Ulferts International Limited - Proxy Solicitation & Information Statement 2004

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

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

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

The Stock Exchange of Hong Kong Limited takes no responsibility for the contents of this circular, make 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.

首長四方（集團）有限公司 SHOUGANG CONCORD GRAND (GROUP) LIMITED

(incorporated in Bermuda with limited liability)

(Stock Code: 730)

MAJOR TRANSACTION

DISPOSAL OF PROPERTY

13 September 2004

	Page
Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
Letter from the Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	3
Appendix I – Financial information on the Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	8
Appendix II – Property valuation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	35
Appendix III – General information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	40

DEFINITIONS

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

“Announcement” the announcement made by the Company on 20 August 2004 in regard to the Disposal “associate” has the meaning ascribed to it under the Listing Rules “Board” the board of Directors “Company” Shougang Concord Grand (Group) Limited, a company incorporated in Bermuda, the securities of which are listed on the Stock Exchange “Consideration” the consideration for the Disposal “Director(s)” the director(s) of the Company “Disposal” the sale of the Property by the Vendor to the Purchaser “Formal Agreement” the formal sale and purchase agreement entered into between the Vendor and the Purchaser in relation to the sale and purchase of the Property “Group” the Company and its subsidiaries “Hong Kong” the Hong Kong Special Administrative Region of the PRC “HK$” Hong Kong dollars, the lawful currency of Hong Kong “Latest Practicable Date” 9 September 2004, being the latest practicable date prior to the printing of this circular for the purpose of ascertaining certain information contained herein “Listing Rules” the Rules Governing the Listing of Securities on the Stock Exchange

“Max Same” Max Same Investment Limited, a wholly-owned subsidiary of Cheung Kong (Holdings) Limited, which is interested in approximately 9.74% of the issued share capital of the Company “Property” the building known as the “Kader Industrial Centre” located at 17 Lok Yip Road, On Lok Tsuen, Fanling, New Territories, Hong Kong

– 1 –

DEFINITIONS

“Provisional Sale and Purchase Agreement”

the provisional sale and purchase agreement dated 18 August 2004 entered into between the Vendor and the Purchaser in relation to the sale and purchase of the Property

“Purchaser” Mr. Lam Kee Fung or his nominated company “Shares” ordinary shares of HK$0.01 each in the share capital of the Company
“Shareholders”

holders of Shares

“Shougang Holding” Shougang Holding (Hong Kong) Limited, a company incorporated in Hong Kong and is beneficially interested in approximately 47.45% in the issued share capital of the Company
“Stock Exchange”

The Stock Exchange of Hong Kong Limited

“Vendor”

Strenbeech Limited, a wholly-owned subsidiary of the Company

“Wheeling Holdings”

Wheeling Holdings Limited, a wholly-owned subsidiary of Shougang Holding and is interested in approximately 45.83% in the issued share capital of the Company

“%”

per cent.

– 2 –

LETTER FROM THE BOARD

首長四方（集團）有限公司 SHOUGANG CONCORD GRAND (GROUP) LIMITED

(incorporated in Bermuda with limited liability)

Executive Directors: Wang Qinghai (Chairman) Cao Zhong (Vice-chairman) Chen Zheng Wang Tian Cheng Xiaoyu

Non-executive Director: Leung Shun Sang, Tony

Independent non-executive Directors: Tam King Ching, Kenny Choy Hok Man, Constance

Registered office: Canon’s Court 22 Victoria Street Hamilton HM12 Bermuda

Principal office in Hong Kong: 6th Floor Bank of East Asia Harbour View Centre 56 Gloucester Road Wanchai Hong Kong

13 September 2004

To the Shareholders

Dear Sir or Madam,

MAJOR TRANSACTION DISPOSAL OF PROPERTY

INTRODUCTION

The Company announced on 20 August 2004 that the Vendor and the Purchaser have entered into the Provisional Sale and Purchase Agreement, pursuant to which the Vendor will dispose of the Property to the Purchaser for a consideration of HK$100,800,000.

The Disposal constitutes a major transaction for the Company under the Listing Rules.

The purpose of this circular is to provide Shareholders with further information in relation to the Disposal and other information in compliance with the requirements of the Listing Rules.

– 3 –

LETTER FROM THE BOARD

PROVISIONAL SALE AND PURCHASE AGREEMENT

Date: 18 August 2004

Parties: (a) Mr. Lam Kee Fung or his nominated company as the purchaser. To the best of the Directors’ knowledge, information and belief having made all reasonable enquiry, each of the Purchaser and his nominated company is an independent third party not connected with the Company or any of its subsidiaries or any of their respective directors, chief executives or substantial shareholders or any of their associates
(b) Strenbeech Limited as the vendor. The Vendor is a wholly-owned subsidiary of the Company and is principally engaged in property investment.

Sale and purchase:

Pursuant to the Provisional Sale and Purchase Agreement, the Vendor will sell and the Purchaser will purchase the Property upon the terms contained therein. The Vendor and the Purchaser entered into the Formal Agreement on 31 August 2004.

The Property will be sold together with the underlying leases. The security deposits of the underlying leases will be transferred to the Purchaser on completion of the Formal Agreement. The rental income of the Property was HK$5,290,000 and HK$5,950,000, representing 33.8% and 38% of the turnover of the Company for the two years ended 31 December 2003 respectively. The net profits attributable from the Property for the two years ended 31 December 2003 were approximately HK$2,380,000 and HK$4,180,000, representing approximately 85% and 15% respectively of the net profits after taxation of the Group for the two years ended 31 December 2003.

Property:

The Property is an industrial building known as Kader Industrial Centre situated at 17 Lok Yip Road, On Lok Tsuen, Fanling, New Territories, Hong Kong. The Property is presently leased out for rental income.

Consideration:

The consideration for the Disposal is HK$100,800,000 (the “Consideration”) which has been or will be paid by the Purchaser in cash in the following manner:

(a) HK$5,000,000, representing approximately 4.96% of the Consideration, has been paid as an initial non-refundable deposit upon the signing of the Provisional Sale and Purchase Agreement;
(b) HK$5,080,000, representing approximately 5.04% of the Consideration has been paid as a further non-refundable deposit upon the signing of the Formal Agreement; and
(c) the balance of the Consideration in the sum of HK$90,720,000 will be paid upon completion of the Formal Agreement.

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LETTER FROM THE BOARD

HK$10,080,000, representing the portions of the Consideration payable under paragraphs (a) and (b) above have already been received as at the Latest Practicable Date. It is expected that completion of the Formal Agreement will take place on or before 1 November 2004. Completion of the Formal Agreement is subject to proof of good title to the Property.

The net book value of the Property as determined by AA Property Services Limited, an independent professional valuer, in the Company’s latest audited accounts for the year ended 31 December 2003 was approximately HK$115,000,000, representing 15.25% of the total assets of the Company as at 31 December 2003, being the Company’s last accounting date. The market value of the Property as at 18 August 2004 was approximately HK$100,000,000 (as set out in the valuation report prepared by AA Property Services Limited, an independent professional valuer, in Appendix II to this circular).

The terms of the Disposal (including the Consideration) were determined as a result of negotiation between the parties after arm’s length negotiation and were on normal commercial terms. The Consideration represents a discount of approximately 12.35% to the net book value of the Property or a premium of 0.8% above the open market value of the Property as at 18 August 2004, as determined by AA Property Services Limited in their valuation report set out in Appendix II to this circular. Although the net book value was higher than the Consideration, there has been a general lack of interested buyers in the market for industrial buildings, as illustrated by the decrease in open market value of the Property of approximately 13% between the period of 31 December 2003 and 18 August 2004. The Board considers that the terms of the Disposal (including the Consideration) are fair and reasonable in the current market conditions with reference to the open market value of properties situated in the same area, and are in the interest of the Company and the Shareholders as a whole.

REASON FOR THE DISPOSAL OF THE PROPERTY

The principal activity of the Company is investment holding. As the Property is over 10 years old, the maintenance costs of the Property, which amounted to a total of HK$689,400 for the two years ended 31 December 2003, are high. The property market in Hong Kong has experienced a significant downturn since 1997. Although the property market has improved since the beginning of 2004, the improved market conditions apply, to a large extent, to newly constructed residential projects. There has been a lack of interest in industrial buildings. The Directors do not anticipate that there would be any significant improvement in the industrial buildings sector of the property market in the future and believe that the Company should take advantage of the window of opportunity so that resources could be better applied in other investment opportunities that offer a more attractive return. The Directors consider that the Disposal is to the benefit of the Company despite the lose of rental income.

USE OF SALES PROCEEDS

The net sales proceeds of the Property are expected to be approximately HK$99,700,000. The Board is constantly reviewing potential investment opportunities that would offer high returns, including but not limited to property investment, and will consider applying part or all of the net proceeds on any new investment opportunities that may arise in the future. The Company is investigating potential investment projects (including but not limited to property investments and financial services). As at the Latest Practicable Date, the investigations of the Company were only in their preliminary stage and the Group has not identified any concrete investments or entered into any binding agreements to this effect. Moreover, these potential investment investigations may or may not proceed. Should the Company enter

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LETTER FROM THE BOARD

into any investment projects in the future, the Company will make announcement in accordance with the requirements of the Listing Rules.

