Wang On Group Limited

THIS PROSPECTUS IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

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

If you have sold or transferred all your shares in Wang On Group Limited , you should at once hand this prospectus together with the accompanying provisional allotment letter and the form of application for excess Rights Shares to the purchaser or transferee or to the bank, stockbroker or other agent through whom the sale or transfer was effected for transmission to the purchaser or transferee.

A copy of this prospectus, together with the provisional allotment letter and the form of application for excess Rights Shares, has been registered by the Registrar of Companies in Hong Kong as required by Section 342C of the Companies Ordinance of Hong Kong. A copy of this prospectus, together with copies of the provisional allotment letter and the form of application for excess Rights Shares, have been filed with the Registrar of Companies in Bermuda as required by the Companies Act 1981 of Bermuda. The Registrar of Companies in Hong Kong, the Securities & Futures Commission and the Registrar of Companies in Bermuda take no responsibility as to the contents of any of the documents referred to above.

Dealings in the shares of Wang On Group Limited may be settled through the Central Clearing and Settlement System (“CCASS”) and you should consult your stockbroker or other registered dealer in securities, bank manager, solicitor, professional accountant or other professional adviser for details of those settlement arrangements and how such arrangements may affect your rights and interests.

The Stock Exchange of Hong Kong Limited (the “Stock Exchange”) and Hong Kong Securities Clearing Company Limited (the “Hongkong Clearing”) take no responsibility for this prospectus, the provisional allotment letter or the form of application for excess Rights Shares, make no representation as to their accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this prospectus, the provisional allotment letter or the form of application for excess Rights Shares.

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(incorporated in Bermuda with limited liability)

RIGHTS ISSUE OF 6,576,243,732 NEW SHARES ON THE BASIS OF FOUR RIGHTS SHARES FOR EVERY EXISTING SHARE HELD WITH 1,644,060,933 BONUS SHARES TO BE ISSUED WITH RIGHTS SHARES ON THE BASIS OF ONE BONUS SHARE FOR FOUR FULLY PAID RIGHTS SHARES

Financial adviser to Wang On Group Limited

Kingsway Capital Limited

Manager of the Rights Issue

Co-Manager of the Rights Issue

Kingsway SW Securities Limited

The latest time for acceptance of and payment for the Rights Shares is 4:00 p.m. on Friday, 15th March, 2002. The procedure for acceptance and payment or transfer of the Rights Shares is set out on pages 21 to 22 of this prospectus.

It should be noted that the Underwriters may terminate their obligations set out in the Underwriting Agreement by notice in writing given by Kingsway SW Securities Limited (for itself and on behalf of the other Underwriters) to the Company at any time if, prior to 5:00 p.m. on the third Business Day after the date on which the latest time for acceptance of the Rights Shares falls, which is Wednesday, 20th March, 2002, there shall develop, occur, exist or come into effect: (a) any new law or regulation or any change in existing laws or regulations or any change in the interpretation or application thereof by any court or other competent authority in Hong Kong or any other place in which any member of the Group conducts or carries on business; or (b) any change in, or any event or series of events resulting or likely to result in any change in, local, national or international financial, political, military, industrial, economic, currency or (whether or not sui generis with any of the foregoing) market conditions; or (c) any change in the conditions of local, national or international securities markets (including but without limitation, the imposition of any moratorium, suspension or material restriction on trading in securities generally on the Stock Exchange due to exceptional financial circumstances or otherwise), which: (1) is or will have a material adverse effect on the Company or the Group or the Rights Issue; or (2) has or will have a material adverse effect on the success of the Rights Issue or the level of Rights Shares taken up; or (3) makes it inadvisable or inexpedient for the Company to proceed with the Rights Issue. Accordingly, if the Underwriters exercise their rights to terminate the Underwriting Agreement, the Rights Issue will not proceed. This means that any persons contemplating selling or purchasing Rights Shares in their nil-paid form during the period in which they may be traded on the Stock Exchange, which is from Monday, 4th March, 2002 to Tuesday, 12th March, 2002, and in Shares, which have been dealt in on an ex-rights basis from Thursday, 21st February, 2002, bear the risk that the Rights Issue may not proceed.

Any Shareholders or other persons contemplating selling or purchasing Shares and/or Rights Shares in their nil-paid form during the period when the conditions to which the Rights Issue is subject remain unfulfilled or during which the Underwriters have the right to terminate their obligations for force majeure events or otherwise and who are in any doubt about their position are recommended to consult their professional advisers.

Subject to the granting of listing of, and permission to deal in, the Rights Shares in both their nil-paid and fully-paid forms and the Bonus Shares on the Stock Exchange, and subject to compliance with the stock admission requirements of Hongkong Clearing, the Rights Shares in both their nil-paid and fully-paid forms and the Bonus Shares will be accepted as eligible securities by Hongkong Clearing for deposit, clearance and settlement in CCASS with effect from the relevant commencement dates of dealings in the Rights Shares (in both their nil-paid and fully-paid) and the Bonus Shares on the Stock Exchange or such other dates as determined by Hongkong Clearing. Settlement of transactions between participants of the Stock Exchange on any trading day is required to take place in CCASS on the second trading day thereafter. All activities under CCASS are subject to the General Rules of CCASS and CCASS Operational Procedures in effect from time to time.

28th February, 2002

	Page
Termination of the Underwriting Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
Summary of the Rights Issue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	2
Expected timetable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	3
Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	4
Letter from the Board
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	8
Issue statistics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	9
Terms of the Rights Issue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	9
Underwriting arrangements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	12
Conditions of the Rights Issue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	14
Shareholding structure of the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	15
Review of operations and prospects since 31st March, 2001 . . . . . . . . . . . . . . . . . . . .	16
Reasons for the Rights Issue and use of proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	19
Procedures for acceptance and transfer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	21
Application for excess Rights Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	22
Listing and dealings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	23
Permission of the BMA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	24
Warning of the risks of dealings in Shares and Rights Shares . . . . . . . . . . . . . . . . . . .	24
Further information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	24
Appendix I – Financial information relating to the Group. . . . . . . . . . . . . . . . . . . . . . .	25
Appendix II – Financial information relating to Dailywin . . . . . . . . . . . . . . . . . . . . . . .	87
Appendix III – General information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	129

– i –

TERMINATION OF THE UNDERWRITING AGREEMENT

The Underwriters may terminate their obligations set out in the Underwriting Agreement by notice in writing given by Kingsway SW Securities Limited (for itself and on behalf of the other Underwriters) to the Company at any time if, prior to 5:00 p.m. on the third Business Day after the date on which the latest time for acceptance of the Rights Shares falls, which is Wednesday, 20th March, 2002, there shall develop, occur, exist or come into effect:

(a) any new law or regulation or any change in existing laws or regulations or any change in the interpretation or application thereof by any court or other competent authority in Hong Kong or any other place in which any member of the Group conducts or carries on business; or
(b) any change in, or any event or series of events resulting or likely to result in any change in, local, national or international financial, political, military, industrial, economic, currency or (whether or not sui generis with any of the foregoing) market conditions; or
(c) any change in the conditions of local, national or international securities markets (including but without limitation, the imposition of any moratorium, suspension or material restriction on trading in securities generally on the Stock Exchange due to exceptional financial circumstances or otherwise),

which:

(1) is or will have a material adverse effect on the Company or the Group or the Rights Issue; or
(2) has or will have a material adverse effect on the success of the Rights Issue or the level of Rights Shares taken up; or
(3) makes it inadvisable or inexpedient for the Company to proceed with the Rights Issue.

Save for all reasonable costs, charges and expenses which may be incurred in connection with the Rights Issue, upon the giving of notice of termination, all obligations of the Underwriters under the Underwriting Agreement shall cease and no party shall have any claim against any other parties in respect of any matter or thing arising out of or in connection with the Underwriting Agreement. If the Underwriters exercise such right, the Rights Issue will not proceed.

– 1 –

SUMMARY OF THE RIGHTS ISSUE

The following information is derived from, and should be read in conjunction with, the full text of this prospectus.

Number of Shares in issue	1,644,060,933 Shares as at the Latest Practicable
	Date
Basis of the Rights Issue	4 Rights Shares for 1 existing Share held on the
	Record Date
Basis of issue of Bonus Shares	1 Bonus Share for every 4 fully-paid Rights
	Shares
Number of Rights Shares to be issued	6,576,243,732
Number of Bonus Shares to be issued	1,644,060,933
Amount to be raised by the Rights Issue	approximately HK$197 million before expenses
Right of excess applications	Qualifying Shareholders will be entitled to
	apply for any unsold entitlements of the Non-
	Qualifying Shareholders and any Rights Shares
	provisionally allotted but not accepted or
	otherwise subscribed for by transferees of nil-
	paid Rights Shares
Non-Qualifying Shareholders	Arrangements will be made for Rights Shares
	which would otherwise have been provisionally
	allotted to the Non-Qualifying Shareholders to
	be sold in the market in their nil-paid form as
	soon as practicable after dealings in the nil-
	paid Rights Shares commence, if a premium
	(net of expenses) can be obtained. The proceeds
	of such sale, less expenses, of HK$100 or more
	will be paid pro rata to the Non-Qualifying
	Shareholders. The Company will retain
	individual amounts of less than HK$100

– 2 –

2002

EXPECTED TIMETABLE

Record Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Thursday, 28th February Register of members re-opens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Friday, 1st March First day of dealings in nil-paid Rights Shares . . . . . . . . . . . . . . . . . . . . . . . . Monday, 4th March Latest time for splitting nil-paid Rights Shares . . . . . . . . . . . . 4:00 p.m. on Thursday, 7th March Last day of dealings in nil-paid Rights Shares . . . . . . . . . . . . . . . . . . . . . . . . Tuesday, 12th March Latest time for payment for and acceptance of Rights Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4:00 p.m. on Friday, 15th March Rights Issue expected to become unconditional. . . . . . . . . 5:00 p.m. on Wednesday, 20th March Announcement of results of the Rights Issue . . . . . . . . . . . . . . . . . . . . . . . . Thursday, 21st March Despatch of refund cheques in respect of wholly or partially unsuccessful applications for excess Rights Shares on or before . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Thursday, 21st March Despatch of certificates for fully-paid Rights

Shares and Bonus Shares on or before . . . . . . . . . . . . . . . . . . . . . . . . . . . Thursday, 21st March First day of dealings in the fully-paid Rights Shares and the Bonus Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Monday, 25th March

– 3 –

DEFINITIONS

In this prospectus (except Appendix II) the following expressions have the meanings respectively set opposite them unless the context otherwise requires:

“associate”	has the meaning ascribed thereto under the Listing Rules
“BMA”	Bermuda Monetary Authority
“Board”	board of Directors
“Bonus Shares”	1,644,060,933 new Shares to be allotted and issued by
	way of bonus to the first registered holders of the fully-
	paid Rights Shares on the basis of 1 Share (credited as
	fully-paid) for every 4 fully-paid Rights Shares
“Business Day”	any day on which the Stock Exchange is open for the
	business of dealing in securities
“CCASS”	the Central Clearing and Settlement System, established
	and operated by Hongkong Clearing
“Company”	Wang On Group Limited, a company incorporated in
	Bermuda with limited liability the shares of which are
	listed on the Stock Exchange
“Dailywin”	Dailywin Group Limited, a company incorporated in
	Bermuda with limited liability the shares of which are
	listed on the Stock Exchange and admitted to the Official
	List of the London Stock Exchange, and an associated
	company of the Company
“Dailywin Group”	Dailywin and its subsidiaries
“Dailywin Stock”	9.5% convertible unsecured loan stock 2008 issued by
	Dailywin and constituted under a Trust Deed dated 10th
	December, 1998 and made between Dailywin and the
	Trustee, which is admitted to the Official List of the
	London Stock Exchange
“Director(s)”	director(s) of the Company
“Dynamission”	Dynamission Investments Ltd., an indirect wholly-owned
	subsidiary of the Company incorporated in the British
	Virgin Islands

– 4 –

	DEFINITIONS
“EAF(s)”	form(s) of application for excess Rights Shares
“GMP”	acronym for Good Manufacturing Practice, the part of
	quality assurance which ensures that pharmaceutical
	products are consistently produced and controlled to the
	quality standards appropriate to their intended use
“Group”	the Company and its subsidiaries
“Hong Kong” or “HKSAR”	the Hong Kong Special Administrative Region of the
	People’s Republic of China
“Hongkong Clearing”	Hong Kong Securities Clearing Company Limited
“Kingsway Capital”	Kingsway Capital Limited, an investment adviser
	registered under the Securities Ordinance (Chapter 333
	of the Laws of Hong Kong) and the financial adviser to
	the Company in connection with the Rights Issue
“Last Trading Day”	14th January, 2002, being the last trading day before the
	suspension of the trading of the Shares on the Stock
	Exchange pending the publication on 17th January, 2002
	of the Company’s announcement dated 16th January,
	2002 in respect of, among other things, the Rights Issue
“Latest Practicable Date”	26th February, 2002, being the latest practicable date
	prior to the printing of this prospectus for the purpose of
	ascertaining certain information for inclusion in this
	prospectus
“Listing Rules”	the Rules Governing the Listing of Securities on the
	Stock Exchange
“Luxembourg Medicine”	Luxembourg Medicine Company Limited, an associated
	company of the Company incorporated in Hong Kong
“Mr. Tang”	Mr. Tang Ching Ho, the Chairman and Managing Director
	of the Company
“Ms. Tang”	Ms. Tang Mui Fun, a sister of Mr. Tang and one of the
	Underwriters

– 5 –

DEFINITIONS

“Ms. Yau”	Ms. Yau Yuk Yin, the wife of Mr. Tang and who is the
	Deputy Chairman and Deputy Managing Director of the
	Company
“Non-Qualifying Shareholder(s)”	Shareholder(s) other than the Qualifying Shareholders
“PAL(s)”	provisional allotment letter(s) in respect of the Rights
	Shares
“Prospectus Documents”	this prospectus, the PAL and the EAF
“Qualifying Shareholder(s)”	Shareholder(s) whose names appear on the register of
	members of the Company at the close of business on the
	Record Date and whose address(es) as shown in the
	register of members of the Company on that date is/are
	in Hong Kong
“Record Date”	28th February, 2002, being the date by reference to
	which entitlements to the Rights Issue are to be
	determined
“Rich Time”	Rich Time Strategy Limited, an indirect wholly-owned
	subsidiary of the Company incorporated in the British
	Virgin Islands which owns approximately 29% equity
	interest in Dailywin
“Rights Issue”	the proposed issue of the Rights Shares (with Bonus
	Shares) at a price of HK$0.03 per Rights Share on the
	terms and conditions described in this prospectus
“Rights Share(s)”	6,576,243,732 new Share(s) to be allotted and issued
	under the Rights Issue
“SDI Ordinance”	Securities (Disclosure of Interests) Ordinance (Chapter
	396 of the Laws of Hong Kong)
“Share(s)”	share(s) of a nominal value of HK$0.01 each in the
	capital of the Company
“Share Option Scheme”	the share option scheme of the Company adopted on 6th
	February, 1995

– 6 –

DEFINITIONS

“Shareholder(s)”	holder(s) of the Share(s)
“Stock Exchange”	The Stock Exchange of Hong Kong Limited
“Substantial Shareholders”	Caister Limited (which is wholly and beneficially owned
	by Mr. Tang), Mr. Tang, Ms. Yau, Ms. Tang Mui Fong (a
	sister of Mr. Tang), Mr. Yau Yuk Tong (a brother of Ms.
	Yau) and Ms. Tang
“Trustee”	Prudential Trustee Company Limited as trustee for the
	holders of the Dailywin Stock
“Underwriters”	Kingsway SW Securities Limited, Kingston Securities
	Limited, Great China Brokerage Limited, GC Capital
	(Asia) Limited, Luen Fat Securities Co. Ltd. and Ms.
	Tang, whose obligations shall be several (and not joint or
	joint and several)
“Underwriting Agreement”	the agreement dated 15th January, 2002 entered into
	between the Company and the Underwriters in relation to
	the underwriting and certain other arrangements in
	respect of the Rights Issue
“Wai Yuen Tong”	Wai Yuen Tong Medicine Company Limited, a subsidiary
	of the Company incorporated in Hong Kong
“GBP”	Pounds sterling, the lawful currency of the United
	Kingdom
“HK$”	Hong Kong dollars, the lawful currency of Hong Kong
“sq.ft.”	square feet
“%”	per cent.

(Note: For the purpose of this prospectus, the exchange rate of GBP1 = HK$11.05 is used.)

– 7 –

LETTER FROM THE BOARD

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WANG ON GROUP LIMITED

(incorporated in Bermuda with limited liability)

Executive Directors:

Mr. Tang Ching Ho (Chairman and Managing Director)

Ms. Yau Yuk Yin

(Deputy Chairman and

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

Deputy Managing Director)

Mr. Chan Chun Hong, Thomas

Independent non-executive Directors:

Dr. Lee Peng Fei, Allen, CBE, JP Mr. Wong Chun, Justein, MBE, JP Dr. Siu Yim Kwan, Sidney

Head office and principal place of business: 12th Floor, Tower 1 South Seas Centre No. 75 Mody Road Tsimshatsui East Kowloon Hong Kong

28th February, 2002

To the Qualifying Shareholders and,

for information only, Non-Qualifying Shareholders

Dear Sir or Madam,

INTRODUCTION

It was announced on 16th January, 2002 (which announcement was published on 17th January, 2002) that, subject to the satisfaction of the conditions of the Rights Issue as mentioned in the section headed “Conditions of the Rights Issue” below, the Company proposed to raise approximately HK$197 million, before expenses, by way of a rights issue of not less than 6,576,243,732 Rights Shares at the subscription price of HK$0.03 per Rights Share. The Company would provisionally allot 4 Rights Shares in nil-paid form for 1 existing Share held by the Qualifying Shareholders on the Record Date, and would issue by way of bonus 1 Bonus Share for every 4 fully-paid Rights Shares.

– 8 –

LETTER FROM THE BOARD

On 28th February, 2002, the Rights Issue was approved by the Shareholders at the special general meeting of the Company.

In connection with the Rights Issue, Kingsway Capital, which is independent of and not connected with the directors, chief executive or substantial shareholders of the Company or any of its subsidiaries or any of their respective associates, has been appointed as the financial adviser to the Company.

The purpose of this prospectus is to provide you with details of the Rights Issue, including information on dealings and transfer of the Rights Shares in their nil-paid form, the procedure for acceptance of and payment for the Rights Shares and application for excess Rights Shares, and certain financial information relating to the Group and Dailywin.

ISSUE STATISTICS

Basis of the Rights Issue : 4 Rights Shares for 1 existing Share held on the Record Date, issued with 1 Bonus Share for every 4 fully-paid Rights Shares Number of Shares in issue : 1,644,060,933 Shares as at the Latest Practicable Date Number of Rights Shares : 6,576,243,732 Rights Shares Subscription price for Rights Shares : HK$0.03 per Rights Share Number of Bonus Shares : 1,644,060,933 Shares

TERMS OF THE RIGHTS ISSUE

Basis of provisional allotment

4 Rights Shares for 1 existing Share held by a Qualifying Shareholder on the Record Date at the subscription price of HK$0.03 per Rights Share, payable in full on acceptance.

In conjunction with the Rights Issue, the Company proposes to issue Bonus Shares to the first registered holders of fully-paid Rights Shares on the basis of 1 Bonus Share for every 4 fully-paid Rights Shares subscribed for. The Rights Issue is not available to Non-Qualifying Shareholders.

– 9 –

LETTER FROM THE BOARD

Subscription price for the Rights Shares

HK$0.03 per Rights Share, payable in full when a Qualifying Shareholder accepts the relevant provisional allotment of Rights Shares or applies for excess Rights Shares, or when a transferee of nil-paid Rights Shares applies for Rights Shares.

Taking into account the Bonus Shares being issued with the fully-paid Rights Shares, the effective price for each Rights Share is HK$0.024 which represents:

(i) a discount of about 79.66% to the closing price of HK$0.118 per Share as quoted on the Stock Exchange on the Last Trading Day;
(ii) a discount of about 77.84% to the average closing price of HK$0.1083 per Share for the last 10 trading days up to and including the Last Trading Day;
(iii) a discount of about 39.50% to the theoretical ex-rights price of approximately HK$0.040 per Share based on the closing price of HK$0.118 per Share on the Last Trading Day;
(iv) discount of about 35.14% to the closing price of HK$0.037 per Share as quoted on the Stock Exchange on the Latest Practicable Date;
(v) a discount of about 26.15% to the average closing price of HK$0.0325 per Share for the last 10 trading days up to and including the Latest Practicable Date; and
(vi) a discount of about 8.28% to the theoretical ex-rights price of approximately HK$0.026 per Share based on the closing price of HK$0.037 per Share on the Latest Practicable Date.

The subscription price was determined after arm’s length negotiations between the Company and the Underwriters. The Directors consider the terms of the Rights Issue to be fair and reasonable and in the best interests of the Company and the Shareholders.

Status of the Rights Shares and the Bonus Shares

The Rights Shares (when issued and fully paid) and the Bonus Shares (when issued and credited as fully-paid) will rank pari passu with the then existing Shares in all respects. Holders of fully-paid Rights Shares and Bonus Shares will be entitled to receive all future dividends and distributions which are declared, made or paid after the date of allotment and issue of the Rights Shares and the Bonus Shares.

Certificates for Rights Shares and Bonus Shares

Subject to the fulfillment of the conditions of the Rights Issue, certificates for all fullypaid Rights Shares and Bonus Shares are expected to be posted on or about Thursday, 21st

– 10 –

LETTER FROM THE BOARD

March, 2002 to those who have accepted and (where applicable) applied for, and paid, for the Rights Shares at their own risk.

Qualifying Shareholders

The Company will send the Prospectus Documents to the Qualifying Shareholders and the Prospectus, for information only, to the Non-Qualifying Shareholders.

To qualify for the Rights Shares, a Shareholder must:

be registered as a member of the Company on the Record Date; and
have an address in Hong Kong which appears on the register of members of the Company on the Record Date.

The last date on which transfer of Shares were accepted for registration in order to be registered as members on the Record Date was 22nd February, 2002.

Rights of Non-Qualifying Shareholders

The Prospectus Documents will not be registered or filed under the applicable securities legislation of any jurisdictions other than Hong Kong and Bermuda. As the Directors are of the view that the offer of Rights Shares to Non-Qualifying Shareholders would or might, in the absence of compliance with registration or other special formalities in other jurisdictions, be unlawful or impracticable, the Company will send this prospectus to Non-Qualifying Shareholders for their information only but no PAL or EAF will be sent to the Non-Qualifying Shareholders. No provisional allotment of Rights Shares will be made to the Non-Qualifying Shareholders.

No action has been taken in any territory other than Hong Kong and Bermuda to permit the offering of the Rights Shares and/or distribution of the Prospectus Documents. No person receiving the Prospectus Documents in any territory outside Hong Kong may treat it as an offer or invitation unless in a territory where such an offer or invitation could lawfully be made without compliance with any registration or other legal and regulatory requirements. It is the responsibility of anyone outside Hong Kong wishing to make an application for the Rights Shares to satisfy himself as to the observance of the laws and regulations of all relevant territories, including the obtaining of any government or other authorities’ consents, and to pay any taxes and duties required to be paid in such territories in connection therewith. No application for Rights Shares will be accepted from any person who is a Non-Qualifying Shareholder. In particular, the Company reserves the right to refuse to accept any application for Rights Shares where it believes that doing so would violate the applicable securities or other laws or regulations of the territory of residence of the applicant (or of any other relevant territory) or would result in such violation without compliance with registration and/or other legal or regulatory requirements outside Hong Kong and Bermuda.

– 11 –

LETTER FROM THE BOARD

Arrangements will be made for Rights Shares which would otherwise be provisionally allotted to the Non-Qualifying Shareholders to be sold in the market in their nil-paid form as soon as practicable after dealings in the nil-paid Rights Shares commence, if a premium (net of expenses) can be obtained. The proceeds of such sale, less expenses, of HK$100 or more will be paid pro rata to the Non-Qualifying Shareholders. The Company will retain individual amounts of less than HK$100.

UNDERWRITING ARRANGEMENTS

Undertakings from Substantial Shareholders

As at the Latest Practicable Date, the Substantial Shareholders were together beneficially interested in an aggregate of 200,617,117 Shares, representing approximately 12.20% of the issued share capital of the Company. Each of the Substantial Shareholders has given an irrevocable undertaking to accept or procure acceptance of its/his/her entitlement to the Rights Shares which will be provisionally allotted to it/him/her as the holders of such Shares under the Rights Issue, amounting to 802,468,468 Rights Shares in aggregate in respect of all the Substantial Shareholders.

