculated at Hong Kong Inter-bank Offer Rate plus a specified margin.

−33 −

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

10. DIRECTORS’ AND EMPLOYEES’ EMOLUMENTS

2003 HK$’000 (a) Directors’ emoluments Directors’ fees to independent non-executive directors 100 Other emoluments to executive directors Salaries and other benefits 5,484 Contributions to provident fund scheme 36 Total emoluments 5,620 The emoluments of the directors are within the following bands. 2003 Number of directors Nil to HK$1,000,000 3 HK$1,000,001 to HK$1,500,000 1 HK$1,500,001 to HK$2,000,000 1 HK$2,000,001 to HK$2,500,000 – HK$2,500,001 to HK$3,000,000 1	THE GROUP 2002 HK$’000 100 4,584 36 4,720 2002 Number of directors 3 1 1 1 –	2001 HK$’000 20 1,170 9
		1,199

		2001 Number of directors 6 − − − −

(b) Employees’ emoluments

Of the five individuals in the Group with the highest emoluments, three (2002 and 2001: three) were directors of the Company, whose remunerations are included above. The emoluments of the remaining two (2002 and 2001: two) individuals, whose remunerations are individually below HK$1,000,000, are as follows:

Salaries and other benefits Contributions to provident fund scheme	THE GROUP 2003 2002 HK$’000 HK$’000 1,105 1,080 24 24 1,129 1,104	2001 HK$’000 267 6
		273

−34 −

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

11. INCOME TAX EXPENSE

THE GROUP 2003 2002 HK$’000 HK$’000 1,503 7,108	THE GROUP 2003 2002 HK$’000 HK$’000 1,503 7,108	2001 HK$’000 255
1,690 4,403 6,093 7,596 813	1,706 – 1,706 8,814 396	− −
		−
		255 970
8,409	9,210	1,225

Hong Kong Profits Tax is calculated at 17.5% (2002: 16%; 2001: 16%) of estimated assessable profit for the year. During the year, the Hong Kong Profits Tax rate was increased from 16% to 17.5% for the year of assessment 2003/2004. The effect of this increase has been reflected in the calculation of the current and deferred tax balances at 31 December 2003.

Taxation arising in other jurisdictions is calculated at the rates prevailing in the respective jurisdictions.

The charge for the year can be reconciled to the (loss) profit before taxation as follows:

(Loss) profit before taxation Tax at the domestic income tax rate of 17.5% (2002: 16%) Tax effect of expenses that are not deductible in determining taxable profit Tax effect of income that is not taxable in determining taxable profit Tax effect of tax losses not recognised Utilisation of tax losses previously not recognised Effect of a change in tax rate on deferred tax liabilities brought forward Effect of different tax rates of subsidiaries operating in other jurisdictions Effect of share of taxation of associates Others Tax charge for the year	THE GROUP 2003 2002 HK$’000 HK$’000 (805) 50,050	THE GROUP 2003 2002 HK$’000 HK$’000 (805) 50,050

	(141) 4,740 (1,798) 1,032 (1,453) 4,403 632 110 884	8,008 524 (1,002 1,425 (352 – 754 (174 27
	8,409	9,210

−35 −

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

12. (LOSS) EARNINGS PER SHARE

The calculation of the basic loss/earnings per share is based on the net loss for the year of HK$2,798,000 (2002: net profit of HK$11,503,000; 2001: net profit of HK$490,108) and on 241,766,050 (2002: 241,766,050; 2001: 292,191,238) shares in issue during the year. The number of shares adopted in the calculation of the loss/earnings per share has been arrived at after eliminating the shares in the Company held by a subsidiary.

Diluted earnings per share for both years presented are not shown as the exercise prices of the warrants and share options issued/granted by the Company’s listed subsidiaries, Shun Ho Technology and Magnificent Estates, are higher than the average market prices for shares for both years and the conversion of the convertible bonds issued by Magnificent Estates which were outstanding during the prior year, would be anti-dilutive.

As a result of the change in accounting policy as described in note 2 above, the earnings per share for the corresponding comparative prior year has been adjusted as follows:

Basic earnings per share for the year ended 31 December 2002 Reported figure before adjustment Adjustment arising from adoption of SSAP 12 (Revised) Restated	HK Cents 4.96 (0.20) 4.76

The calculation of the earnings per share for the year of 2001 is based on the following data:

Earnings for the purpose of basic earnings per share
Effect of dilutive potential ordinary shares in respect of
convertible bonds issued by Magnificent Estates
Earnings for the purpose of diluted earnings per share
Weighted average number of ordinary shares for the purpose
of basic earnings per share
Effect of dilutive potential ordinary shares in respect of
convertible bonds issued by Magnificent Estates
Weighted average number of ordinary shares for the purpose of
diluted earnings per share

2001
HK$
490,108
(196,940)
293,168
2001
Number of shares
292,191,238
(27,613,793)
264,577,445

The weighted average number of shares adopted for the calculation of the earnings per share for the year of 2001 have been arrived at after eliminating the shares in the Company held by a subsidiary.

The computation of the diluted earnings per share for the year of 2001 has not assumed the exercise of the warrants issued and share options granted by Shun Ho Technology and Magnificent Estates, as the exercise prices of the warrants and share options were higher than the average market price for shares for that year.

−36 −

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

13. INVESTMENT PROPERTIES

Investment properties in Hong Kong, at valuation At beginning of the year Additions Carried by subsidiaries acquired Disposals Revaluation increase (decrease) At end of the year	THE GROUP 2003 2002 HK$’000 HK$’000 643,700 700,600 3,477 – – – (78,000) – 19,023 (56,900) 588,200 643,700	2001 HK$’000 − – 700,600 − −
		700,600

An analysis of the investment properties is as follows:

Land and buildings in Hong Kong on land held on Long lease Medium-term leases	THE GROUP 2003 2002 HK$’000 HK$’000 383,400 364,000 204,800 279,700 588,200 643,700	2001 HK$’000 387,000 313,600
		700,600

The investment properties of the Group were revalued on 31 December 2003 on an open market value basis by Dudley Surveyors Limited, an independent firm of property valuers. This valuation gave rise to a revaluation increase of HK$19,023,000 (2002: revaluation decrease of HK$56,900,000; 2001: Nil), which, after adjusting for minority interests, has been dealt with in the investment property revaluation reserve.

The Group’s investment properties with an aggregate carrying value of approximately HK$519 million (2002: HK$616 million; 2001: HK$656 million) were rented out under operating leases at the balance sheet date.

−37 −

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

14. PROPERTY, PLANT AND EQUIPMENT

Land and buildings Hotel property and furnished suites Property under construction Property for own use HK$’000 HK$’000 HK$’000 560,000 − 66,500 – − –	Land and buildings Hotel property and furnished suites Property under construction Property for own use HK$’000 HK$’000 HK$’000 560,000 − 66,500 – − –	Land and buildings Hotel property and furnished suites Property under construction Property for own use HK$’000 HK$’000 HK$’000 560,000 − 66,500 – − –	Furniture, fixtures and equipment HK$’000 7,293 760	Motor vehicles and vessels HK$’000 3,313 –	Total HK$’000 637,106 760
560,000 – – –	− − − −	66,500 907 759 1,666	8,053 1,230 556 1,786	3,313 2,535 344 2,879	637,866
					4,672 1,659
					6,331
560,000 560,000 480,000	− − 80,707	64,834 65,593 66,352	6,267 6,063 3,686	434 778 2,493	631,535

					632,434

					633,238

					Furniture, fixtures and equipment HK$’000
					424 (424

THE COMPANY

COST

At 1 January 2003 and 31 December 2003 424 DEPRECIATION At 1 January 2003 and 31 December 2003 (424)

NET BOOK VALUES

At 31 December 2003 and 31 December 2002 and 31 December 2001 –

−38 −

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

The following is an analysis of the net book value of the Group’s land and buildings:

Properties on land under medium-term leases Hotel property in Hong Kong Furnished suites in the PRC Property under construction in the PRC Property in Hong Kong for own use on long lease land	2003 HK$’000 450,000 110,000	2002 HK$’000 450,000 110,000	2001 HK$’000 480,000 −
	560,000 − 64,834	560,000 − 65,593	480,000 80,707 66,352
	624,834	625,593	627,059

The Group’s hotel property and furnished suites are carried at their open market value, on an existing use basis, at 31 December 2003, as valued by Dudley Surveyors Limited, an independent firm of property valuers.

Had the Group’s hotel property and furnished suites not been revalued, they would have been included in these financial statements at the historical cost of approximately HK$571,012,000 (2002: HK$571,012,000; 2001: HK$480,000,000).

The Group’s property for own use, which was reclassified from investment properties in 2001, is carried at its open market value, on an existing use basis, at 31 December 2000, as valued by Dudley Surveyors Limited, an independent firm of property valuer, less subsequent depreciation.

Other property, plant and equipment are carried at cost less depreciation.