FINANCIAL EFFECTS

The gross rental income earned from the Property for the two years ended 31 December 2003 amounted to approximately HK$5,290,000 and HK$5,950,000, representing approximately 33.8% and 38% of the turnover of the Group for the two years ended 31 December 2003. The net profits earned from the Property for the two years ended 31 December 2003 amounted to approximately HK$2,380,000 and HK$4,180,000, representing approximately 85% and 15% of the net profits after taxation of the Group respectively for the two years ended 31 December 2003. Upon completion of the Disposal, the Group will record a loss of approximately HK$15,300,000 in its profits and loss accounts, which is calculated on the basis of the difference between the net book value of the Property and the proceeds of the Disposal after deduction of expenses. The net assets of the Group will also decreased by the same amount, representing 2% of the audited net assets value of the Group as at 31 December 2003. The security deposits of the underlying leases in the amount of approximately HK$1,490,000 will be transferred to the Purchaser on completion of the Formal Agreement and will have no effect on the net assets value of the Group.

GENERAL

The Group is principally engaged in investment holding, property investment and property management.

The Consideration represents a premium of HK$800,000 (or 0.8%) above the open market value of the Property, the Directors believe that the terms of the Provisional Sale and Purchase Agreement are fair and reasonable under the current market conditions and are in the interests of the Company so far as the Shareholders are concerned.

APPROVAL BY SHAREHOLDERS

The Disposal constitutes a major transaction for the Company under the Listing Rules and is subject to the approval by Shareholders at a special general meeting. To the best of the Directors’ knowledge, information and belief having made all reasonable enquiry, no Shareholders have a material interest in the Disposal.

Each of Wheeling Holdings and Max Same has confirmed to the Company that it does not have any interest in the Disposal. To the best of the Directors’ knowledge, information and belief having made all reasonable enquiry, each of the Purchaser and his nominated company is an independent third party not connected with the Company or any of its subsidiaries or any of their respective directors, chief executives or substantial shareholders or any of their associates. Accordingly, no Shareholders are required to abstain from voting in the special general meeting of the Company.

Wheeling Holdings and Max Same were interested in approximately 45.83% and 9.74% of the issued share capital of the Company as at the date of the Announcement. The Company has therefore applied to the Stock Exchange in relation to the acceptance of a written certificate given by Wheeling Holdings and Max Same, the two closely allied Shareholders which together were interested in

– 6 –

LETTER FROM THE BOARD

approximately 55.57% of the issued share capital of the Company, on 19 August 2004 in respect of their approvals of the Disposal in lieu of a resolution to be passed at the special general meeting pursuant to Rule 14.44 of the Listing Rules. Accordingly, no general meeting of the Company will be convened to obtain approvals from the Shareholders in respect of the Disposal.

Your attention is also drawn to the general information set out in the appendix of this circular.

Yours faithfully, By Order of the Board Shougang Concord Grand (Group) Limited Cao Zhong

– 7 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

INDEBTEDNESS

As at the close of business on 31 July 2004, the Group had outstanding bank loans of approximately HK$111,050,000 of which except for the bank loan of approximately HK$1,810,000, the Group’s bank loans were secured by the pledge of the Group’s investment properties and land and buildings located in Hong Kong amounted to approximately HK$231,014,000 (including the Property).

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

WORKING CAPITAL

The Directors are of the opinion that taking into account of the Group’s internal resources, the estimated net proceeds from the Disposal and after subsequent repayment of the relevant bank loan of HK$100,000,000 secured by the Property and other properties of the Group as a result of the Disposal, and available banking facilities, the Group has sufficient working capital for its present operation.

CURRENT TRADING PROSPECTS

The Company is constantly investigating and reviewing potential investment opportunities that would offer high returns and the Directors expect that the Group’s performance and financial prospects will be maintained.

LIQUIDITY AND CAPITAL RESOURCES

As at 31 December 2003, the Group’s gearing ratio (i.e. ratio of bank borrowings to equity) was 0.18.

The routine business operation and investment of the Group are in Hong Kong and the PRC, with revenue and expenditure denominated in HKD and RMB. The RMB income from the PRC is mainly remitted to Hong Kong at the prevailing official exchange rate. Given the stable official exchange rate of RMB to HKD, the Group believes that it will not be subject to any significant exposure associated with fluctuation in exchange rates under foreseeable circumstances.

SIGNIFICANT INVESTMENTS HELD BY THE GROUP

Beijing Dongzhimen International Apartment Co., Ltd. (“Beijing Dongzhimen”)

The Group beneficially owns a 44% interest in Beijing Dongzhimen which is principally engaged in the leasing of East Lake Villas Phases 1 and 2 (which comprises a variety of garden villa, high-rise apartments and office building, club house, shops, restaurants and numerous sports facilities).

The outbreak of SARS in the second quarter of 2003 and the reduction in revenue resulting from the suspension of business of East Lake Villas Phase 1 for renovation had a severe impact on the performance of Beijing Dongzhimen in 2003. The renovation of East Lake Villas Phase 1 was completed

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FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

at end 2003 as scheduled. Further to the completion of the renovation, it is expected that its rental income will pick up gradually in 2004 and its competitiveness is expected to be enhanced.

China’s accession into the WTO and Beijing’s 2008 Olympic Games are expected to boost the demand for quality serviced apartments in Beijing. With its newly renovated East Lake Villas Phase 1, extended scale and competitive edges such as its convenient location in the embassy district, the traditional fine art style and architecture of Suzhou Garden, comprehensive and modern facilities, and quality property management, the Company believes that Beijing Dongzhimen is well positioned for future growth.

FINANCIAL SUMMARY

The following is a summary of the audited financial information of the Group for the three financial years ended 31 December 2003, the audited consolidated income statement of the Group for the two years ended 31 December 2003, the audited consolidated balance sheet of the Group and the audited balance sheet of the Company as at 31 December 2003 and 31 December 2002, the audited consolidated statement of changes in equity and the audited consolidated cash flow statement of the Group for the two financial years ended 31 December 2003, together with the accompanying notes extracted from the annual report of the Company for the financial year ended 31 December 2003. The financial information of the Group for the financial year ended 31 December 2002 have been restated following the adoption of the Statement of Standard Accounting Practice 12 (Revised) “Income Taxes” (the “SSAP 12 (Revised)”) issued by the Hong Kong Society of Accountants. The financial information for the financial year ended 31 December 2001 have not been restated to show the effects of the adoption of the SSAP 12 (Revised).

– 9 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

(a) Three year financial summary

Summary of results for the three financial years ended 31 December 2003

Turnover Other operating income Administrative expenses Profit (loss) from operations Finance costs Share of result of a jointly controlled entity Amortisation of goodwill arising on acquisition of a jointly controlled entity Share of results of associates Gain on deemed disposal of an associate Profit (loss) before taxation Taxation Net profit (loss) for the year Earnings (loss) per share Basic Diluted	2003 HK$’000 15,470 2,115 (15,945) 1,640 (2,907) (5,583) (1,873) 7,049 28,273 26,599 1,882 28,481 HK3.34 cents N/A	For the financial year ended 31 December 2002 2001 HK$’000 HK$’000 15,661 22,028 1,145 2,318 (19,626) (63,488) (2,820) (39,142) (3,251) (5,627) (2,554) 2,399 (1,873) – 12,045 (27,878) – – 1,547 (70,248) 1,239 (2,534) 2,786 (72,782) HK0.34 cents (HK8.79 cents) N/A N/A

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FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

Summary of consolidated balance sheet as at 31 December 2003, 2002 and 2001

Non-current assets
Investment properties
Property, plant and equipment
Interest in a jointly controlled entity
Interests in associates
Current assets
Other investments
Prepayments, deposits and other receivables
Bank balances and cash
Current liabilities
Creditors and accruals
Rental and management fee deposits received
Taxation payable
Bank borrowings – due within one year
Net current assets (liabilities)
Total assets less current liabilities
Non-current liabilities
Bank borrowings – due after one year
Deferred tax liabilities
Net assets
Capital and reserves
Share capital
Reserves
Shareholders’ funds

As at 31 December
2003
2002
2001
HK$’000
HK$’000
HK$’000
236,000
236,000
240,300
2,669
2,743
2,837
211,582
222,367
236,871
249,394
241,664
231,296
699,645
702,774
711,304
1,020
830
858
1,823
1,854
2,417
51,677
6,470
23,891
54,520
9,154
27,166
3,580
2,443
1,893
3,281
3,457
4,186
478
1,672
3,527
5,600
30,600
30,000
12,939
38,172
39,606
41,581
(29,018)
(12,440)
741,226
673,756
698,864
105,800
51,400
70,000
3,471
2,662
–
109,271
54,062
70,000
631,955
619,694
628,864
8,579
8,279
8,279
623,376
611,415
620,585
631,955
619,694
628,864

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FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

(b) Audited financial statements of the Group for the financial year ended 31 December 2003

Consolidated Income Statement

For the year ended 31 December 2003

Notes Turnover Other operating income Administrative expenses Profit (loss) from operations 5 Finance costs 7 Share of result of a jointly controlled entity Amortisation of goodwill arising on acquisition of a jointly controlled entity Share of results of associates Gain on deemed disposal of an associate Profit before taxation Taxation 8 Net profit for the year Earnings per share 9 Basic Diluted	2003 HK$’000 15,470 2,115 (15,945) 1,640 (2,907) (5,583) (1,873) 7,049 28,273 26,599 1,882 28,481 HK3.34 cents N/A	2002 HK$’000 (As restated) 15,661 1,145 (19,626) (2,820) (3,251) (2,554) (1,873) 12,045 – 1,547 1,239 2,786 HK0.34 cents N/A