Underwriting Agreement

Date	:	15th January, 2002	15th January, 2002
Underwriters	:	(1)	Kingsway SW Securities Limited
		(2)	Kingston Securities Limited
		(3)	Great China Brokerage Limited
		(4)	GC Capital (Asia) Limited
		(5)	Luen Fat Securities Co. Ltd.
		(6)	Ms. Tang
Commission	:	2.5% of the total subscription price of the Rights Shares underwritten
		by the Underwriters

Save for Ms. Tang, all the other Underwriters are dealers registered under the Securities Ordinance (Chapter 333 of the Laws of Hong Kong).

Ms. Tang is a sister of Mr. Tang and one of the Substantial Shareholders who currently holds 37,036,907 Shares and who has undertaken to take up her entitlement under the Rights Issue of 148,147,628 Rights Shares. Ms. Tang is also a director of 55 subsidiaries of the Company. Dr. Siu Yim Kwan, Sidney, an independent non-executive Director, is a controlling shareholder of Great China Brokerage Limited. Save as disclosed in this paragraph, the Underwriters are independent of and not connected with the directors, chief executive or substantial shareholders of the Company or any of its subsidiaries or any of their respective associates.

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LETTER FROM THE BOARD

The Underwriters have fully underwritten all of the Rights Shares to be issued under the Rights Issue other than the 802,468,468 Rights Shares which are the subject of the Substantial Shareholders’ irrevocable undertakings referred to above, amounting to 5,773,775,264 in aggregate. Such obligations imposed on the Underwriters shall be several (and not joint or joint and several). Sub-underwriting arrangements, if any, will be at the sole discretion of the Underwriters in respect of their respective shares of the Rights Shares underwritten.

Pursuant to the Underwriting Agreement, Ms. Tang as one of the Underwriters has agreed to underwrite 615,336,334 Rights Shares. Assuming the Substantial Shareholders subscribe in full for all of the 802,468,468 Rights Shares to which they are respectively entitled under the Rights Issue in accordance with the irrevocable undertakings referred to above and assuming Ms. Tang is required to take up 615,336,334 Rights Shares (which will be issued with Bonus Shares), she together with the other Substantial Shareholders will be beneficially interested in an aggregate (including the Bonus Shares to be issued with the relevant fully-paid Rights Shares) of 1,972,873,120 Shares, representing approximately 20% of the issued share capital of the Company as enlarged by the allotment and issue of the Rights Shares and the Bonus Shares. Ms. Tang has indicated to the Directors that she will procure any Rights Shares underwritten by herself pursuant to the Underwriting Agreement which are required to be taken up by her to be allocated to the Substantial Shareholders in proportion to their respective shareholdings in the Company as at the Record Date.

Termination of the Underwriting Agreement

(a) any new law or regulation or any change in existing laws or regulations or any change in the interpretation or application thereof by any court or other competent authority in Hong Kong or any other place in which any member of the Group conducts or carries on business; or
(b) any change in, or any event or series of events resulting or likely to result in any change in, local, national or international financial, political, military, industrial, economic, currency or (whether or not sui generis with any of the foregoing) market conditions; or
(c) any change in the conditions of local, national or international securities markets (including but without limitation, the imposition of any moratorium,

– 13 –

LETTER FROM THE BOARD

suspension or material restriction on trading in securities generally on the Stock Exchange due to exceptional financial circumstances or otherwise),

which:

(1) is or will have a material adverse effect on the Company or the Group or the Rights Issue; or
(2) has or will have a material adverse effect on the success of the Rights Issue or the level of Rights Shares taken up; or
(3) makes it inadvisable or inexpedient for the Company to proceed with the Rights Issue.

Save for all reasonable costs, charges and expenses which may be incurred in connection with the Rights Issue, upon the giving of notice of termination, all obligations of the Underwriters under the Underwriting Agreement shall cease and no party shall have any claim against any other parties in respect of any matter or thing arising out of or in connection with the Underwriting Agreement. If the Underwriters exercise such right, the Rights Issue will not proceed.

CONDITIONS OF THE RIGHTS ISSUE

The Rights Issue is conditional upon each of the following conditions being fulfilled:

the Listing Committee of the Stock Exchange granting, or agreeing to grant, the listing of, and permission to deal in, the Rights Shares, in their nil-paid and fullypaid forms, and the Bonus Shares by not later than the first Business Day after the date of despatch of this prospectus;
the registration of the Prospectus Documents with the Registrar of Companies in Hong Kong, and the filing of the Prospectus with the Registrar of Companies in Bermuda, on or prior to the date of despatch of this prospectus;
compliance by the Substantial Shareholders with their irrevocable undertakings to take up all the Rights Shares to be provisionally allotted to them under the Rights Issue; and
the obligations of the Underwriters under the Underwriting Agreement becoming unconditional and the Underwriting Agreement not being terminated in accordance with its terms or otherwise.

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LETTER FROM THE BOARD

SHAREHOLDING STRUCTURE OF THE COMPANY

The shareholding structure of the Company is, and will be, as follows:

Immediately before completion of the Rights Issue and on the basis that the Substantial Shareholders hold the same number of Shares as at the Latest Practicable Date Shares % Caister Limited_(Note 1) 36,314,000 2.21% Mr. Tang 9,927,645 0.60% Ms. Yau 9,927,645 0.60% Ms. Tang Mui Fong 65,904,095 4.01% Mr. Yau Yuk Tong 41,506,825 2.52% Ms. Tang 37,036,907 2.25% Dr. Siu Yim Kwan, Sidney 100,000 0.01% Public(Note 2) 1,443,343,816 87.80% Underwriters (excluding Ms. Tang) (Notes 2 and 3)_ – – Total 1,644,060,933 100.00%	Immediately after completion of the Rights Issue (assuming all Qualifying Shareholders take up the Rights Shares in full) and the issue of the Bonus Shares Shares % 217,884,000 2.21% 59,565,870 0.60% 59,565,870 0.60% 395,424,570 4.01% 249,040,950 2.52% 222,221,442 2.25% 600,000 0.01% 8,660,062,896 87.80% – – 9,864,365,598 100.00%	Immediately after completion of the Rights Issue (assuming no Qualifying Shareholders take up any Rights Shares except the Substantial Shareholders) and the issue of the Bonus Shares Shares % 217,884,000 2.21% 59,565,870 0.60% 59,565,870 0.60% 395,424,570 4.01% 249,040,950 2.53% 991,391,860 10.05% 100,000 <0.01% 1,443,343,816 14.63% 6,448,048,662 65.37% 9,864,365,598 100.00%	Immediately after completion of the Rights Issue (assuming no Qualifying Shareholders take up any Rights Shares except the Substantial Shareholders) and the issue of the Bonus Shares Shares % 217,884,000 2.21% 59,565,870 0.60% 59,565,870 0.60% 395,424,570 4.01% 249,040,950 2.53% 991,391,860 10.05% 100,000 <0.01% 1,443,343,816 14.63% 6,448,048,662 65.37% 9,864,365,598 100.00%
	9,864,365,598	9,864,365,598	100.00%

Notes:

Mr. Tang is deemed to be interested in these Shares due to Caister Limited being wholly and beneficially owned by Mr. Tang.
Assuming no Qualifying Shareholders take up any Rights Shares except the Substantial Shareholders and assuming the Underwriters themselves will subscribe for the Rights Shares underwritten by them respectively, immediately after completion of the Rights Issue and the issue of the Bonus Shares, the percentage of Shares in public hands for the purpose of the Listing Rules will be approximately 29.41% of the total issued Shares as enlarged by the allotment and issue of the Rights Shares and Bonus Shares (including approximately 14.78% of the total issued Shares held by some of the Underwriters immediately after completion of the Rights Issue who will not be substantial shareholders of the Company for the purpose of the Listing Rules).
Assuming no Qualifying Shareholders take up any Rights Shares except the Substantial Shareholders and assuming the Underwriters themselves will subscribe for the Rights Shares underwritten by them respectively, immediately after completion of the Rights Issue and the issue of the Bonus Shares, Kingsway SW Securities Limited, being one of the Underwriters, will be interested in 3,323,048,662 Shares, representing approximately 33.69% of the total issued Shares as enlarged by the allotment and issue of the Rights Shares and Bonus Shares. In this event, Kingsway SW Securities Limited will become the controlling shareholder of the Company for the purpose of the Listing Rules. Kingsway SW Securities Limited will undertake to the Company to take appropriate steps such as making sub-underwriting arrangements and/or placing down its share of Rights Shares to make itself not become a controlling shareholder of the Company immediately after completion of the Rights Issue.

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LETTER FROM THE BOARD

REVIEW OF OPERATIONS AND PROSPECTS SINCE 31ST MARCH, 2001

Business review

The Group is principally engaged in the commercial management of Chinese wet markets, shopping centers, car parks, manufacturing and sale of Chinese medicine, herbs and other medicinal products, building related contracting and property investment.

The Group’s unaudited consolidated turnover and net profit attributable to Shareholders for the six months ended 30th September, 2001 are approximately HK$145.9 million (2000: HK$87.6 million) and approximately HK$7.6 million (2000: HK$2.3 million) respectively. The increase in turnover as compared with the last corresponding period was mainly attributable to the increase in the Group’s management and sub-licensing of Chinese wet markets business and the turnover generated by Wai Yuen Tong, a subsidiary of the Company acquired in February 2001. The increase in net profit attributable to Shareholders was mainly due to the profit generated by Wai Yuen Tong and the reduction in the amount of provision which had to be made for technology-related and building related contracting businesses in the six-month period ended 30th September, 2001.

Management and sub-licensing of Chinese wet markets

After the recent opening of the Tin Chak (Allmart) Chinese Market at Tin Chak Shopping Centre, Tin Shui Wai, Hong Kong, the Group currently operates 12 Chinese wet markets in Hong Kong with a total area of over 254,000 sq.ft.. The Directors believe that the Group is a leading operator of Chinese wet markets in Hong Kong, and it is expected that the turnover and revenue resulting from its Chinese wet markets business will continue to generate over 50% of the Group’s total turnover.

Management and sub-licensing of shopping centres and car parks management

The Group currently manages and operates 10 shopping centres with a floor area of over 1.7 million sq.ft. and over 3,900 car parking bays which generate a steady source of income of the Group.

Wai Yuen Tong

Since its acquisition in February 2001, substantial efforts have been made by the Group in improving and modernising Wai Yuen Tong’s existing business and these efforts have proved to be fruitful and rewarding. Whilst preserving Wai Yuen Tong’s over 100 year’s old reputable

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LETTER FROM THE BOARD

brand name, new elements have been injected into the traditional Chinese medicine business of the company to further enhance its image and to make its products more appealing to the younger generation. Product range and retail distribution have also been expanded.

The Directors are confident that with the global increase in health awareness and the increasing popularity of Chinese medicinal therapies, Wai Yuen Tong will gradually become one of the Group’s core businesses which will provide a steady and stable income for the Group.

Other investments in pharmaceutical business

As disclosed in the Group’s 2001 annual report, the Group acquired an approximate 19% equity interest in Luxembourg Medicine in April 2001, which is principally engaged in the manufacturing and sale of medicinal products under the brand name “Madame Pearl”. With a view to strengthening its investment in Luxembourg Medicine, the Group recently acquired a further approximate 3.6% and a further approximate 19% equity interest in Luxembourg Medicine in November and December 2001 respectively, which resulted in Luxembourg Medicine becoming an associate of the Group. Details as to the further acquisition of an approximate 19% equity interest in Luxembourg Medicine were set out in the Company’s announcement dated 19th December, 2001 and its circular to Shareholders dated 9th January, 2002.

The business of Hunan Xiangya Pharmaceutical Co., Limited, the Group’s first investment in the PRC pharmaceutical market, remains stable. The Directors believe that this investment will assist the Group to further expand into Mainland China’s pharmaceutical business.

Investment in Dailywin

As detailed in the announcements made by the Company on 16th August, 2001 and 29th August, 2001, the Group has acquired an approximate 29% equity interest in Dailywin, the holding company of a listed group which is principally engaged in the manufacturing and sale of watches and bags, at a consideration of HK$7.7 million, and a loan of HK$21 million was also made to Dailywin. Subsequent to the acquisition, further loans amounting to HK$9.93 million were made to Dailywin as at the Latest Practicable Date. New directors nominated by the Group have been appointed to Dailywin’s board of directors to assist in its business restructuring. The aggregate of the remuneration payable to and benefits in kind receivable by the Directors have not been varied in consequence of the acquisition of the equity interest in Dailywin by the Group.

As disclosed in the Company’s announcement dated 11th February, 2002, Dailywin, the Trustee, Rich Time and Dynamission entered into the Heads of Agreement on 7th February, 2002 pursuant to which Dynamission agreed to acquire from the holders of the Dailywin Stock not less than 70% of the outstanding Dailywin Stock (with an aggregate principal amount of GBP 2,756,816 (approximately HK$30.46 million)) at the price of 78% of the face value of the

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LETTER FROM THE BOARD

Dailywin Stock. As also disclosed in the same announcement, as a result of the implementation of the arrangements provided in the Heads of Agreement and taking into account the total indebtedness of Dailywin to the Group, the Group’s possible total relevant advance to Dailywin for the purposes of Practice Note 19 of the Listing Rules was HK$61.39 million and could, depending on the actual amount of Dailywin Stock to be delivered, amount up to approximately 30% (and taking into account the net proceeds from the Rights Issue approximately 16.5%) of the Company’s net tangible asset value as at 30th September, 2001.

At completion of the Heads of Agreement on 20th February, 2002, Dynamission acquired from the holders of the Dailywin Stock in the aggregate principal amount of GBP2,270,710 (approximately HK$25.09 million), representing approximately 82.37% of the outstanding Dailywin Stock, for a total consideration of GBP1,771,153.80 (approximately HK$19.57 million). In addition to the Dailywin Stock in the principal amount of GBP430,000 (approximately HK$4.75 million) at the aggregate consideration of GBP255,850 (approximately HK$2.88 million) acquired in December 2001, the Group's holding of Dailywin Stock as at the Latest Practicable Date amounted to an aggregate principal amount of GBP2,700,710 (approximately HK$29.84 million), representing approximately 97.96% of the outstanding Dailywin Stock. The payment made by Dynamission under the Heads of Agreement has been made by internal resources of the Group. Following implementation of the terms of the Heads of Agreement, the winding up petition previously taken out by the Trustee against Dailywin was dismissed by the Court on 25th February, 2002.

Business trend and prospects of the Group since 31st March, 2001

The Directors believe that with the global increase in health awareness and the increasing popularity of Chinese medicinal therapies, the business of manufacture and sale of Chinese medicine has a good prospect and a promising outlook. Whilst continuing to strengthen its steady growing commercial management business, the Group plans to further invest in and develop its pharmaceutical business by expanding and upgrading its production facilities and sales network.

Meanwhile, the Group will continue to explore suitable opportunities to diversify its business into areas which would bring about future economic benefits and possible further improvement to the Group’s results.

The Directors believe that the Group’s investments in the pharmaceutical business, together with the steady income generated by the Group’s existing commercial management business, will maintain the Group’s financial position. Furthermore, the Directors are optimistic about the Group’s future and that Shareholders will benefit from the Group’s expected growth.

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LETTER FROM THE BOARD

Business trend and prospects of the Dailywin Group since 31st March, 2001

The global economic downturn continues to exert negative pressure on the Dailywin Group’s business. Whilst its management will continue to put emphasis on the marketing of its products, in view of the difficult economic environment, they will continue to look for possible new sources of funding and new business opportunities in order to enhance the business of the Dailywin Group.

REASONS FOR THE RIGHTS ISSUE AND USE OF PROCEEDS

In view of the current market conditions and the considerable amount intended to be raised for the purposes as stated below, the Directors consider the Rights Issue to be a good opportunity for the Group to raise funds to enhance its pharmaceutical production facilities and to strengthen its financial position.

The net proceeds of the Rights Issue of approximately HK$191 million are intended to be used in the following manner:

(i) approximately HK$40 million for the improvement and upgrade of the Group’s pharmaceutical production facilities to GMP;
(ii) approximately HK$26 million for financing the completion of the acquisition of an industrial building by the Company and for its renovation, further details of which acquisition were set out in the Company’s announcement dated 19th December, 2001 and its circular to Shareholders dated 9th January, 2002;
(iii) approximately HK$15 million for repayment of the Group’s indebtedness;
(iv) approximately HK$35 million for possible investments in new business opportunities (although no opportunities have yet been determined); and
(v) the balance of approximately HK$75 million as the Group’s working capital.

As the Qualifying Shareholders are given the opportunity to maintain their respective pro rata shareholdings in the Company after the Rights Issue, the Directors consider that it is in the interests of the Company and its Shareholders as a whole to raise the capital by way of the Rights Issue.

In 2001, the Company raised a total of approximately HK$86 million (net of related expenses) through placings of Shares and convertible bonds issued by the Company, out of which the Company has utilized a total of approximately HK$59 million as at the Latest Practicable Date. The balance of proceeds of approximately HK$27 million are currently

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LETTER FROM THE BOARD

placed on deposits with banks in Hong Kong. Set out below are the details of the intended uses (as announced previously) and the actual uses of the proceeds raised from the placings of Shares and issue of convertible bonds in 2001.

Date of	Amount and intended		Unutilised amount
announcement	use of proceeds as set out	Amount of proceeds	as at the Latest
of Placing	in the announcement	utilized and the actual use	Practicable Date
24th July, 2001	HK$10 million for acquisition	HK$10 million for the acquisition	–
	of, or investment into, new	of Hunan Xiangya Pharmaceutical
	business	Co., Limited_(Note 1)_
	HK$10 million for expansion	HK$10 million for expansion of	–
	of the commercial	commercial management business
	management business in
	Chinese wet markets, car
	parks and shopping centres
	HK$9.5 million for general	HK$1 million for the acquisition of	–
	working capital	Hunan Xiangya Pharmaceutical Co.,
		Limited, and HK$8.5 million for part
		of the consideration for the acquisition
		of an approximate 22.57% shareholding
		in Luxembourg Medicine_(Notes 1 &_	2)
25th September,	HK$7 million for expansion	–	HK$7 million
2001	of the Group’s
	pharmaceutical business
	HK$5.3 million for general	HK$5.3 million for part of the	–
	working capital	consideration for the acquisition of
		an approximate 22.57% shareholding
		in Luxembourg Medicine
1st November,	HK$10 million for acquisition	HK$10 million for part of the	–
2001	of, or investment into, new	consideration for the acquisition of
	business	an approximate 22.57% shareholding
		in Luxembourg Medicine
	HK$4 million for repayment	HK$4 million for repayment of	–
	of bank loans	bank loans
	HK$6 million for general	HK$6 million for part of the	–
	working capital	consideration for the acquisition of
		an approximate 22.57% shareholding
		in Luxembourg Medicine
19th December,	HK$24 million for partial	HK$4 million for property deposit	HK$20 million
2001	satisfaction of the aggregate
	consideration for property
	acquisition_(Note 3)_

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LETTER FROM THE BOARD

Notes:

Details of the acquisition of Hunan Xiangya Pharmaceutical Co., Limited were set out in the Company’s announcements dated 18th June, 2001 and 10th July, 2001.
Details as to the acquisition of an approximate 19.01% shareholding in Luxembourg Medicine were set out in the Company’s announcement dated 19th December, 2001 and its circular to Shareholders dated 9th January, 2002.
Details of the property acquisition were set out in the Company’s announcement dated 19th December, 2001 and its circular to Shareholders dated 9th January, 2002.

PROCEDURES FOR ACCEPTANCE AND TRANSFER

Qualifying Shareholders will find enclosed with this prospectus a PAL which entitles Qualifying Shareholders to take up the number of Rights Shares shown therein. If any Qualifying Shareholder wishes to exercise his rights to take up all the Rights Shares specified in the PAL, he will need to lodge the PAL in accordance with the instructions printed thereon, together with a remittance for the full amount payable on acceptance, with the branch share registrar of the Company in Hong Kong, Tengis Limited of 4th Floor, Hutchison House, 10 Harcourt Road, Central, Hong Kong by no later than 4:00 p.m. on Friday, 15th March, 2002. All remittances must be made in Hong Kong dollars. Cheques must be drawn on an account with, and banker’s cashier orders must be issued by, a bank in Hong Kong and made payable to “ WANG ON GROUP LIMITED – PROVISIONAL ALLOTMENT ACCOUNT ” and crossed “ ACCOUNT PAYEE ONLY ”.

It should be noted that unless the PAL, together with the appropriate remittance, has been lodged with Tengis Limited by 4:00 p.m. on Friday, 15th March, 2002, whether by the original allottee or any person to whom the rights have been validly transferred, the relevant provisional allotment and all rights thereunder will be deemed to have been declined and will be cancelled.

If any Qualifying Shareholder wishes to accept only part of his provisional allotment and/ or to transfer part of his right to subscribe for the Rights Shares provisionally allotted to him or to transfer his rights to more than one person, the PAL must be surrendered by no later than 4:00 p.m. on Thursday, 7th March, 2002 to Tengis Limited which will cancel the original PAL and issue new PALs, in the denominations required.

The PAL contains full information regarding the procedures to be followed for acceptance and/or transfer of the whole or part of provisional allotment of Qualifying Shareholders.

All cheques and banker’s cashier orders will be presented for payment following receipt and all interest earned on such monies will be retained for the benefit of the Company. Completion and lodgment of a PAL together with a cheque or banker’s cashier order in payment for the Rights Shares accepted will constitute a warranty by the subscriber that the cheque or banker’s cashier order will be honoured on first presentation. Without prejudice to its rights in

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LETTER FROM THE BOARD

respect thereof (but subject to the terms of the Underwriting Agreement), the Company reserves the right to reject any PAL in respect of which the accompanying cheque or banker’s cashier order is dishonoured on first presentation and, in the event, the relevant provisional allotment and all rights thereunder will be deemed to have been declined.

If the Underwriters exercise its right to terminate its obligations under the Underwriting Agreement or conditions of the Underwriting Agreement are not fulfilled on or before 5:00 p.m. on Wednesday, 20th March, 2002, being the third Business Day following the last day for the acceptance of the Rights Shares, the monies received in respect of applications for Rights Shares will be returned to the Qualifying Shareholders or such other persons to whom the nilpaid Rights Shares shall have been validly transferred without interest by means of cheques despatched by ordinary post at the address of the applicants at their own risk on or before Thursday, 21st March, 2002.

APPLICATION FOR EXCESS RIGHTS SHARES

Qualifying Shareholders will be entitled to apply (by completing the EAFs) for any unsold entitlements of the Non-Qualifying Shareholders and any Rights Shares provisionally allotted but not accepted or otherwise subscribed for by transferees of nil-paid Rights Shares. The fullypaid Rights Shares issued pursuant to excess applications will also be issued with Bonus Shares on the basis of 1 Bonus Share for every 4 Rights Shares so issued. The Directors will allocate the excess Rights Shares at their discretion, but on a fair and reasonable basis, and will give preference to topping-up odd lots to whole board lots.

If a Qualifying Shareholder wishes to apply for any Rights Shares in addition to his provisional allotment under the Rights Issue, he must complete and sign the enclosed EAF as indicated therein and lodge it, together with a separate remittance for the amount payable on application in respect of the excess Rights Shares applied for, with the branch share registrar of the Company in Hong Kong, Tengis Limited of 4th Floor, Hutchison House, 10 Harcourt Road, Central, Hong Kong by no later than 4:00 p.m. on Friday, 15th March, 2002. All remittances must be made in Hong Kong dollars. Cheques must be drawn on an account with, and banker’s cashier orders must be issued by, a bank in Hong Kong and made payable to “ WANG ON GROUP LIMITED – EXCESS APPLICATION ACCOUNT ” and crossed “ ACCOUNT PAYEE ONLY ”.

If no excess Rights Shares are allotted to such Qualifying Shareholders, it is expected that a cheque for the amount tendered on application will be posted to their addresses as shown on the register of members of the Company on the Record Date without interest at their own risk on or before Thursday, 21st March, 2002. If the number of excess Rights Shares allotted to such Qualifying Shareholders is less than that applied for, it is expected that a cheque for the amount of the surplus application monies will be posted to their addresses as shown on the register of members of the Company on the Record Date without interest at their own risk on or before Thursday, 21st March, 2002.

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LETTER FROM THE BOARD

All cheques and cashier orders will be presented for payment following receipt and all interest earned on such monies will be retained for the benefit of the Company. Completion and lodgment of an EAF together with a cheque or banker’s cashier order in payment for the Rights Shares applied for will constitute a warranty by the applicant that the cheque or banker’s cashier order will be honoured on first presentation. Without prejudice to its rights in respect thereof (but subject to the terms of the Underwriting Agreement), the Company reserves the right to reject any EAF in respect of which the accompanying cheque or banker’s cashier order is dishonoured on first presentation.