15. PROPERTIES UNDER DEVELOPMENT

At cost At beginning of the year Additions during the year Transferred to properties for sale on completion Carried by subsidiaries acquired during the year At end of the year	THE GROUP 2003 2002 HK$’000 HK$’000 121,335 105,733 269,604 15,602 (148,972) – – – 241,967 121,335	2001 HK$’000 − 1,081 – 104,652
		105,733

An analysis of the Group’s properties under development is as follows:

Properties in Hong Kong on Long leases Medium-term leases	THE GROUP 2003 2002 HK$’000 HK$’000 241,967 – – 121,335 241,967 121,335	THE GROUP 2003 2002 HK$’000 HK$’000 241,967 – – 121,335 241,967 121,335
		121,335

Included in the carrying amounts of the properties are interest expense of HK$63,000 (2002: HK$11,534,000) capitalised.

−39 −

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

16. INTERESTS IN SUBSIDIARIES

Shares listed in Hong Kong, at cost Unlisted shares, at cost Amounts due from subsidiaries less allowance Market value of listed shares	THE COMPANY 2003 2002 HK$’000 HK$’000 − − 14,015 14,015 239,219 239,207 253,234 253,222 – –	2001 HK$’000 292 14,849 266,436
		281,577

		196

The amounts due from subsidiaries are unsecured with no fixed repayment terms. In the opinion of the directors, repayment of the amounts will not be demanded within one year from the balance sheet date, accordingly the amounts are classified as non-current assets.

Particulars regarding the principal subsidiaries at 31 December 2003 are set out in note 31.

17. INTERESTS IN ASSOCIATES

Unlisted associates Share of net assets Amount due from an associate	THE GROUP 2003 2002 HK$’000 HK$’000 8,514 6,410 84,786 87,585 93,300 93,995	2001 HK$’000 5,491 91,636
		97,127

Particulars regarding the associates at 31 December 2003 are as follows:

		Proportion of
		nominal value of
	Place of	issued ordinary
	incorporation and	capital held by
Name of associate	operation	subsidiary	Principal activity
		%
Lucky Country Development	Hong Kong	50	Property
Limited			investment
Beautiful Sky Investment Limited	Hong Kong	50	Inactive

−40 −

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

The following financial information is prepared from the financial statements of a significant associate, Lucky Country Development Limited.

Operating results

Turnover Profit from ordinary activities before taxation Profit from ordinary activities before taxation attributable to the Group Financial position Non-current asset Investment property Current assets Current liabilities Non-current liabilities Amounts due to shareholders Other liabilities Net assets Net assets attributable to the Group	Year ended 31 December 2003 2002 HK$’000 HK$’000 15,542 15,536 8,042 7,130 4,021 3,565 At 31 December 2003 2002 HK$’000 HK$’000 185,000 185,000 389 385 (668) (1,204) (167,371) (171,607) (560) – 16,790 12,574 8,395 6,287

−41 −

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

18. INVESTMENTS IN SECURITIES

THE GROUP Listed securities at market value Equity securities listed: In Hong Kong Outside Hong Kong Debt securities listed outside Hong Kong Unlisted equity investments	Other securities (non-current) 2003 2002 2001 HK$’000 HK$’000 HK$’000 – 5,120 5,520 – 1,077 1,459 – – − 780 780 780 780 6,977 7,759	Trading securities (current) 2003 2002 2001 HK$’000 HK$’000 HK$’000 1,229 8,746 8,370 – – − 22,766 21,971 20,257 – – − 23,995 30,717 28,627	Trading securities (current) 2003 2002 2001 HK$’000 HK$’000 HK$’000 1,229 8,746 8,370 – – − 22,766 21,971 20,257 – – − 23,995 30,717 28,627
			28,627

19. NEGATIVE GOODWILL

	THE GROUP
	HK$’000
GROSS AMOUNT (Note)
At 1 January 2003	129,449
Arising on acquisition during the year	33,649
At 31 December 2003	163,098
RELEASED TO INCOME
At 1 January 2003	1,559
Amount released for the year	4,206
A 31 December 2003	5,765
CARRYING AMOUNT
At 31 December 2003	157,333

At 31 December 2002	127,890

At 31 December 2001	16,121

Note: The negative goodwill arose from the acquisition of interests in Magnificent Estates. The negative goodwill, other than the portion attributable to properties held for sale, is recognised to income on a straight-line basis over a period of approximately 40 years, being the average useful life of the properties carried by Magnificent Estates group for long term purposes. Negative goodwill attributable to the properties held for sale will be released to income upon disposal of such properties.

−42 −

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

20. TRADE AND OTHER RECEIVABLES

Except for an average credit period of 30 to 60 days granted to travel agencies and customers of the hotel and the furnished suites, the Group does not allow any credit period to its customers.

The following is an aged analysis of trade and other receivables at the balance sheet date:

0-30 days 31-60 days Over 60 days	THE GROUP 2003 2002 HK$’000 HK$’000 1,941 2,468 101 735 489 743 2,531 3,946	2001 HK$’000 2,494 554 649
		3,697

21. TRADE AND OTHER PAYABLES

The following is an aged analysis of trade and other payables at the balance sheet date:

0-30 days 31-60 days Over 60 days	THE GROUP 2003 2002 HK$’000 HK$’000 10,180 11,502 263 651 5,787 3,922 16,230 16,075	2001 HK$’000 2,868 296 4,278
		7,442

22. SHARE CAPITAL

Ordinary shares of HK$0.5 each Authorised: At the beginning and end of the year Issued and fully paid: At the beginning and end of the year	THE GROUP AND THE COMPANY Number of shares 2003, 2002 & 2001 Nominal value 2003, 2002 & 2001 ’000 HK$’000 400,000 200,000 304,369 152,184	THE GROUP AND THE COMPANY Number of shares 2003, 2002 & 2001 Nominal value 2003, 2002 & 2001 ’000 HK$’000 400,000 200,000 304,369 152,184

		152,184

There was no change in the share capital of the Company for the years presented.

At 31 December 2003, 62,602,700 (2002 and 2001: 62,602,700) issued shares of the Company with an aggregate nominal value of HK$31,301,350 (2002 and 2001: HK$31,301,350) were held by a subsidiary of Magnificent Estates. In accordance with the Companies Ordinance, members of the Group who are shareholders of the Company have no right to vote at meetings of the Company.

−43 −

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Share options

The share option schemes of the Company’s subsidiaries, Shun Ho Technology and Magnificent Estates, which were respectively adopted on 30 June 1990 and 27 September 1990 for the primary purpose of providing incentives to directors and eligible employees, expired on 30 June 2000 and 27 September 2000 respectively. Details of share options previously granted which were cancelled during the year are as follows:

(a) Shun Ho Technology

The share options outstanding at 31 December 2002 which were granted to a director on 19 October 1993 to subscribe for 5,374,691 shares of Shun Ho Technology at the subscription price of HK$1.11 per share exercisable during the period from 20 October 1993 to 19 October 2003, were cancelled during the year.

(b) Magnificent Estates

The share options outstanding at 31 December 2002 which were granted to a director on 29 June 1994, to subscribe for 43,799,524 ordinary shares of Magnificent Estates at the subscription price of HK$0.2 per share exercisable during the period from 30 June 1994 to 29 June 2004, were cancelled during the year.

Warrants

At 31 December 2002, a total of 644,713,356 units of warrants issued by Magnificent Estates were outstanding, of which 629,361,166 units were held by Shun Ho Technology and its subsidiary. The warrants, which carried an aggregate subscription right of HK$22,564,967, entitled the holders thereof to subscribe for shares in Magnificent Estates at the subscription price of HK$0.035 per share during the three months period commencing from 14 November 2002.

During the year, 629,350,706 units of such warrants held by Shun Ho Technology and its subsidiary were exercised at a price of HK$0.035 per share. The remaining warrants not exercised had lapsed.

−44 −

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

23. RESERVES

Share premium HK$’000 20,068 − − − −	Investment property revaluation reserve HK$’000 99,280 (2,567) − − −	Other property revaluation reserve HK$’000 40,844 (13,575) − − −	Securities revaluation reserve Negative goodwill (goodwill) on consolidation HK$’000 HK$’000 (9,334) 3,869 (3,117) − 199 − − − − −	Securities revaluation reserve Negative goodwill (goodwill) on consolidation HK$’000 HK$’000 (9,334) 3,869 (3,117) − 199 − − − − −	Retained profits HK$’000 184,187 − − 490 −	Own shares held by a subsidiary HK$’000 − − − − (12,834)	Total HK$’000 338,914 (19,259) 199 490 (12,834)
20,068 20,068 –	96,713 96,713 (3,382)	27,269 27,269 (5,368)	(12,252) (12,252) –	3,869 3,869 (10,860)	184,677 184,677 (1,048)	(12,834) (12,834) –	307,510 307,510 (20,658)
20,068 – – – – –	93,331 (21,712) – – – –	21,901 (2,789) – (371) – –	(12,252) – (198) – 198 –	(6,991) – – – – –	183,629 – – – – 11,503	(12,834) – – – – –	286,852 (24,501) (198) (371) 198 11,503
20,068 – – – –	71,619 6,539 (319) (148) –	18,741 – (527) – –	(12,252) – – – –	(6,991) – – – –	195,132 – – – (2,798)	(12,834) – – – –	273,483 6,539 (846) (148) (2,798)
20,068	77,691	18,214	(12,252)	(6,991)	192,334	(12,834)	276,230

−45 −

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

The Group’s share of post-acquisition reserves of the associates included in reserves is analysed below:

Share premium HK$’000 –	Investment property revaluation reserve HK$’000 537	Other property revaluation reserve HK$’000 –	Securities revaluation reserve Negative goodwill (goodwill) on consolidation HK$’000 HK$’000 – – – – − −	Securities revaluation reserve Negative goodwill (goodwill) on consolidation HK$’000 HK$’000 – – – – − −	Retained profits HK$’000 1,445	Own shares held by a subsidiary HK$’000 –	Total HK$’000 1,982

–	537	–	–	–	1,083	–	1,620

−	537	−	−	−	869	−	1,406

20,068 −	− −	− −	− −	− −	81,273 187	− −	101,341 187
20,068 –	− –	− –	− –	− –	81,460 (253)	− –	101,528 (253
20,068 –	– –	– –	– –	– –	81,207 (463)	– –	101,275 (463
20,068	–	–	–	–	80,744	–	100,812

Note: The property revaluation reserves are not distributable to shareholders until they are realised. The Company’s reserves available for distribution to shareholders at 31 December 2003 represent retained profits of HK$80,744,000 (2002: HK$81,207,000; 2001: HK$81,460,000). The directors do not recommend the payment of a dividend in respect of the year (2002: Nil; 2001: Nil).