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FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

Consolidated Balance Sheet

As at 31 December 2003

Notes
Non-current assets
Investment properties
10
Property, plant and equipment
11
Interest in a jointly controlled entity
13
Interests in associates
14
Current assets
Other investments
15
Prepayments, deposits and other receivables
Bank balances and cash
Current liabilities
Creditors and accruals
Rental and management fee deposits received
Taxation payable
Bank borrowings – due within one year
16
Net current assets (liabilities)
Total assets less current liabilities
Non-current liabilities
Bank borrowings – due after one year
16
Deferred tax liabilities
20
Net assets
Capital and reserves
Share capital
17
Reserves
Shareholders’ funds

2003
2002
HK$’000
HK$’000
(As restated)
236,000
236,000
2,669
2,743
211,582
222,367
249,394
241,664
699,645
702,774
1,020
830
1,823
1,854
51,677
6,470
54,520
9,154
3,580
2,443
3,281
3,457
478
1,672
5,600
30,600
12,939
38,172
41,581
(29,018)
741,226
673,756
105,800
51,400
3,471
2,662
109,271
54,062
631,955
619,694
8,579
8,279
623,376
611,415
631,955
619,694

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FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

Balance Sheet

As at 31 December 2003

Notes Non-current assets Interests in subsidiaries 12 Current assets Prepayments, deposits and other receivables Amounts due from subsidiaries Bank balances and cash Current liabilities Creditors and accruals Taxation payable Bank borrowings – due within one year 16 Net current assets (liabilities) Total assets less current liabilities Non-current liability Bank borrowings – due after one year 16 Net assets Capital and reserves Share capital 17 Reserves 19 Shareholders’ fund	2003 HK$’000 603,749 13 13,819 51,051 64,883 149 29 5,600 5,778 59,105 662,854 105,800 557,054 8,579 548,475 557,054	2002 HK$’000 608,576 1 12,743 6,130 18,874 199 29 30,600 30,828 (11,954) 596,622 51,400 545,222 8,279 536,943 545,222

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FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

Consolidated Statement of Changes in Equity

For the year ended 31 December 2003

At 1 January 2002 – as originally stated – prior year adjustment (Note 2) – as restated Share of movements in reserves of an associate not recognised in the consolidated income statement Exchange differences on translation of a jointly controlled entity outside Hong Kong Net gains not recognised in the consolidated income statement Net profit for the year At 31 December 2002 and 1 January 2003 Exchange differences on translation of a jointly controlled entity outside Hong Kong Net losses not recognised in the consolidated income statement Shares issued at premium Release on deemed disposal of an associate Net profit for the year At 31 December 2003 Attributable to: The Company and subsidiaries Jointly controlled entity Associates At 31 December 2003 The Company and subsidiaries Jointly controlled entity Associates At 31 December 2002	Share capital HK$’000 8,279 – 8,279 – – – – 8,279 – – 300 – – 8,579 8,579 – – 8,579 8,279 – – 8,279	Share premium HK$’000 192,744 – 192,744 – – – – 192,744 – – 14,100 – – 206,844 206,844 – – 206,844 192,744 – – 192,744	Negative goodwill HK$’000 85,217 – 85,217 – – – – 85,217 – – – (27,921) – 57,296 57,296 – – 57,296 85,217 – – 85,217	Contributed surplus HK$’000 (Note 19) 364,866 – 364,866 – – – – 364,866 – – – – – 364,866 364,866 – – 364,866 364,866 – – 364,866	Translation Accumulated reserve losses HK$’000 HK$’000 3,689 (25,931) – (11,978) 3,689 (37,909) 1 – 21 – 22 – – 2,786 3,711 (35,123) (1,842) – (1,842) – – – (857) – – 28,481 1,012 (6,642) – (11,990) (747) 7,584 1,759 (2,236) 1,012 (6,642) – (36,016) 1,095 11,364 2,616 (10,471) 3,711 (35,123)	Total HK$’000 628,864 (11,978) 616,886 1 21 22 2,786 619,694 (1,842) (1,842) 14,400 (28,778) 28,481 631,955 625,595 6,837 (477) 631,955 615,090 12,459 (7,855) 619,694

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FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

Consolidated Cash Flow Statement

For the year ended 31 December 2003

OPERATING ACTIVITIES Profit before taxation Adjustments for: Finance costs Share of results of jointly controlled entity and associates Amortisation of goodwill arising on acquisition of a jointly controlled entity Gain on deemed disposal of an associate Dividend income from other investments Depreciation Interest income Unrealised holding (gain) loss on other investments Deficit on revaluation of investment properties Operating cash flows before movements in working capital Decrease in prepayments, deposits and other receivables Increase in creditors and accruals Decrease in rental and management fee deposits received Cash generated from operations Hong Kong Profits Tax paid Tax refunded Interest paid Bank facility arrangement fee NET CASH USED IN OPERATING ACTIVITIES INVESTING ACTIVITIES Dividend received from a jointly controlled entity Proceeds on disposal of an investment property Interest received Dividends received from other investments Purchases of property, plant and equipment NET CASH FROM INVESTING ACTIVITIES FINANCING ACTIVITIES Repayment of bank borrowings Proceeds on issue of shares New bank loan raised NET CASH FROM (USED IN) FINANCING ACTIVITIES NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE YEAR CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR ANALYSIS OF THE BALANCES OF CASH AND CASH EQUIVALENTS Bank balances and cash Time deposits	2003 HK$’000 26,599 2,907 (1,466) 1,873 (28,273) (54) 142 (202) (190) – 1,336 31 1,313 (176) 2,504 (1,749) 257 (2,833) (250) (2,071) 3,290 – 202 54 (68) 3,478 (70,600) 14,400 100,000 43,800 45,207 6,470 51,677 955 50,722 51,677	2002 HK$’000 (As restated) 1,547 3,251 (9,491) 1,873 – (49) 97 (237) 28 3,800 819 544 625 (729) 1,259 (810) 49 (3,326) – (2,828) 2,605 500 256 49 (3) 3,407 (30,000) – 12,000 (18,000) (17,421) 23,891 6,470 587 5,883 6,470

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FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

Notes to the Financial Statements

31 December 2003

1. GENERAL

The Company is incorporated in Bermuda as an exempted company with limited liability and its shares are listed on The Stock Exchange of Hong Kong Limited (the “Stock Exchange”).

The Company is an investment holding company. The principal activities of its subsidiaries, jointly controlled entity and associates are set out in notes 12, 13 and 14, respectively.

2. ADOPTION OF HONG KONG FINANCIAL REPORTING STANDARDS

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

SSAP 12 (Revised)

Income Taxes

In the current year, the Group has adopted SSAP 12 (Revised) Income Taxes. The principal effect of the implementation of SSAP 12 (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 2002 have been restated accordingly.

As a result of this change in policy, the balance of accumulated losses at 1 January 2002 has been increased by HK$11,978,000 representing the cumulative effect of the change in policy on the results prior to 1 January 2002.

The adoption of SSAP 12 (Revised) has given rise to goodwill of approximately HK$33,710,000 attributable to the acquisition of the jointly controlled entity during the year ended 31 December 1998 and a corresponding reduction in share of net asset value in a jointly controlled entity. The goodwill has been capitalised as an asset and included in the interest in a jointly controlled entity and amortised on the straight-line basis over its estimated useful life. As at 1 January 2003, accumulated amortisation of goodwill amounted to HK$8,429,000 (1 January 2002: HK$6,556,000).

In addition, included in the above increase to the accumulated losses, approximately HK$1,277,000 and HK$2,440,000 respectively was the Group’s share of adjustment on adoption of SSAP 12 (Revised) in an associate and a jointly controlled entity. This has resulted in an increase in the Group’s share of the accumulated losses of the associate and jointly controlled entity as at 1 January 2003 (1 January 2002: HK$1,810,000 and HK$1,644,000 respectively) and a corresponding reduction in the share of net assets of the associate and jointly controlled entity.

3. SIGNIFICANT ACCOUNTING POLICIES

The financial statements have been prepared under the historical cost convention as modified for the revaluation of certain properties and in accordance with accounting principles generally accepted in Hong Kong. The principal accounting policies adopted are as follows:

Basis of consolidation

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

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

Investments in subsidiaries

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

– 17 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

3. SIGNIFICANT ACCOUNTING POLICIES (Continued)

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, less any identified impairment loss.

Jointly controlled entity

Joint venture arrangements which involve the establishment of a separate entity in which each venturer has an interest are referred to as jointly controlled entities.

The Group’s interest in a jointly controlled entity is included in the consolidated balance sheet at the Group’s share of the net assets of a jointly controlled entity plus the goodwill in so far as it has not already been amortised, less any identified impairment loss. The Group’s share of the post-acquisition results of its jointly controlled entity is included in the consolidated income statement.

Goodwill

Goodwill arising on consolidation represents the excess of the cost of acquisition over the Group’s interest in the fair value of the identifiable assets and liabilities of a subsidiary, associate or jointly controlled entity at the date of acquisition. Goodwill is capitalised and amortised on a straight-line basis over its useful economic life. Goodwill arising on the acquisition of an associate or a jointly controlled entity is included within the carrying amount of the associate or jointly controlled entity. Goodwill arising on the acquisition of subsidiaries is presented separately in the balance sheet.