An EAF is for use only by the person(s) to whom it is addressed and is not transferable. All documents, including cheques or banker’s cashier orders for amounts due, will be posted at the risk of the persons entitled thereto to their addresses as shown on the register of members of the Company on the Record Date.

If the Underwriters exercise their right to terminate their obligations set out in the Underwriting Agreement or conditions of the Underwriting Agreement are not fulfilled on or before 5:00 p.m. on Wednesday, 20th March, 2002 being the third Business Day following the last day for the acceptance of the Rights Issue, the monies received in respect of applications for excess Rights Shares will be returned to applicants without interest by means of cheques despatched by ordinary post to their addresses as shown on the register of members of the Company on the Record Date at their own risk on or before Thursday, 21st March.

LISTING AND DEALINGS

The Company has applied to the Listing Committee of the Stock Exchange for the listing of, and permission to deal in, the Rights Shares, in both their nil-paid and fully-paid forms, and the Bonus Shares.

No part of the share capital of the Company is listed or dealt in on any stock exchange other than the Stock Exchange and no application is being made or is currently proposed or sought for the securities of the Company to be listed or dealt in on any other stock exchange.

Subject to the granting of listing of, and permission to deal in, the Rights Shares (in both their nil-paid and fully-paid forms) and the Bonus Shares on the Stock Exchange, and subject to compliance with the stock admission requirements of Hongkong Clearing, the Rights Shares (in both their nil-paid and fully-paid forms) and the Bonus Shares will be accepted as eligible securities by Hongkong Clearing for deposit, clearance and settlement in CCASS with effect from the relevant commencement dates of dealings in the Rights Shares (in both their nil-paid and fully-paid) and the Bonus Shares on the Stock Exchange or such other dates as determined by Hongkong Clearing. Settlement of transactions between participants on the Stock Exchange on any trading day is required to take place in CCASS on the second trading day thereafter. All activities under CCASS are subject to the General Rules of CCASS and CCASS Operational Procedures in effect from time to time.

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LETTER FROM THE BOARD

For the purpose of trading on the Stock Exchange, a board lot for the Rights Shares, in both their nil-paid and fully-paid forms, and for the Bonus Shares, will be 2,000 Shares, which is the same as the board lot size for the existing Share trading on the Stock Exchange.

Dealings in the Rights Shares, in both their nil-paid and fully-paid forms, and the Bonus Shares registered in the branch register of the Company in Hong Kong will be subject to the payment of stamp duty in Hong Kong.

PERMISSION OF THE BMA

Permission under the Exchange Control Act 1972 of Bermuda (and regulations made thereunder) has been received from the BMA in respect of the issue of the Rights Shares and Bonus Shares to persons regarded as non-residents of Bermuda for exchange control purposes subject to the requirement that the Rights Shares and Bonus Shares are listed on the Stock Exchange. In granting such permission and in accepting this prospectus, the PAL and the EAF for filing, neither the BMA nor the Registrar of Companies of Bermuda accepts any responsibility for the financial soundness of the Group or for the correctness of any statements made or opinions expressed in this prospectus, the PAL or the EAF.

WARNING OF THE RISKS OF DEALINGS IN SHARES AND RIGHTS SHARES

Existing Shares have been dealt in on an ex-rights basis from Thursday, 21st February, 2002. Dealings in the Rights Shares in their nil-paid form will take place from Monday, 4th March, 2002 to Tuesday, 12th March, 2002 (both dates inclusive). If the conditions of the Rights Issue are not fulfilled, the Rights Issue will not proceed.

Any Shareholders or other persons contemplating selling or purchasing Shares and/ or Rights Shares in their nil-paid form during the period in which they may be traded on the Stock Exchange, which is from Monday, 4th March, 2002 to Tuesday, 12th March, 2002 who are in any doubt about their position are recommended to consult their professional advisers. Any Shareholders or other persons dealing in Shares up to the date on which all the conditions to which the Rights Issue is subject are fulfilled and any persons dealing in the nil-paid Rights Shares during the period in which they may be traded on the Stock Exchange will accordingly bear the risk that the Rights Issue may not become unconditional or may not proceed.

FURTHER INFORMATION

Your attention is drawn to the appendices to this prospectus.

By Order of the Board

Wang On Group Limited

Tang Ching Ho

Chairman and Managing Director

– 24 –

APPENDIX I FINANCIAL INFORMATION RELATING TO THE GROUP

1. THREE YEAR INCOME STATEMENT SUMMARY

Set out below is a summary of the audited consolidated profit and loss account of the Group for the three years ended 31st March, 2001 and the audited consolidated assets and liabilities of the Group as at 31st March, 1999, 2000 and 2001 extracted from the Company’s audited financial statements for the relevant years:

RESULTS
TURNOVER
PROFIT/(LOSS) FROM OPERATING
ACTIVITIES AFTER FINANCE COSTS
Share of profits less losses
of associates
PROFIT/(LOSS) BEFORE TAX
Tax
PROFIT/(LOSS) BEFORE
MINORITY INTERESTS
Minority interests
NET PROFIT/(LOSS) FROM
ORDINARY ACTIVITIES
ATTRIBUTABLE TO SHAREHOLDERS
ASSETS AND LIABILITIES
TOTAL ASSETS
TOTAL LIABILITIES
MINORITY INTERESTS
NET ASSETS

Year ended 31 March
2001
2000
1999
HK$’000
HK$’000
HK$’000
211,998
342,646
882,882
(48,837)
15,067
(120,813)
899
5,595
4,002
(47,938)
20,662
(116,811)
138
389
1,568
(47,800)
21,051
(115,243)
287
–
(870)
(47,513)
21,051
(116,113)
31 March
2001
2000
1999
HK$’000
HK$’000
HK$’000
331,295
368,598
291,233
(163,550)
(103,239)
(240,002)
(7,829)
–
–
159,916
265,359
51,231

– 25 –

APPENDIX I FINANCIAL INFORMATION RELATING TO THE GROUP

2. FINANCIAL INFORMATION FOR EACH OF THE TWO YEARS ENDED 31ST MARCH, 2001

Set out below are the audited consolidated income statements, consolidated statements of recognised gains and losses and consolidated cash flow statements of the Group for each of the two years ended 31st March, 2001 and the audited consolidated balance sheets and balance sheets of the Company as at 31st March, 2001 and 31st March, 2000 together with the relevant notes thereto as extracted from the Company’s audited financial statements set out in the Company’s annual report for the year ended 31st March, 2001:

CONSOLIDATED PROFIT AND LOSS ACCOUNT

Year ended 31 March 2001

Notes TURNOVER 3 Cost of sales Gross profit Other revenue Selling and distribution costs Administrative expenses Other operating expenses Provision for impairment of investments PROFIT/(LOSS) FROM OPERATING ACTIVITIES 4 Finance costs 5 Share of profits less losses of associates PROFIT/(LOSS) BEFORE TAX Tax 8 PROFIT/(LOSS) BEFORE MINORITY INTERESTS Minority interests NET PROFIT/(LOSS) FROM ORDINARY ACTIVITIES ATTRIBUTABLE TO SHAREHOLDERS 9 Dividend 10 RETAINED PROFITS/(ACCUMULATED LOSSES) FOR THE YEAR EARNINGS/(LOSS) PER SHARE 11 Basic Diluted	2001 HK$’000 211,998 (201,625) 10,373 24,190 (2,637) (40,114) (18,084) (20,715) (46,987) (1,850) 899 (47,938) 138 (47,800) 287 (47,513) – (47,513) (6.08 cents) N/A	2000 HK$’000 342,646 (281,232) 61,414 14,156 – (46,264) (8,250) – 21,056 (5,989) 5,595 20,662 389 21,051 – 21,051 (8,176) 12,875 4.55 cents 4.39 cents

– 26 –

APPENDIX I FINANCIAL INFORMATION RELATING TO THE GROUP

CONSOLIDATED STATEMENT OF RECOGNISED GAINS AND LOSSES

Year ended 31 March 2001

Notes Surplus/(deficit) on revaluation of investment properties 31 Net profit/(loss) not recognised in the profit and loss account Net profit/(loss) for the year attributable to shareholders Total recognised gains and losses Goodwill eliminated directly against reserves 31	2001 HK$’000 (1,841) (1,841) (47,513) (49,354) (95,769) (145,123)	2000 HK$’000 2,095
		2,095 21,051
		23,146 –
		23,146

– 27 –

APPENDIX I FINANCIAL INFORMATION RELATING TO THE GROUP

CONSOLIDATED BALANCE SHEET

31 March 2001

Notes NON-CURRENT ASSETS Fixed assets 12 Interests in associates 14 Long term investments 15 Loans receivable Rental deposits paid Deposit paid 16 CURRENT ASSETS Properties held for re-sale 18 Short term investments 15 Inventories 19 Trade receivables 20 Prepayments, deposits and other debtors Tax recoverable Pledged time deposits 21 Cash and cash equivalents 22 Due from a director 23 CURRENT LIABILITIES Trade payables 24 Other payables and accruals Deposits received and receipts in advance Interest-bearing bank and other borrowings 25 Provision for onerous contracts 26 Tax payable Proposed final dividend NET CURRENT ASSETS TOTAL ASSETS LESS CURRENT LIABILITIES	2001 HK$’000 66,371 729 7,437 2,586 21,650 – 98,773 5,134 11,263 4,359 6,711 19,237 182 – 185,636 – 232,522 5,440 27,703 49,881 14,676 9,367 2,467 – 109,534 122,988 221,761	2000 HK$’000 45,668 4,329 – 4,106 15,388 19,507
		88,998
		5,723 – – 11,631 21,551 2,050 8,037 230,547 61
		279,600
		16,325 18,869 28,199 4,425 4,990 3,940 8,176
		84,924
		194,676
		283,674

– 28 –

APPENDIX I FINANCIAL INFORMATION RELATING TO THE GROUP

Notes NON-CURRENT LIABILITIES Interest-bearing bank loans 27 Finance lease payables 28 Provision for onerous contracts 26 Deferred tax 29 MINORITY INTERESTS CAPITAL AND RESERVES Issued capital 30 Reserves 31	2001 HK$’000 29,526 168 23,339 983 54,016 7,829 159,916 8,221 151,695 159,916	2000 HK$’000 12,612 113 5,590 –
		18,315 –
		265,359

		6,826 258,533
		265,359

– 29 –

APPENDIX I FINANCIAL INFORMATION RELATING TO THE GROUP

CONSOLIDATED CASH FLOW STATEMENT

Year ended 31 March 2001

Notes NET CASH INFLOW FROM OPERATING ACTIVITIES 32(a) RETURNS ON INVESTMENTS AND SERVICING OF FINANCE Interest income from investments Interest received Interest paid Interest element of finance lease rental payments Dividend received from an associate Dividend paid Net cash inflow from returns on investments and servicing of finance TAX Hong Kong profits tax paid INVESTING ACTIVITIES Decrease/(increase) in due from an associate Decrease in pledged time deposits Purchases of subsidiaries 32(b)&(c) Purchases of associates Proceeds from disposal of subsidiaries 32(d) Proceeds from disposal of interests in a subsidiary 32(e) Purchases of fixed assets Purchases of investment properties Proceeds from disposal of fixed assets Proceeds from disposal of investments Deposit paid Purchases of long term investments Purchases of short term investments Net cash outflow from investing activities	2001 HK$’000 694 2,142 12,172 (1,845) (5) – (6,867) 5,597 (340) 3,041 8,037 (108,693) (2,226) 4,972 30,029 (12,910) (41) 970 44,744 – (36,447) (48,216) (116,740)	2000 HK$’000 76,511 – 6,240 (5,968) (21) 4,167 – 4,418 (6,541) (1,980) 4,550 – – 3,630 – (6,651) (15,905) 104 – (19,507) – – (35,759)

– 30 –

APPENDIX I FINANCIAL INFORMATION RELATING TO THE GROUP

Note NET CASH INFLOW/(OUTFLOW) BEFORE FINANCING ACTIVITIES FINANCING ACTIVITIES 32(f) Proceeds from issue of shares Share issue expenses Redemption of convertible notes Repayment of bank loans New bank loans Capital element of finance lease rental payments Contributions from minority interests Net cash inflow from financing activities INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS Cash and cash equivalents at beginning of year CASH AND CASH EQUIVALENTS AT END OF YEAR ANALYSIS OF BALANCES OF CASH AND CASH EQUIVALENTS Cash and bank balances Unpledged time deposits with original maturity of less than three months when acquired Bank overdrafts	2001 HK$’000 (110,789) 39,150 (779) – (3,666) 30,000 63 287 65,055 (45,734) 230,547 184,813 30,799 154,837 (823) 184,813	2000 HK$’000 38,629 203,626 (4,468) (23,750) (59,890) 13,000 (94) – 128,424 167,053 63,494 230,547 7,914 222,633 – 230,547

– 31 –

APPENDIX I FINANCIAL INFORMATION RELATING TO THE GROUP

BALANCE SHEET

31 March 2001

Notes NON-CURRENT ASSETS Fixed assets 12 Interests in subsidiaries 13 Interests in associates 14 CURRENT ASSETS Prepayments, deposits and other debtors Cash and cash equivalents 22 CURRENT LIABILITIES Other payables and accruals Proposed final dividend NET CURRENT ASSETS TOTAL ASSETS LESS CURRENT LIABILITIES CAPITAL AND RESERVES Issued capital 30 Reserves 31	2001 HK$’000 49 56,490 219 56,758 154 111,306 111,460 519 – 519 110,941 167,699 8,221 159,478 167,699	2000 HK$’000 60 68,049 219
		68,328
		1,084 203,437
		204,521
		228 8,176
		8,404
		196,117
		264,445

		6,826 257,619
		264,445

– 32 –

APPENDIX I FINANCIAL INFORMATION RELATING TO THE GROUP

NOTES TO FINANCIAL STATEMENTS

31 March 2001

1. CORPORATE INFORMATION

The head office and principal place of business of Wang On Group Limited is located at 12th Floor, Tower 1, South Seas Centre, No. 75 Mody Road, Tsimshatsui East, Kowloon.

During the year, the Group was involved in the following principal activities:

management and sub-licensing of Chinese wet markets, shopping centres and car parks
manufacturing and sale of Chinese medicine, herbs and other medicinal products
provision of project management and agency services
provision of building related contracting services
property investments

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of preparation

These financial statements have been prepared in accordance with Hong Kong Statements of Standard Accounting Practice (“SSAP”), accounting principles generally accepted in Hong Kong and the disclosure requirements of the Hong Kong Companies Ordinance. They have been prepared under the historical cost convention, except for the remeasurement of investment properties and certain investments in securities, as further explained below.

Basis of consolidation

The consolidated financial statements include the financial statements of the Company and its subsidiaries for the year ended 31 March 2001 together with the Group’s share of the results for the year and net assets of its associates as set out below. The results of the subsidiaries and associates acquired or disposed of during the year are consolidated from or to their effective dates of acquisition or disposal, respectively. All significant intercompany transactions and balances within the Group are eliminated on consolidation.

Subsidiaries

A subsidiary is a company in which the Company, directly or indirectly, controls more than half of its voting power or issued share capital or controls the composition of its board of directors.

Interests in subsidiaries are stated at cost unless, in the opinion of the directors, there have been impairment in values, when they are written down to values determined by the directors.

– 33 –

APPENDIX I FINANCIAL INFORMATION RELATING TO THE GROUP

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Associates

An associate is a company, not being a subsidiary, in which the Group has a long term interest of generally not less than 20% of its issued share capital and over which it is in a position to exercise significant influence.

The Group’s share of the post-acquisition results and reserves of associates is included in the consolidated profit and loss account and consolidated reserves, respectively. The Group’s interests in associates are stated in the consolidated balance sheet at the Group’s share of net assets under the equity method of accounting less any provisions for impairment in values deemed necessary by the directors, other than those considered to be temporary in nature.

The results of associates are included in the Company’s profit and loss account to the extent of dividends received and receivable. The Company’s interests in associates are stated at cost less any provisions for impairment in values deemed necessary by the directors, other than those considered to be temporary in nature.

Goodwill or capital reserve

The goodwill or capital reserve arising on consolidation of subsidiaries and on acquisition of associates represents the excess or shortfall, respectively, of the purchase consideration paid for subsidiaries and associates over the fair values ascribed to the net underlying assets acquired, and is eliminated against or credited to reserves, respectively, in the year of acquisition. On disposal of such subsidiaries or associates, the relevant portion of attributable goodwill or capital reserve previously eliminated against or credited to reserves is written back and included in the calculation of the gain or loss on disposal.

Fixed assets and depreciation

Fixed assets, other than investment properties, are stated at cost less accumulated depreciation. The cost of an asset comprises its purchase price and any directly attributable costs of bringing the asset to its working condition and location for its intended use. Expenditure incurred after fixed assets have been put into operation, such as repairs and maintenance, is normally charged to the profit and loss account in the period in which it is incurred. In situations where it can be clearly demonstrated that the expenditure has resulted in an increase in the future economic benefits expected to be obtained from the use of the fixed asset, the expenditure is capitalised as an additional cost of that asset.

Depreciation is calculated on the straight-line basis to write off the cost of each asset over its estimated useful life. The principal annual rates used for this purpose are as follows:

Leasehold land	Over the lease terms
Buildings	2%
Leasehold improvements	10%–20%
Plant and machinery	15%–20%
Furniture, fixtures and office equipment	15%–20%
Motor vehicles	20%–30%
Computer equipment	15%–30%

– 34 –

APPENDIX I FINANCIAL INFORMATION RELATING TO THE GROUP

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

The gain or loss on disposal or retirement of a fixed asset recognised in the profit and loss account is the difference between the net sales proceeds and the carrying amount of the relevant asset.

Investment properties

Investment properties are interests in land and buildings in respect of which construction work and development have been completed and which are intended to be held on a long term basis for their investment potential, any rental income being negotiated at arm’s length. Such properties are not depreciated and are stated at their open market values on the basis of annual professional valuations performed at the end of each financial year. Changes in the values of investment properties are dealt with as movements in the investment property revaluation reserve. If the total of this reserve is insufficient to cover a deficit, on a portfolio basis, the excess of the deficit will be charged to the profit and loss account. Where a deficit has previously been charged to the profit and loss account and a revaluation surplus subsequently arises, this surplus is credited to the profit and loss account to the extent of the deficit previously charged.

On the disposal of an investment property, the relevant portion of the investment property revaluation reserve realised in respect of previous valuations is released to the profit and loss account.

Provision for onerous contracts

Onerous contracts represent lease contract for certain Hong Kong properties and projects where the unavoidable costs of meeting the obligations under the contract exceed the economic benefits expected to be received under it. Provisions for onerous contracts are calculated based on the difference between the unavoidable rental payments receivable by the Group and those payable by the Group under the contracts, together with any compensation or penalties arising from failure to fulfill the contracts.

Leased assets

Leases that transfer substantially all the rewards and risks of ownership of assets to the Group, other than legal title, are accounted for as finance leases. At the inception of a finance lease, the cost of the leased asset is capitalised at the present value of the minimum lease payments and recorded together with the obligation, excluding the interest element, to reflect the purchase and financing. Assets held under finance leases are included in fixed assets and depreciated over the shorter of the lease terms and the estimated useful lives of the assets. The finance costs of such leases are charged to the profit and loss account so as to produce a constant periodic rate of charge over the lease terms.

Assets acquired through hire purchase contracts of a financing nature are accounted for as finance leases, but are depreciated over their estimated useful lives.

Leases where substantially all the rewards and risks of ownership of assets remain with the lessor are accounted for as operating leases. Rental receipts or payments under such operating leases are credited or charged to the profit and loss account on the straight-line basis over the lease terms.

– 35 –

APPENDIX I FINANCIAL INFORMATION RELATING TO THE GROUP

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Investments

Debt securities which are intended to be held to maturity are accounted for as held-tomaturity securities, while other securities are accounted for as investment securities or other investments, as explained below.

The profit or loss on disposal of an investment is credited or charged to the profit and loss account in the period in which the disposal occurs as the difference between the net sales proceeds and the carrying amount of the investment.

Provisions against the carrying values of investments are written back when the circumstances and events that led to the write-down or write-off cease to exist and there is persuasive evidence that the new circumstances and events will persist for the foreseeable future.

Held-to-maturity securities

Investments in dated debt securities which are intended to be held to maturity are stated at cost, adjusted for the amortisation of premiums or discounts arising on acquisitions, less any provisions for impairment in values.

The carrying amounts of held-to-maturity securities are reviewed as at the balance sheet date in order to assess the credit risk and whether the carrying amounts are expected to be recovered. Provisions are made when carrying amounts are not expected to be recovered and are recognised as an expense in the profit and loss account in the period in which they arise.

Investment securities

Investments in dated debt securities and equity securities, intended to be held for a continuing strategic or identified long term purpose, are stated at cost less any provisions for impairment in values deemed necessary by the directors, other than those considered to be temporary in nature, on an individual basis.

When such impairment in values have occurred, the carrying amounts of the securities are reduced to their fair values, as estimated by the directors, and the amounts of the impairment are charged to the profit and loss account for the period in which they arise. When the circumstances and events which led to the impairment in values cease to exist and there is persuasive evidence that the new circumstances and events will persist for the foreseeable future, the amounts of the impairment previously charged are credited to the profit and loss account to the extent of the amounts previously charged.

Other investments

Investments in equity securities which are not intended to be held for an identified long term purpose are stated in the balance sheet at fair values. Fair values are determined on the basis of their quoted market prices at the balance sheet date, on an individual investment basis. The gains or losses arising from changes in fair values of such investments are credited or charged to the profit and loss account in the period in which they arise.

– 36 –

APPENDIX I FINANCIAL INFORMATION RELATING TO THE GROUP

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Inventories

Inventories are stated at the lower of cost and net realisable value. Cost is determined on the first-in, first-out basis and in the case of finished goods, comprise direct materials, direct labour and an appropriate proportion of overheads. Net realisable value is based on estimated selling price less any estimated costs to be incurred to completion and disposal.

Construction, renovation and decoration contracts

Contract revenue comprises the agreed contract amount and appropriate amounts from variation orders, claims and incentive payments. Contract costs incurred comprise direct materials, the cost of subcontracting, direct labour and an appropriate proportion of variable and fixed construction overheads.

Revenue from fixed price construction contracts is recognised on the percentage of completion method, measured by reference to the percentage of billings raised to the estimated total billings for each contract.

Provision is made for foreseeable losses as soon as they are anticipated by management.

Where contract costs incurred to date plus recognised profits less recognised losses exceed progress billings, the surplus is reflected as an amount due from contract customers.

Where progress billings exceed contract costs incurred to date plus recognised profits less recognised losses, the surplus is reflected as an amount due to contract customers.

Website development cost

Costs incurred for the development and enhancement of websites are charged to the profit and loss account as incurred.

Deferred tax

Deferred tax is provided, using the liability method, on all significant timing differences to the extent it is probable that the liability will crystallise in the foreseeable future. A deferred tax asset is not recognised until its realisation is assured beyond reasonable doubt.

Foreign currencies

Foreign currency transactions are recorded at the applicable rates of exchange ruling at the transaction dates. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are translated at the applicable rates of exchange ruling at that date. Exchange differences are dealt with in the profit and loss account.

– 37 –

APPENDIX I FINANCIAL INFORMATION RELATING TO THE GROUP

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Retirement benefits scheme

The Group operates a defined contribution Mandatory Provident Fund retirement benefits scheme (the “Scheme”) under the Mandatory Provident Fund Scheme Ordinance, for those employees who are eligible to participate in the Scheme. The Scheme became effective from 1 December 2000. Contributions are made based on a percentage of the employees’ basic salaries and are charged to the profit and loss account as they become payable in accordance with the rules of the Scheme. The assets of the Scheme are held separately from those of the Group in an independently administered fund. The Group’s employer contributions vest fully with the employees when contributed into the Scheme.

Prior to the Scheme being effective, the Group operated a defined contribution retirement benefits scheme for those employees who were eligible to participate in the scheme. This scheme operated in a similar way to the Scheme, except that when an employer left the scheme prior to his/ her interest in the Group’s employer contributions vesting fully, the ongoing contributions payable by the Group were reduced by the relevant amount of forfeited contributions. This scheme was terminated with effect from 1 December 2000.

Revenue recognition

Revenue is recognised when it is probable that the economic benefits will flow to the Group and when the revenue can be measured reliably, on the following bases:

(a) from construction and decoration contracts, based on the percentage of completion basis as further explained in the accounting policy for “Construction, renovation and decoration contracts” above;
(b) from project management and agency services, when services are rendered;
(c) from the sale of goods, when the significant risks and rewards of ownership have been transferred to the buyer, provided that the Group maintains neither managerial involvement to the degree usually associated with ownership, nor effective control over the goods sold;
(d) from the sale of properties, at the time when the sale agreement becomes unconditional;
(e) rental and sub-licensing fee income, on an accrual basis; and
(f) interest income, on a time proportion basis taking into account the principal outstanding and the effective interest rate applicable.