24. LONG TERM BANK LOANS

		THE GROUP
	2003	2002	2001
	HK$’000	HK$’000	HK$’000
Secured bank loans repayable between
two and five years	123,625	–	−

−46 −

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

25. DEFERRED TAX LIABILITIES

The following are the deferred tax liabilities recognised and movements thereon during the current and prior reporting periods.

Accelerated tax depreciation HK$’000 – 4,201	Revaluation of properties HK$’000 – 28,986	Hotel property (Note) HK$’000 – 44,800	Total HK$’000 – 77,987
4,201 1,706 – 5,907 1,690 1,688 –	28,986 – 1,466 30,452 – – 2,268	44,800 – – 44,800 – 2,715 –	77,987 1,706 1,466
			81,159 1,690 4,403 2,268
9,285	32,720	47,515	89,520

Note: The deferred tax liability on the hotel property is attributable to the excess of the carrying amount of the property, which is held by a subsidiary of Magnificent Estates, over its tax base at the time when the subsidiary was acquired by the Group.

At the balance sheet date, the Group has unused tax losses of HK$43,670,000 (2002: HK$46,077,000) available for offset against future profits. No deferred tax asset has been recognised in respect of the tax losses due to the unpredictability of future profit streams. Substantially all the unrecognised tax losses may be carried forward indefinitely.

26. PROJECT COMMITMENTS

At the balance sheet date, the Group had outstanding commitments in respect of:

(a) Consideration for the acquisition of a property contracted but not provided for in the financial statements (b) Property development expenditure contracted but not provided for in the financial statements	2003 HK$’000 13,110 –	2002 HK$’000 – 25,313	2001 HK$’000 −

			10,142

The Company had no material commitments at the balance sheet date.

−47 −

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

27. OPERATING LEASE COMMITMENTS

The Group as lessor

Rental income from investment properties earned during the year is approximately HK$20,480,000 (2002: HK$24,864,000; 2001: HK$4,700,000). The properties under leases have committed tenants for one to three years without termination options granted to tenants.

At the balance sheet date, the Group had contracted with tenants for the following future minimum lease payments under non-cancellable operating leases:

Within one year In the second to fifth years inclusive The Group as lessee Minimum lease payments for office premises paid under operating leases during the year	2003 HK$’000 14,372 4,307 18,679 2003 HK$’000 161	2002 HK$’000 16,674 9,431 26,105 2002 HK$’000 238	2001 HK$’000 23,746 6,492
			30,238

			2001 HK$’000 223

The Company had no material lease commitments at the balance sheet date.

28. CONTINGENT LIABILITIES AND PLEDGE OF ASSETS

At the balance sheet date, the bank loan facilities of the Group, which were utilised to the extent of approximately HK$283 million (2002: HK$90 million; 2001: HK$136 million), were secured by the following:

(a) hotel property and other properties of the Group with carrying amounts of approximately HK$450 million (2002: HK$450 million) and HK$530 million (2002: HK$278 million) respectively (2001: properties together with related assets with an aggregate carrying book value of approximately HK$554 million);
(b) pledge of shares in and subordination of loans due from subsidiaries with an aggregate carrying value of approximately HK$367 million (2002: HK$329 million; 2001: 177 million);
(c) assignment of the rentals and hotel revenue of a subsidiary; and
(d) pledge of listed securities and bank deposits held by subsidiaries with an aggregate carrying amount of approximately HK$49 million (2002: HK$50 million; 2001: HK$55 million) and HK$126,000 (2002: HK$2,860,000; 2001: HK$6,000,000) respectively.

29. RELATED PARTY TRANSACTIONS

(a) During the year, a subsidiary, Claymont Services Limited (“Claymont”), made unsecured advances to its associate, Lucky Country Development Limited, with no fixed repayment terms. Such advances to the extent of HK$60,000,000 (2002 and 2001: HK$60,000,000) carried interest chargeable at the rate of 3% to 5% (2002: 5%; 2001: 5% to 8.5%) per annum with the remaining balance interest free. Interest receivable by Claymont on such advances in respect of the year amounted to HK$2,400,000 (2002: HK$3,000,000; 2001: HK$4,050,000 of which HK$3,479,348 was accounted for by Magnificent Estates prior to becoming a subsidiary of the Company). At the balance sheet date, advances due from the associate amounted to HK$84,786,000 (2002: HK$87,586,000; 2001: HK$91,636,000) remained outstanding.

−48 −

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(b) During the year of 2002, a director * of the Company made unsecured short-term advances to the Group which carry interest chargeable at rates ranging from bank fixed deposit rates to Hong Kong Inter-bank Offer Rate plus 2% per annum. The advances are repayable on demand. Interest payable by the Group on such advances amounted to HK$585,000 (2001: HK$2,132,000, of which HK$1,503,000 was accounted for by Shun Ho Technology and Magnificent Estates prior to becoming subsidiaries of the Company). Such advances were fully repaid during the year of 2002.
Mr. William Cheng Kai Man

30. RETIREMENT BENEFIT PLANS

The Group operates a Mandatory Provident Fund Scheme for all qualifying employees. Assets of the scheme are held separately from those of the Group, in funds under the control of trustees. The Group contributes 5% of relevant payroll costs to the scheme, which contribution is matched by employees.

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

The cost charged to income of HK$962,000 (2002: HK$976,000; 2001: HK$237,000) represents contributions payable to the schemes by the Group in respect of the current accounting period. The forfeited contributions under the Group’s defined contribution retirement scheme which had been suspended are immaterial.

31. PARTICULARS OF PRINCIPAL SUBSIDIARIES

All the subsidiaries are incorporated and operating in Hong Kong except as otherwise indicated. None of the subsidiaries had any debt securities outstanding at 31 December 2003 or at any time during the year.

	Paid up issued/registered	Paid up issued/registered	Proportion	of nominal
	ordinary	capital	value of issued/registered
	Number of		ordinary capital held by
Name of subsidiary	shares	Par value	Company	Subsidiary	Principal activities
			%	%
Omnico Company Inc. (i)	1	US$1	100	–	Investment holding
Trillion Resources Limited	5,000,000	HK$1	100	–	Securities trading
Shun Ho Technology	537,076,602	HK$0.5	–	49.7	Investment holding
Holdings Limited
Duplexway Limited	2	HK$1	–	100	Property investment
Good Taylor Limited	2	HK$1	–	100	Investment holding
Noblesse International	1	US$1	–	100	Property investment
Limited (ii)
Shun Ho (Lands	10	US$1	–	100	Investment holding
Development) Limited (ii)
South Point Investments	1	US$1	–	100	Investment holding
Limited (ii)
Babenna Limited	2	HK$10	–	100	Investment holding
City Wealth Limited	2	HK$1	–	100	Property investment
Claymont Services Limited	1	US$1	–	100	Investment holding
(ii)
Gainwell Holdings Limited	2	HK$1	–	100	Property investment
Harbour Rich Industrial	10,000	HK$1	–	100	Property development
Limited
Houston Venture Limited (ii)	1	US$1	–	100	Investment holding
Joes River Limited	2	HK$1	–	100	Property investment

−49 −

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

	Paid up issued/registered	Paid up issued/registered	Proportion	of nominal
	ordinary capital		value of issued/registered
	Number of		ordinary capital held by
Name of subsidiary	shares	Par value	Company	Subsidiary	Principal activities
			%	%
Joligance Limited	2	HK$1	–	100	Investment holding
Longham Investment	1	US$1	–	100	Investment holding
Limited (ii)
Magnificent Estates Limited	5,464,700,883	HK$0.01	–	69.2	Investment holding
					and provision of
					management
					services
Magnificent International	2	HK$1	–	100	Property investment
Hotel Limited
Mercury Fast Limited	2	HK$1	–	100	Securities trading and
					investment holding
New Champion	1	US$1	–	100	Vessel leasing
Developments Limited (ii)
Shanghai Shun Ho (Lands	1	US$1	–	100	Investment holding
Development) Limited (ii)
Shanghai Shun Ho	Registered	US$4,950,000	–	100	Property investment
Property Development	capital
Co., Ltd. (iii)
Shun Ho Capital	1	US$1	–	100	Investment holding
Properties Limited (ii)
Shun Ho Real Estate	2	HK$1	–	100	Provision of
Limited					hospitality services
Silver Courage Company	2	HK$10	–	100	Property investment
Limited
Tennyland Limited	2	HK$10	–	100	Property investment
Trans-Profit Limited	1,000,000	HK$1	–	100	Property investment
United Assets Company	2,000,000	HK$1	–	100	Hotel investment and
Limited					investment holding

(i) Incorporated in the Republic of Liberia

(ii) Incorporated in the British Virgin Islands

(iii) Wholly foreign owned enterprise established and operating in the PRC

In addition to the percentage shareholding in Shun Ho Technology Holdings Limited disclosed above, at 31 December 2003, approximately 15.59% of the issued share capital of Shun Ho Technology was held by a subsidiary of Magnificent Estates.