Negative Goodwill

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

Negative goodwill arising on acquisition prior to 1 January 2001 continues to be held in reserves and will be credited to income at the time of disposal of the relevant associate.

Negative goodwill arising on acquisition after 1 January 2001 is presented as deduction from assets. To the extent that such negative goodwill is attributable to losses or expenses anticipated at the date of acquisition, it is released to income in the period in which those losses or expenses arise. The remaining negative goodwill is recognised as income on a straight-line basis over the remaining average useful life of the identifiable acquired depreciable assets. To the extent that such negative goodwill exceeds the aggregate fair value of the acquired identifiable non-monetary assets, it is recognised in income immediately.

Negative goodwill arising on the acquisition of an associate or a jointly controlled entity is deducted from the carrying value of that associate or jointly controlled entity. Negative goodwill arising on the acquisition of subsidiaries is presented separately in the balance sheet as a deduction from assets.

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 each balance sheet date. Any surplus or deficit 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 deficit, in which case the excess of the deficit 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 surplus subsequently arises, this increase is credited to the income statement to the extent of the deficit previously charged.

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

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

– 18 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

3. SIGNIFICANT ACCOUNTING POLICIES (Continued)

Property, plant and equipment

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

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

Leasehold land Over the shorter of the term of the lease, or 50 years Buildings 2% Leasehold improvements Over the lease term Furniture and fixtures 20% – 25% Motor vehicles 30% Office equipment 25%

The gain or loss arising on 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.

Impairment

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

Where an impairment loss subsequently reverses, the carrying amount of the asset is increased to the revised estimate of its recoverable amount, 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.

Investments in securities

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

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

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

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

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

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 income statement items that are never taxable or deductible.

– 19 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

3. SIGNIFICANT ACCOUNTING POLICIES (Continued)

Taxation (Continued)

Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, 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 taxable profit nor the accounting profit.

Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries and associates, and interests in joint ventures 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 profits 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 year 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.

Turnover

Turnover represents rental and management fee income but excludes intra-group transactions.

Revenue recognition

Rental and management fee income is recognised on a straight-line basis over the relevant lease terms.

Interest income 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 shareholders’ rights to receive payment have been established.

Leases

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

Foreign currencies

Transactions in foreign currencies are initially recorded at the rates of exchange prevailing on the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies are re-translated at the rates prevailing on the balance sheet date. Profits and losses arising on exchange are included in net profit or loss for the year.

On consolidation, the assets and liabilities of the Group’s overseas operations are translated at exchange rates prevailing 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 year in which the operation is disposed of.

Retirement benefit costs

Payments to the Mandatory Provident Fund Scheme are charged as an expense as they fall due.

– 20 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

3. SIGNIFICANT ACCOUNTING POLICIES (Continued)

Borrowing costs

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

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

4. SEGMENTAL INFORMATION

The Group is principally engaged in property leasing and building management services and therefore no business segment information is presented.

No geographical segment information is presented as over 90% of the Group’s segment revenue and assets are derived from operations carried out in Hong Kong. The jointly controlled entity is not a reportable segment as defined by SSAP 26 Segment reporting. Further details of the location and principal activities of the jointly controlled entity are set out in note 13.

5. PROFIT (LOSS) FROM OPERATIONS

Profit (loss) from operations has been arrived at after charging: Staff costs, including directors’ remuneration_(note 6): – Salaries, wages and other benefits(Note) – Retirement benefit scheme contributions Total staff costs Auditors’ remuneration Costs incurred in the provision of rental and management services(Note)_ Depreciation of property, plant and equipment Minimum lease payments under operating leases for land and buildings Revaluation deficit of investment properties Unrealised holding loss on other investments and after crediting: Gross rents from investment properties Less: outgoings Dividend income from other investments Interest income from bank deposits Unrealised holding gain on other investments	THE GROUP 2003 2002 HK$’000 HK$’000 9,000 7,196 170 151 9,170 7,347 270 400 2,689 2,854 142 97 594 543 – 3,800 – 28 13,910 14,159 (618) (653) 13,292 13,506 54 49 202 237 190 –	THE GROUP 2003 2002 HK$’000 HK$’000 9,000 7,196 170 151 9,170 7,347 270 400 2,689 2,854 142 97 594 543 – 3,800 – 28 13,910 14,159 (618) (653) 13,292 13,506 54 49 202 237 190 –
		7,347
		400 2,854 97 543 3,800 28 14,159 (653)
		13,506
		49 237 –

Note: Staff costs of HK$1,430,000 (2002: HK$1,902,000) are included in costs incurred in the provision of rental and management services.

– 21 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

6. DIRECTORS’ AND EMPLOYEES’ EMOLUMENTS

(a) Directors’ emoluments

Fees: Executive directors Non-executive directors Independent non-executive directors Other emoluments of executive directors: Salaries and other benefits Retirement benefit scheme contributions Total directors’ emoluments The emoluments of the directors were within the following bands: Nil to HK$1,000,000 HK$1,000,001 to HK$1,500,000	2003 2002 HK$’000 HK$’000 – – 66 66 120 120 186 186 2,635 2,365 5 – 2,640 2,365 2,826 2,551 Number of directors 2003 2002 8 9 1 1 9 10	2002 HK$’000 – 66 120
		186
		2,365 –
		2,365
		2,551

		10

No director waived any emoluments in both years.

(b) Employees’ Emoluments

Of the five individuals with the highest emoluments in the Group, two (2002: two) were directors of the Company whose emoluments are set out above. The emoluments of the remaining three (2002: three) individuals were as follows:

Salaries and other benefits Contributions to retirement benefits schemes	2003 HK$’000 1,764 36 1,800	2002 HK$’000 1,746 36
		1,782

The aggregate emoluments of each of the highest paid non-director employees were within the emolument band ranging from HK$Nil to HK$1,000,000 for both years.

7. FINANCE COSTS

Interest on bank and other borrowings wholly repayable within five years Other finance costs	2003 HK$’000 2,530 377 2,907	2002 HK$’000 3,251 –
		3,251

– 22 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

8. TAXATION

Current tax: Hong Kong Provision for the year Overprovision in prior years Deferred taxation_(note 20)_: Current year Attributable to a change in tax rate Taxation attributable to the Company and its subsidiaries Share of taxation attributable to: A jointly controlled entity Associates	2003 HK$’000 303 (5) 298 559 250 809 1,107 (1,803) (1,186) (1,882)	2002 HK$’000 323 (1,417)
		(1,094)
		694 –
		694
		(400) (707) (132)
		(1,239)

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

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

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

Profit before taxation Tax at Hong Kong Profits Tax rate of 17.5% (2002: 16%) Tax effect of expenses not deductible for tax purpose Tax effect of income not taxable for tax purpose Tax effect of tax losses not recognised Utilisation of tax losses previously not recognised Increase in opening deferred tax liabilities resulting from an increase in Hong Kong Profits Tax rate Tax effect on share of result of a jointly controlled entity Tax effect on share of results of associates Overprovision in prior years Tax credit and effective tax rate for the year	2003 HK$’000 26,599 4,655 1,124 (5,158) 738 (241) 250 (825) (2,420) (5) (1,882)	2002 HK$’000 1,547

		247 1,798 (90) 1,027 (447) – (298) (2,059) (1,417)
		(1,239)

9. EARNINGS PER SHARE

The calculation of the basic earnings per share is based on the net profit attributable to shareholders of approximately HK$28,481,000 (2002: HK$2,786,000) and on the weighted average of 852,689,832 shares (2002: 827,867,914 shares) in issue during the year.

No diluted earnings per share has been presented because the exercise price of the Company’s options was higher than the average market price for shares for both years.

– 23 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

10. INVESTMENT PROPERTIES

At 1 January 2003 and 31 December 2003	THE GROUP HK$’000 236,000

Investment properties were valued at their open market value at 31 December 2003 by AA Property Services Limited, an independent professional valuer and are rented out under operating leases.

The Group’s investment properties have been pledged to banks to secure general banking facilities granted to the Company.

The carrying amount of investment properties comprises land in Hong Kong as follows: Long lease Medium-term lease	THE GROUP 2003 & 2002 HK$’000 87,650 148,350
	236,000

11. PROPERTY, PLANT AND EQUIPMENT

THE GROUP COST At 1 January 2003 Additions At 31 December 2003 DEPRECIATION At 1 January 2003 Provided for the year At 31 December 2003 NET BOOK VALUES At 31 December 2003 At 31 December 2002	Leasehold land and buildings HK$’000 3,143 – 3,143 481 70 551 2,592 2,662	Leasehold improvements HK$’000 101 25 126 101 25 126 – –	Other fixed assets HK$’000 3,526 43 3,569 3,445 47 3,492 77 81	Total HK$’000 6,770 68
				6,838
				4,027 142
				4,169
				2,669

				2,743

The Group’s leasehold land and buildings are situated in Hong Kong held under long term leases.

– 24 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

12. INTERESTS IN SUBSIDIARIES

Unlisted shares, at cost Amounts due from subsidiaries Amounts due to subsidiaries	THE COMPANY 2003 2002 HK$’000 HK$’000 231,154 231,154 399,883 403,576 (27,288) (26,154 603,749 608,576	THE COMPANY 2003 2002 HK$’000 HK$’000 231,154 231,154 399,883 403,576 (27,288) (26,154 603,749 608,576
		608,576

The balances with subsidiaries are unsecured and in the opinion of directors, the balances will not be receivable/ repayable within one year from the balance sheet date, and are therefore shown as non-current. Except for an amount of amounts due from subsidiaries of HK$13,819,000 (2002: HK$12,743,000) bears interest at 3% per annum, the remaining balances are interest free.