Properties held for re-sale

Properties held for re-sale are stated at the lower of their carrying values and net realisable values, which are determined by the directors by reference to prevailing market prices.

– 38 –

APPENDIX I FINANCIAL INFORMATION RELATING TO THE GROUP

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Related parties

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

Cash equivalents

For the purpose of the consolidated cash flow statement, cash equivalents represent short term, highly liquid investments which are readily convertible into known amounts of cash and which were within three months of maturity when acquired, less advances from banks repayable within three months from the date of the advance. For the purpose of the balance sheet classification, cash equivalents represent assets similar in nature to cash, which are not restricted as to use.

3. TURNOVER AND REVENUE

Turnover represents the invoiced value of building related contracting services, building materials, Chinese medicine, herbs and other medicinal products sold, and sub-licensing fee income, the proceeds from the disposal of properties. All significant intra-group transactions have been eliminated.

An analysis of turnover and revenue is as follows:

Management and sub-licensing of Chinese wet markets Management and sub-licensing of shopping centres Management of car parks Sale of Chinese medicine, herbs and other medicinal products Sales of investment properties and properties held for resale Building related contracting business Trading of building materials Others Turnover Interest income Gain on disposal of investments Revenue	2001 HK$’000 104,923 20,558 70,109 9,036 1,230 1,515 – 4,627 211,998 12,172 2,281 226,451	2000 HK$’000 60,358 21,390 77,594 – 74,900 86,671 19,425 2,308
		342,646 6,240 –
		348,886

– 39 –

APPENDIX I FINANCIAL INFORMATION RELATING TO THE GROUP

4. PROFIT/(LOSS) FROM OPERATING ACTIVITIES

The Group’s profit/(loss) from operating activities is arrived at after charging/(crediting):

Cost of inventories sold
Depreciation:
Owned fixed assets
Leased fixed assets
Operating lease rentals for land and buildings
Website development cost
Auditors’ remuneration
Staff costs (including directors’ remuneration –Note 6):
Wages and salaries
Pension scheme contributions
Less: Forfeited contributions
Loss/(gain) on disposal of properties held for re-sale
Loss on disposal of fixed assets
Provision for contingency, net
Provision for doubtful debts
Loss/(gain) on disposal of interests in subsidiaries
Provision/(amount released) for onerous contracts
–Note 26
Provision for impairment of investments
Write-back of provision for doubtful debts and bad debt expenses
Gain on disposal of investments, net
Net holding gain on investments
Interest income from investments
Exchange losses/(gains), net
Gain on early redemption of convertible notes
Interest income
Gross rental income
Less: Outgoings
Net rental income

Group
2001
2000
HK$’000
HK$’000
3,398
96,289
10,791
8,830
113
210
119,515
114,064
7,169
5,449
945
784
40,262
29,491
754
287
(148)
(144)
40,868
29,634
(641)
2,074
19
5,048
8,927
1,200
5,182
3,480
(1,060)
1,885
26,676
(1,706)
20,715
–
(638)
(6,431)
(2,281)
–
(215)
–
(2,142)
–
12
(10)
–
(1,250)
(12,172)
(6,240)
(1,734)
(1,863)
–
122
(1,734)
(1,741)

– 40 –

APPENDIX I FINANCIAL INFORMATION RELATING TO THE GROUP

5. FINANCE COSTS

Interest on bank loans, overdrafts and other loans wholly repayable within five years Interest on finance leases	Group 2001 2000 HK$’000 HK$’000 1,845 5,968 5 21 1,850 5,989	Group 2001 2000 HK$’000 HK$’000 1,845 5,968 5 21 1,850 5,989
		5,989

6. DIRECTORS’ REMUNERATION

Directors’ remuneration disclosed pursuant to the Listing Rules and Section 161 of the Hong Kong Companies Ordinance is as follows:

Fees: Executive directors Independent non-executive directors Other emoluments for executive directors: Salaries and allowances Pension scheme contributions	Group 2001 2000 HK$’000 HK$’000 – – 631 331 9,012 8,649 48 51 9,691 9,031	Group 2001 2000 HK$’000 HK$’000 – – 631 331 9,012 8,649 48 51 9,691 9,031
		9,031

The remuneration of the directors fell within the following bands:

Nil – HK$1,000,000 HK$1,000,001 – HK$1,500,000 HK$1,500,001 – HK$2,000,000 HK$2,500,001 – HK$3,000,000 HK$4,000,001 – HK$4,500,000	Number of directors 2001 2000 3 3 – 1 1 – 1 1 1 1 6 6	Number of directors 2001 2000 3 3 – 1 1 – 1 1 1 1 6 6
		6

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

– 41 –

APPENDIX I FINANCIAL INFORMATION RELATING TO THE GROUP

6. DIRECTORS’ REMUNERATION (CONTINUED)

No value is included in directors’ remuneration in respect of share options granted during the year because, in the absence of a readily available market value for the options on the Company‘s shares, the directors are unable to arrive at an accurate assessment of the value of the options granted. Details of the options granted to the directors during the year are set out in the section “Directors’ rights to acquire shares” in the Report of the Directors.

7. FIVE HIGHEST PAID EMPLOYEES

The five highest paid employees during the year included three (2000: three) directors, details of whose remuneration are disclosed in note 6 above. The details of the remuneration of the remaining two (2000: two) non-director, highest paid employees are as follows:

Salaries and allowances Pension scheme contributions	Group 2001 2000 HK$’000 HK$’000 2,199 2,167 45 47 2,244 2,214	Group 2001 2000 HK$’000 HK$’000 2,199 2,167 45 47 2,244 2,214
		2,214

The remuneration of the two (2000: two) non-director, highest paid employees fell within the following bands:

Nil to HK$1,000,000 HK$1,500,001 to HK$2,000,000	Number of employees 2001 2000 1 1 1 1 2 2	Number of employees 2001 2000 1 1 1 1 2 2
		2

– 42 –

APPENDIX I FINANCIAL INFORMATION RELATING TO THE GROUP

8. TAX

Hong Kong profits tax has been provided at the rate of 16% on the estimated assessable profits arising in Hong Kong during the year. In the prior year, no provision for Hong Kong profits tax had been made because the Group had no estimated assessable profits arising in Hong Kong.

Group: Hong Kong profits tax Overprovision in prior year Deferred –Note 29 Share of tax attributable to: Associates Tax credit for the year	2001 HK$’000 411 (1,644) 919 (314) 176 (138)	2000 HK$’000 – (725) (450)
		(1,175) 786
		(389)

9. NET PROFIT/(LOSS) FROM ORDINARY ACTIVITIES ATTRIBUTABLE TO SHAREHOLDERS

The net loss from ordinary activities attributable to shareholders dealt with in the financial statements of the Company is HK$136,426,000 (2000: profit of HK$15,332,000).

10. DIVIDEND

Proposed final – Nil cent (2000: 1 cent) per ordinary share	2001 HK$’000 –	2000 HK$’000 8,176

In the prior year, the directors proposed a final dividend of 1 cent per ordinary share with an option to elect to receive new shares of the Company credited as fully paid in lieu of cash payment in respect of part or all of the final dividend by way of a scrip dividend.

11. EARNINGS/(LOSS) PER SHARE

The calculation of basic earnings/(loss) per share is based on the net loss attributable to shareholders for the year of HK$47,513,000 (2000: profit of HK$21,051,000) and on the weighted average number of 781,688,699 (2000: 463,095,553) ordinary shares in issue during the year.

In the prior year, the calculation of diluted earnings per share was based on the net profit attributable to shareholders for the year of HK$21,051,000. The weighted average number of ordinary shares used in the calculation is 463,095,553 ordinary shares in issue as used in the basic earnings per share calculation, and the weighted average of 16,862,965 ordinary shares assumed to have been issued at no consideration on the deemed exercise of all share options.

The diluted loss per share for the year ended 31 March 2001 has not been shown as the options outstanding this year had an anti-dilutive effect on the basic loss per share.

– 43 –

FINANCIAL INFORMATION RELATING TO THE GROUP

APPENDIX I

12. FIXED ASSETS

Group

Furniture, Leasehold Leasehold fixtures land and Investment improve- Plant and and office buildings properties ments machinery equipment HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 Cost or valuation: At beginning of year – 18,000 22,206 4,675 26,632 Additions – 41 9,006 1,591 1,888 Acquisition of subsidiaries 6,156 1,550 894 2,381 40,980 Disposals – – (12) (106) (107) Deficit on revaluation – (1,841) – – – At 31 March 2001 6,156 17,750 32,094 8,541 69,393 Accumulated depreciation: At beginning of year – – 9,991 3,129 14,384 Provided during the year 35 – 4,278 684 5,351 Acquisition of subsidiaries 796 – 880 2,244 26,838 Disposals – – (3) (74) (44) At 31 March 2001 831 – 15,146 5,983 46,529 Net book value: At 31 March 2001 5,325 17,750 16,948 2,558 22,864 At 31 March 2000 – 18,000 12,215 1,546 12,248 Analysis of cost or valuation: At cost 6,156 – 32,094 8,541 69,393 At 31 March 2001 valuation – 17,750 – – – 6,156 17,750 32,094 8,541 69,393	Motor Computer vehicles equipment HK$’000 HK$’000 2,919 2,540 – 425 1,534 962 (1,602) (989) – – 2,851 2,938 2,547 1,253 248 308 1,502 711 (1,578) (128) 2,719 2,144 132 794 372 1,287 2,851 2,938 – – 2,851 2,938	Total HK$’000 76,972 12,951 54,457 (2,816) (1,841) 139,723 31,304 10,904 32,971 (1,827) 73,352 66,371 45,668 121,973 17,750 139,723

– 44 –

APPENDIX I FINANCIAL INFORMATION RELATING TO THE GROUP

12. FIXED ASSETS (CONTINUED)

Company

Furniture, fixtures and office equipment HK$’000 Cost: At beginning of year – Additions 10 At 31 March 2001 10 Accumulated depreciation: At beginning of year – Provided during the year 1 At 31 March 2001 1 Net book value: At 31 March 2001 9 At 31 March 2000 –	Computer equipment HK$’000 66 – 66 6 20 26 40 60	Total HK$’000 66 10
		76
		6 21
		27
		49

		60

The net book value of the fixed assets of the Group held under finance leases included in the total amount of office equipment at 31 March 2001 amounted to HK$240,453 (2000: HK$141,600). At 31 March 2000, net book value of HK$280,425 of motor vehicles was held under finance leases.

The Group’s leasehold land and buildings and investment properties are all situated in Hong Kong and held under medium term leases.

The Group’s investment properties were revalued on 31 March 2001 by DTZ Debenham Tie Leung Limited, an independent professional valuer, at HK$17,750,000 on an open market, existing use basis.

At 31 March 2001, certain of the Group’s investment properties were pledged to secure general banking facilities granted to the Group (Note 27).

– 45 –

APPENDIX I FINANCIAL INFORMATION RELATING TO THE GROUP

13. INTERESTS IN SUBSIDIARIES

Unlisted shares, at cost Due from subsidiaries –Note (i) Loans to subsidiaries –Note (ii) Due to subsidiaries –Note (i) Provisions for impairment in values	Company 2001 2000 HK$’000 HK$’000 71,000 71,000 327,341 189,501 93,863 92,313 (16,265) (9,649) 475,939 343,165 (419,449) (275,116) 56,490 68,049	Company 2001 2000 HK$’000 HK$’000 71,000 71,000 327,341 189,501 93,863 92,313 (16,265) (9,649) 475,939 343,165 (419,449) (275,116) 56,490 68,049
		343,165 (275,116)
		68,049

Notes:

(i) The amounts due are unsecured, interest-free and have no fixed terms of repayment in the current and prior years.
(ii) The loans to the Company’s subsidiaries are unsecured and have no fixed terms of repayment in the current and prior years. Except for a loan to a subsidiary of HK$20,232,000 which bears interest at 8% per annum for the current year, the remaining balances are interest-free. In the prior year, loans to subsidiaries of HK$22,835,000 bore interest at 8.5% per annum.

Particulars of the principal subsidiaries at the balance sheet date are as follows:

	Nominal value	Nominal value
		of issued	Percentage
	Place of	ordinary/	of	equity
	incorporation/	registered	attributable to
Name	registration	share capital	the Company		Principal activities
			Direct	Indirect
			%	%
Billion Good	Hong Kong	Ordinary	–	75.79	Property holding
lnvestment Limited		HK$2			and investment
Charter Golden Design	Hong Kong	Ordinary	–	100	Provision of
& Contracting		HK$2			decoration
Limited					services
Conway Consultants	Hong Kong	Ordinary	–	70	Provision of
Limited	HK$1,050,000				medical
		Non-voting			consultation
		preference (Note 2)			services
		HK$450,000

– 46 –

APPENDIX I FINANCIAL INFORMATION RELATING TO THE GROUP

13. INTERESTS IN SUBSIDIARIES (CONTINUED)

	Nominal value	Nominal value
		of issued	Percentage
	Place of	ordinary/	of	equity
	incorporation/	registered	attributable to
Name	registration	share capital	the Company		Principal activities
			Direct	Indirect
			%	%
Denox Management	Hong Kong	Ordinary	–	100	Management and
Limited		HK$2			property
					sub-letting
Fenny Planning &	Hong Kong	Ordinary	–	100	Promotion of
Project Management		HK$100			Chinese wet
Limited					markets activities
Fulling Limited	Hong Kong	Ordinary	–	100	Money lending
		HK$100
Geswin Limited	Hong Kong	Ordinary	–	100	Investment holding
		HK$2
Goodtech Management	Hong Kong	Ordinary	–	100	Management of
Limited	HK$1,100,100				shopping centres
Grand Quality	Hong Kong	Ordinary	–	100	Property investment
Development Limited		HK$2
Join China lnvestment	Hong Kong	Ordinary	–	100	Investment holding
Limited		HK$2
Kinetic Technology	Hong Kong	Ordinary	–	100	Provision of
Limited		HK$2			technology
(Notes 5 and 6)					services
Lead Fortune Limited	Hong Kong	Ordinary	–	100	Property investment
		HK$1,000
Lica Parking Company	Hong Kong	Ordinary	–	99	Management and
Limited	HK$25,500,000				sub-licensing of
					car parks
Majorluck Limited	Hong Kong	Ordinary	–	100	Management and
		HK$10,000			sub-licensing of
					Chinese wet
					markets

– 47 –

APPENDIX I FINANCIAL INFORMATION RELATING TO THE GROUP

13. INTERESTS IN SUBSIDIARIES (CONTINUED)

	Nominal value	Nominal value
		of issued	Percentage
	Place of	ordinary/	of	equity
	incorporation/	registered	attributable to
Name	registration	share capital	the Company		Principal activities
			Direct	Indirect
			%	%
Parking Lot	Hong Kong	Ordinary	–	100	Management and
Management		HK$2			sub-licensing of
Limited					car parks
Real World Limited	British Virgin	Ordinary	–	100	Investment holding
	Islands	US$1
Royal Focus Limited	Hong Kong	Ordinary	–	100	Investment holding
		HK$2
Wai Yuen Tong	Hong Kong	Ordinary	–	75.79	Manufacturing and
Medicine		HK$217,374			sale of Chinese
Company Limited		Non-voting			medicine, herbs
		deferred (Note 3)			and other
	HK$17,373,750				medicinal
					products
Wang On Builders	Hong Kong	Ordinary	–	100	Provision of
Limited		HK$2			renovation and
					project
					management
					services
Wang On Commercial	British Virgin	Ordinary	–	100	Investment holding
Management Limited	Islands	US$2
Wang On Construction	Hong Kong	Ordinary	–	100	Provision of
Engineering Limited	HK$15,000,000				construction,
		Non-voting			renovation &
		deferred (Note 3)			project
		HK$100			management
					services
Wang On Design &	Hong Kong	Ordinary	–	100	Provision of
Contracting Limited	HK$1,000,000				decoration
					services

– 48 –

APPENDIX I FINANCIAL INFORMATION RELATING TO THE GROUP

13. INTERESTS IN SUBSIDIARIES (CONTINUED)

	Nominal value	Nominal value
		of issued	Percentage
	Place of	ordinary/	of	equity
	incorporation/	registered	attributable to
Name	registration	share capital	the Company		Principal activities
			Direct	Indirect
			%	%
Wang On Engineering	Hong Kong	Ordinary	–	100	Provision of
Holding Limited		HK$477			decoration
		Non-voting			& project
		deferred (Note 3)			management
	HK$1,262,523				services
Wang On Enterprises	British Virgin	Ordinary	100	–	Investment holding
(BVI) Limited	Islands	US$1
Wang On Majorluck	Hong Kong	Ordinary	–	100	Management and
Limited		HK$1,000			sub-licensing of
					Chinese wet
					markets
Wang On Shopping	Hong Kong	Ordinary	–	100	Management and
Centre Management		HK$2			sub-licensing of
Limited					shopping centres
Willing Dental	Hong Kong	Ordinary	–	100	Provision of dental
Consultants Limited		HK$100			consultation
					services

Notes:

(1) The above table lists the subsidiaries of the Company which, in the opinion of the directors, principally affected the results for the year or formed a substantial portion of the net assets and liabilities of the Group. To give details of other subsidiaries would, in the opinion of the directors, result in particulars of excessive length.
(2) The non-voting preference shares carry no voting rights, but they rank in priority to any other class of shares provided the assets of the company available for distribution to its members.
(3) The non-voting deferred shares carry no voting rights or rights to dividends. On the winding up of the companies, the non-voting deferred shares have a right to repayment in proportion to the amounts paidup on all ordinary and deferred shares after the first HK$1,000,000,000,000 thereof has been distributed among the holders of the ordinary shares.
(4) All of the subsidiaries have their principal operations in Hong Kong except for Kinetic Technology Limited, for which the principal operation is in the People’s Republic of China.
(5) The financial statements of the company is not audited by Ernst & Young Hong Kong or other Ernst & Young International member firms.
(6) Subsequent to the balance sheet date, the company applied for a members’ voluntary winding-up.

– 49 –

APPENDIX I FINANCIAL INFORMATION RELATING TO THE GROUP

14. INTERESTS IN ASSOCIATES

Unlisted shares, at cost Share of net assets Due from associates Provisions for impairment in values	Group 2001 2000 HK$’000 HK$’000 – – 102 661 1,227 3,668 1,329 4,329 (600) – 729 4,329	Company 2001 2000 HK$’000 HK$’000 – – – – 219 219 219 219 – – 219 219	Company 2001 2000 HK$’000 HK$’000 – – – – 219 219 219 219 – – 219 219
			219 –
			219

Due from associates are unsecured, interest-free and have no fixed terms of repayment.

Particulars of the principal associates at the balance sheet date are as follows:

			Percentage of	Percentage of
			ownership
		Place of	interest
	Business	incorporation	attributable
Name	structure	and operations	to the	Group	Principal activities
			2001	2000
			%	%
Hong Kong Classic	Corporate	Hong Kong	50	–	Provision of
Information Technology					technology
Limited –(Note 2)					services
Tse’s Waxing & Cleaning	Corporate	Hong Kong	50	–	Provision of
Company Limited					cleaning services

Notes:

(1) The above table lists the associates of the Group which, in the opinion of the directors, principally affected the results of the year or formed a substantial portion of the net assets and liabilities of the Group. To give details of other associates would, in the opinion of the directors, result in particulars of excessive length.
(2) The financial statements of the company is not audited by Ernst & Young Hong Kong or other Ernst & Young International member firms.

– 50 –

FINANCIAL INFORMATION RELATING TO THE GROUP

APPENDIX I

15. INVESTMENTS

(a) Long term investments

Held-to-maturity securities Hong Kong listed dated debt securities, at amortised cost Investment securities Investment in unlisted shares, at cost Less: Provisions for impairment in values	Group 2001 2000 HK$’000 HK$’000 7,437 – 12,521 – (12,521) – 7,437 –	Group 2001 2000 HK$’000 HK$’000 7,437 – 12,521 – (12,521) – 7,437 –
		–

The aggregate market value of the Hong Kong listed dated debt securities totalled approximately HK$8,132,000 at 31 March 2001.

(b) Short term investments

Held-to-maturity securities Hong Kong listed dated debt securities, at amortised cost# Investment securities Hong Kong listed equity securities, at cost# Less: Provisions for impairment in values Other investments Hong Kong listed equity securities, at fair value	Group 2001 2000 HK$’000 HK$’000 4,906 – 13,531 – (8,194) – 1,020 – 11,263 –	Group 2001 2000 HK$’000 HK$’000 4,906 – 13,531 – (8,194) – 1,020 – 11,263 –
		–

# The aggregate market value of the Hong Kong listed dated debt securities and Hong Kong listed equity securities totalled approximately HK$4,910,000 and HK$17,176,000, respectively, at 31March 2001.

The Hong Kong listed securities were disposed after the balance sheet date and the provision for impairment in value had been incorporated in the financial statements at 31 March 2001.

– 51 –

APPENDIX I FINANCIAL INFORMATION RELATING TO THE GROUP

16. DEPOSIT PAID

The amount paid in the prior year represented deposit for the acquisition of the remaining 51% equity interest in Majorluck Limited in which the Group had a 49% equity interest as at 31 March 2000. The conditions for completion of the agreement on the acquisition of 51% equity interest in Majorluck Limited were fulfilled during the year.

17. CONSTRUCTION CONTRACTS

Retentions of HK$224,000 (2000: HK$1,320,000) held by customers for contract works were included in trade receivables in current assets.

18. PROPERTIES HELD FOR RE-SALE

Properties held for re-sale at the balance sheet date represented the Group’s interests in certain retail shops situated in Hong Kong. The properties are currently leased to third parties.

The Group’s properties held for re-sale are situated in Hong Kong and are held under medium term leases. At 31 March 2001, all of the properties held for re-sale and the rental income therefrom were pledged to secure certain banking facilities granted to the Group (Notes 25 and 27).

19. INVENTORIES

Raw materials Packing materials Finished goods	Group 2001 2000 HK$’000 HK$’000 952 – 1,065 – 2,342 – 4,359 –	Group 2001 2000 HK$’000 HK$’000 952 – 1,065 – 2,342 – 4,359 –
		–

20. TRADE RECEIVABLES

The aging analysis of trade receivables at the balance sheet date was as follows:

Current to 90 days 91 days to 180 days Over 180 days Less: Provision for doubtful debts	2001 HK$’000 6,460 62 504 7,026 (315) 6,711	Group % 2000 HK$’000 92 7,675 1 247 7 8,668 100 16,590 (4,959) 11,631	% 46 2 52
			100

– 52 –

APPENDIX I FINANCIAL INFORMATION RELATING TO THE GROUP

20. TRADE RECEIVABLES (CONTINUED)

The Group generally does not grant any credit to customers, except for the Group’s medical and medicinal distribution business which offers a credit term of 30 to 180 days.

As at 31 March 2001, retentions held by customers for contract works, as included in trade receivables in current assets amounted to HK$224,000 (2000: HK$1,320,000).

21. PLEDGED TIME DEPOSITS

The Group’s time deposits pledged to banks for general banking facilities granted to certain group companies in the prior year were released during the current year.

22. CASH AND CASH EQUIVALENTS

Cash and bank balances Time deposits	Group 2001 2000 HK$’000 HK$’000 30,799 7,914 154,837 222,633 185,636 230,547	Company 2001 2000 HK$’000 HK$’000 417 64 110,889 203,373 111,306 203,437	Company 2001 2000 HK$’000 HK$’000 417 64 110,889 203,373 111,306 203,437
			203,437

23. DUE FROM A DIRECTOR

Particulars of the amount due from a director disclosed pursuant to Section 161B of the Hong Kong Companies Ordinance are as follows:

Group

Name Mr. Tang Ching Ho	Maximum amount 31 March outstanding 2001 during the year HK$’000 HK$’000 – 61	1 April 2000 HK$’000 61

The balance in the prior year represented the outstanding amount of shortfall in rental income, as detailed in note 36(b) and rental receivable, as detailed in note 36(c) and was fully settled in April 2000.