The directors are of the opinion that a complete list of the particulars of all the subsidiaries of the Company will be of excessive length and therefore the above list contains only the particulars of subsidiaries which principally affect the results or assets of the Group.

−50 −

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

32. ACQUISITION OF SUBSIDIARIES

On 14 November 2002, the Group acquired an additional 14.22% of the issued ordinary shares of its subsidiary, Magnificent Estates, through the conversion of the convertible bonds issued by Magnificent Estates which resulted in a negative goodwill of HK$122,626,447.

In the year of 2001, a former associate, Shun Ho Technology, acquired an additional 1.98% of the issued ordinary shares of Magnificent Estates, through the exercise of the convertible bonds issued by Magnificent Estates. As a result, the Company has become the holding company of Shun Ho Technology. This acquisition has been accounted for under the acquisition method of accounting. The amount of negative goodwill arising as a result of the acquisition is HK$14,437,345. An analysis of the consolidated assets and liabilities acquired and the cash flows arising on acquisition is as follows:

Consolidated assets and liabilities acquired
Investment properties
Property, plant and equipment
Property under development
Investments in other securities
Interests in associates
Inventories
Properties for sale
Investments in trading securities
Trade and other receivables
Deposits and prepayments
Pledged bank deposits
Bank balances and cash
Trade and other payables
Rental and other deposits received
Advance from the Company
Advance from a director
Amount due to an associate
Taxation liabilities
Bank loans, secured
Bank overdrafts
Convertible bonds
Less: Minority interests
Less: Carrying value of investment in associate
Negative goodwill
Net cash inflow arising on acquisition
Bank balances and cash acquired
Bank overdrafts acquired
Net inflow of cash and cash equivalents in respect
of the acquisition of subsidiaries

HK$’000
700,600
628,916
104,652
19,940
95,965
421
70,653
26,542
5,717
1,425
14,803
7,454
(71,426)
(7,014)
(31,159)
(41,559)
(157)
(3,891)
(77,399)
(746)
(2,283)
1,441,454
(974,379)
467,075
(452,638)
(14,437)
–
HK$’000
7,454
(746)
6,708

The subsidiaries acquired in the year of 2001 contributed approximately HK$12,662,000 to the Group’s turnover, and HK$5,514,000 to the Group’s net profit for that year.

−51 −

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

33. POST BALANCE SHEET EVENTS

(a) In December 2003, the Group entered into an agreement with an independent third party for the acquisition of a property for a cash consideration of HK$13,800,000. The acquisition was completed subsequent to the balance sheet date.
(b) Subsequent to the balance sheet date, the Group entered into agreements with certain independent third parties for the disposal of its investment properties for an aggregate cash consideration of HK$281,660,000 which is above the carrying amounts of the properties disposed. Up to the date of approval of these financial statements, the disposal of one of the properties for a consideration of HK$250,000,000 has not been completed.

34. CONVERTIBLE BONDS

Unsecured convertible bonds Less: Unamortised bond issue expenses	THE GROUP 2003 2002 HK$’000 HK$’000 – – – – – –	2001 HK$’000 2,300 (14) 2,286

The convertible bonds (the “Bonds”), which carry interest at 5 per cent per annum payable quarterly in arrears with the last payment due on 14 November 2002, entitled the holders thereof to convert the Bonds into shares of Magnificent Estates at a conversion price of HK$0.06 per share during the period from 14 May 2001 to 14 November 2002.

During the year of 2002, the Bonds with an aggregate principal value of HK$88,904,164, of which HK$86,604,176 were held by the Group, were mandatorily converted into 1,481,736,051 new ordinary shares of HK$0.01 each in Magnificent Estates at the conversion price of HK$0.06 per share.

2. WORKING CAPITAL STATEMENT

The Directors are of the opinion that, after taking into account the financial resources and banking facilities available to the Group, including its internally generated funds, the Group has sufficient working capital to satisfy its present requirements.

3. INDEBTEDNESS STATEMENT

At the close of business on 30 April 2004, being the latest practicable date prior to the printing of this circular, the Group had outstanding bank borrowings of approximately HK$264,345,000, all of which were secured by fixed charges on the Group’s assets, including properties, investments in debt securities and other assets.

Save as aforesaid, and apart from intra-group liabilities, the Group did not have outstanding at the close of business on 30 April 2004 any debt securities or debt securities and loan capital issued and outstanding or agreed to be issued, bank overdrafts, loans or other similar indebtedness, liabilities under acceptance or acceptable credits, debentures, mortgages, charges, hire purchase commitments, guarantees or other material contingent liabilities.

−52 −

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

4. MANAGEMENT DISCUSSION AND ANALYSIS FOR THE PRECEDING THREE YEARS

For the financial year ended 2001, Shun Ho Technology increased its shareholding in Magnificent Estates so that Magnificent Estates became a subsidiary company of Shun Ho Technology. While Magnificent Estates being also a member of Shun Ho Technology, enabled the Group to control over 50% voting rights of Shun Ho Technology. It followed that Shun Ho Technology became a subsidiary of the Group resulting in the consolidation of Shun Ho Technology’s results into the Group. The decline in profit for the year ended 2001 was due mainly to the loss from the disposal by Magnificent Estates of certain blue-chip stocks subsequent to the “September 11” event. Magnificent Estates’s operating income from its hotel operation declined due to weakened market conditions after September 2001 but the impact was moderated by cost reduction. The hotel occupancy rate for the period was approximately 82% with reduced room rates. The Group’s investment properties maintained an overall occupancy of approximately 95%. During the year, Magnificent Estates acquired the Aspen Court at No. 46 High Street, Hong Kong. As to capital expansion, Magnificent Estates issued HK$96.7 million of mandatorily convertible bonds in May 2001 to reduce its liabilities. At the end of 31 December 2001, gearing of the Group was around 14.4%.

For the financial year ended 2002, the Group recorded a profit of approximately HK$11.5 million. The increase in turnover and profit was mainly due to the sale of the Aspen Court by Magnificent Estates on a strata-title basis. During the year, the Group’s hotel income improved moderately with the occupancy increased to approximately 89% at reduced room rates. The Group’s leasing property maintained an average occupancy rate of approximately 95%. In November 2002, the convertible bonds issued by Magnificent Estates in the prior year were fully converted into equity thus strengthening its capital base. Gearing of the Group in terms of external bank borrowings and total funds employed was around 6.9%.

For the financial year ended 2003, the Group recorded a loss of approximately HK$2.8 million due mainly to the loss on the sale of the commercial property at No. 210 Pak Sha Wan by Magnificent Estates earlier in June 2003. There was a decrease in the Group’s turnover due to the reduction in property sales during the year. As the property market improved towards the end of the year, there has been revaluation increase in the Group’s investment properties. Operating income from Magnificent Estates’s hotel declined as a result of the adverse impact of the SARS disease which occurred during the second quarter of the year. The hotel business recovered gradually after August 2003 with the year round occupancy rate of approximately 70% at reduced room rates. The Group’s investment properties maintained an overall occupancy of approximately 90%. By the end of the year 2003, Magnificent Estates completed the purchase of the development site at No. 633 King’s Road which will be developed into a 3-star hotel with 600 rooms. Towards the end of the year 2003, Magnificent Estates completed the development of the 34 town houses at Ho Chung for sale in the next financial year. During the year, there has been the exercise of Magnificent Estates’s warrants amounting to approximately HK$22 million which further strengthened Magnificent Estates capital base. As at 31st December 2003, gearing of the Group was around 23.8%.

−53 −

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

The implementation by the PRC Government of CEPA and the furtherance of relaxation of mainland travellers to visit Hong Kong helps stimulate further recovery. Also, the recent rising property prices also add momentum in the Hong Kong business environment. This would certainly assist the Group in its sale of Group’s town houses in Ho Chung later in the year. The rental market is seen to have bottomed out in recent months. As such, the occupancy and rental rates of the Group’s investment property can be maintained. Although the epidemic diseases such as SARS and avian flu may have adverse impacts on the hotel business from time to time, the government and the community have now been both vigilant and well prepared in the prevention of the outbreaks of such diseases so that the impacts of any future occurrence of those diseases will be minimized.

With the further improvement in the property market subsequent to the year ended 2003, the growing influx of mainland travellers, and the Group’s enhanced property portfolio, the Board is optimistic about the performance and prospects of the Group for the current financial year.