Details of the Company’s principal subsidiaries at 31 December 2003 are as follows:

			Proportion of nominal
	Place of	Issued and	value of issued
	incorporation/	fully paid	share capital
Name of subsidiary	operation	share capital	held by the Company	Principal activities
Direct subsidiary
SCG Investment (B.V.I.)	British Virgin	HK$100,000	100%	Investment holding
Limited	Islands (“BVI”)
Indirect subsidiaries
Dunley Developments	BVI	US$1	100%	Investment holding
Limited
Ecko Limited	Hong Kong	HK$2	100%	Property management
Eldex Investment Company	Hong Kong	HK$541,000	100%	Property investment
Limited		(ordinary)
		HK$1,459,000
		(non-voting
		deferred)
Grand Award Limited	BVI	US$1	100%	Investment holding
Grand Park Investment	Hong Kong	HK$2	100%	Property investment
Limited
Grand Phoenix Limited	BVI	US$1	100%	Investment holding
Jeckman Holdings Limited	BVI	US$16	100%	Investment holding
Linksky Limited	Hong Kong	HK$2	100%	Property holding
Long Cosmos Investment	Hong Kong	HK$2	100%	Provision of
Limited				management services
Lyre Terrace	Hong Kong	HK$1,000,000	100%	Investment holding
Management Limited				and property
				investment
On Hing Investment	Hong Kong	HK$1,000	100%	Property investment
Company, Limited		(ordinary)
		HK$2,000,000
		(non-voting
		deferred)

– 25 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

12. INTERESTS IN SUBSIDIARIES (Continued)

			Proportion of nominal
	Place of	Issued and	value of issued
	incorporation/	fully paid	share capital
Name of subsidiary	operation	share capital	held by the Company	Principal activities
SCG Financial Investment	BVI	US$1,000	100%	Investment holding
Limited
SCG Leasing Corporation	Hong Kong	HK$2	100%	Property investment
Limited
Strenbeech Limited	BVI/	HK$147,000,008	100%	Property investment
	Hong Kong
Tin Fung Investment	Hong Kong	HK$975,000	100%	Property investment
Company, Limited		(ordinary)
		HK$210,000
		(non-voting
		deferred)
Upper Nice Assets Ltd.	BVI	US$1	100%	Investment holding

Note: All issued share capital are ordinary shares unless otherwise stated.

The above table lists the subsidiaries of the Group which, in the opinion of the directors, principally affected the results or assets and liabilities of the Group. To give details of other subsidiaries would, in the opinion of directors, result in particulars of excessive length.

13. INTEREST IN A JOINTLY CONTROLLED ENTITY

Share of net assets Goodwill_(Note) _Note: COST At 1 January 2002, 31 December 2002 and 31 December 2003 AMORTISATION 1 January 2002 Charge for the year At 31 December 2002 and 1 January 2003 Charge for the year At 31 December 2003 NET BOOK VALUES At 31 December 2003 At 31 December 2002	THE GROUP 2003 2002 HK$’000 HK$’000 188,174 197,086 23,408 25,281 211,582 222,367 HK$’000 33,710 6,556 1,873 8,429 1,873 10,302 23,408 25,281	THE GROUP 2003 2002 HK$’000 HK$’000 188,174 197,086 23,408 25,281 211,582 222,367 HK$’000 33,710 6,556 1,873 8,429 1,873 10,302 23,408 25,281
		222,367

		HK$’000 33,710
		6,556 1,873
		8,429 1,873
		10,302
		23,408

		25,281

– 26 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

13. INTEREST IN A JOINTLY CONTROLLED ENTITY (Continued)

At 31 December 2003, the Group had interest in the following jointly controlled entity:

			Proportion of
			nominal value of
	Form of	Place of	issued ordinary
	business	incorporation	share capital indirectly
Name of entity	structure	and operation	held by the Company	Principal activities
Beijing Dongzhimen International	Sino-foreign	People’s	44%	Property holding and
Apartment Co., Ltd.	equity joint	Republic		provision of
(“Beijing Dongzhimen”)	venture	of China		residential service
		(“PRC”)		apartments

Beijing Dongzhimen is a sino-foreign equity joint venture which was established in the PRC on 18 December 1986 with a tenure of 14 years and 8 months to 17 August 2001 (the “initial JV term”). The extension of the initial JV term for a further period of 15 years from the date of expiry of the initial JV term to 17 August 2016 has been approved by the relevant authorities.

Beijing Dongzhimen has obtained approval from relevant authorities to further extend the land use right of the residential service apartments for 40 years following the expiry of the initial JV term.

The following details have been extracted from the audited financial statements of Beijing Dongzhimen:

Results

Turnover Loss before taxation Loss before taxation attributable to the Group Financial position Non-current assets Current assets Current liabilities Non-current liabilities Net assets Net assets attributable to the Group	2003 HK$’000 87,250 (12,689) (5,583) 2003 HK$’000 712,158 11,498 (100,443) (195,545) 427,668 188,174	2002 HK$’000 99,166

		(5,804)

		(2,554)

		2002 HK$’000 663,216 41,134 (133,032) (123,395)
		447,923

		197,086

– 27 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

14. INTERESTS IN ASSOCIATES

Share of net assets Loan to an associate Due from an associate Less: Allowance for doubtful debts Associates include: Share of net assets of a Hong Kong listed company Market value of listed shares	THE GROUP 2003 2002 HK$’000 HK$’000 249,394 241,664 27,900 27,900 3,589 3,589 280,883 273,153 (31,489) (31,489) 249,394 241,664 249,394 241,664 393,948 196,974	THE GROUP 2003 2002 HK$’000 HK$’000 249,394 241,664 27,900 27,900 3,589 3,589 280,883 273,153 (31,489) (31,489) 249,394 241,664 249,394 241,664 393,948 196,974
		273,153 (31,489)
		241,664

		241,664

		196,974

The loan of HK$27,900,000 (2002: HK$27,900,000) to an associate is unsecured, interest-bearing at 15% per annum and has no fixed terms of repayment. The amount “Due from an associate” is unsecured, interest-free and has no fixed terms of repayment. Both of these amounts have been fully provided against at the balance sheet date.

As at 31 December 2003, the Group had interests in the following associates:

		Place of	Proportion of
	Form of	incorporation/	nominal value of
	business	registration	issued share capital
Name of entity	structure	and operation	held by the Group	Principal activities
Shougang Concord Technology	Incorporated	Hong Kong	31.13%	Investment holding
Holdings Limited (“Shougang				(Note)
Concord Technology”)
Top Pearl International	Incorporated	BVI/PRC	50%	Property development
Development Limited

Note: The principal activities of the material associate of the Group, Shougang Concord Technology and its subsidiaries, at the balance sheet date were engaged in the manufacture and sale of telephone cords and accessories, power cords, adaptors and electronic products, printed circuit boards, high precision metal parts and the provision of freight forwarding and delivery services.

– 28 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

14. INTERESTS IN ASSOCIATES (Continued)

The following details have been extracted from the audited financial statements of Shougang Concord Technology:

Results Turnover Profit before taxation Profit before taxation attributable to the Group Financial position Non-current assets Current assets Current liabilities Non-current liabilities Minority interests Net assets Net assets attributable to the Group 15. OTHER INVESTMENTS Listed equity investments in Hong Kong, at market value 16. BANK BORROWINGS Secured Unsecured The maturity of the bank borrowings is as follows: On demand or within one year More than one year, but not exceeding two years More than two years, but not exceeding five years Less: Amounts due within one year shown under current liabilities	2003 2002 HK$’000 HK$’000 387,744 426,269 19,156 27,184 7,049 12,045 2003 2002 HK$’000 HK$’000 768,128 310,358 395,405 559,490 (286,023) (133,332) (66,937) (205,053) (9,605) (9,543) 800,968 521,920 249,394 241,664 THE GROUP 2003 2002 HK$’000 HK$’000 1,020 830 THE GROUP AND THE COMPANY 2003 2002 HK$’000 HK$’000 109,520 80,000 1,880 2,000 111,400 82,000 5,600 30,600 15,800 35,600 90,000 15,800 111,400 82,000 (5,600) (30,600) 105,800 51,400	2002 HK$’000 426,269

		27,184

		12,045

		2002 HK$’000 310,358 559,490 (133,332) (205,053) (9,543)
		521,920

		241,664

		82,000

		30,600 35,600 15,800
		82,000 (30,600)
		51,400

– 29 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

17. SHARE CAPITAL

Ordinary shares of HK$0.01 each Authorised: At 1 January and 31 December Issued and fully paid: At 1 January Share issued at premium At 31 December	2003 Number Nominal of shares value HK$’000 2,000,000,000 20,000 827,867,914 8,279 30,000,000 300 857,867,914 8,579	2002 Number Nominal of shares value HK$’000 2,000,000,000 20,000 827,867,914 8,279 – – 827,867,914 8,279	2002 Number Nominal of shares value HK$’000 2,000,000,000 20,000 827,867,914 8,279 – – 827,867,914 8,279

			8,279 –
			8,279

On 19 February 2003, Shougang Holding (Hong Kong) Limited (“Shougang Holding”), the intermediate holding company, entered into an agreement with the placing agent, CITIC Capital Markets Limited (“CITIC”), to place on a fully underwritten basis 30,000,000 existing ordinary shares of the Company at a price of HK$0.48 per share. The shares were placed by CITIC to an independent third party on 21 February 2003.