– 53 –

APPENDIX I FINANCIAL INFORMATION RELATING TO THE GROUP

24. TRADE PAYABLES

The aging analysis of trade payables at the balance sheet date was as follows:

Current to 90 days 91 days to 180 days Over 180 days	2001 HK$’000 1,191 – 4,249 5,440	Group % 2000 HK$’000 22 4,846 – – 78 11,479 100 16,325	% 30 – 70
			100

25. INTEREST-BEARING BANK AND OTHER BORROWINGS

Notes Current portion of bank loans and overdrafts 27 Current portion of finance lease payables 28	Group 2001 2000 HK$’000 HK$’000 14,618 4,375 58 50 14,676 4,425	Group 2001 2000 HK$’000 HK$’000 14,618 4,375 58 50 14,676 4,425
		4,425

26. PROVISION FOR ONEROUS CONTRACTS

At beginning of year Provided during the year Utilised during the year Released during the year At 31 March Portion classified as current liabilities Long term portion	Group 2001 2000 HK$’000 HK$’000 10,580 38,068 26,676 – (4,550) (25,782) – (1,706) 32,706 10,580 (9,367) (4,990) 23,339 5,590	Group 2001 2000 HK$’000 HK$’000 10,580 38,068 26,676 – (4,550) (25,782) – (1,706) 32,706 10,580 (9,367) (4,990) 23,339 5,590
		10,580 (4,990)
		5,590

– 54 –

APPENDIX I FINANCIAL INFORMATION RELATING TO THE GROUP

27. INTEREST-BEARING BANK LOANS AND OVERDRAFTS

Bank overdrafts: Unsecured Bank loans: Secured Unsecured Bank overdrafts repayable on demand Bank loans repayable: Within one year In the second year In the third to fifth years, inclusive Beyond five years Portion classified as current liabilities_(Note 25)_ Long term portion	Group 2001 2000 HK$’000 HK$’000 823 – 7,118 16,987 36,203 – 43,321 16,987 44,144 16,987 823 – 13,795 4,375 13,864 4,375 13,458 7,502 2,204 735 44,144 16,987 (14,618) (4,375) 29,526 12,612

At 31 March 2001, all of the Group’s properties held for resale and rental therefrom and certain of the Group’s investment properties were pledged to secure the banking facilities granted to the Group.

At 31 March 2000, the Group’s cash and bank balances of HK$8,037,000 were pledged to secure the banking facilities granted to the Group.

– 55 –

APPENDIX I FINANCIAL INFORMATION RELATING TO THE GROUP

28. FINANCE LEASE PAYABLES

There were obligations under finance leases at the balance sheet date as follows:

Amounts payable: Within one year In the second year In the third to fifth years, inclusive Total minimum lease payments Future finance charges Total net lease payables Portion classified as current liabilities_(Note 25)_ Long term portion	Group 2001 2000 HK$’000 HK$’000 58 54 58 29 110 84 226 167 – (4) 226 163 (58) (50) 168 113

29. DEFERRED TAX

Balance at beginning of year Acquisition of a subsidiary Charge/(credit) for the year –Note 8 At 31 March	Group 2001 2000 HK$’000 HK$’000 – 450 64 – 919 (450) 983 –

There are no significant potential deferred tax liabilities for which provision has not been made.

The revaluation of the Group’s investment properties does not constitute a timing difference and, consequently, the amount of potential deferred tax thereon has not been quantified.

– 56 –

APPENDIX I FINANCIAL INFORMATION RELATING TO THE GROUP

30. SHARE CAPITAL

Authorised: 10,000,000,000 (2000: 10,000,000,000) ordinary shares of HK$0.01 (2000: HK$0.01) each Issued and fully paid: 822,060,933 (2000: 682,593,914) ordinary shares of HK$0.01 (2000: HK$0.01) each	2001 HK$’000 100,000 8,221	2000 HK$’000 100,000

		6,826

On 13 July 2000, 135,000,000 ordinary shares of HK$0.01 each were issued for cash at subscription price of HK$0.29 per share for a total cash consideration, before expenses, of HK$39,150,000. The net proceeds were used for acquisition and investment, for the expansion of the commercial management in Chinese wet markets, car parks and shopping centres, for repayment of bank loans and working capital.

A summary of the transactions during the year with reference to the above movements of the Company’s ordinary share capital is as follows:

Nominal value of shares issued HK$’000 At beginning of year 6,826 Issue of 135,000,000 shares of HK$0.01 each 1,350 Scrip dividend (Notes 10 and 31) 45 8,221	Number of shares issued 682,593,914 135,000,000 4,467,019
	822,060,933

As a result of the scrip dividend option in respect of the final dividend in the prior year, 4,467,019 new ordinary shares were issued at a subscription price of HK$0.293 per share during the year under review.

Share option scheme

On 6 February 1995, the Company approved a share option scheme under which the directors may, at their discretion, invite any full-time employee or executive director of the Group to take up options to subscribe for shares of the Company at any time during the 10 years from the date of approval. The maximum number of shares on which options may be granted may not exceed 10% of the issued share capital of the Company from time to time, excluding any shares issued on the exercise of options. The scheme became effective upon the listing of the Company’s shares on The Stock Exchange of Hong Kong Limited on 28 February 1995.

During the year, the Company granted a total of 43,800,000 share options which entitle the holders to subscribe for ordinary shares in the capital of the Company in the period from 6 March 2001 to 5 February 2005 at an exercise price of HK$0.13 each. The aggregate consideration paid by each grantee for each lot of share options granted is HK$1.00.

– 57 –

APPENDIX I FINANCIAL INFORMATION RELATING TO THE GROUP

30. SHARE CAPITAL (CONTINUED)

No share option was exercised during the year and the Company had 43,800,000 outstanding share options at the balance sheet date. Exercise in full of such share options would, under the present capital structure of the Company, result in the issue of 43,800,000 additional ordinary shares and would generate cash proceeds, before the related issue expenses, of approximately HK$5,694,000.

31. RESERVES

Group

Notes At 1 April 1999 Issue of shares Share issue expenses Transfer from share premium (i) Reduction in nominal value of shares (ii) Surplus on revaluation of investment properties Profit for the year Proposed final dividend At 31 March and 1 April 2000 Issue of shares Share issue expenses Premium on shares issued by way of scrip dividend Goodwill on acquisition Deficit on revaluation of investment properties Loss for the year At 31 March 2001 Reserves retained by: Company and subsidiaries Associates At 31 March 2001 Company and subsidiaries Associates At 31 March 2000	Share premium account HK$’000 160,997 193,924 (4,468) (131,466) – – – – 218,987 37,800 (779) 1,264 – – – 257,272 257,272 – 257,272 218,987 – 218,987	Capital reserve HK$’000 5,721 – – – – – – – 5,721 – – – (5,721) – – – – – – 5,721 – 5,721	Investment Retained properties profits/ revaluation (accumulated reserve losses) HK$’000 HK$’000 – (154,226) – – – – – 131,466 – 41,615 2,095 – – 21,051 – (8,176) 2,095 31,730 – – – – – – – (90,048) (1,841) – – (47,513) 254 (105,831) 254 (106,084) – 253 254 (105,831) 2,095 24,705 – 7,025 2,095 31,730	Total HK$’000 12,492 193,924 (4,468) – 41,615 2,095 21,051 (8,176) 258,533 37,800 (779) 1,264 (95,769) (1,841) (47,513) 151,695 151,442 253 151,695 251,508 7,025 258,533

– 58 –

APPENDIX I FINANCIAL INFORMATION RELATING TO THE GROUP

31. RESERVES (CONTINUED)

Company

Notes At 1 April 1999 Issue of shares Share issue expenses Transfer from share premium (i) Reduction in nominal value of shares (ii) Profit for the year Proposed final dividend At 31 March and 1 April 2000 Issue of shares Share issue expenses Premium on shares issued by way of scrip dividend Loss for the year At 31 March 2001	Retained Share profits/ premium Contributed (accumulated account surplus losses) HK$’000 HK$’000 HK$’000 160,997 31,476 (173,081) 193,924 – – (4,468) – – (131,466) – 131,466 – – 41,615 – – 15,332 – – (8,176) 218,987 31,476 7,156 37,800 – – (779) – – 1,264 – – – – (136,426) 257,272 31,476 (129,270)	Total HK$’000 19,392 193,924 (4,468) – 41,615 15,332 (8,176) 257,619 37,800 (779) 1,264 (136,426) 159,478

Notes:

(i) Pursuant to a special resolution passed on 20 December 1999, the Company’s share premium account was reduced by an amount of HK$131,466,000, which was applied to offset the accumulated losses of the Company.
(ii) Pursuant to a resolution passed on 24 September 1999, the nominal value of the shares in the capital of the Company was reduced from HK$0.10 each to HK$0.01 each by cancelling the issued capital to the extent of HK$0.09 paid up on each of the issued shares and that every unissued share be sub-dividend to the extent that each unissued share of HK$0.10 shall become ten unissued shares of HK$0.01 each.
(iii) The contributed surplus of the Company originally derived from the difference between the nominal value of the share capital and share premium of the subsidiaries acquired pursuant to the Group reorganisation on 6 February 1995 and the par value of the Company’s shares issued in exchange therefor. Under the Companies Act 1981 of Bermuda (as amended), the contributed surplus is distributable to shareholders under certain circumstances.

– 59 –

APPENDIX I FINANCIAL INFORMATION RELATING TO THE GROUP

32. NOTES TO THE CASH FLOW STATEMENT

(a) Reconciliation of profit/(loss) from operating activities to net cash inflow from operating activities:

Profit/(loss) from operating activities Net holding gain on investments Interest income from investments Provision for impairment of investments Interest income Loss/(gain) on disposal of interests in subsidiaries Gain on disposal of investments, net Provision for doubtful debts Write back of provision for doubtful debts and bad debt expenses Increase/(decrease) in provision for onerous contracts Depreciation Gain on early redemption of convertible notes Loss on disposal of fixed assets Decrease in trade receivables, prepayments, deposits and other debtors Decrease in inventories Decrease in amount due from a director Decrease in amount due from customers for contract work Decrease in properties held for re-sale Decrease in trade payables, other payables and accruals Increase in deposits received and receipts in advance Decrease in amount due to customers for contract work Net cash inflow from operating activities	2001 HK$’000 (46,987) (215) (2,142) 20,715 (12,172) (1,060) (2,281) 5,182 (638) 22,126 10,904 – 19 16,043 250 61 – 589 (11,546) 1,846 – 694	2000 HK$’000 21,056 – – – (6,240) 1,885 – 3,480 (6,431) (27,488) 9,040 (1,250) 5,048 25,364 – 727 5,186 76,278 (30,517) 874 (501) 76,511

– 60 –

APPENDIX I FINANCIAL INFORMATION RELATING TO THE GROUP

32. NOTES TO THE CASH FLOW STATEMENT (CONTINUED)

(b) Purchase of a subsidiary

Net assets acquired: Fixed assets Investment properties Inventories Trade receivables, prepayments, deposits and other debtors Cash and cash equivalents Trade payables, other payables and accruals Tax payable Deferred tax Minority interests Goodwill on acquisition Satisfied by: Cash	2001 HK$’000 7,231 1,550 4,609 4,408 16,751 (2,883) (905) (64) (60) 30,637 98,239 128,876 128,876	2000 HK$’000 – – – – – – – – –
		– –
		–

		–

Analysis of the net outflow of cash and cash equivalents in respect of the purchase of a subsidiary:

Cash consideration Cash and cash equivalents acquired Net outflow of cash and cash equivalents in respect of purchase of a subsidiary	2001 HK$’000 128,876 (16,751) 112,125	2000 HK$’000 – –
		–

The subsidiary acquired during the year contributed approximately HK$5,020,000 to the Group’s net operating cash flows, received approximately HK$198,000 in respect of the net returns on investments and servicing of finance, paid approximately HK$2,454,000 in respect of investing activities, but had no significant impact in respect of tax and financing activities.

The subsidiary acquired during the year contributed turnover of approximately HK$9,036,000 and profit after tax of approximately HK$590,000 to the Group’s turnover and loss after tax and before minority interests for the year ended 31 March 2001, respectively.

– 61 –

APPENDIX I FINANCIAL INFORMATION RELATING TO THE GROUP

32. NOTES TO THE CASH FLOW STATEMENT (CONTINUED)

(c) Summary of the effects of additional purchase of shares in an associate which became a subsidiary as a result thereof

Net assets acquired: Fixed assets Trade receivables, prepayments, deposits and other debtors Due from ultimate holding company Due from fellow subsidiaries Cash and cash equivalents Trade payables, other payables and accruals Deposits received and receipts in advance Tax payable Due to fellow subsidiaries Goodwill on acquisition Satisfied by: Decrease in deposit paid Cash Reclassification from interest in an associate	2001 HK$’000 12,705 9,977 3,200 548 3,591 (3,001) (19,836) (1,063) (3,611) 2,510 18,439 20,949 19,507 159 1,283 20,949	2000 HK$’000 – – – – – – – – –
		– –
		–

		– – –
		–

Analysis of the net inflow of cash and cash equivalents in respect of the purchase of a subsidiary:

Cash consideration Cash and cash equivalents acquired Net inflow of cash and cash equivalents in respect of purchase of a subsidiary	2001 HK$’000 159 (3,591) (3,432)	2000 HK$’000 – –
		–

The subsidiary acquired during the year contributed approximately HK$4,712,000 to the Group’s net operating cash flows, received approximately HK$133,000 in respect of the net returns on investments and servicing of finance, paid approximately HK$128,000 in respect of investing activities, but had no significant impact in respect of tax and financing activities.

– 62 –

APPENDIX I FINANCIAL INFORMATION RELATING TO THE GROUP

32. NOTES TO THE CASH FLOW STATEMENT (CONTINUED)

The subsidiary acquired during the year contributed turnover of approximately HK$24,798,000 and profit after tax of approximately HK$4,451,000 to the Group’s turnover and loss after tax and before minority interests for the year ended 31 March 2001, respectively.

(d) Disposal of subsidiaries

Net assets disposed of: Long term investments Fixed assets Deposits and other debtors Cash and cash equivalents Trade payables, other payables and accruals Release of capital reserve Profit/(loss) on disposal of subsidiaries Satisfied by: Cash	2001 HK$’000 3,000 – 38 – – 166 3,204 1,768 4,972 4,972	2000 HK$’000 – 69 7,311 670 (1,865) – 6,185 (1,885) 4,300 4,300

An analysis of the net inflow of cash and cash equivalents in respect of the disposal of subsidiaries is as follows:

Cash consideration Cash and bank balances disposed of Net inflow of cash and cash equivalents in respect of the disposal of subsidiaries	2001 HK$’000 4,972 – 4,972	2000 HK$’000 4,300 (670) 3,630

The subsidiaries disposed of during the year made no significant contribution to the Group in respect of the cash flows, turnover and contribution to the Group’s loss after tax and before minority interests for the year ended 31 March 2001.

The subsidiaries disposed of in the prior year contributed approximately HK$14,042,000 to turnover and profits of approximately HK$7,500 to the consolidated profit after tax for the year ended 31 March 2000.

The subsidiaries disposed of in the prior year did not have any significant impact on the Group’s net operating or other cash flows.

– 63 –

APPENDIX I FINANCIAL INFORMATION RELATING TO THE GROUP

32. NOTES TO THE CASH FLOW STATEMENT (CONTINUED)

(e) Disposal of interests in a subsidiary

Net assets disposed of: Minority interests Release of goodwill Loss on disposal of interests in a subsidiary Satisfied by: Cash	2001 HK$’000 7,602 23,135 30,737 (708) 30,029 30,029	2000 HK$’000 – –
		– –
		–

		–

(f) Analysis of changes in financing activities during the year

Share capital (including share premium account) HK$’000 At 1 April 1999 199,736 Net cash inflow/(outflow) from financing activities 199,158 Transfer to retained earnings (131,466) Reduction of share capital (41,615) Gain on early redemption of convertible notes – At 31 March and 1 April 2000 225,813 Issue by way of scrip dividend 45 Premium on shares issued by way of scrip dividend 1,264 Net cash inflow/(outflow) from financing activities 38,371 Inception of finance lease contracts – At 31 March 2001 265,493	Finance Bank Convertible lease loans loans obligations HK$’000 HK$’000 HK$’000 63,877 25,000 257 (46,890) (23,750) (94) – – – – – – – (1,250) – 16,987 – 163 – – – – – – 26,334 – (81) – – 144 43,321 – 226	Minority interests HK$’000 – – – – –
		– – – 287 –
		287

– 64 –

APPENDIX I FINANCIAL INFORMATION RELATING TO THE GROUP

32. NOTES TO THE CASH FLOW STATEMENT (CONTINUED)

(g) Major non-cash transactions

During the year, the Group paid dividends by way of scrip dividend of HK$1,309,000 (2000:

Nil).

33. CONTINGENT LIABILITIES

At the balance sheet date, contingent liabilities not provided for in the financial statements were as follows:

(a) Group 2001 2000 HK$’000 HK$’000 Guarantees in respect of performance bonds given to third parties 24,458 12,487 Guarantees given in lieu of utility and property rental deposits 18,300 14,785 Guarantees given to financial institutions in connection with facilities granted to subsidiaries and associates – 23,286 42,758 50,558	Company 2001 2000 HK$’000 HK$’000 24,458 12,487 18,300 5,550 144,363 67,035 187,121 85,072	Company 2001 2000 HK$’000 HK$’000 24,458 12,487 18,300 5,550 144,363 67,035 187,121 85,072
		85,072

(b) A corporate guarantee in the amount of approximately HK$464,000 (2000: HK$2,318,000) was given to the landlord in respect of the full rental payments of the office premises during the tenancy period.
(c) In the prior year, a sub-contractor claimed against a wholly-owned subsidiary of the Group (the “Subsidiary”) for recovery of approximately HK$900,000 for works performed. In turn, the Subsidiary instigated litigation against the main contractor for recovery of approximately HK$6,000,000 on works performed. The main contractor then made a counter claim against the Subsidiary for overpayment of approximately HK$4,900,000.

In the prior year, the Subsidiary also instigated litigation against another sub-contractor an amount of approximately HK$120,000 for delay in completion of works performed. The subcontractor made a counter claim against the Subsidiary of approximately HK$1,000,000 on works performed.

The directors, having reviewed the claims and obtained legal advices, consider that the alleged claims from the main and sub-contractors referred to above are without grounds, therefore, no provision had been made for the alleged claims in the financial statements at 31 March 2000 and 31 March 2001.

– 65 –

APPENDIX I FINANCIAL INFORMATION RELATING TO THE GROUP

34. COMMITMENTS

(a) Capital commitments

		Group
	2001	2000
	HK$’000	HK$’000
Capital commitments:
Contracted, but not provided for	3,616	379

(b) Commitments under operating leases

At 31 March 2001, the Group had commitments under non-cancellable operating leases to make payments in the following year as follows:

Land and buildings expiring: Within one year In the second to fifth years, inclusive After five years	Group 2001 2000 HK$’000 HK$’000 13,395 – 101,465 58,161 8,640 13,108 123,500 71,269	Group 2001 2000 HK$’000 HK$’000 13,395 – 101,465 58,161 8,640 13,108 123,500 71,269
		71,269

The Company did not have any commitments at the balance sheet date (2000: Nil).

35. POST BALANCE SHEET EVENTS

Subsequent to the balance sheet date, the Group had the following material events:

(i) On 12 April 2001, Macro Pacific Investment Limited (“Macro Pacific”), a wholly-owned subsidiary of the Group, entered into an agreement to acquire 19.01% equity interest in Luxembourg Medicine Company Limited (“Luxembourg”) from an independent third party for a consideration of HK$20 million. Luxembourg is principally engaged in the manufacture and sale of medical products under the brand name of “Madam Pearl”.
(ii) On 15 June 2001, Advance Century Limited (“Advance Century”), a wholly-owned subsidiary of the Group, entered into a conditional agreement with certain independent third parties to invest in 22% of the issued share capital (as enlarged by the issue of such new shares to Advance Century) of China Field Enterprises Limited at a consideration of HK$15 million. Advance Century will hold an 80% equity interest in a joint venture pharmaceutical enterprise in Changsha, Hunan Province in the People’s Republic of China. Details of the transactions have been disclosed in the Company’s announcement dated 18 June 2001.

– 66 –

APPENDIX I FINANCIAL INFORMATION RELATING TO THE GROUP

36. RELATED PARTY TRANSACTIONS

The Group had the following transactions with related parties during the year:

		2001	2000
	Notes	HK$’000	HK$’000
Rental paid to Wisex Limited	(a)	–	791
Shortfall in rental income received
from Mr. Tang Ching Ho	(b)	–	136
Acquisition of investment property from
Ying Jun Limited	(c)	–	15,000
Rental income received from Mr. Tang Ching Ho	(c)	1,080	305
Income from associates:	(d)
– Consultancy fee		372	600
– Repairs and maintenance		64	309
– Renovation fee		–	135
– Management fee		743	1,200
– Rental		1,187	540
Cleaning expenses paid to an associate	(d)	2,902	–

(a) In accordance with the rental agreement dated 1 October 1996, the Group paid a monthly rental of HK$280,000 to Wisex Limited in the prior year. Wisex Limited is a company in which Mr. Tang Ching Ho and Ms. Yau Yuk Yin (directors of the Company), have beneficial interests. The rental agreement was terminated on 30 June 1999.
(b) In accordance with the sale and purchase agreement approved by independent shareholders on 4 March 1998, Mr. Tang Ching Ho paid approximately HK$136,000 to the Group in respect of the shortfall in rental income from certain properties which the Group had acquired from Mr. Tang in the prior year.
(c) The Group acquired a Hong Kong property (the “Property”) from Ying Jun Limited, a company whollyowned by Ms. Yau Yuk Yin, for a consideration of HK$15 million in the prior year. The Property was then leased to Mr. Tang Ching Ho for a period of two years from 20 December 1999 at an agreed monthly rental of HK$90,000.
(d) The transactions were based on terms as agreed between the Group and the associates.

37. APPROVAL OF THE FINANCIAL STATEMENTS

The financial statements were approved by the board of directors on 6 July 2001.

– 67 –

APPENDIX I FINANCIAL INFORMATION RELATING TO THE GROUP

3. FINANCIAL INFORMATION FOR THE SIX MONTHS ENDED 30TH SEPTEMBER, 2001 AND 30TH SEPTEMBER, 2000

Set out below are the unaudited consolidated income statements, unaudited consolidated statements of recognised gains and losses and unaudited consolidated cash flow statements of the Group for the six months ended 30th September, 2000 and 30th September, 2001 , the unaudited consolidated balance sheet of the Group as at 30th September, 2001 and the audited consolidated balance sheet of the Group as at 31st March, 2001 together with the relevant notes thereto as extracted from the Company’s financial statements set out in the Company’s interim report for the six months ended 30th September, 2001:

CONDENSED CONSOLIDATED INCOME STATEMENT – UNAUDITED

Notes
TURNOVER
3
Cost of sales
Gross profit
Other revenue
Selling and distribution costs
Administrative expenses
Other operating expenses
PROFIT FROM OPERATING ACTIVITIES
4
Finance costs
Share of profits less losses of associates
PROFIT BEFORE TAX
Tax
5
Profit before minority interests
Minority interests
NET PROFIT FROM ORDINARY ACTIVITIES
ATTRIBUTABLE TO SHAREHOLDERS
EARNINGS PER SHARE
6
Basic
Diluted

Six months ended
30 September
2001
2000
HK$’000
HK$’000
145,882
87,626
(108,099)
(71,859)
37,783
15,767
6,980
10,729
(6,593)
–
(24,072)
(16,000)
(1,125)
(7,745)
12,973
2,751
(2,042)
(823)
129
172
11,060
2,100
(2,301)
(60)
8,759
2,040
(1,197)
228
7,562
2,268
0.88 cent
0.31 cent
0.85 cent
N/A

– 68 –

APPENDIX I FINANCIAL INFORMATION RELATING TO THE GROUP

CONDENSED CONSOLIDATED STATEMENT OF RECOGNISED GAINS AND LOSSES – UNAUDITED

Net loss not recognised in the consolidated income statement – goodwill on acquisition of associates Net profit for the period attributable to shareholders	Six months ended 30 September 2001 2000 HK$’000 HK$’000 – (2,290) 7,562 2,268 7,562 (22)

– 69 –

APPENDIX I FINANCIAL INFORMATION RELATING TO THE GROUP

CONDENSED CONSOLIDATED BALANCE SHEET

30 Notes NON-CURRENT ASSETS Fixed assets Goodwill 8 Interests in associates 9 Long term investments 10 Loans receivable Rental deposits paid CURRENT ASSETS Properties held for re-sale Short term investments 10 Inventories Trade receivables 11 Prepayments, deposits and other debtors Tax recoverable Cash and cash equivalents CURRENT LIABILITIES Trade payables 12 Other payables and accruals Deposits received and receipts in advance Interest-bearing bank and other borrowings Provision for onerous contracts Tax payable NET CURRENT ASSETS	Unaudited September 2001 HK$’000 63,743 15,908 26,885 32,633 4,322 22,803 166,294 4,668 – 6,002 11,570 19,855 182 193,847 236,124 5,552 42,832 54,851 20,765 8,441 4,731 137,172 ------------- 98,952 -------------	Audited 31 March 2001 HK$’000 66,371 – 729 7,437 2,586 21,650
		98,773
		5,134 11,263 4,359 6,711 19,237 182 185,636
		232,522
		5,440 27,703 49,881 14,676 9,367 2,467
		109,534 -------------
		122,988 -------------

– 70 –

APPENDIX I FINANCIAL INFORMATION RELATING TO THE GROUP

CONDENSED CONSOLIDATED BALANCE SHEET (continued)

30 Notes TOTAL ASSETS LESS CURRENT LIABILITIES NON-CURRENT LIABILITIES Interest-bearing bank loans Finance lease payables Provision for onerous contracts Deferred tax Minority Interests CAPITAL AND RESERVES Issued capital 13 Reserves 14	Unaudited September 2001 HK$’000 265,246 35,688 139 22,203 983 59,013 9,177 197,056 9,821 187,235 197,056	Audited 31 March 2001 HK$’000 221,761 29,526 168 23,339 983
		54,016
		7,829
		159,916

		8,221 151,695
		159,916

– 71 –

APPENDIX I FINANCIAL INFORMATION RELATING TO THE GROUP

CONDENSED CONSOLIDATED CASH FLOW STATEMENT – UNAUDITED

NET CASH INFLOW FROM OPERATING ACTIVITIES
Net cash inflow from returns on investments and
servicing of finance
Tax refunded
Net cash outflow from investing activities
Net cash outflow before financing activities
NET CASH INFLOW FROM FINANCING ACTIVITIES
INCREASE/(DECREASE) IN CASH AND
CASH EQUIVALENTS
Cash and cash equivalents at beginning of period
CASH AND CASH EQUIVALENTS
AT END OF PERIOD
ANALYSIS OF BALANCES OF CASH AND
CASH EQUIVALENTS
Cash and bank balances
Unpledged time deposits with original maturity of less
than three months when acquired

Six months ended
30 September
2001
2000
HK$’000
HK$’000
26,605
1,307
1,503
4,263
–
47
(61,848)
(100,480)
(33,740)
(94,863)
42,774
37,089
9,034
(57,774)
184,813
230,547
193,847
172,773
16,332
9,321
177,515
163,452
193,847
172,773

– 72 –

APPENDIX I FINANCIAL INFORMATION RELATING TO THE GROUP

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. BASIS OF PREPARATION

The unaudited condensed consolidated interim financial statements of the Group are prepared in accordance with Hong Kong Statement of Standard Accounting Practice (“SSAP”) 25 “Interim Financial Reporting”. Except as described in Note 2, the accounting policies adopted in the preparation of the interim financial statements are the same as those used in the annual financial statements for the year ended 31 March 2001.