5. GENERAL OUTLOOK OF THE GROUP’S BUSINESS

In the financial year of 2003, the Company’s major subsidiaries, Shun Ho Technology and Magnificent Estates continued with its operations of property investment, property development and trading, property leasing, investment in and operation of hotel and furnished suites and investment holding. The decrease in turnover was due to the reduction in property sales during the year. The loss for the year was mainly due to the loss on Magnificent Estates’s disposal of a commercial property.

Operating income from Magnificent Estates’s hotel declined as a result of the adverse impact of the SARS disease which occurred during the second quarter of the year of 2003. The hotel business managed to recover gradually after August 2003. The average occupancy rate of the hotel for the year under review was approximately 70% at reduced room rates.

As to property leasing, the Group’s investment properties maintained an overall occupancy of approximately 90% during the financial year of 2003 and through 2004.

Regarding property development, construction of the Magnificent Estates’s 34 town houses at Ho Chung has been completed by the end of the year 2003 and is now ready for sale and will be put on to the market at an optimal time in light of the continued improving property market conditions in the year 2004.

In Shanghai, the PRC, the Magnificent Estates has continued with the business of short-term leasing of the furnished suites at the Magnificent International Hotel commercial property at Xizang Road.

−54 −

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

In September 2003, Magnificent Estates entered into a sale and purchase agreement to acquire the development site at No. 633 King’s Road, North Point for a consideration of HK$230 million. This acquisition was completed in December 2003. The site area is approximately 17,150 sq.ft. and the site will be developed into a 3-star hotel with 600 rooms of gross floor area of approximately 258,601 sq.ft.

In March 2004, Magnificent Estates has completed the sale of House No. 23, Las Pinadas at No. 33 Shouson Hill Road, Hong Kong for a consideration of HK$31.7 million. This disposal has realized a gain of approximately HK$4 million which will be reflected in the results of this year. Also in March 2004, Magnificent Estates has completed the acquisition of 5 town houses on a site of approximately 9,820 sq.ft. at So Kun Wat, Tuen Mun, N.T. for a consideration of HK$13.8 million.

In March 2004, Shun Ho Technology has entered into a sale and purchase agreement to dispose of the investment property at No. 3-5, Plunkett’s Road, Hong Kong for a consideration of HK$250 million. This disposal is completed by the end of May 2004 and a gain of approximately HK$80 million, representing the excess of the sale consideration over the property’s book value is to be realized and reflected in the current financial year.

Looking ahead, the Board considers that the economic recovery in Hong Kong is well on its way subsequent to the SARS disease occurred during the second quarter of 2003. The implementation by the PRC Government of CEPA and the furtherance of relaxation of mainland travellers to visit Hong Kong helps stimulate further recovery. Also, the recent rising property prices also add momentum in the Hong Kong business environment. This would certainly assist the Group in its sale of Group’s town houses in Ho Chung later in the year. The rental market is seen to have bottomed out in recent months. As such, the occupancy and rental rates of the Group’s investment property can be maintained. Although the epidemic diseases such as SARS and avian flu may have adverse impacts on the hotel business from time to time, the government and the community have now been both vigilant and well prepared in the prevention of the outbreaks of such diseases so that the impacts of any future occurrence of those diseases will be minimized. With the increase in the influx of the mainland travellers on an individual basis, it is envisaged that the hotel business should further improve during the rest of the year. With the enhanced property portfolio of the Group after the completion of the Acquisition, the Group can further develop its hotel investment and operation business. With the recovered economic environment in Hong Kong, the Group is optimistic about its business prospects as a whole.

−55 −

APPENDIX II PRO FORMA FINANCIAL INFORMATION OF THE GROUP

The following is the text of a letter prepared for the purpose of incorporation in this circular received from Deloitte Touche Tohmatsu in connection with the pro forma financial information of the Group.

==> picture [188 x 60] intentionally omitted <==

==> picture [95 x 55] intentionally omitted <==

5 June 2004

The Directors

Shun Ho Resources Holdings Limited

3/F Shun Ho Tower

24-30 Ice House Street Central, Hong Kong

Dear Sirs,

We report on the unaudited pro forma financial information (the “Pro Forma Financial Information”), comprising the pro forma net assets statement and pro forma income statement set out in Sections 1 and 2 of Appendix II to the circular issued by Shun Ho Resources Holdings Limited (the “Company”) dated 5 June 2004 in connection with the proposed acquisition of the property situated at 304-314 Des Voeux Road West and 12 Lai On Lane, Hong Kong (the “Property”) at a cash consideration of HK$350,000,000, which has been prepared by the Directors of the Company, for illustration purposes only, to provide information about how the acquisition of the Property might have affected the net assets and the results of the Group, comprising the Company and its subsidiaries.

RESPONSIBILITIES

It is the responsibility solely 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 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.

−56 −

PRO FORMA FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

BASIS OF OPINION

We conducted our work in accordance with 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.

Because the above work does not constitute an audit or review made in accordance with Statements of Auditing Standards issued by the Hong Kong Society of Accountants, 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 the first paragraph of this letter for illustration purposes only and, because of its nature, it may not be indicative of:

(a) the Group’s financial position as at 31 December 2003;
(b) the Group’s results for the year ended 31 December 2003; or
(c) the Group’s financial position or results at any future date.

OPINION

In our opinion:

(a) the Pro Forma Financial Information has been properly compiled on the basis as stated in the pro forma net assets statement and pro forma income statement referred to in the first paragraph of this letter;
(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,

Deloitte Touche Tohmatsu

Certified Public Accountants Hong Kong

−57 −

PRO FORMA FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

The pro forma financial information set out in this Appendix is prepared in a manner consistent with both the format and accounting policies adopted by the Company and is to provide the information to the Shareholders about the financial impact of the Acquisition which is prepared for illustrative purpose only, and because of its nature, it may not give a true picture of the Company’s financial position or results.

1. PRO FORMA NET ASSETS STATEMENT OF THE GROUP

The pro forma net assets statement of the Group as presented below has been prepared based on the published audited financial statements of the Group for the year ended 31 December 2003, and adjusted, where appropriate, to give effect of the acquisition of the Property as if it had occurred at 31 December 2003.

Non-current Assets Investment properties Property, plant and equipment Properties under development Interests in associates Investments in securities Negative goodwill Current Assets Inventories Properties for sale Investments in securities Trade and other receivables Deposits and prepayments Pledged bank deposits Bank balances and cash Current Liabilities Trade and other payables Rental and other deposits received Tax liabilities Bank loans, secured Net Current Assets (Liabilities) Non-current Liabilities Long term bank loans Deferred tax liabilities Minority interests Net Assets Notes:	As at 31 December 2003 Audited Adjustments Pro forma HK$’000 HK$’000 Note HK$’000 588,200 588,200 631,535 363,125 (1) 994,660 241,967 241,967 93,300 93,300 780 780 (157,333) (157,333) 1,398,449 1,761,574 406 406 148,972 148,972 23,995 23,995 2,531 2,531 1,954 1,954 126 126 12,209 (163,125) (1) (150,916) 190,193 27,068 16,230 16,230 4,654 4,654 1,242 1,242 159,663 159,663 181,789 181,789 8,404 (154,721) 123,625 200,000 (1) 323,625 89,520 89,520 (213,145) (413,145) (765,294) (765,294) 428,414 428,414	As at 31 December 2003 Audited Adjustments Pro forma HK$’000 HK$’000 Note HK$’000 588,200 588,200 631,535 363,125 (1) 994,660 241,967 241,967 93,300 93,300 780 780 (157,333) (157,333) 1,398,449 1,761,574 406 406 148,972 148,972 23,995 23,995 2,531 2,531 1,954 1,954 126 126 12,209 (163,125) (1) (150,916) 190,193 27,068 16,230 16,230 4,654 4,654 1,242 1,242 159,663 159,663 181,789 181,789 8,404 (154,721) 123,625 200,000 (1) 323,625 89,520 89,520 (213,145) (413,145) (765,294) (765,294) 428,414 428,414
	1,398,449 406 148,972 23,995 2,531 1,954 126 12,209 (163,125) (1) 190,193 16,230 4,654 1,242 159,663 181,789 8,404 123,625 200,000 (1) 89,520 (213,145) (765,294)	1,761,574
		406 148,972 23,995 2,531 1,954 126 (150,916
		27,068
		16,230 4,654 1,242 159,663
		181,789
		(154,721
		323,625 89,520
		(413,145
		(765,294
	428,414

(1) To account for the cost of acquisition of the Property and applicable stamp duty. Other transaction costs which are insignificant have not been accounted for.

The acquisition of the Property is intended to be financed by a long term bank loan of HK$200,000,000 and the Group’s internal resources. The disposal of an investment property of the Group at a consideration of HK$250,000,000, as disclosed in the Company’s 2003 annual report, was completed subsequent to 31 December 2003. No adjustments have been made to reflect the disposal of the investment property in the pro forma net assets statement shown above.

(2) As the Property was not ready for its intended use, no adjustments have been made to the pro forma net assets statement to reflect the open market value of the Property at 31 December 2003.