On the same date, the Company entered into a conditional agreement with Shougang Holding for the subscription of 30,000,000 new ordinary existing shares by Shougang Holding at a price of HK$0.48 per share. On 5 March 2003, the condition as specified in the agreement had been fulfilled and, accordingly the said transaction was completed.

18. SHARE OPTIONS SCHEMES

On 7 June 2002, the share option scheme (the “Old Scheme”) of the Company adopted on 8 September 1993 ceased to operate and a new share option scheme (the “New Scheme”) has been adopted to comply with the new requirements of Chapter 17 of the Listing Rules regarding share option schemes of a company. No share options under the Old Scheme were outstanding as at 1 January 2002 and no share option was granted by virtue of the Old Scheme for the period from 1 January 2002 and up to 7 June 2002, being the date of termination of the Old Scheme.

The Company operates the New Scheme for the purpose of providing incentives and rewards to eligible participants who contribute to the success of the Group’s operations and/or its associated companies. Eligible participants of the New Scheme included directors (including executive and non-executive directors), executives, officers, employees or shareholders of the Company or any of its subsidiaries or any of its associated companies and any suppliers, customers, consultants, advisers, agents, partners or business associates. The New Scheme became effective on 7 June 2002, unless otherwise cancelled or amended, will remain in force for 10 years from that date.

The maximum number of unexercised share options currently permitted to be granted under the New Scheme is an amount equivalent, upon their exercise, to 10% of the shares of the Company in issue at the date of the passing of such resolution. At 19 April 2004, the total number of shares available for issue under the New Scheme was 85,786,791, which represented approximately 9.1% of the Company’s shares in issue as at that date. The maximum number of shares issuable under share options to each eligible participant in the New Scheme within any 12month period, is limited to 1% of the shares of the Company in issue at any time. Any further grant of share options in excess of this limit is subject to shareholders’ approval in a general meeting.

Share options granted to a director, chief executive or substantial shareholder of the Company, or to any of their associates, are subject to approval in advance by the independent non-executive directors. In addition, any share options granted to a substantial shareholder or an independent non-executive director of the Company, or to any of their associates, in excess of 0.1% of the shares of the Company in issue at any time and with an aggregate value (based on the price of the Company’s shares at the date of the grant) in excess of HK$5 million, within any 12-month period, are subject to shareholders’ approval in advance in a general meeting.

The offer of a grant of share options may be accepted within 60 days from the date of the offer, upon payment of a nominal consideration of HK$1 in total by the grantee. An option may be exercised under the New Scheme at any time within 10 years from the date of the options have been granted.

– 30 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

18. SHARE OPTIONS SCHEMES (Continued)

The exercise price of the share options is determinable by the directors, but may not be less than the higher of (i) the Stock Exchange closing price of the Company’s shares on the date of the offer of the share options; (ii) the average Stock Exchange closing price of the Company’s shares for the five trading days immediately preceding the date of the offer; and (iii) the nominal value of the Company’s ordinary shares.

Share options do not confer rights on the holders to dividends or to vote at shareholders’ meetings.

The following table discloses the details of the share options and movements in such holdings during the years ended 31 December 2003 and 2002:

Number of share options	Number of share options	Number of share options	Number of share options
At 1.1.2003 31,431,112 – 16,557,358 4,000,000 – 1,822,944 – 53,811,414	Granted Exercised during during the year the year – – 10,762,283 – – – – – 5,120,000 – – – 13,085,735 – 28,968,018 – Number of share options		At 31.12.2003 31,431,112 10,762,283 16,557,358 4,000,000 5,120,000 1,822,944 13,085,735
			82,779,432


At 1.1.2002 – – – – –	Granted during the year 31,431,112 16,557,358 4,000,000 1,822,944 53,811,414	Exercised during the year – – – – –	At 31.12.2002 31,431,112 16,557,358 4,000,000 1,822,944
			53,811,414

Notes:

Total consideration received during the year from employees for taking up the options granted is amounted to HK$7 (2002: HK$11).
No share options were exercised or lapsed or cancelled under the New Scheme during the year.
The closing price of the shares of the Company immediately before 6 March 2003, the date of grant of the share options, was HK$0.70.
The financial impact of share options granted is not recorded in the Company’s or the Group’s balance sheet until such item as the options are exercised, and no charge is recognised in the income statement in respect of the value of options granted in the year. Upon the exercise of the share options, the resulting shares issued are recorded by the Company as additional share capital at the nominal value of the shares, and the excess of the exercise price per share over the nominal value of the shares is recorded by the Company in the share premium account. Options which lapse or are cancelled prior to their exercise date are deleted from the register of outstanding options.

– 31 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

19. RESERVES

THE GROUP

The contributed surplus represented the difference between the nominal value of the shares of the subsidiaries acquired pursuant to the Group reorganisation in 1991 over the nominal value of the Company’s shares issued in exchange.

THE COMPANY At 1 January 2002 Loss for the year At 31 December 2002 and 1 January 2003 Shares issued at premium Loss for the year At 31 December 2003	Share premium account HK$’000 192,744 – 192,744 14,100 – 206,844	Contributed surplus HK$’000 362,731 – 362,731 – – 362,731	Accumulated losses HK$’000 (16,884) (1,648) (18,532) – (2,568) (21,100)	Total HK$’000 538,591 (1,648
				536,943 14,100 (2,568
				548,475

The contributed surplus represented the difference between the consolidated shareholders’ funds of the subsidiaries at the date on which they are acquired by the Company and the nominal amount of the Company’s shares issued for the acquisition at the time of a group reorganisation in 1991. Under the Companies Act 1981 of Bermuda (as amended), the contributed surplus account of the Company is available for distribution. However, the Company cannot declare or pay a dividend, or make a distribution out of contributed surplus if:

(a) it is, or would after the payment be, unable to pay its liabilities as they become due; or

(b) the realisable value of its assets would thereby be less than the aggregate of its liabilities and its issued share capital and share premium accounts.

In the opinion of the directors, as at 31 December 2003, the Company’s reserves available for distribution consisted of contributed surplus and accumulated losses of HK$341,631,000 (2002: HK$344,199,000).

20. DEFERRED TAX LIABILITIES

The following are the major deferred tax liabilities recognised and movements thereon during the current and prior years:

THE GROUP At 1 January 2002 – as previously reported – adjustment on adoption of SSAP 12 (Revised) – as restated Charge to income statement for the year At 31 December 2002 and 1 January 2003 Charge to income statement Effect of change in tax rate – charge to income statement At 31 December 2003	Investment properties HK$’000 – 1,941 1,941 687 2,628 557 247 3,432	Accelerated tax depreciation HK$’000 – 27 27 7 34 2 3 39	Total HK$’000 – 1,968
			1,968 694
			2,662 559 250
			3,471

– 32 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

20. DEFERRED TAX LIABILITIES (Continued)

At the balance sheet date, the Group has unused tax losses of HK$48,758,000 (2002: HK$45,915,000) available for offset against future profits. No deferred tax asset has been recognised in relation to the unused tax losses due to the unpredictability of future profit streams.

The Company had no significant unprovided deferred taxation during the year or at the balance sheet date.

21. OPERATING LEASES

The Group as lessor

The Group’s property rental income earned during the year was HK$13,910,000 (2002: HK$14,159,000). The Group’s investment properties have committed tenants for the next one to three years.

At the balance sheet date, the Group had contracted with tenants for the following future minimum lease payments:

Within one year In the second to fifth year inclusive	THE GROUP 2003 2002 HK$’000 HK$’000 7,119 9,156 1,782 4,158 8,901 13,314	THE GROUP 2003 2002 HK$’000 HK$’000 7,119 9,156 1,782 4,158 8,901 13,314
		13,314

22. CAPITAL COMMITMENTS

The Group’s share of the jointly controlled entity’s capital commitments: Contracted but not provided for	THE GROUP 2003 2002 HK$’000 HK$’000 11,814 24,580

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

23. PLEDGE OF ASSETS

At 31 December 2003, the Group’s investment properties and land and buildings with an aggregate carrying value of approximately HK$238,592,000 (2002: HK$238,662,000) were pledged to banks for bank loans. At 31 December 2003, the outstanding amount of such bank loans were HK$109,520,000 (2002: HK$80,000,000).

24. RETIREMENT BENEFIT SCHEMES

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

25. POST BALANCE SHEET EVENT

On 13 February 2004, a resolution was passed by the directors to approve a payment of a special dividend to be satisfied by the distribution in specie of the Group’s entire shareholding of approximately 31.02% in Shougang Concord Technology to the Company’s shareholders whose name as recorded on the register of members of the Company on 4 March 2004 on a pro-rata basis.

At the balance sheet date, the Group owns 371,649,069 shares in Shougang Concord Technology, representing approximately 31.13% of the Shougang Concord Technology’s issued shares.

– 33 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

26. RELATED PARTY TRANSACTIONS

During the year, the Group entered into certain transactions with Shougang Holding and with Shougang Holding’s subsidiary and with Shougang Concord International Enterprises Company Limited (“Shougang International”), an associate of Shougang Holding.