Figures for the year ended 31 March 2001 are extracted from the Group’s annual financial statements for that year.

2. IMPACT OF NEW AND REVISED STATEMENTS OF STANDARD ACCOUNTING PRACTICE (“SSAPS”)

The following is a summary of new and revised SSAPs which have been adopted in the preparation of the current period’s financial statements.

SSAP	9 (revised)	:	Events after the Balance Sheet Date
SSAP	14 (revised)	:	Leases
SSAP	28	:	Provisions, Contingent Liabilities and Contingent Assets
SSAP	29	:	Intangible Assets
SSAP	30	:	Business Combinations
SSAP	31	:	Impairment of Assets
SSAP	32	:	Consolidated Financial Statements and Accounting
			for Investments in Subsidiaries

The Group has complied with SSAP 14 (revised) “Leases” for the first time in this interim reporting period. As a result, total future minimum operating lease commitments are disclosed instead of annual operating lease commitments under non-cancellable operating leases. Figures for the year ended 31 March 2001 are extracted from the Group’s audited financial statements for that year.

Goodwill represents the excess of the cost of an acquisition over the fair values of the Group’s share of the underlying net assets of the acquired subsidiary, associate or jointly controlled entity at the date of acquisition. In the previous years, goodwill was eliminated against reserves in the year in which it arose. Following the introduction of SSAP 30, goodwill arising on acquisitions on or after 1 April 2001 is capitalised as an intangible asset in the balance sheet and is amortised to the profit and loss account using the straight-line method over its estimated useful economic life not exceeding ten years. In accordance with the transitional provisions of SSAP 30, goodwill arising from earlier acquisitions before 1 April 2001 will continue to be held in reserves and no reinstatement has been made.

Apart from SSAP 14 and SSAP 30 as explained above, the implementation of the above SSAPs did not have a material impact on the Group’s financial statements.

– 73 –

APPENDIX I FINANCIAL INFORMATION RELATING TO THE GROUP

3. ANALYSIS OF TURNOVER AND CONTRIBUTION TO PROFIT

By principal activities:

Management and sub-licensing of Chinese wet markets Management and sub-licensing of shopping centres and car parks Sale of Chinese medicine, herbs and other medicinal products Building related contracting business Technology related business Others	Unaudited Six months ended 30 September Contribution to profit from Turnover operating activities 2001 2000 2001 2000 HK$’000 HK$’000 HK$’000 HK$’000 75,169 39,431 9,256 9,063 43,154 44,253 262 886 23,721 – 6,252 – 1,010 171 (1,784) (2,665) – – – (8,199) 2,828 3,771 (1,013) 3,666 145,882 87,626 12,973 2,751	Unaudited Six months ended 30 September Contribution to profit from Turnover operating activities 2001 2000 2001 2000 HK$’000 HK$’000 HK$’000 HK$’000 75,169 39,431 9,256 9,063 43,154 44,253 262 886 23,721 – 6,252 – 1,010 171 (1,784) (2,665) – – – (8,199) 2,828 3,771 (1,013) 3,666 145,882 87,626 12,973 2,751
		2,751

By geographical area of markets:

Unaudited

	Unaudited	Unaudited
The People’s Republic of China (the “PRC”) Hong Kong SAR Elsewhere North America South East Asia	Six months ended 30 September Contribution to profit from Turnover operating activities 2001 2000 2001 2000 HK$’000 HK$’000 HK$’000 HK$’000 143,838 87,626 11,928 2,751 389 – 147 – 1,065 – 577 – 590 – 321 – 145,882 87,626 12,973 2,751
		2,751

– 74 –

APPENDIX I FINANCIAL INFORMATION RELATING TO THE GROUP

4. PROFIT FROM OPERATING ACTIVITIES

The Group’s profit from operating activities is arrived at after charging/(crediting): Depreciation Amortisation of goodwill Amount released from onerous contracts Gain on disposal of properties held for re-sale Interest income Investment income – Listed – Unlisted TAX Group: Hong Kong profits tax Under provision in prior year Share of tax attributable to: Associates	Unaudited Six months ended 30 September 2001 2000 HK$’000 HK$’000 7,479 4,524 196 – (2,062) (2,485) (6) (640) (3,179) (5,075) (632) (260) – (702) Unaudited Six months ended 30 September 2001 2000 HK$’000 HK$’000 2,074 – 189 – 38 60 2,301 60

5. TAX

Hong Kong profits tax has been provided at the rate of 16% (2000: 16%) on the estimated assessable profits arising in Hong Kong for the period under review. The Group did not have any significant unprovided deferred tax in respect of the periods.

– 75 –

APPENDIX I FINANCIAL INFORMATION RELATING TO THE GROUP

6. EARNINGS PER SHARE

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

Net profit from ordinary activities attributable to shareholders Weighted average number of ordinary shares for the purpose of basic earnings per share Effect of dilutive potential ordinary shares – share options & convertible bonds Weighted average number of ordinary shares for the purpose of diluted earnings per share	Unaudited Six months ended 30 September 2001 2000 HK$’000 HK$’000 7,562 2,268 No. of shares ’000 ’000 857,362 741,610 28,380 – 885,742 741,610	Unaudited Six months ended 30 September 2001 2000 HK$’000 HK$’000 7,562 2,268 No. of shares ’000 ’000 857,362 741,610 28,380 – 885,742 741,610
		741,610

7. PLEDGE OF ASSETS

As at 30 September 2001, certain of the Group’s investment properties, all of its properties held for re-sale and rental income therefrom were pledged to secure certain banking facilities granted to the Group.

8. GOODWILL

Details and movements of goodwill arising on the acquisitions of two associates are summarised below:

Cost Additions and balance at 30 September 2001 Accumulated amortisation Provided during the period and balance at 30 September 2001 Net carrying amount At 30 September 2001	Unaudited HK$’000 16,104 (196)
	15,908

– 76 –

APPENDIX I FINANCIAL INFORMATION RELATING TO THE GROUP

9. INTERESTS IN ASSOCIATES

Unaudited 30 September 2001 HK$’000 Share of net assets 5,022 Due from associates 24,863 29,885 Provisions for impairment in values (3,000) 26,885	Audited 31 March 2001 HK$’000 102 1,227 1,329 (600) 729

Except for the balances of HK$21,000,000 and HK$3,000,000 due from an associate which are unsecured, bear interest at Hong Kong dollar prime rate plus 2% per annum and are repayable in February and March 2003, respectively, the remaining balances due from associates are interest-free and have no fixed terms of repayment.

Particulars of the principal associates which were acquired by the Group during the period are as follows:

			Percentage of
		Place of	ownership
		incorporation	interest
	Business	and	attributable	Principal
	structure	operations	to the Group	activities
			%
China Field Enterprises	Corporate	Hong Kong	22	Investment
Limited				holding
Dailywin Group	Corporate	Bermuda	29.19	Investment
Limited*				holding

Listed on The Stock Exchange of Hong Kong Limited

– 77 –

FINANCIAL INFORMATION RELATING TO THE GROUP

APPENDIX I

10. INVESTMENTS

(a) Long term investments

Unaudited 30 September 2001 HK$’000 Held-to-maturity securities Hong Kong listed dated debt securities, at amortised cost 12,467 Investment securities Investment in unlisted shares, at cost 32,687 Less: Provisions for impairment in values (12,521) 32,633	Audited 31 March 2001 HK$’000 7,437 12,521 (12,521) 7,437

The aggregate market value of the Hong Kong listed dated debt securities totalled approximately HK$12,800,000 at 30 September 2001 (31 March 2001: HK$8,132,000).

(b) Short term investments

Unaudited 30 September 2001 HK$’000 Held-to-maturity securities Hong Kong listed dated debt securities, at amortised cost – Investment securities Hong Kong listed equity securities, at cost – Less: Provisions for impairment in values – Other investments Hong Kong listed equity securities, at fair value – –	Audited 31 March 2001 HK$’000 4,906 13,531 (8,194) 1,020 11,263

– 78 –

APPENDIX I FINANCIAL INFORMATION RELATING TO THE GROUP

11. TRADE RECEIVABLES

The aging analysis of trade receivables is as follows:

Current to 90 days 91 days to 180 days Over 180 days Less: Provision for doubtful debts	Unaudited 30 September 2001 HK$’000 % 10,702 89 687 6 599 5 11,988 100 (418) 11,570	Audited 31 March 2001 HK$’000 % 6,460 92 62 1 504 7 7,026 100 (315) 6,711	Audited 31 March 2001 HK$’000 % 6,460 92 62 1 504 7 7,026 100 (315) 6,711
			100

The Group generally does not grant any credit to customers, except for the Group’s pharmaceutical business which offers credit terms of 30 to 60 days.

12. TRADE PAYABLES

The aging analysis of trade payables is as follows:

Current to 90 days 91 days to 180 days Over 180 days	Unaudited 30 September 2001 HK$’000 % 1,251 23 – – 4,301 77 5,552 100	Audited 31 March 2001 HK$’000 % 1,191 22 – – 4,249 78 5,440 100	Audited 31 March 2001 HK$’000 % 1,191 22 – – 4,249 78 5,440 100
			100

– 79 –

APPENDIX I FINANCIAL INFORMATION RELATING TO THE GROUP

13. SHARE CAPITAL

Unaudited 30 September 2001 HK$’000 Authorised: 10,000,000,000 ordinary shares of HK$0.01 each 100,000 Issued and fully paid: 982,060,933 (31 March 2001: 822,060,933) ordinary shares of HK$0.01 each 9,821	Audited 31 March 2001 HK$’000 100,000

	8,221

In August 2001, a total of 160,000,000 ordinary shares of HK$0.01 each were issued at the subscription price of HK$0.188 per share upon full exercise of the conversion rights of all convertible bonds in the principal amount of HK$30,080,000 which had been issued by the Company on 3 August 2001. The net proceeds were mainly applied for acquisitions of associates and long term investments, and for the expansion of the Group’s management and sub-licensing operations of Chinese wet markets, car parks and shopping centres.

A summary of the movements in the Company’s issued ordinary share capital during the period is as follows:

	Nominal value	Number of
	of shares issued	shares issued
	HK$’000
At 1 April 2001 (audited)	8,221	822,060,933
Conversion of convertible bonds into
ordinary shares at a conversion price
of HK$0.188 per share	1,600	160,000,000
At 30 September 2001 (unaudited)	9,821	982,060,933

– 80 –

FINANCIAL INFORMATION RELATING TO THE GROUP

APPENDIX I

14. RESERVES

At 1 April 2001 (audited) Issue of shares Share issue expenses Net profit for the period At 30 September 2001 (unaudited)	Share premium account HK$’000 257,272 28,480 (502) – 285,250	Investment properties revaluation reserve HK$’000 254 – – – 254	Accumu- lated losses HK$’000 (105,831) – – 7,562 (98,269)	Total HK$’000 151,695 28,480 (502) 7,562
				187,235

15. COMMITMENTS

(a) Capital commitments

	Unaudited	Audited
	30 September	31 March
	2001	2001
	HK$’000	HK$’000
Capital commitments:
Contracted, but not provided for	10,022	3,616

(b) Commitments under operating leases

As at 30 September 2001, the Group had commitments under non-cancellable operating leases as follows:

	Unaudited	Audited
	30 September	31 March
	2001	2001
	Total	Annual
	commitments	commitments
	HK$’000	HK$’000
Land and buildings expiring:
Within one year	128,383	13,395
In the second to fifth years, inclusive	236,915	101,465
After five years	15,158	8,640
	380,456	123,500

– 81 –

APPENDIX I FINANCIAL INFORMATION RELATING TO THE GROUP

Included in the total balance as at 30 September 2001 are approximately HK$376,384,000 of total future minimum lease payments relating to the Group’s management and sub-licensing operations of Chinese wet markets, shopping centres and car parks.

16. CONTINGENT LIABILITIES

As at the balance sheet date, contingent liabilities not provided for in the financial statements were as follows:

(a) Guarantees

Unaudited 30 September 2001 HK$’000 Guarantees in respect of performance bonds given to third parties 24,581 Guarantees given in lieu of utility and property rental deposits 18,175 42,756	Audited 31 March 2001 HK$’000 24,458 18,300
	42,758

(b) As reported in the Group’s 2001 annual report, in the prior year, a sub-contractor claimed against a wholly-owned subsidiary of the Group (the “Subsidiary”) for recovery of approximately HK$900,000 for works performed. In turn, the Subsidiary instigated litigation against the main contractor for recovery of approximately HK$6,000,000 on works performed. The main contractor then made a counter claim against the Subsidiary for overpayment of approximately HK$4,900,000.

In the prior year, the Subsidiary also instigated litigation against another sub-contractor for an amount of approximately HK$120,000 for delay in the completion of works performed. The sub-contractor made a counter claim against the Subsidiary of approximately HK$1,000,000 on works performed.

The directors, having reviewed the claims and obtained legal advices, consider that the alleged claims from the main and sub-contractors referred to above are without grounds. Therefore, no provision had been made for the alleged claims in the financial statements.

17. POST BALANCE SHEET EVENTS

Subsequent to the balance sheet date, the following material transactions have occurred:

(i) In October and November 2001, two top-up placements were made whereby an aggregate of 160,000,000 ordinary shares and 228,000,000 ordinary shares of HK$0.01 each were issued at an issue price of HK$0.08 and HK$0.09 each, respectively. After completion of these two placements, the Company’s issued share capital was increased to 1,370,060,933 ordinary shares.

– 82 –

FINANCIAL INFORMATION RELATING TO THE GROUP

APPENDIX I

(ii) Pursuant to a special resolution passed on 9 November 2001, the Company’s share premium account was reduced by an amount of HK$129,269,955.53 which was applied to set off against the audited accumulated lossess of the Company as at 31 March 2001.
(iii) On 16 November 2001, Macro Pacific Investment Limited (“Macro Pacific”), a wholly owned subsidiary of the Group, entered into an agreement with an independent third party to further acquire approximately 3.6% equity interest in Luxembourg Medicine Company Limited (“Luxembourg”) at a consideration of approximately HK$3.6 million which brought the Group’s interest in Luxembourg to 22.6%. Luxembourg is principally engaged in the manufacturing and sale of medicinal products under the brand name of “Madam Pearl”.

18. RELATED PARTY TRANSACTIONS

The Group had the following transactions with related parties during the period:

		Unaudited	Unaudited
		Six months	ended
		30 September
		2001	2000
	Notes	HK$’000	HK$’000
Rental income received from Mr. Tang Ching Ho	(a)	540	540
Income from associates:	(b)
Consultancy fee		–	300
Promotion fee		–	3,500
Repairs and maintenance		–	25
Management fee		128	624
Interest income		149	–
Rental		–	360
Cleaning expenses paid to an associate	(b)	2,703	673

(a) A property was leased to Mr. Tang Ching Ho for a period of two years from 20 December 1999 at a monthly rental of HK$90,000, which was approved at the Company’s special general meeting held on 17 December 1999. Details of the transaction were set out in the Company’s announcement dated 6 November 1999.

(b) The transactions were based on terms as agreed between the Group and the associates.

19. APPROVAL OF THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The unaudited condensed consolidated financial statements were approved by the board of directors on 14 December 2001.

– 83 –

APPENDIX I FINANCIAL INFORMATION RELATING TO THE GROUP

4. PRO FORMA ADJUSTED UNAUDITED CONSOLIDATED NET TANGIBLE ASSETS OF THE GROUP

Set out below is the pro forma adjusted unaudited consolidated net tangible assets of the Group and the pro forma adjusted unaudited consolidated net tangible asset value per Share before and after the issue of the Rights Shares and the Bonus Shares:

Unaudited consolidated net assets of the Group as at 30th September, 2001
Less: Intangible assets as at 30th September, 2001
Add: Net proceeds from the top-up placing of the then existing Shares and
placing of new Shares as announced by the Company
on 25th September, 2001 (Shares were issued and
allotted on 6th and 8th October, 2001)
Add: Net proceeds from the top-up placing of the then existing Shares and
placing of new Shares as announced by the Company on
1st November, 2001 (Shares were issued and
allotted on 9th and 12th November, 2001)
Add: Net proceeds from the top-up placing of the then existing Shares and
placing of new Shares as announced by the Company on
19th December, 2001 (Shares were issued and
allotted on 28th and 31st December, 2001)
Less: Estimated goodwill for acquisition of shares in
Luxembourg Medicine and China Ocean Investments Limited
Pro forma adjusted unaudited consolidated net tangible assets of the
Group before the Rights Issue
Add: Estimated net proceeds of the Rights Issue
Pro forma adjusted unaudited consolidated net tangible assets of the
Group after the Rights Issue
Pro forma adjusted unaudited consolidated net tangible assets
of the Group per Share:
– before the issue of Rights Shares and Bonus Shares
(based on 1,644,060,933 Shares in issue)
– after the issue of Rights Shares and Bonus Shares
(based on 9,864,365,598 Shares in issue)

HK’000
197,056
(15,908)
181,148
12,300
20,000
24,000
(56,200)
181,248
191,369
372,617
11.02 cents
3.78 cents

– 84 –

APPENDIX I FINANCIAL INFORMATION RELATING TO THE GROUP

The above table has not taken into account the operating profit or loss of the Group for the period from 1st October, 2001 to the Latest Practicable Date. The Directors consider that the operating profit or loss is immaterial to the pro forma adjusted unaudited consolidated net tangible assets of the Group.

5. WORKING CAPITAL STATEMENT

Taking into account the internal resources of the Group and the proceeds from the Rights Issue, the Directors are of the opinion that the Group has sufficient working capital for its present requirement.

6. INDEBTEDNESS STATEMENT

Borrowings

As at 31st December, 2001, the Group had outstanding borrowings of approximately HK$51.3 million comprising secured bank loans of approximately HK$16.3 million, unsecured bank loans of approximately HK$34.8 million and obligation under finance leases of approximately HK$0.2 million.

Securities

As at 31st December, 2001, the Group’s facilities were secured by certain of the Group’s investment properties, rental income from certain of the Group’s sub-licensing operations of Chinese wet markets and shopping centers and corporate guarantees given by the Company.

Contingent liabilities

As at 31st December, 2001, the Group had the following outstanding litigations:

During 2000, a sub-contractor claimed against a wholly-owned subsidiary of the Group (the “Subsidiary”) for recovery of approximately HK$900,000 for works performed. In turn, the Subsidiary instigated litigation against the main contractor for recovery of approximately HK$6,000,000 on works performed. The main contractor then made a counter claim against the Subsidiary for overpayment by the main contractor to the Subsidiary of approximately HK$4,900,000.

During 2000, the Subsidiary also instigated litigation against another sub-contractor for an amount of approximately HK$120,000 for delay in completion of works performed. The sub-contractor made a counter claim against the Subsidiary of approximately HK$1,000,000 on works performed.

– 85 –

APPENDIX I FINANCIAL INFORMATION RELATING TO THE GROUP

In addition, the Group had contingent liabilities of approximately HK$44.6 million comprising guarantees in respect of performance bonds given to third parties of approximately HK$24.6 million and guarantees given in lieu of utility and property rental deposits of approximately HK$20.0 million.

Save as aforesaid or as otherwise disclosed herein, and apart from intra-group liabilities, the Group did not have at the close of business on 31st December, 2001 any outstanding mortgages, charges, debentures or other loan capital or bank overdrafts, loans, debt securities or other similar indebtedness, or any obligations under hire purchase contracts or finance leases payable or any guarantees or other material contingent liabilities.

– 86 –

APPENDIX II FINANCIAL INFORMATION RELATING TO DAILYWIN

For the purpose of this appendix only, the “Company” shall refer to Dailywin, and the “Group” shall refer to Dailywin and its subsidiaries.

Wang On Group Limited acquired an approximate 29% equity interest in the Company after 31st March, 2001, being the date of its last published audited accounts, and its total relevant advance to the Company for the purpose of Practice Note 19 of the Listing Rules amounted to HK$60.77 million as at the Latest Practicable Date. As such, for the purpose of giving general information of the Company to the shareholders of Wang On Group Limited, information for the last three financial years of the Company with respect to its profits and losses and its latest published audited balance sheet together with the notes on the annual accounts for the last financial year of the Company are set out below.