−58 −

PRO FORMA FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

2. PRO FORMA INCOME STATEMENT OF THE GROUP

The following pro forma income statement has been prepared based on the published audited financial statements of the Group for the year ended 31 December 2003. As the Property was not ready for its intended use in the year ended 31 December 2003, no adjustments have been made to the income statement to give effect of the acquisition of the Property as if it had occurred at the start of the year ended 31 December 2003.

Turnover Cost of sales Other service costs Gain on investments in securities Other operating income Administrative expenses Loss on disposal of an investment property Loss from operations Finance costs Share of profits of associates Loss before taxation Income tax expense Loss before minority interests Minority interests Net loss for the year Loss per share Basic	For the year ended 31 December 2003 Audited Adjustment Pro forma HK$’000 HK$’000 HK$’000 71,863 71,863 (12,999) (12,999) (23,824) (23,824) 35,040 35,040 4,125 4,125 5,780 5,780 (20,531) (20,531) (26,165) (26,165) (1,751) (1,751) (3,071) (3,071) 4,017 4,017 (805) (805) (8,409) (8,409) (9,214) (9,214) 6,416 6,416 (2,798) (2,798) HK Cents HK Cents (1.16) (1.16)	For the year ended 31 December 2003 Audited Adjustment Pro forma HK$’000 HK$’000 HK$’000 71,863 71,863 (12,999) (12,999) (23,824) (23,824) 35,040 35,040 4,125 4,125 5,780 5,780 (20,531) (20,531) (26,165) (26,165) (1,751) (1,751) (3,071) (3,071) 4,017 4,017 (805) (805) (8,409) (8,409) (9,214) (9,214) 6,416 6,416 (2,798) (2,798) HK Cents HK Cents (1.16) (1.16)
	35,040 4,125 5,780 (20,531) (26,165) (1,751) (3,071) 4,017 (805) (8,409) (9,214) 6,416	35,040 4,125 5,780 (20,531 (26,165
		(1,751 (3,071 4,017
		(805 (8,409
		(9,214 6,416
	(2,798) HK Cents (1.16)

−59 −

VALUATION REPORT

APPENDIX III

The following is the text of a letter and valuation certificate prepared for the purpose of incorporation in the circular received from Dudley Surveyors Limited in connection with the valuation of the Property as at 4 May 2004.

==> picture [254 x 77] intentionally omitted <==

Date: 5 June 2004

The Directors Shun Ho Resources Holdings Limited (“The Company”) 3/F Shun Ho Tower Nos. 24-30 Ice House Street Hong Kong

Dear Sirs,

Re: Proposed Hotel Development at Nos. 304-314 Des Voeux Road West and No. 12 Lai On Lane, Hong Kong.

We refer to your instruction for us to assess the open market value of the captioned property interest in its existing state as at 4 May 2004 (“date of valuation”) for acquisition purposes. We confirm that we have carried out inspections, made relevant enquiries and obtained such further information as we consider necessary for the purpose of providing you with our opinion of the open market value of the property interest as at the date of valuation.

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

(a) a willing seller;
(b) that, prior to the date of valuation, there had been a reasonable period (having regard to the nature of the property and the state of the market) for the proper marketing of the interest, for the agreement of price and terms and for the completion of the sale;
(c) that the state of the market, level of values and other circumstances were, on any earlier assumed date of exchange of contracts, the same as on the date of valuation;
(d) that no account is taken of any additional bid by a purchaser with a special interest; and

−60 −

VALUATION REPORT

APPENDIX III

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

Our valuation is prepared in accordance with the Hong Kong Guidance Notes on the Valuation of Property Assets (2nd Edition) published by the Hong Kong Institute of Surveyors and in compliance with the Chapter 5 of the Listing Rules published by The Stock Exchange of Hong Kong Limited.

The property is under the stage of conversion from an office building to a hotel. We have valued the property on the basis that it will be developed and completed to a hotel in accordance with the Building Plans as approved by the Building Authority on 29 November 2002 under reference number BD 2/2035/96H provided to us. In arriving at our opinion of value, we have adopted the Direct Comparison Approach by making reference to recent hotel transactions with regard to the status of construction of the property as at the date of valuation and the development costs to be expended to reflect the quality of the completed development.

Our valuation has been made on the assumption that the owner sells the property interest on the open market in its existing state without the benefit of a deferred term contract, leasebacks, joint ventures, management agreement or any similar arrangement which would serve to increase the value of the property.

We have relied to a considerable extent on any information given by your company and have accepted advice given to us on such matters as the properties to be valued, planning approvals or statutory notices, easements, tenure, occupation, site and floor areas, attributable interests and all other relevant matters. Dimensions, measurements and areas included in this valuation certificate are based on information contained in the documents and leases provided to us and are therefore approximations only.

We have no reasons to doubt the truth and accuracy of the information provided to us by your company. Your company has also advised us that no material facts have been omitted from the information and documents supplied for us to reach an informed view.

We have not been provided with copies of the title documents related to the property interest but have caused searches to be made at the Urban Land Registry. However, we have not searched the original documents to verify ownership and any lease amendments which may not appear on the copies handed to us. All documents and leases have been used for reference only and all dimensions, measurements and areas are approximate.

We have inspected the exteriors and where possible, the interiors of the property. No structural survey has been made. We are therefore not able to report that the property is free from rot, infestation or any other structural defects. No tests were carried out on any of the services.

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

−61 −

VALUATION REPORT

APPENDIX III

Our valuation is shown in the valuation certificate as attached.

Yours faithfully, For and on behalf of

Dudley Surveyors Limited Brian W.K. LI

B.Sc. (Est. Man.), MRICS, MHKIS Registered Professional Surveyor (GP) Director

BL/CT/KCL

Encl.

Note : Mr. Brian W.K. LI of 14/F, Siu Ying Commercial Building, 153 Queen’s Road Central, Hong Kong, who is a member of the Hong Kong Institute of Surveyors, a member of the Royal Institution of Chartered Surveyors and a Registered Professional Surveyor in General Practice, has over 21 years’ experience in valuing properties in Hong Kong and the PRC.

−62 −

VALUATION REPORT

APPENDIX III

VALUATION CERTIFICATE

Property

Description and Tenure

Capital Value Particulars of in Existing State Occupancy as at 4 May 2004

The property, which currently comprises a 28-storey office building, is situated at the junction of Des Voeux Road West and Water Street in Sai Ying Pun, Hong Kong.

Proposed Hotel Development, Nos. 304-314, Des Voeux Road West and No. 12 Lai On Lane, Hong Kong.

Lai On Lane, The office building stands on a site of Hong Kong. rectangular shape of approximately 959.96 square metres (10,333 sq.ft.) and is of Inland Lots Nos. reinforced concrete construction with 4499, 4500, 4501, curtain wall exteriors completed in about 4503, 4504, 1996. It is served by 3 passenger lifts, 1 Section A of cargo lifts and 2 staircases. Inland Lot No. 4502 and The The property is zoned as “Commercial / Remaining Portion Residential” under the Sai Ying Pun & of Inland Lot No. Sheung Wan Outline Zoning Plan No. 4502. S/H3/20 of which the land use of “Hotel” is always permitted.

As at the date of valuation, the subject property was vacant and is under the stage of conversion from an office building to a hotel.

HK$383,000,000

Building plans to covert the subject office building into a hotel were approved by the Building Authority on 29 November 2002 and the total Gross Floor Area of the proposed hotel is approximately 14,401.98 square metres (155,022 square feet) plus area of Back-of-the-House facilities of approximately 595.24 square metres (6,407 square feet).

The proposed hotel will comprise a total of 279 standard rooms, 9 suites and 1 deluxe suite as well as hotel lobby, restaurant, coffee shop, function rooms, business centre and exercise room. The planned accommodation of the proposed hotel is shown as follows:

Floor Planned Use

G/F	Hotel Lobby, Reception Counter,
	Coffee Shop
1/F	Carparks
2/F	Carparks & Plant Rooms
3/F	Restaurant, Staff Canteen &
	Kitchen
5/F	Function Rooms
6/F	Business Centre & Exercise
	Room
7-10/F	14 Hotel Rooms per floor
11-13/F	14 Hotel Rooms per floor
15-23/F
25-27/F
28/F	13 Hotel Rooms per floor
29/F	6 Suites
30/F	3 Suites & 1 Deluxe Suite

The subject lots are held under various Government Leases for a term of 999 years commencing from 7 January 1862.

The total Government Rent payable for the lots is HK$118 per annum.

−63 −

VALUATION REPORT

APPENDIX III

Notes:

The registered owner of the property is Super Delight Enterprises Limited vide Assignment Memorial No. 6911266 dated 30 December 1996 at a consideration of HK$863,000,000.00.
The development details of the project are summarized as follows:
a. Existing stage of development: The conversion work to the proposed hotel development is approximately 85% completed.
b. Estimated completion date:
According to the information provided by the company, the conversion work is expected to be completed within about 6 months of the completion of the sales and purchase.
c. Estimated cost of completing The estimated construction cost to be expended to complete the the development: proposed hotel development is about HK$25,200,000.
d. Estimated capital value when The capital value of the project upon completion is estimated to be completed: HK$437,000,000.
The following encumbrances registered against the subject property are noted:
Mortgage to Secure General Banking Facilities in favour of Liu Chong Hing Bank Limited vide Memorial No. 6911267 dated 30 December 1996.
Various Sealed Copy Charging Orders in favour of Canal Expertise International Group Limited “Judgment Creditor/Plaintiff”, Super Delight Enterprises Limited “Judgment Debtor/Defendant” (Remark: In H.C. Construction and Arbitration Proceedings No. 64 of 2003.)