Management and service fees charged by Shougang International_(Note a) Consultancy expenses charged by Shougang International(Note a) Rental expenses charged by Winluck Properties Limited(Note b) Rental expenses charged by Wonderfine Development Limited(Note b) Consultancy expenses charged by Shougang Holding(Note c)_	2003 HK$’000 – – 594 – 960	2002 HK$’000 498

		400

		–

		543

		960

Notes:

(a) The management and services fees and consultancy expenses were charged in accordance with the agreements between the Group and Shougang International.
(b) The rental expenses were charged in accordance with the agreements between the Group, Winluck Properties Limited and Wonderfine Development Limited, subsidiaries of Shougang Holding.
(c) The consultancy expenses were charged in accordance with the agreement between the Group and Shougang Holding.

– 34 –

PROPERTY VALUATION

APPENDIX II

31 August 2004

The Directors

Shougang Concord Grand (Group) Limited

6th Floor Bank of East Asia Harbour View Centre No. 56 Gloucester Road

Wan Chai Hong Kong

Dear Sirs,

In accordance with your instruction to value the property interests owned by Shougang Concord Grand (Group) Limited (hereinafter together referred to as the “Group”) located in Hong Kong, we confirm that we have made relevant searches and 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 interests for sale purpose as at 18 August 2004.

Our valuation is our opinion of the open market value which we would define as intended to mean “the best price at which the sale of an interest in 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 the 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 prospective purchaser with a special interest; and
(e) that both parties to the transaction had acted knowledgeably, prudently and without compulsion”.

Our valuation has been made on the assumption that the property interests are sold on the open market in their existing state without the benefit of deferred term contracts, leaseback, joint ventures, management agreements or any similar arrangements which would serve to increase the value of such property interests.

We have valued the property interests on open market basis assuming sale with the benefit of vacant possession by reference to comparable market transactions and where appropriate on the basis of capitalisation of the rental income receivable from the property with due allowance for reversionary income potential.

– 35 –

PROPERTY VALUATION

APPENDIX II

We have relied to a very considerable extent on the information provided by the Group and have accepted advice given to us on such matters as planning approvals or statutory notices, easements, tenure, lettings, rentals, site and floor areas and all other relevant matters.

We have caused searches to be made in respect of the property interests at the relevant Land Registry. However, we have not scrutinised the original documents to verify ownership or to verify any lease and title amendments which may not appear on the copies handed to us. All documents and leases have been used as reference only and all dimensions, measurements and areas are approximate. No onsite measurements have been taken.

The government lease under which the property interests are held expired on 30 June 1997. By virtue of section 6 of the New Territories Leases (Extension) Ordinance 1988, the lease term of the property interests has been extended until the expiry of 30 June 2047. The annual government rents for the property interests are equal to three per cent of the rateable value of the property interests.

We have not conducted inspection of the property included in the valuation certificate attached. For the purpose of valuation, we have assumed that the property was in reasonable condition and occupied for their authorised usage without any additions or alterations as at the date of valuation.

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

Our summary of valuation and the valuation certificate are attached.

Yours faithfully, For and on behalf of

A A PROPERTY SERVICES LIMITED PATRICK W.C. LAI MRICS, MHKIS, MCIArb., RPS

Executive Director

– 36 –

PROPERTY VALUATION

APPENDIX II

SUMMARY OF VALUATION

Property

The Whole Block of Kader Industrial Building No. 17 Lok Yip Road Lot No. 5366 in D.D. No. 51 On Lok Tsuen Fanling New Territories

Capital value in existing state as at 18 August 2004

HK$100,000,000

– 37 –

PROPERTY VALUATION

APPENDIX II

VALUATION CERTIFICATE

Description and Tenure

Property

The Whole Kader Industrial Building is a Block of Kader six-storeyed industrial building Industrial with carparking facilities and Building, loading and unloading facilities No. 17 provided on ground floor. The Lok Yip Road, building is served by four cargo Lot No.5366 lifts, two passenger lifts and six in D.D. No. 51, staircases. It was completed in On Lok Tsuen, 1989. Fanling, New Territories The registered site area of the subject lot is about 40,473

Lot No. 5366 square feet (or about 3,760 in Demarcation square metres). District No. 51

The property comprises the whole of the building. It contains 3 industrial units on the ground floor and 2 industrial units on each of the first to fifth floor together with 11 covered carparking spaces, 10 covered lorry parking spaces and 2 covered container parking spaces on ground floor.

Particulars of Occupancy

The property (except the carparking space nos. P1, P2 & P7 on G/F) was, as at 18 August 2004 subject to various tenancies/ licences with the latest expiry date on 31 March 2006.

The total monthly rental and licence fees receivable from the leased portions of the property was HK$622,536.5 as at 18 August 2004.

Capital value in existing state as at 18 August 2004

HK$100,000,000

– 38 –

PROPERTY VALUATION

APPENDIX II

			Capital value in
		Particulars of	existing state as at
Property	Description and Tenure	Occupancy	18 August 2004
	The building contains a total
	gross floor area of about
	207,863 square feet (or about
	19,310.94 square metres) plus
	roof of about 33,710 square feet
	(or about 3,131.74 square
	metres) and the total saleable
	area of the industrial units is
	about 180,290 square feet (or
	about 16,749.35 square metres)
	and that of the roof is about
	33,710 square feet (or about
	3,131.74 square metres).
	By virtue of section 6 of the
	New Territories Leases
	(Extension) Ordinance 1988 the
	lease term of the property is
	extended until the expiry of 30
	June 2047. The annual
	government rent for the
	property is equal to 3% of the
	rateable value of the property.

Notes:

The registered owner of the property is Strenbeech Limited.
The property is subject to a tripartite legal charge/mortgage in favour of The Citic Ka Wah Bank Limited vide memorial no. 548809 dated 30 June 2003.

– 39 –

GENERAL INFORMATION

APPENDIX III

1. RESPONSIBILITY STATEMENT

This circular includes particulars given in compliance with the Listing Rules for the purpose of giving information with regard to the 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 not contained in this circular, the omission of which would make any statement herein misleading.

2. DISCLOSURE OF INTERESTS

(a) Disclosure of interests by the Directors

As at the Latest Practicable Date, the Directors and chief executive of the Company had the following interests or short positions in the shares, underlying shares and debentures of the Company or any associated corporations (within the meaning of Part XV of the SFO) as recorded in the register required to be kept under section 352 of the SFO or otherwise notified to the Company and the Stock Exchange pursuant to the Model Code for Securities Transactions by Directors of Listed Companies (“Model Code”), were as follows:

	Name of
corporation in			Number of
which interests		Number of	Shares	Nature of
Name of Director	are held	Shares	under options	interests
Wang Qinghai	Company	8,278,679	–	Personal
Cao Zhong	Company	8,278,679	21,447,000	Personal
			(Note 1)
Chen Zheng	Company	–	18,015,000	Personal
			(Note 1)
Wang Tian	Company	–	16,299,000	Personal
			(Note 1)
Cheng Xiaoyu	Company	8,278,679	15,441,000	Personal
			(Note 1)
Leung Shun Sang, Tony	Company	8,278,000	75_(Note 2)_	Personal
			604_(Note 3)_
Choy Hok Man, Constance	Company	400,000	–	Personal

– 40 –

GENERAL INFORMATION

APPENDIX III

Notes:

Under the share option scheme of the Company adopted on 7 June 2002 on the terms and conditions as set out in the circular of the Company dated 10 May 2004, the options to subscribe for the Shares are exercisable at any time from 8 June 2004 to 7 June 2014 at a subscription price of HK$0.82 per Share, subject to adjustment. The options were granted on 8 June 2004 to each grantee at a consideration of HK$1.00.
Under the share option scheme of the Company adopted on 7 June 2002, the options to subscribe for the Shares are exercisable at any time from 23 August 2002 to 6 June 2012 at a subscription price of HK$0.73 per Share, subject to adjustment. The options were granted on 23 August 2002 to each grantee at a consideration of HK$1.00.
Under the share option scheme of the Company adopted on 7 June 2002, the options to subscribe for the Shares are exercisable at any time from 6 March 2003 to 5 March 2013 at a subscription price of HK$0.76 per Share, subject to adjustment. The options were granted on 6 March 2003 to each grantee at a consideration of HK$1.00.

(b) Particulars of Directors’ other interests

As at the Latest Practicable Date, no Director had a service contract with any member of the Group which is not determinable by the Company within one year without the payment other than statutory compensation.