1. THREE YEAR INCOME STATEMENT SUMMARY

Set out below is a summary of the audited consolidated income statements of the Group for the three years ended 31st March, 2001 as extracted from the Company’s audited financial statements for the relevant years:

CONSOLIDATED INCOME STATEMENT

For the year ended 31st March, 2001

Turnover Cost of sales Gross profit Distribution costs Administrative expenses Other operating income Operating (loss) profit Net interest payable Loss before taxation Taxation Loss after taxation Minority interest Loss for the year Loss per ordinary share	2001 HK$’000 240,358 (176,677) 63,681 (31,212) (64,250) 6,411 (25,370) (5,890) (31,260) 231 (31,491) – (31,491) (24.2 cents)	2000 HK$’000 238,112 (158,514) 79,598 (26,735) (56,037) 3,207 33 (6,831) (6,798) 127 (6,925) – (6,925) (6.5 cents)	1999 HK$’000 228,905 (187,122) 41,783 (22,868) (108,202) 1,887 (87,400) (5,573) (92,973) (568) (92,405) 141 (92,264) (56.5 cents)

– 87 –

APPENDIX II FINANCIAL INFORMATION RELATING TO DAILYWIN

2. FINANCIAL INFORMATION FOR EACH OF THE TWO YEARS ENDED 31ST MARCH, 2001

Set out below are the audited consolidated income statements, consolidated cash flow statements, consolidated statements of total recognised gains and losses and reconciliations of movements in consolidated shareholders’ funds of the Group for each of the two years ended 31st March, 2001 and the audited consolidated balance sheets and balance sheets of the Company as at 31st March, 2001 and 31st March, 2000 together with the relevant notes thereto as extracted from the Company’s audited financial statements set out in the Company’s annual report for the year ended 31st March, 2001:

CONSOLIDATED INCOME STATEMENT

For the year ended 31st March, 2001

Notes Turnover 4 Cost of sales Gross profit Distribution costs Administrative expenses Other operating income Operating (loss) profit 5 Net interest payable 6 Loss before taxation Taxation 9 Loss for the year 10 & 23 Loss per ordinary share 11	2001 HK$’000 240,358 (176,677) 63,681 (31,212) (64,250) 6,411 (25,370) (5,890) (31,260) 231 (31,491) (24.2 cents)	2000 HK$’000 238,112 (158,514) 79,598 (26,735) (56,037) 3,207 33 (6,831) (6,798) 127 (6,925) (6.5 cents)

– 88 –

APPENDIX II FINANCIAL INFORMATION RELATING TO DAILYWIN

CONSOLIDATED BALANCE SHEET

At 31st March, 2001

		2001	2000
	Notes	HK$’000	HK$’000
Non-current assets
Investment properties	12	4,600	5,400
Property, plant and equipment	13	34,169	38,273
Intangible assets	14	42	56
		38,811	43,729
Current assets
Inventories	16	37,208	49,551
Trade receivables	17	27,345	19,171
Other receivables		3,223	5,288
Taxation recoverable		36	60
Bank balances and cash		4,559	5,023
		72,371	79,093
Current liabilities
Trade payables	18	41,055	41,023
Other payables		26,526	15,358
Other loans	19	3,640	–
Tax liabilities		422	220
Obligations under finance leases and hire
purchase contracts – due within one year	25	144	110
Secured bank loan – due within one year	25	134	121
Secured bank overdrafts		4,405	–
Bills payable – secured		20,355	19,012
		96,681	75,844
Net current (liabilities) assets		(24,310)	3,249
		14,501	46,978

– 89 –

APPENDIX II FINANCIAL INFORMATION RELATING TO DAILYWIN

		2001	2000
	Notes	HK$’000	HK$’000
Capital and reserves
Share capital	20	13,190	11,164
Reserves	23	(26,460)	(6,353)
		(13,270)	4,811
Non-current liabilities
Convertible loan stock	24	27,069	41,433
Secured bank loan – due after one year	25	519	652
Obligations under finance leases and hire
purchase contracts – due after one year	25	183	82
		27,771	42,167
		14,501	46,978

– 90 –

APPENDIX II FINANCIAL INFORMATION RELATING TO DAILYWIN

PARENT COMPANY BALANCE SHEET

At 31st March, 2001

		2001	2000
	Notes	HK$’000	HK$’000
Non-current assets
Interest in subsidiaries	15	–	–
Current assets
Amounts due from subsidiaries		13,046	47,982
Other receivables		57	42
		13,103	48,024
Current liability
Other payables		405	–
Net current assets		12,698	48,024
		12,698	48,024
Capital and reserves
Share capital	20	13,190	11,164
Reserves	23	(27,561)	(4,573)
		(14,371)	6,591
Non-current liability
Convertible loan stock	24	27,069	41,433
		12,698	48,024

– 91 –

APPENDIX II FINANCIAL INFORMATION RELATING TO DAILYWIN

CONSOLIDATED CASH FLOW STATEMENT

For the year ended 31st March, 2001

Notes Net cash inflow from operating activities 27 Returns on investments and servicing of finance Interest received Interest paid Net cash outflow from returns on investments and servicing of finance Taxation Hong Kong Profits Tax paid Hong Kong Profits Tax refunded Tax (paid) recovered Investing activities Purchase of property, plant and equipment Proceeds from disposal of property, plant and equipment Net cash outflow from investing activities Net cash (outflow) inflow before financing Financing 28 Proceeds from issue of new shares Proceeds from exercise of share options Redemption of convertible loan stock Expenses incurred in connection with the issue of new shares Principal payments of obligations under finance leases and hire purchase contracts Repayment of bank loans Net cash inflow from financing (Decrease) increase in cash and cash equivalents 30	2001 HK$’000 5,669 50 (5,940) (5,890) (5) – (5) (6,470) 1,055 (5,415) (5,641) 15,200 – (12,400) (1,743) (165) (120) 772 (4,869)	2000 HK$’000 18,406 78 (6,909) (6,831) (92) 253 161 (6,624) 204 (6,420) 5,316 – 2,216 – – (218) (115) 1,883 7,199

– 92 –

APPENDIX II FINANCIAL INFORMATION RELATING TO DAILYWIN

CONSOLIDATED STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES

For the year ended 31st March, 2001

Revaluation (decrease) increase on investment properties not recognised in the income statement Loss for the year Total recognised losses for the year	2001 HK$’000 (160) (31,491) (31,651)	2000 HK$’000 160 (6,925) (6,765)

RECONCILIATION OF MOVEMENTS IN CONSOLIDATED SHAREHOLDERS’ FUNDS

For the year ended 31st March, 2001

Loss for the year Issue of ordinary shares on exercise of share options Issue of ordinary shares on redemption of convertible loan stock Issue of ordinary shares on conversion of convertible loan stock Expenses incurred on issue of new shares Other recognised (losses) gain relating to the year Net deduction from shareholders’ funds Consolidated shareholders’ funds at 1st April Consolidated (deficiency) surplus of shareholders’ funds at 31st March	2001 HK$’000 (31,491) – 15,200 113 (1,743) (17,921) (160) (18,081) 4,811 (13,270)	2000 HK$’000 (6,925) 2,216 – 507 – (4,202) 160 (4,042) 8,853 4,811

No note of historical cost profits and losses has been presented as there is no material difference between the Group’s results as disclosed in the consolidated income statement and the results on an unmodified historical cost basis.

– 93 –

APPENDIX II FINANCIAL INFORMATION RELATING TO DAILYWIN

NOTES TO THE FINANCIAL STATEMENTS

For the year ended 31st March, 2001

1 GENERAL

The Company was incorporated in Bermuda on 12th August, 1994 under the Companies Act 1981 of Bermuda as an exempted company and its shares are listed on the London Stock Exchange and The Stock Exchange of Hong Kong Limited.

The Company is the holding company for a group which is principally engaged in the design, manufacture, assembly and sale of watches and watch components.

2. BASIS OF PREPARATION OF FINANCIAL STATEMENTS

In preparing the financial statements, the directors have given careful consideration to the going concern status of the Group in the context of the Group’s current working capital difficulties.

Against this background, the directors are taking active steps to improve the Group’s liquidity position. Since the year end, the Group has obtained a credit facility of HK$13,000,000 from an independent third party. At the same time, the directors are currently in discussion with potential new equity investors. Provided that existing credit facilities continue to be made available to the Group and provided that sufficient additional equity funding can be obtained, the directors consider that the Group will be able to meet in full its financial obligations as they fall due in the foreseeable future. Accordingly, the financial statements have been prepared on a going concern basis.

3. SIGNIFICANT ACCOUNTING POLICIES

The financial statements have been prepared in accordance with accounting principles generally accepted in Hong Kong. United Kingdom accounting requirements that are applicable to the Group do not differ materially from those accounting principles adopted by the Group except that:

the revision of FRS1 “Cash Flow Statements” in 1996 would result in a different format for presentation of the cash flow statement;
the turnover and operating (loss) profit have been analysed between continuing operations and discontinued operations in notes 4 and 7 and not on the face of the income statement as required by FRS 3 “Reporting financial performance”;

– the treatment of Goodwill as required by FRS10 “Goodwill and intangible assets” differs from the Group’s policy of writing goodwill off to reserves. However, no goodwill has arisen in the current year and the transitional provisions of FRS10 allow that goodwill previously eliminated against reserves need not be reinstated;

the disclosures as required by FRS 13 “Derivatives and other financial instruments : disclosures”; and
the treatment of deficit on revaluation of investment properties as required by UK SSAP 19 “Investment properties” for which the effect of non-adoption has been to increase the loss for the year by HK$640,000.

– 94 –

APPENDIX II FINANCIAL INFORMATION RELATING TO DAILYWIN

3. SIGNIFICANT ACCOUNTING POLICIES (continued)

Basis of consolidation

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

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

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

Goodwill and capital reserve

Goodwill or capital reserve, representing respectively the excess or shortfall of the purchase consideration over the fair value ascribed to the separable net assets at the date of acquisition of a subsidiary, is written off or credited directly to reserves respectively in the year of acquisition.

On disposal of a subsidiary, the attributable amount of goodwill previously eliminated against or credited to reserves is included in the determination of the profit and loss on disposal of the subsidiary.

Investment in subsidiaries

A subsidiary is an enterprise in which the Company, directly or indirectly, controls more than half of the voting power or issued capital or where the Company controls the composition of its board of directors or equivalent governing body.

Investments in subsidiaries are included in the Company’s balance sheet at cost, as reduced by any impairment losses recognised.

Revenue recognition

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

Rental income, including rental invoiced in advance, from properties under operating leases is recognised on a straight line basis over the terms of the relevant leases.

Interest income from bank deposits 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 Company’s rights to receive payment have been established.

– 95 –

APPENDIX II FINANCIAL INFORMATION RELATING TO DAILYWIN

3. SIGNIFICANT ACCOUNTING POLICIES (continued)

Property, plant and equipment

Property, plant and equipment are stated at cost less depreciation or amortisation at the balance sheet date. The cost of an asset comprises its purchase price and any directly attributable costs of bringing the asset to its present working condition and location for its intended use. Expenditure incurred after the assets have been put into operation, such as repairs and maintenance and overhaul costs, is normally charged to the income statement in the period in which it is incurred. In situations where it can be clearly demonstrated that the expenditure has resulted in an increase in the future economic benefits expected to be obtained from the use of the asset, the expenditure is capitalised as an additional cost of the asset.

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

Where the recoverable amount of an asset has declined below its carrying amount, the carrying amount is reduced to reflect the decline in value. In determining the recoverable amount of assets, expected future cash flows are not discounted to their present values.

Depreciation and amortisation are provided to write off the cost of items of property, plant and equipment over their estimated useful lives, using the straight line method, at the following rates per annum:

Land held on medium-term leases	Over twenty five years or the terms of the leases,
	if shorter
Buildings	Over twenty five years or the terms of the leases,
	if shorter
Leasehold improvements	20%
Plant and machinery	20%
Furniture and equipment	20% – 25%
Motor vehicles	20%
Computer system	20%

Assets held under finance leases and hire purchase contracts are depreciated over their expected useful lives, on the same basis as assets owned by the Group, or, where shorter, the terms of the finance leases.

Trademarks

Trademarks are stated at cost less amortisation. Amortisation is provided to write off the cost over 10 years, using the straight line method.

– 96 –

APPENDIX II FINANCIAL INFORMATION RELATING TO DAILYWIN

3. SIGNIFICANT ACCOUNTING POLICIES (continued)

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 valuation at the balance sheet date. Any surplus or deficit arising on the revaluation of investment properties is credited or charged to the 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 revaluation reserve is charged to the income statement. Where a deficit has previously been charged to the income statement and a revaluation surplus subsequently arises, this surplus is credited to the income statement to the extent of the deficit previously charged.

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

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

This policy represents a departure from the United Kingdom Companies Act 1985, which require depreciation to be provided on all property, plant and equipment. The directors consider that this policy is necessary in order that the financial statements may give a true and fair view, because current values and changes in current values are of prime importance rather than the calculation of systematic annual depreciation. Depreciation is only one of many factors reflected in the annual valuation and the amount which might otherwise have been shown cannot be separately identified or quantified.

Assets held under finance leases and hire purchase contracts

A lease is classified as a finance lease whenever the term of the lease transfers substantially all the risks and rewards of ownership of the asset concerned to the Group.

Assets held under finance leases and hire purchase contracts are capitalised at their fair values at the date of acquisition. The corresponding principal portion of finance lease and hire purchase commitments is shown as obligations of the Group. The finance charges, which represent the difference between the total commitments and the fair values of the assets acquired, are charged to the income statement using the sum-of-the-digits method over the period of the respective leases and contracts.

All other leases are classified as operating leases and the rental expenses and income are charged and credited respectively to the income statement on a straight line basis over the lease terms.

– 97 –

APPENDIX II FINANCIAL INFORMATION RELATING TO DAILYWIN

3. SIGNIFICANT ACCOUNTING POLICIES (continued)

Inventories

Inventories are stated at the lower of cost and net realisable value. Cost, which comprises direct materials and, where applicable, direct labour costs and those overheads that have been incurred in bringing the inventories to their present location and condition, is calculated using the first-in, firstout method. Net realisable value represents the expected selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale.

Convertible loan stock

Convertible loan stock are separately disclosed and regarded as liabilities unless conversion actually occurs. The cost incurred in connection with the issue of convertible loan stock are deferred and amortised on a straight line basis over the lives of the convertible loan stock from the date of issue of the loan stock to their final redemption date. If any of the loan stock are purchased and cancelled, redeemed or converted prior to the final redemption date, an appropriate portion of any remaining unamortised costs will be charged immediately to the income statement.

Foreign currencies

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

Taxation

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

Provident fund

The Group operates a defined contribution provident fund. The assets of the fund are held separately from those of the Group in independently administered funds. The amount charged against profits represents the contributions payable to the schemes in respect of the financial year.

Cash equivalents

Cash equivalents are defined as short-term, highly liquid investments which are readily convertible into known amounts of cash and which were within three months of maturity when acquired, less advances from banks repayable within three months from the date of the advance.

– 98 –

APPENDIX II FINANCIAL INFORMATION RELATING TO DAILYWIN

4. ANALYSIS OF TURNOVER, OPERATING (LOSS) PROFIT AND NET ASSETS

The Group’s turnover, operating (loss) profit and net assets are analysed as follows:

							Operating	Operating	Operating
Class of business		Turnover					(loss) profit						Net assets
		2001		2000			2001			2000			2001		2000
	HK$’000		HK$’000			HK$’000			HK$’000			HK$’000			HK$’000
Continuing operations:
Assembly of watches and
manufacture of cases	160,655		169,294			(12,937)			3,041				(8,245)		(1,559)
Retail of complete watches
and bags	77,940		60,279			(11,767)			(2,922)			(13,457)			(2,817)
Property investments and
property holding		193		167			(729)			(87)			958		1,713
	238,788		229,740			(25,433)				32		(20,744)			(2,663)
Discontinued operation:
Trading of watch movements		1,570	8,372				63			1			7,474		7,474
	240,358		238,112			(25,370)				33		(13,270)			4,811

	Turnover by			Turnover					Operating (loss)					Net	assets
Geographical segments	destination			by origin					profit by origin					by origin
	2001	2000		2001			2000		2001		2000		2001		2000
	HK$’000	HK$’000	HK$’000			HK$’000		HK$’000		HK$’000			HK$’000		HK$’000
United States of America	112,660	97,806			–		–		–			–		–	–
People’s Republic
of China (“PRC”)	77,959	60,312	238,592			229,441		(26,312)			856		(61,235)		(31,915)
Hong Kong	13,497	12,168		1,766			8,671		942		(823)		47,965		36,726
Switzerland	11,715	16,878			–		–		–			–		–	–
India	7,687	20,542			–		–		–			–		–	–
France	4,816	17,524			–		–		–			–		–	–
United Kingdom	2,976	2,625			–		–		–			–		–	–
Others	9,048	10,257			–		–		–			–		–	–
	240,358	238,112	240,358			238,112		(25,370)			33		(13,270)		4,811

– 99 –

APPENDIX II FINANCIAL INFORMATION RELATING TO DAILYWIN

5. OPERATING (LOSS) PROFIT

Operating (loss) profit has been arrived at after charging: Amortisation on issue cost of convertible loan stock Release of issue cost of convertible loan stock – on redemption – on conversion Amortisation of trademarks Auditors’ remuneration Depreciation and amortisation – assets owned by the Group – assets held under finance leases and hire purchase contracts Loss on disposal of property, plant and equipment Operating leases charges in respect of premises Staff costs and after crediting: Net foreign exchange profits Rental income, net of outgoings of HK$33,000 (2000: HK$31,000)	2001 HK$’000 443 1,401 13 14 400 9,536 143 140 696 39,237 3,875 447	2000 HK$’000 603 – – 14 376 10,373 192 184 1,019 34,986 225 273

Non audit fees paid to the Company’s auditors amounted to HK$777,000 in connection with professional services on taxation matters, the review of cashflow projection and advisory services on business structure (2000: HK$59,000 in connection with professional services on taxation matters).

6. NET INTEREST PAYABLE

Interest income Interest expense on: Bank loans and overdrafts – wholly repayable within five years – not wholly repayable within five years Obligations under finance leases and hire purchase contracts Convertible loan stock	2001 HK$’000 50 (2,705) – (46) (3,189) (5,940) (5,890)	2000 HK$’000 78
		(2,300) (79) (35) (4,495)
		(6,909)
		(6,831)

– 100 –

APPENDIX II FINANCIAL INFORMATION RELATING TO DAILYWIN

7. DISCONTINUED OPERATION

During the year, the Group ceased trading in watch movements. The results of the trading of watch movements for the year ended 31st March, 2001, which have been included in the consolidated income statement, were as follows:

Turnover Cost of sales Gross profit Distribution costs Administrative expenses Other operating income Operating profit Net interest payable Profit (loss) before taxation Taxation Profit (loss) for the year	2001 HK$’000 1,570 (1,504) 66 (1) (50) 48 63 (53) 10 – 10	2000 HK$’000 8,372 (8,280)
		92 (27) (90) 26
		1 (309)
		(308) –
		(308)

8. INFORMATION REGARDING DIRECTORS AND EMPLOYEES

The aggregate cost of persons employed by the Group were as follows:

Wages and salaries Other pension costs	2001 HK$’000 37,482 1,483 38,965	2000 HK$’000 33,561 1,161
		34,722

The average weekly number of persons employed was as follows:

Office and management Manufacturing and distribution	2001 Number 351 823 1,174	2000 Number 352 831
		1,183

– 101 –

APPENDIX II FINANCIAL INFORMATION RELATING TO DAILYWIN

8. INFORMATION REGARDING DIRECTORS AND EMPLOYEES (continued)

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

(a) Directors’ emoluments

Directors’ fees: Executive Non-executive Other emoluments: Executive directors: Salaries and allowances Contributions to provident funds	2001 HK$’000 – 259 5,111 181 5,551	2000 HK$’000 – 264 4,974 179
		5,417

No emoluments were paid to the independent non-executive directors.

None of the directors participate in the Group’s provident fund.

The highest remuneration paid to a director who is also the Chairman was as follows:

Salary and allowances Contributions to provident funds	2001 HK$’000 2,404 93 2,497	2000 HK$’000 2,343 90
		2,433

Directors’ emoluments include the use of rent free accommodation with an estimated rateable value of HK$234,000 (2000: HK$243,000) per annum provided by the Group to one of the directors.

The directors’ emoluments were within the following bands:

Nil to HK$1,000,000 HK$1,000,001 to HK$1,500,000	2001 Number of directors 5 2	2000 Number of directors 7 2

– 102 –

APPENDIX II FINANCIAL INFORMATION RELATING TO DAILYWIN

8. INFORMATION REGARDING DIRECTORS AND EMPLOYEES (continued)

(b) Employees’ emoluments

Of the five highest paid individuals in the Group, three (2000: three) were directors of the Company whose emoluments are set out in note 8(a) above. The emoluments of the remaining two (2000: two) individuals were as follows:

Salaries and allowances Contributions to provident funds Their emoluments were within the following bands: Nil to HK$1,000,000 HK$1,000,001 to HK$1,500,000	2001 HK$’000 1,732 65 1,797 2001 Number of employees 1 1	2000 HK$’000 1,903 39
		1,942

		2000 Number of employees 1 1

Save as disclosed above, during each of the two years ended 31st March, 2001, no emoluments were paid by the Group to the five highest paid individuals, including directors, as an inducement to join or upon joining the Group or as compensation for loss of office. In addition, during each of the two years ended 31st March, 2001, no directors waived any emoluments.

9. TAXATION

The charge comprises: Hong Kong Profits Tax calculated at 16% (2000: 16%) of the estimated assessable profits – current year (see note (a) below) – overprovision in respect of prior years PRC Income Tax (see note (b) below)	2001 HK$’000 34 28 169 231	2000 HK$’000 6 – 121
		127

Notes:

(a) A portion of the Group’s profit neither arose in, nor was derived from, Hong Kong. Accordingly, that portion of the Group’s profit is not subject to Hong Kong Profits Tax.
(b) PRC Income Tax is calculated at the rate prevailing in the relevant jurisdiction.

– 103 –

APPENDIX II FINANCIAL INFORMATION RELATING TO DAILYWIN

10. LOSS FOR THE YEAR

Of the Group’s loss for the year of HK$31,491,000 (2000: HK$6,925,000), a loss of HK$34,532,000 (2000: HK$4,985,000) has been dealt with in the financial statements of the Company.

As permitted by Section 230 of the United Kingdom Companies Act 1985, no income statement is presented for the Company.

11. LOSS PER ORDINARY SHARE

The calculation of basic loss per ordinary share is based on the Group’s loss for the year of HK$31,491,000 (2000: HK$6,925,000) and on the weighted average of 130,305,613 (2000: 106,908,722) ordinary shares in issue during the year.

No diluted loss per ordinary share has been presented as the exercise of dilutive potential ordinary shares would result in a reduction in the loss per ordinary share in both years.

12. INVESTMENT PROPERTIES

At 1st April, 2000 Revaluation decrease At 31st March, 2001	HK$’000 5,400 (800) 4,600

The investment properties were held under medium-term leases and were revalued on 31st March, 2001 by Chesterton Petty Limited, a firm of independent professional valuers, on an open market, existing use basis, resulting in a deficit on revaluation of HK$800,000 of which an amount of HK$640,000 was charged to the income statement and the balance of HK$160,000 was charged to the revaluation reserve.

– 104 –

FINANCIAL INFORMATION RELATING TO DAILYWIN

APPENDIX II

13. PROPERTY, PLANT AND EQUIPMENT

Leasehold Leasehold Furniture land and improve- Plant and and buildings ments machinery equipment HK$’000 HK$’000 HK$’000 HK$’000 THE GROUP COST At 1st April, 2000 31,628 20,567 16,102 14,410 Additions – 1,723 248 3,447 Disposals – (463) – (1,408) At 31st March, 2001 31,628 21,827 16,350 16,449 DEPRECIATION AND AMORTISATION At 1st April, 2000 9,257 14,837 11,492 10,110 Provided for the year 1,899 3,105 1,636 2,301 Disposals – (174) – (506) At 31st March, 2001 11,156 17,768 13,128 11,905 NET BOOK VALUE At 31st March, 2001 20,472 4,059 3,222 4,544 At 31st March, 2000 22,371 5,730 4,610 4,300	Motor Computer vehicles system HK$’000 HK$’000 2,886 5,149 459 893 (269) (16) 3,076 6,026 2,886 3,887 186 552 (269) (12) 2,803 4,427 273 1,599 – 1,262	Total HK$’000 90,742 6,770 (2,156)
		95,356
		52,469 9,679 (961)
		61,187
		34,169

		38,273

The net book value of leasehold land and buildings shown above comprises:

Medium-term leases: In Hong Kong In PRC	2001 HK$’000 10,867 9,605 20,472	2000 HK$’000 11,285 11,086
		22,371

At 31st March, 2001, the net book value of property, plant and equipment included assets held under finance leases and hire purchase contracts amounted to HK$322,000 (2000: HK$278,000).

– 105 –

APPENDIX II FINANCIAL INFORMATION RELATING TO DAILYWIN

14. INTANGIBLE ASSETS

	Trademarks
	HK$’000
THE GROUP
COST
At 1st April, 2000 and 31st March, 2001	139
AMORTISATION
At 1st April, 2000	83
Provided for the year	14
At 31st March, 2001	97
NET BOOK VALUE
At 31st March, 2001	42
At 31st March, 2000	56

15. INTEREST IN SUBSIDIARIES

Unlisted shares, at cost Less: Impairment losses recognised	THE COMPANY 2001 2000 HK$’000 HK$’000 54,780 54,780 (54,780) (54,780) – –	THE COMPANY 2001 2000 HK$’000 HK$’000 54,780 54,780 (54,780) (54,780) – –

		–

The cost of the investment in the unlisted shares of the subsidiaries is based on the value of the underlying net assets of the subsidiaries acquired under a group reorganisation in 1995.

Particulars of the Company’s subsidiaries at 31st March, 2001 are set out in note 37 to the financial statements.

16. INVENTORIES

Raw materials and consumables Work-in-progress Finished goods	THE 2001 HK$’000 8,594 5,588 23,026 37,208	GROUP 2000 HK$’000 24,467 5,539 19,545
		49,551

– 106 –

APPENDIX II FINANCIAL INFORMATION RELATING TO DAILYWIN

17. TRADE RECEIVABLES

The Group allows an average credit period of 60 days to its trade customers.