Nature	Memorial No.	Date of Instrument
Sealed Copy Charging Order: Notice to Show Cause	8986096	12 August 2003
Sealed Copy Charging Order Absolute	9008362	15 September 2003
Sealed Copy Amended Charging Order: Notice to	9077818	12 August 2003
Show Cause
Sealed Copy Amended Charging Order: Absolute	9077819	15 September 2003
A Sealed Copy Order	9080243	16 December 2003
Sealed Copy Charging Order: Notice to Show Cause	9135302	9 February 2004
Sealed Copy Charging Order Absolute	9167204	10 March 2004

The existing office building is subject to an Occupation Permit No. H94/96 dated 11 December 1996.

−64 −

GENERAL INFORMATION

APPENDIX IV

1. RESPONSIBILITY STATEMENT

This circular includes particulars given in compliance with the Listing Rules for the purpose of giving information with regard to the 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.

2. DISCLOSURE OF INTERESTS

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

(a) Directors’ interests or short positions in the Shares

		Interest in	Shares/(Short	positions)
				Interest in		Approximate
				underlying		percentage
				Shares	Aggregate	of the
		Capacity		pursuant to	interest/	Company’s
	Personal	Family	Corporate	share	(Short	issued share
Name of director	interest	interest	interest	options	positions)	capital
William Cheng	Nil	Nil	216,608,825	Nil	216,608,825	71.2
Kai Man			(Note)
Jim Wong Tin Yue	103,687	Nil	Nil	Nil	103,687	0.03
Albert Hui Wing Ho	45,787	Nil	Nil	Nil	45,787	0.02
Fung Chi Keung	2,000	Nil	Nil	Nil	2,000	0.0007

Note: Trillion Resources Limited and Mercury Fast Limited beneficially owned 154,006,125 Shares and 62,602,700 Shares respectively, representing approximately 50.6% and 20.6% respectively of the issued share capital of the Company. Mr. William Cheng Kai Man has controlling interests in each of these two companies.

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GENERAL INFORMATION

APPENDIX IV

(b) Directors’ interests in associated corporations (within the meaning of Part XV of the SFO) of the Company

				Interest in		Approximate
				underlying		percentage
				Shares	Aggregate	of the issued
	Name of			pursuant	interest/	share of
Name of	associated		Nature of	to share	(Short	associated
Director	corporation	Capacity	interest	options	positions)	corporation
William Cheng	Shun Ho	Interest of	Corporate	Nil	350,628,682	65.3
Kai Man	Technology	controlled
	(Note 1)	corporations
William Cheng	Magnificent	Interest of	Corporate	Nil	3,781,883,239	69.2
Kai Man	Estates	controlled
	(Note 2)	corporations
William Cheng	Trillion	Beneficial	Personal	Nil	1	100
Kai Man	Resources	owner
	Limited
	(Note 3)
Fung Chi	Shun Ho	Beneficial	Personal	Nil	2,000	0.0004
Keung	Technology	owner
Fung Chi	Magnificent	Beneficial	Personal	Nil	2,000	0.00004
Keung	Estates	owner

Notes:

Shun Ho Technology, the Company’s subsidiary, is a public limited company incorporated in Hong Kong, the shares of which are listed on the Stock Exchange.
Magnificent Estates, the Company’s indirect subsidiary, is a public limited company incorporated in Hong Kong, the shares of which are listed on the Stock Exchange.
Trillion Resources Limited, the Company’s holding company, is a company incorporated in the British Virgin Islands.

Save as disclosed above, none of the Directors and chief executive of the Company had any interests or 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) which were required (a) to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short positions which they were taken or deemed to have under such provisions of the SFO); or (b) pursuant to section 352 of Part XV of the SFO, to be entered in the register referred to therein; or (c) pursuant to the Model Code for Securities Transactions by Directors of Listed Company to be notified to the Company and the Stock Exchange

(c) Other interest

Madam Mabel Lui Fung Mei Yee, an independent non-executive Director of the Company, is a partner of Dibb Lupton Alsop, one of the legal advisers to the Company on Hong Kong law. Dibb Lupton Alsop receives normal professional fees in connection with services provided to the Company in certain legal matters.

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GENERAL INFORMATION

APPENDIX IV

(d) Competing interests

None of the Directors or management Shareholders nor their respective associates have any interest in any business, which may compete with the business of the Group.

(e) Directors’ interests in assets of the Group

As at the Latest Practicable Date, none of the Directors has any direct or indirect interests in any assets which have been acquired or disposed of by, or leased to, or which are proposed to be acquired or disposed of by, or leased to, the Company or any of its subsidiaries since 31 December 2003, the date to which the latest published audited consolidated financial statements of the Group were made up.

(f) Directors’ interests in contracts of the Group

As at the Latest Practicable Date, none of the Directors is materially interested in any contract or arrangement entered into by any member of the Group subsisting as at the date of this circular which is significant in relation to the business of the Group.

3. SUBSTANTIAL SHAREHOLDERS

Other than the interests disclosed above in respect of the Directors, so far as is known to the Directors and chief executive of the Company, as at the Latest Practicable Date, the following persons (not being Directors or chief executive of the Company), had an interest or short position in the Shares and underlying Shares which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO, or who were directly or indirectly, interested in 10% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of any other member of the Group or had any options in respect of such capital.

			Approximate
		Number of	% of
Name of Shareholder	Capacity	Shares	shareholding
Mercury Fast Limited	Beneficial owner	62,602,700	20.6
(“Mercury”)
Magnificent Estates	Interest of controlled	62,602,700	20.6
(Note 1)	corporation
Shun Ho Technology	Interest of controlled	62,602,700	20.6
(Note 1)	corporation
Trillion Resources	Beneficial owner and	216,608,825	71.2
Limited (“Trillion”)	interest of controlled
(Note 2)	corporation
Liza Lee Pui Ling	Interest of spouse	216,608,825	71.2
(Note 3)

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GENERAL INFORMATION

APPENDIX IV

Notes:

Magnificent Estates and Shun Ho Technology were taken to be interested in 62,602,700 Shares owned by Mercury as Mercury is a wholly-owned subsidiary of Magnificent Estates which in turn owned as to 69.2% by Shun Ho Technology.
Trillion beneficially owned 154,006,125 Shares and was taken to be interested in 62,602,700 Shares by virtue of its indirect interests in Mercury. Mercury is an indirect subsidiary of Shun Ho Technology. Shun Ho Technology is directly and indirectly owned as to 65.3% by Omnico Company Inc., which is in turn owned as to 100% by the Company, which is in turn directly and indirectly owned as to 71.2% by Trillion, Trillion is wholly-owned by Mr. William Cheng Kai Man.
Madam Liza Lee Pui Ling was deemed to be interested in 216,608,825 Shares by virtue of the interest in such Shares of her spouse, Mr. William CHENG Kai Man, a director of the Company.

Save as disclosed above, the Directors are not aware of any other person who, as at the Latest Practicable Date, had an interest or short position in the Shares or underlying Shares which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO, or who was directly or indirectly, interested in 10% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of any member of the Group or had any options in respect of such capital.

4. DIRECTORS’ SERVICE CONTRACTS

As at the Latest Practicable Date, none of the Directors had entered into, or was proposing to enter into, any service contracts with the Company or any member of the Group (excluding contracts expiring or determinable by the employer within one year without payment of compensation (other than statutory compensation)).

5. PROFESSIONAL QUALIFICATION AND CONSENT

(a) Dudley Surveyors Limited is an independent Registered Professional Surveyor appointed to value the Property. It prepared the valuation report as set out in Appendix III for the incorporating the same into this circular.
(b) Deloitte Touche Tohmatsu is the independent auditors of the Company. A letter issued by Deloitte Touche Tohmatsu in connection with the pro forma net assets statement and pro forma income statement of the Group is set out in Appendix II for the purpose of incorporating the same into this circular.
(c) As at the Latest Practicable Date, Dudley Surveyors Limited and Deloitte Touche Tohmatsu did not have any holding, directly or indirectly, of any securities in the Company or any of its subsidiaries or associated corporations or any right or option (whether legally enforceable or not) to subscribe for or to nominate persons to subscribe for any securities of the Company or any of its subsidiaries or associated corporations.
(d) As at the Latest Practicable Date, Dudley Surveyors Limited and Deloitte Touche Tohmatsu did not have any direct or indirect interests in any assets which have been

−68 −

GENERAL INFORMATION

APPENDIX IV

acquired or disposed of by, or leased to, or which are proposed to be acquired or disposed of by, or leased to, the Company or any of its subsidiaries since 31 December 2003, the date to which the latest published audited consolidated financial statements of the Group were made up.

(e) Dudley Surveyors Limited and Deloitte Touche Tohmatsu have given and have not withdrawn its written consent to the issue of this circular with inclusion of their letter/report and the references to its name included herein in the form and context in which they respectively appear.