(c) Save as disclosed above, as at the Latest Practicable Date:

(i) none of the Directors and chief executive hold any interest or short position in the shares, underlying shares and debentures of the Company or any of its associated corporation (within the meaning of the SFO) notificable to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short positions which they are taken or deemed to have under such provisions of the SFO) or which are required, pursuant to Section 352 of the SFO, to be entered in the register referred to therein, or which are required, pursuant to the Model Code to be notified to the Company and the Stock Exchange;
(ii) none of the Directors had any direct or indirect interest in any assets which have been, since the date to which the latest published audited accounts of the Group were made up, acquired or disposed of by, or leased to the Company or any of its subsidiaries, or are proposed to be acquired or disposed of by, or leased to, the Company or any of its subsidiaries;
(iii) none of the Directors is materially interested in any contract or arrangement entered into by the Company or any of its subsidiaries which contract or arrangement is subsisting at the date of this circular and which is significant in relation to the business of the Group;
(iv) none of the Directors has entered or is proposing to enter into a service contract with the Company or any of its subsidiaries (excluding contracts expiring or determinable within one year without payment of compensation other than statutory compensation); and

– 41 –

GENERAL INFORMATION

APPENDIX III

(d) Directors’ interests in competing businesses

As at the Latest Practicable Date, the interests of the Directors in the businesses (other than those businesses where the Directors were appointed as directors to represent the interests of the Company and/or any member of the Group) which are considered to compete or are likely to compete, either directly or indirectly, with the businesses of the Group were as follows:

Description Name of entity of businesses of whose businesses are the entity which are considered to compete considered to compete or likely to compete or likely to compete Nature of with the businesses with the businesses interest of the Name of Director of the Group of the Group Director in the entity Note Wang Qinghai Shougang Corporation Manufacture, sale director 1 and trading of steel products, shipping services and property investment Cao Zhong China Shougang Trading of steel director 1 International products, property Trade and investment and Engineering shipping services Corporation Note:

Such businesses may be carried out through its subsidiaries, associates or by way of other forms of investments.

3. SUBSTANTIAL SHAREHOLDERS

(a) As at the Latest Practicable Date, according to the register kept by the Company under Section 336 of the SFO, the following persons and companies were interested in 5% or more in the Shares or underlying Shares which fall to be disclosed to the Company under Divisions 2 and 3 of Part XV of the SFO:

Name	Notes	Number of Shares held	%
Shougang Holding	1	445,731,315	47.45
Wheeling Holdings	1	430,491,315	45.83
Cheung Kong (Holdings) Limited	2,3	133,048,717	14.16
(“Cheung Kong”)
Max Same	3	91,491,193	9.74

– 42 –

GENERAL INFORMATION

APPENDIX III

Notes:

Wheeling Holdings is a wholly-owned subsidiary of Shougang Holding and its interests are included in the interests held by Shougang Holding.
By virtue of their interests in Cheung Kong, the following person and companies are each deemed to be interested in the Shares held by Cheung Kong:

Mr. Li Ka-Shing

Li Ka-Shing Unity Trustcorp Limited as a trustee of a discretionary trust holding units in the Li Ka-Shing Unity Trust.

Li Ka-Shing Unity Trustee Company Limited as trustee of the Li-Ka-Shing Unity Trust Li Ka-Shing Unity Trustee Corporation Limited as trustee of the Li Ka-Shing Unity Discretionary Trust

Max Same is a wholly-owned subsidiary of Cheung Kong and its interest is included in the interests held by Cheung Kong.

Save as disclosed above, so far as was known to the Directors, there was no other person (other than the Directors or chief executive of the Company) who, as at the Latest Practicable Date, had an interest or short position in the Shares and underlying Shares which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO, or, who was, directly or indirectly, beneficially interested in 5% or more of the issued share capital of the Company.

4. LITIGATION

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

5. MATERIAL ADVERSE CHANGE

Save as disclosed in this circular, 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 accounts of the company were made up.

6. MATERIAL CONTRACTS

In the two years immediately preceding the Latest Practicable Date, the following contracts, not being contracts entered into in the ordinary course of business, were entered into by the Company or its subsidiaries which are material:

(i) a letter agreement with Nanyang Commercial Bank on 15 November 2002 for a banking facilities of HK$10,000,000 extended to the Company;
(ii) the subscription agreement dated 19 February 2003 between the Company and Shougang Holding in respect of the subscription of the 30,000,000 new Shares by Shougang Holding.
(iii) a facility letter with Citic Ka Wah Bank Limited for a facility up to HK$100,000,000 extended to the Company on 19 May 2003;

– 43 –

GENERAL INFORMATION

APPENDIX III

(iv) a joint venture agreement with Simplex Capital Asia Limited and Shougang Holding on 14 July 2003 for the provision of financial services;
(v) the sale and purchase agreement dated 27 August 2004 between Eldex Investment Company Limited, a wholly-owned subsidiary of the Company, and Sky Rich Enterprises Limited relating to the disposal of certain properties located at Kaiser Estate, Man Yue Street, Man Lok Street and Hok Yuen Street, Hunghom, Kowloon, Hong Kong; and
(vi) the Formal Agreement

7. QUALIFICATION AND CONSENT OF EXPERT

AA Property Services Limited has given and has not withdrawn its written consent to the issue of this circular with the inclusion of its letter or report and reference to its name in the form and context in which they appear.

The qualification of the experts who have provided their advice which are contained in this circular is set out as follows:

Name

Qualification

AA Property Services Limited Registered Professional Surveyor

AA Property Services Limited has no interest in any Shares or shares in any member of the Group nor does it have any right or option (whether legally enforceable or not) to subscribe for or nominate persons to subscribe for any Shares or shares in any member of the Group.

8. MISCELLANEOUS

(a) The registered office of the Company is Canon’s Court, 22 Victoria Street, Hamilton HM 12, Bermuda.
(b) The branch share registrar of the Company in Hong Kong is Tengis Limited located at G/F, Bank of East Asia Harbour View Centre, 56 Gloucester Road, Wanchai, Hong Kong.
(c) The company secretary and the qualified accountant of the Company is Ms. Chan Yuet Kwai, a fellow member of each of The Association of Chartered Certified Accountants and the Hong Kong Institute of Certified Public Accountants (formerly known as the Hong Kong Society of Accountants).
(d) The English text of this circular will prevail over the Chinese text.

– 44 –

GENERAL INFORMATION

APPENDIX III

9. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents will be available for inspection during business hours at the Hong Kong principal office of the Company at 6th Floor, Bank of East Asia Harbour View Centre, 56 Gloucester Road, Wanchai, Hong Kong from the date of this circular up to and including 28 September, 2004:

(a) the bye-laws of the Company;
(b) the annual reports of the Company for the two years ended 31 December 2002 and 2003.
(c) the letter of consent referred to in the section headed “Expert and consent” of this appendix;
(d) the property valuation report prepared by AA Property Services Limited, the text of which is set out in Appendix II to this circular;
(e) the material contracts referred to in the section headed “Material contracts” in this appendix;
(f) the Provisional Sale and Purchase Agreement;
(g) the circular issued pursuant to the requirements set out in Chapter 14 and/or 14A issued since the date of the latest published audited accounts.

– 45 –

AI assistant

Ulferts International Limited — Proxy Solicitation & Information Statement 2004

50108_rns_2004-09-13_56ed1a96-7c4f-46a7-bce6-3f711a9592a2.pdf

首長四方（集團）有限公司 SHOUGANG CONCORD GRAND (GROUP) LIMITED

MAJOR TRANSACTION

DISPOSAL OF PROPERTY

CONTENTS

DEFINITIONS

DEFINITIONS

首長四方（集團）有限公司 SHOUGANG CONCORD GRAND (GROUP) LIMITED

MAJOR TRANSACTION DISPOSAL OF PROPERTY

INTRODUCTION

PROVISIONAL SALE AND PURCHASE AGREEMENT

Sale and purchase:

Property:

Consideration:

LETTER FROM THE BOARD

REASON FOR THE DISPOSAL OF THE PROPERTY

USE OF SALES PROCEEDS

FINANCIAL EFFECTS

GENERAL

APPROVAL BY SHAREHOLDERS

LETTER FROM THE BOARD

INDEBTEDNESS

WORKING CAPITAL

CURRENT TRADING PROSPECTS

LIQUIDITY AND CAPITAL RESOURCES

SIGNIFICANT INVESTMENTS HELD BY THE GROUP

Beijing Dongzhimen International Apartment Co., Ltd. (“Beijing Dongzhimen”)

FINANCIAL SUMMARY

(a) Three year financial summary

APPENDIX I

(b) Audited financial statements of the Group for the financial year ended 31 December 2003

Consolidated Income Statement

Consolidated Balance Sheet

Balance Sheet

Consolidated Statement of Changes in Equity

Consolidated Cash Flow Statement

Notes to the Financial Statements

1. GENERAL

2. ADOPTION OF HONG KONG FINANCIAL REPORTING STANDARDS

3. SIGNIFICANT ACCOUNTING POLICIES

Basis of consolidation

Investments in subsidiaries

3. SIGNIFICANT ACCOUNTING POLICIES (Continued)

Interests in associates

Jointly controlled entity

Goodwill

Negative Goodwill

Investment properties

3. SIGNIFICANT ACCOUNTING POLICIES (Continued)

Property, plant and equipment

Impairment

Investments in securities

Taxation

3. SIGNIFICANT ACCOUNTING POLICIES (Continued)

Turnover

Revenue recognition

Leases

Foreign currencies

Retirement benefit costs

3. SIGNIFICANT ACCOUNTING POLICIES (Continued)

Borrowing costs

4. SEGMENTAL INFORMATION

5. PROFIT (LOSS) FROM OPERATIONS

6. DIRECTORS’ AND EMPLOYEES’ EMOLUMENTS

(a) Directors’ emoluments

(b) Employees’ Emoluments

7. FINANCE COSTS

8. TAXATION

9. EARNINGS PER SHARE

10. INVESTMENT PROPERTIES

11. PROPERTY, PLANT AND EQUIPMENT

APPENDIX I

12.

INTERESTS IN SUBSIDIARIES

12. INTERESTS IN SUBSIDIARIES (Continued)

13. INTEREST IN A JOINTLY CONTROLLED ENTITY

13. INTEREST IN A JOINTLY CONTROLLED ENTITY (Continued)

Results

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