6. MATERIAL ADVERSE CHANGE

As at the Latest Practicable Date, the Directors are not aware of any material adverse change in the financial or trading position of the Group since 31 December 2003, the date to which the latest published audited consolidated financial statements of the Group were made up. The Directors are also of the view that the working capital available to the Group is sufficient.

7. MATERIAL CONTRACTS

No member of the Group has entered into any contracts, not being contracts entered into in the ordinary course of business, which are or may be material within the two years preceding the Latest Practicable Date. The Directors believe that the Memorandum of Agreement were entered into in the ordinary course of business of the Group.

8. LITIGATION

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

9. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents will be available for inspection during normal business hours on any weekday (except for public holidays) at the office of Woo, Kwan, Lee & Lo at 27th Floor, Jardine House, 1 Connaught Place, Hong Kong, up to and including Monday, 21 June 2004:

(a) the memorandum of association and articles of association of the Company;
(b) the audited financial statements of the Group for the two years ended 31 December 2003;
(c) the letter issued by Deloitte Touche Tohmatsu in connection with the pro forma net assets statement and pro forma income statement of the Group as set out in Appendix II;

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GENERAL INFORMATION

APPENDIX IV

(d) the invitation to tender with the Conditions of Sale attached;
(e) the offer letter given by the Purchaser in pursuance to invitation to tender;
(f) the Memorandum of Agreement;
(g) the valuation report in respect of the Property as set out in Appendix III;
(h) the consent letter given by Dudley Surveyors Limited for incorporation of the valuation report of the Property in this circular and reference of their name in this circular;
(i) the consent letter given by Deloitte Touche Tohmatsu for incorporation of the letter in connection with the pro forma net assets statement and pro forma income statement of the Group in this circular and reference of their name in this circular; and
(j) the circular of the Company regarding the discloseable transaction dated 21 April 2004.

10. GENERAL

(a) The qualified accountant of the Company is Mr. Wong Chok Keung HKSA, ACMA.
(b) The secretary of the Company is Mr. Peter Lee Yip Wah, a solicitor in Hong Kong.
(c) The registered office of the Company is situated at 3rd Floor, Shun Ho Tower, 24-30 Ice House Street, Central, Hong Kong.
(d) The registrar of the Company in Hong Kong is Tengis Limited whose office is situate at G/F., Bank of East Asia Harbour View Centre, 56 Gloucester Road, Wanchai, Hong Kong.
(e) Once the Acquisition has been completed, its book value will be HK$350,000,000.
(f) In any event of inconsistency, the English language text of this circular shall prevail over the Chinese language text.

−70 −

NOTICE OF EXTRAORDINARY GENERAL MEETING

==> picture [54 x 57] intentionally omitted <==

SHUN HO RESOURCES HOLDINGS LIMITED ( )

(incorporated in Hong Kong with limited liability)

(Stock Code: 253)

NOTICE IS HEREBY GIVEN that an extraordinary general meeting of the shareholders of Shun Ho Resources Holdings Limited (the “Company”) will be held at 1st Floor, Ramada Hotel Kowloon, 73-75 Chatham Road, Tsimshatsui, Kowloon, Hong Kong on Monday, 21 June 2004 at 9:15 a.m. for the purpose of considering and, if thought fit, passing (with or without modifications) the following resolution as an ordinary resolution of the Company:

ORDINARY RESOLUTION

“ THAT the submission of the tender (the “Tender”) by Magnificent International Hotel Limited (formerly known as Hotel Royale International Limited) (the “Purchaser”), an indirectly-owned subsidiary of the Company, on 23 April 2004 in pursuance to an invitation to tender made by the receivers acting as agent of Super Delight Enterprises Limited (the “Vendor”) in respect of the property of the land registered in the Land Registry as Inland Lot No. 4499, Inland Lot No. 4500, Inland Lot No. 4501, Section A of Inland Lot No. 4502, the Remaining Portion of Inland Lot No. 4502, Inland Lot No. 4503 and Inland Lot No. 4504 and the buildings thereon known as 304-314 Des Voeux Road West and 12 Lai On Lane, Hong Kong (the “Property”) (a copy of the Tender marked “A” has been produced to the meeting and signed by the Chairman of the meeting for the purpose of identification) be and is hereby approved, ratified and confirmed and THAT as a result of the acceptance of the Tender by the Vendor on 26 April 2004, the acquisition of the Property by the Purchaser from the Vendor for a consideration of HK$350,000,000 in pursuance to the legally-binding formal agreement formed between the Vendor and the Purchaser who are bound by the terms and provisions of the conditions of sale contained in an invitation to tender made by the receivers as agent of the Vendor in respect of the Property and all the incidental transactions contemplated be and are hereby approved, ratified and confirmed and THAT the directors of the Company be and they are hereby authorised on behalf of the Company to sign, seal, execute, perfect, deliver and do all such documents, deeds, acts, matters and things as they may in their discretion consider necessary or desirable for the purpose of or in connection with the acquisition of the Property and the completion of the same.”

By order of the Board Peter Lee Yip Wah Secretary

Hong Kong, 5 June 2004

−71 −

NOTICE OF EXTRAORDINARY GENERAL MEETING

Registered Office:

3rd Floor, Shun Ho Tower

24-30 Ice House Street

Central Hong Kong

Notes:

(1) Any member entitled to attend and vote at the meeting is entitled to appoint more than one proxy to attend and on a poll to vote instead of him. A proxy need not be a member of the Company.
(2) Where there are joint registered holders of any share, any one of such persons may vote at the meeting, either personally or by proxy, in respect of such share as if he were solely entitled thereto, but if more than one of such joint holders be present at the meeting personally or by proxy, that one of the said persons so present whose name stands first on the register in respect of such share shall alone be entitled to vote in respect thereof.
(3) A form of proxy for use at the meeting is enclosed.
(4) To be valid, the form of proxy, together with the power of attorney or other authority, if any, under which it is signed or a certified copy of such power or authority, must be deposited at the share registrar of the Company in Hong Kong, Tengis Limited at G/F., BEA Harbour View Centre, 56 Gloucester Road, Wanchai, Hong Kong, not less than 48 hours before the time appointed for holding the meeting or adjourned meeting. Completion and return of the form of proxy will not preclude members from attending and voting in person at the meeting.

−72 −

AI assistant

Shun Ho Holdings Limited — Proxy Solicitation & Information Statement 2004

49070_rns_2004-06-08_26a28ddf-b302-4e61-8256-8b5a3b2adfe5.pdf

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

SHUN HO RESOURCES HOLDINGS LIMITED ( )

VERY SUBSTANTIAL ACQUISITION ACQUISITION OF PROPERTY

DEFINITIONS

DEFINITIONS

SHUN HO RESOURCES HOLDINGS LIMITED ( )

VERY SUBSTANTIAL ACQUISITION ACQUISITION OF PROPERTY

INTRODUCTION

FORMAL AGREEMENT FOR ACQUISITION

(2) Parties Vendor

(3) Sale and Purchase

(4) Property

LETTER FROM THE BOARD

(5) Consideration

LETTER FROM THE BOARD

(6) Memorandum of Agreement

(7) Other principal terms of the Conditions of Sale

(8) Completion Date : 23 June 2004

REASONS FOR THE ACQUISITION

LETTER FROM THE BOARD

VERY SUBSTANTIAL ACQUISITION

EFFECT OF ACQUISITION ON ASSETS AND LIABILITIES OF THE GROUP

EXTRAORDINARY GENERAL MEETING

ACTIONS TO BE TAKEN

PROCEDURE FOR DEMANDING A POLL

LETTER FROM THE BOARD

RECOMMENDATION

GENERAL

1. AUDITED FINANCIAL STATEMENTS OF THE GROUP FOR THREE YEARS ENDED 31 DECEMBER 2003

Consolidated Income Statement

Consolidated Balance Sheet

FINANCIAL INFORMATION OF THE GROUP

Company Balance Sheet

Consolidated Statement of Changes in Equity

Consolidated Cash Flow Statement

Notes to the Financial Statements

1. GENERAL

2. ADOPTION OF REVISED STATEMENT OF STANDARD ACCOUNTING PRACTICE

3. SIGNIFICANT ACCOUNTING POLICIES

Basis of consolidation

Goodwill/negative goodwill

Investments in subsidiaries

Interests in associates

Investments in securities

Investment properties

Property, plant and equipment

Properties under development

Properties for sale

Inventories

Operating leases

Impairment

Foreign currencies

Taxation

Capitalisation of borrowing costs

Retirement benefit costs

Revenue recognition

APPENDIX I

4. TURNOVER

5. BUSINESS AND GEOGRAPHICAL SEGMENTS

Business Segments

Revenue and Results

Balance Sheet

Revenue and Results

Balance Sheet

Other Information

Revenue and Results

Balance Sheet

Other Information

Geographical Segments

APPENDIX I

6. GAIN (LOSS) ON INVESTMENTS IN SECURITIES

7. OTHER OPERATING INCOME

8. (LOSS) PROFIT FROM OPERATIONS

9. FINANCE COSTS

10. DIRECTORS’ AND EMPLOYEES’ EMOLUMENTS

(b) Employees’ emoluments

11. INCOME TAX EXPENSE

Shun Ho Holdings Limited Proxy Solicitation & Information Statement 2004