The following is an aged analysis of trade receivables at the reporting date:

0 – 30 days 31 – 60 days 61 – 120 days Over 120 days	THE 2001 HK$’000 18,837 6,247 2,174 87 27,345	GROUP 2000 HK$’000 14,013 3,622 1,235 301
		19,171

18. TRADE PAYABLES

The following is an aged analysis of trade payables at the reporting date:

0 – 30 days 31 – 60 days 61 – 120 days Over 120 days	THE 2001 HK$’000 14,582 6,714 13,997 5,762 41,055	GROUP 2000 HK$’000 12,272 11,466 14,136 3,149
		41,023

19. OTHER LOANS

The other loans are unsecured, interest-bearing and are repayable on demand.

– 107 –

FINANCIAL INFORMATION RELATING TO DAILYWIN

APPENDIX II

20. SHARE CAPITAL

Ordinary shares of HK$0.10 (2000: HK$0.10) each Authorised: At 31st March, 2001 and 31st March, 2000 Issued and fully paid: At 1st April, 1999 Exercise of share options Convention of convertible loan stock At 31st March, 2000 Issued by private placement Conversion of convertible loan stock At 31st March, 2001	Number of shares 800,000,000 106,611,464 4,020,000 1,014,450 111,645,914 20,000,000 253,950 131,899,864	Amount HK$’000 80,000

		10,661 402 101
		11,164 2,000 26
		13,190

21. SHARE OPTION SCHEME

Pursuant to the share option scheme approved and adopted by the Company on 16th October, 1997 (the “1997 Scheme”), the Board of Directors of the Company may, at their discretion, grant options to directors or employees of the Company or any of its subsidiaries to subscribe for shares in the Company in accordance with the terms of the 1997 Scheme.

Options may be granted at a nominal consideration and will entitle the holder to subscribe for shares during a period of ten years from the date the option is granted and accepted or from a later date as determined by the Board at a price (subject to adjustments as provided therein) equal to the higher of the nominal value of the shares and 80 per cent. of the average of the closing prices of the shares on the Hong Kong Stock Exchange on the five trading days immediately preceding the date of the grant of the options.

The maximum number of shares in respect of which options may be granted under the 1997 Scheme shall not exceed 10 per cent. of the share capital of the Company in issue from time to time (except shares issued pursuant to the 1997 Scheme) and the maximum number of shares in respect of which options may be granted to any one employee shall not exceed 25 per cent. of the maximum number of shares in respect of which options may be granted under the 1997 Scheme.

– 108 –

APPENDIX II FINANCIAL INFORMATION RELATING TO DAILYWIN

21. SHARE OPTION SCHEME (continued)

During the year, no options were granted or exercised and the outstanding share options are as follows:

	At 31.3.2000
Exercise price	and 31.3.2001
	Number
	of shares
HK$0.285 per share	3,980,000
HK$0.820 per share	2,000,000
	5,980,000

22. PROVISIONS FOR LIABILITIES AND CHARGES

THE GROUP

At 31st March, 2001, the Group had an unrecognised potential deferred taxation asset principally in respect of estimated tax losses carried forward amounting to approximately HK$47,064,000 (2000: HK$31,880,000). The potential deferred taxation asset has not been recognised in the financial statements as it is not certain that the benefit will be realised in the foreseeable future.

THE COMPANY

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

– 109 –

FINANCIAL INFORMATION RELATING TO DAILYWIN

APPENDIX II

23. RESERVES

Movements in reserves were as follows:

THE GROUP At 1st April, 1999 Transfer_(note)_ Exercise of share options Conversion of convertible loan stock Surplus arising on revaluation of investment properties Loss for the year At 31st March, 2000 Share issue at premium Share issue expenses Conversion of convertible loan stock Deficit arising on revaluation of investment properties Loss for the year At 31st March, 2001 THE COMPANY At 1st April, 1999 Exercise of share options Conversion of convertible loan stock Loss for the year At 31st March, 2000 Share issue at premium Share issue expenses Conversion of convertible loan stock Loss for the year At 31st March, 2001	Share premium HK$’000 1,979 (350) 1,814 406 – – 3,849 13,200 (1,743) 87 – – 15,393 1,629 1,814 406 – 3,849 13,200 (1,743) 87 – 15,393	Contri- buted surplus HK$’000 – – – – – – – – – – – – – 18,494 – – – 18,494 – – – – 18,494	Revalu- ation reserve HK$’000 – – – – 160 – 160 – – – (160) – – – – – – – – – – – –	Special reserve HK$’000 (27,500) 350 – – – – (27,150) – – – – – (27,150) – – – – – – – – – –	Other	reserves	Total HK$’000 27,698 350 – – – – 28,048 – – – – – 28,048 54,589 – – – 54,589 – – – – 54,589	Accumu- lated losses HK$’000 (31,485) – – – – (6,925) (38,410) – – – – (31,491) (69,901) (76,520) – – (4,985) (81,505) – – – (34,532) (116,037)	Total HK$’000 (1,808) – 1,814 406 160 (6,925) (6,353) 13,200 (1,743) 87 (160) (31,491) (26,460) (1,808) 1,814 406 (4,985) (4,573) 13,200 (1,743) 87 (34,532) (27,561)
					Capital reserve HK$’000 609 – – – – – 609 – – – – – 609 – – – – – – – – – –	General reserve HK$’000 54,589 – – – – – 54,589 – – – – – 54,589 54,589 – – – 54,589 – – – – 54,589

Note: The amount disclosed as share premium in the previous year’s financial statements has been re-analysed between share premium attributable to the holding company and share premium attributable to subsidiaries. The portion attributable to subsidiaries has been transferred to special reserve.

– 110 –

APPENDIX II FINANCIAL INFORMATION RELATING TO DAILYWIN

23. RESERVES (continued)

Notes:

(a) The special reserve of the Group represents the difference between the nominal value of ordinary shares issued by the Company and the aggregate nominal value of the issued ordinary share capital of the subsidiaries acquired pursuant to a group reorganisation in 1995.
(b) The contributed surplus of the Company represents the difference between the value of the underlying net assets of the subsidiaries acquired by the Company and the nominal amount of the ordinary share capital issued by the Company under a group reorganisation in 1995, less capitalisation on bonus issue of shares.

Under the Companies Act 1981 of Bermuda (as amended), the Company shall not declare or pay a dividend, or make a distribution out of contributed surplus, if there are reasonable grounds for believing that:

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, at 31st March, 2001 and 2000, the Company had no reserves available for distribution to its shareholders.

24. CONVERTIBLE LOAN STOCK

£2,756,816 (2000: £3,766,974) 9.5% convertible unsecured loan stock 2008 (“CL Stock”) Less: Issue cost Release on redemption Release on conversion Accumulated amortisation of issue cost	THE GROUP AND THE COMPANY 2001 2000 HK$’000 HK$’000 30,490 46,711 6,032 6,032 (1,401) – (13) – (1,197) (754) 3,421 5,278 27,069 41,433

On 12th January, 1999, the Company issued CL Stock with a nominal value of £3,807,552 divided into 3,807,552 stock units. The CL Stock bear interest at the rate of 9.5% per annum, payable every half year on 31st March and 30th September of each year, and are redeemable at par on 30th September, 2008 or, if later, the date falling 30 days after the final conversion date in respect of the year 2008.

– 111 –

FINANCIAL INFORMATION RELATING TO DAILYWIN

APPENDIX II

24. CONVERTIBLE LOAN STOCK (continued)

Holders of the CL Stock are entitled to convert their stock units biannually at any time within 30 calendar days after the despatch of the interim report or final report of the Company up to and including 29th September, 2008 on the following bases, subject to adjustment:

(a) in respect of any conversion in any of the years 1999 to 2001 (both years inclusive), 25 ordinary shares for every stock unit (i.e. a theoretical conversion price of HK$0.50 for each ordinary share (taking an exchange rate of £1 = HK$12.5)); or
(b) in respect of any conversion in any of the years 2002 to 2008 (both years inclusive), 14.286 ordinary shares for every stock unit (i.e. a theoretical conversion price of HK$0.87 for each ordinary share (taking an exchange rate of £1 = HK$12.5)).

During the year, the Company placed 20 million new ordinary shares of HK$0.10 each with third parties, the net proceed of approximately HK$13.5 million was used as to approximately HK$12.4 million to redeem £1 million of convertible loan stock units and, as to the balance of net proceeds, for general working capital purposes.

In addition, 253,950 (2000: 1,014,450) ordinary shares of the Company were issued in respect of the conversion of an aggregate sum of 10,158 (2000: 40,578) stock units during the year.

25. BORROWINGS

Secured bank loans Obligations under finance leases and hire purchase contracts Due within one year Due after more than one year Analysis of loan repayments: Secured bank loans – within one year or on demand – between one and two years – between two and five years Obligations under finance leases and hire purchase contracts – within one year – between one and two years – between two and five years	THE GROUP 2001 2000 HK$’000 HK$’000 653 773 327 192 980 965 278 231 702 734 980 965 134 121 147 621 372 31 144 110 87 82 96 – 980 965	THE GROUP 2001 2000 HK$’000 HK$’000 653 773 327 192 980 965 278 231 702 734 980 965 134 121 147 621 372 31 144 110 87 82 96 – 980 965
		965

		231 734
		965

		121 621 31 110 82 –
		965

– 112 –

APPENDIX II FINANCIAL INFORMATION RELATING TO DAILYWIN

25. BORROWINGS (continued)

The bank loans, which carry interest at market rates in Hong Kong, are secured by fixed and floating charges on the property, plant and equipment of the Group (see note 32). Obligations under finance leases and hire purchase contracts are secured over the related assets.

26. PENSION SCHEME

The Group operates a defined contribution pension scheme for its qualifying employees. The scheme assets are held separately under a provident fund managed by an independent trustee. The Group and its employees are each required to make contributions to the scheme calculated at 5% of the employees’ basic salaries on a monthly basis. The employees are entitled to 100% of the Group contribution and the accrued interest after 10 years’ of complete service, or at a reduced scale of between 50% to 90% after completion of 3 to 9 years’ service. The forfeited contributions and related accrued interest are to be used to reduce the Group’s future contribution.

At 31st March, 2001, there were forfeited contributions of approximately HK$15,000 (2000: HK$1,000) which arose upon employees leaving the pension scheme prior to vesting fully in the Group’s contributions. The forfeited contributions are available to reduce the contributions payable in future years.

On 10th July, 2000, the above provident fund scheme was granted an exemption of the Mandatory Provident Fund Schemes. The principal deed and the rules of the above provident fund scheme were amended accordingly to comply with the rules of the Mandatory Provident Fund Schemes Ordinance.

With effect from 1st December, 2000, the Group also participated in a mandatory provident fund scheme. The scheme assets are held under a mandatory provident fund operated by HSBC Provident Fund Trustee (Hong Kong) Limited. Under the scheme, the Group is required to make contributions to the scheme calculated at 5% of the employees’ relevant income (as defined in the Mandatory Provident Fund Schemes Ordinance) on a monthly basis.

The employees entitled to the defined contribution provident fund scheme before 1st December, 2000 are granted options to join the mandatory provident fund or to continue making contributions to the defined contribution provident fund scheme. All other existing or newly employed employees are required to join the mandatory provident fund scheme compulsorily. The Group is required to make contributions to either of the two schemes according to the employees’ options.

The Group’s aggregate contributions, net of forfeited contributions, which have been dealt with in the income statement are as follows:

Gross contributions Less: Forfeited contributions utilised to offset Group contributions for the year Net contributions charged to the income statement	2001 HK$’000 853 (168) 685	2000 HK$’000 791 (100) 691

– 113 –

FINANCIAL INFORMATION RELATING TO DAILYWIN

APPENDIX II

27. RECONCILIATION OF LOSS BEFORE TAXATION TO NET CASH INFLOW FROM OPERATING ACTIVITIES

Loss before taxation Provision for bad and doubtful debts Interest income Interest expenses Interest on obligations under finance leases and hire purchase contracts Depreciation and amortisation Amortisation of issue cost of convertible loan stock Release of issue cost on redemption of convertible loan stock Amortisation of trademarks Exchange differences on translation of convertible loan stock Deficit (surplus) arising on revaluation of investment properties Loss on disposal of property, plant and equipment Decrease (increase) in inventories Increase in trade and other receivables Increase in trade and other payables Increase in bills payable – secured Net cash inflow from operating activities	2001 HK$’000 (31,260) 494 (50) 5,894 46 9,679 443 1,401 14 (3,695) 640 140 12,343 (6,603) 14,840 1,343 5,669	2000 HK$’000 (6,798) 299 (78) 6,874 35 10,565 603 – 14 (500) (40) 184 (6,542) (6,637) 17,066 3,361 18,406

– 114 –

FINANCIAL INFORMATION RELATING TO DAILYWIN

APPENDIX II

28. ANALYSIS OF CHANGES IN FINANCING DURING THE YEAR

At 1st April, 1999 Exercise of share options Conversion of convertible loan stock Transfer to special reserve Amortisation of issue cost Exchange differences on translation Repayment during the year At 31st March, 2000 Proceeds from issue of new shares Redemption of convertible loan stock Conversion of convertible loan stock Expenses incurred on issue of new shares Amortisation of issue cost Release of issue cost on redemption of convertible loan stock Release of issue cost on conversion of convertible loan stock Exchange differences on translation Inception of finance lease contracts Repayment during the year At 31st March, 2001	Share capital and premium HK$’000 12,640 2,216 507 (350) – – – 15,013 15,200 – 113 (1,743) – – – – – – 28,583	Convertible loan stock HK$’000 41,837 – (507) – 603 (500) – 41,433 – (12,400) (126) – 443 1,401 13 (3,695) – – 27,069	Obligations under finance leases and Bank hire purchase loans contracts HK$’000 HK$’000 888 410 – – – – – – – – –– (115) (218) 773 192 – – – – – – – – – – – – – – – – – 300 (120) (165) 653 327

29. MAJOR NON-CASH TRANSACTIONS

During the year, the Group entered into finance lease and hire purchases arrangements in respect of assets with a total capital value at the inception of leases contracts of HK$300,000 (2000: nil).

In addition, 253,950 (2000: 1,014,450) ordinary shares of the Company were issued in respect of the conversion of an aggregate sum of 10,158 (2000: 40,578) stock units during the year.

– 115 –

FINANCIAL INFORMATION RELATING TO DAILYWIN

APPENDIX II

30. ANALYSIS OF CHANGES IN CASH AND CASH EQUIVALENTS DURING THE YEAR

Balance brought forward Net cash (outflow) inflow Balance carried forward ANALYSIS OF CASH AND CASH EQUIVALENT BALANCES Bank balances and cash Secured bank overdrafts	2001 HK$’000 5,023 (4,869) 154 2001 HK$’000 4,559 (4,405) 154	2000 HK$’000 (2,176) 7,199
		5,023

		2000 HK$’000 5,023 –
		5,023

31. ANALYSIS OF CASH AND CASH EQUIVALENT BALANCES

32. PLEDGE OF ASSETS

At 31st March, 2001, the Group had pledged its land and buildings, investment properties and plant and machinery with an aggregate net book value of approximately HK$15,467,000 (2000: HK$16,684,000) to a bank to secure general banking facilities granted to the Group.

In addition, the Company has created a debenture in favour of a bank by way of fixed and floating charges over all its assets to secure general banking facilities granted to the Group.

33. CAPITAL COMMITMENTS

At the balance sheet date, neither the Group nor the Company had any significant capital commitments.

34. CONTINGENT LIABILITIES

Bills discounted with recourse Guarantees given to bankers in respect of banking facilities granted to subsidiaries	THE GROUP 2001 2000 HK$’000 HK$’000 2,093 2,564 – –	THE COMPANY 2001 2000 HK$’000 HK$’000 – – 3,500 5,300 (note)	THE COMPANY 2001 2000 HK$’000 HK$’000 – – 3,500 5,300 (note)

			5,300

Note: The Company has also given an unlimited corporate guarantee to a bank in respect of banking facilities granted to its subsidiaries.

The extent of banking facilities utilised by the subsidiaries as at 31st March, 2001 amounted to approximately HK$25.4 million (2000: HK$19.8 million).

– 116 –

APPENDIX II FINANCIAL INFORMATION RELATING TO DAILYWIN

35. OPERATING LEASE COMMITMENTS

At the balance sheet date, the Group had annual commitments under non-cancellable operating leases for land and buildings, which are payable in the following year, as follows:

Operating leases which expire: – within one year – in the second to fifth year inclusive	THE GROUP 2001 2000 HK$’000 HK$’000 280 104 29 309 309 413	THE GROUP 2001 2000 HK$’000 HK$’000 280 104 29 309 309 413
		413

At the balance sheet date, the Company did not have any operating lease commitments.

36. RELATED PARTY TRANSACTION

During the year, Mr. Leung Wai Ho provided an unlimited personal guarantee and a guarantee to the extent of HK$3,500,000 (2000: HK$5,300,000), without charge, to two banks in respect of general banking facilities granted to the Group.

37. ADDITIONAL INFORMATION ON SUBSIDIARIES

Particulars of the subsidiaries at 31st March, 2001 are as follows:

		Nominal	Proportion of	Proportion of
	Place of	value of issued	issued share
	incorporation/	and paid up	capital held		Principal
Name of subsidiary	operation	share capital	by the Company		activity
			Directly	Indirectly
Always Prosperous Limited	Hong Kong	HK$500,000	–	100%	Property
					investment
Dailywin Time Limited	Hong Kong	HK$400,000	–	100%	Inactive
Dailywin Watch Products	Hong Kong	HK$2,500,000	–	–	Manufacture of
Mfg. Limited		non-voting			watch cases,
(“Dailywin Watch”)		deferred_(note 1)_			assembly of
		HK$1,000	–	100%	watches and
		ordinary			trading in watches
Dongguan Dailywin Watch	PRC	HK$55,800,000	–	95%	Manufacture of
Company Limited		registered capital			watch cases,
(“Dongguan Dailywin”)		(note 2)			assembly of
					watches and
					trading in watches

– 117 –

FINANCIAL INFORMATION RELATING TO DAILYWIN

APPENDIX II

37. ADDITIONAL INFORMATION ON SUBSIDIARIES (continued)

		Nominal	Proportion of	Proportion of
	Place of	value of issued	issued share
	incorporation/	and paid up	capital held			Principal
Name of subsidiary	operation	share capital	by the Company			activity
			Directly	Indirectly
D & S Concepts (HK) Limited	Hong Kong	HK$2	–	100%		Investment holding
Ever Precision Corporation	British Virgin	US$1	–	100%		Investment holding
	Islands
Great Prime International	British Virgin	US$25,001	100%		–	Investment holding
Holdings Limited	Islands
Tensfine Investments Limited	Hong Kong	HK$10,000	–	100%		Property holding
World Light Technology	Hong Kong	HK$10,000	–	100%		Trading in watch
Limited						movements
東莞市時尚風釆貿易	PRC	RMB500,000	–	note	3	Trading in watches
有限公司(“Trendi Image”)		registered capital

Notes:

(1) The deferred shares in Dailywin Watch, which are not held by the Group, practically carry no rights to dividends or to receive notice of or to attend or vote at any general meeting of the company or to participate in any distribution on winding up. The company has been granted an option by the holders of the deferred shares to acquire these shares at a nominal amount.
(2) Dongguan Dailywin is a joint venture limited liability company established in the PRC for a term of 15 years starting 15th January, 1992, subject to extension. The registered capital of Dongguan Dailywin is owned as to 95% by the Group and 5% by an independent PRC third party.
(3) Trendi Image is a private limited liability company established in the PRC on 29th December, 1999. The registered capital of Trendi Image was previously owned as to 90% by Mr. Leung Wai Ho (“Mr. Leung”); 5% by Mr. Tsang Pui Sing, Aloysius (“Mr. Tsang”) and 5% by an independent third party. Pursuant to a deed entered into between Mr. Leung, Mr. Tsang and D & S Concepts (HK) Limited (“D&S”), a wholly owned subsidiary of the Company, Mr. Leung and Mr. Tsang has each agreed, inter alia, (a) to assign to D&S all past, present and future benefits received by them as owners of the registered capital of Trendi Image; (b) to vote at board meetings, general meetings or otherwise of Trendi Image in accordance with instructions of D&S; and (c) not to dispose of his interest in Trendi Image unless authorized by D&S. In return, D&S has agreed to (a) provide all funding and financing for Trendi Image as and when requested by Mr. Leung and Mr. Tsang; and (b) indemnify Mr. Leung and Mr. Tsang for any costs, expenses or losses incurred by them by reason of their carrying on Trendi Image’s business. By virtue of this deed, Mr. Leung and Mr. Tsang have effectively transferred their entire economic interests in Trendi Image to D&S. During the year, the shareholders of Trendi Image have been changed and the shares held by Mr. Leung and Mr. Tsang were transferred to Mr. 陳偉力 and Mr. 陳富堯 . The registered capital is now owned as to 48% held by Mr. 陳偉力 , 47% held by Mr. 陳富堯 and 5% by an independent third party. Pursuant to a deed entered into between Mr. 陳偉力 and Mr. 陳富堯 and D&S on the same terms as above, Mr. 陳偉力 and Mr. 陳富堯 have effectively transferred their entire economic interests in Trendi Image to D&S. Accordingly, Trendi Image is continued to be regarded as a subsidiary of the Company.

– 118 –

APPENDIX II FINANCIAL INFORMATION RELATING TO DAILYWIN

3. FINANCIAL INFORMATION FOR THE SIX MONTHS ENDED 30TH SEPTEMBER, 2001 AND 30TH SEPTEMBER, 2000

Set out below are the unaudited consolidated income statements and consolidated cash flow statements of the Group for the six months ended 30th September, 2000 and 30th September, 2001, the unaudited consolidated balance sheet as at 30th September, 2001 and the audited consolidated balance sheet of the Group as at 31st March, 2001 together with the relevant notes thereto as extracted from the Company’s financial statements set out in the Company’s interim report for the six months ended 30th September, 2001:

CONDENSED CONSOLIDATED INCOME STATEMENT (UNAUDITED)

For the six months ended 30 September

Notes Turnover 3 Cost of sales Gross profit Distribution costs Administrative expenses Other operating income Operating loss 3 & 4 Net interest payable Loss before taxation Taxation 5 Loss for the period Loss per ordinary share 7 – Basic – Diluted	2001 HK$’000 129,661 (92,400) 37,261 (14,655) (37,232) 1,807 (12,819) (2,654) (15,473) (6) (15,479) (11.7 cents) N/A	2000 HK$’000 123,746 (82,100) 41,646 (15,482) (29,806) 953 (2,689) (2,995) (5,684) (4) (5,688) (4.4 cents) N/A

There were no recognised gains or losses other than the loss for both periods.

– 119 –

APPENDIX II FINANCIAL INFORMATION RELATING TO DAILYWIN

CONDENSED CONSOLIDATED BALANCE SHEET

30 September
2001
(Unaudited)
Notes
HK$’000
Non-current assets
Investment properties
8
4,200
Property, plant and equipment
9
30,742
Intangible assets
35
34,977
Current assets
Inventories
33,578
Trade receivables
10
40,251
Other receivables
5,243
Taxation recoverable
36
Bank balances and cash
5,446
84,554
Current liabilities
Trade payables
11
43,045
Other payables
31,910
Convertible loan stock
12
28,404
Loan from a director
13
8,774
Trust receipt loans – secured
7,996
Other loans
2,612
Tax liabilities
428
Obligations under finance leases and
hire purchase contracts – due within one year
402
Secured bank loan – due within one year
–
Secured bank overdrafts
–
123,571
Net current liabilities
(39,017)
(4,040)

31 March
2001
(Audited)
HK$’000
4,600
34,169
42
38,811
37,208
26,851
3,717
36
4,559
72,371
41,055
26,526
–
–
20,355
3,640
422
144
134
4,405
96,681
(24,310)
14,501

– 120 –

APPENDIX II FINANCIAL INFORMATION RELATING TO DAILYWIN

30 September 2001 (Unaudited) Notes HK$’000 Capital and reserves Share capital 13,190 Reserves (41,939) (28,749) Non-current liabilities Loans from a shareholder 14 24,000 Obligations under finance leases and hire purchase contracts – due after one year 709 Convertible loan stock 12 – Secured bank loan – due after one year – 24,709 (4,040)	31 March 2001 (Audited) HK$’000 13,190 (26,460) (13,270) – 183 27,069 519 27,771 14,501

– 121 –

APPENDIX II FINANCIAL INFORMATION RELATING TO DAILYWIN

CONDENSED CONSOLIDATED CASHFLOW STATEMENT (UNAUDITED)

For the six months ended 30 September

Net cash (outflow)/inflow from operating activities Net cash outflow from returns on investments and servicing of finance Net cash outflow from investing activities Net cash outflow before financing Net cash inflow from financing Increase/(decrease) in cash and cash equivalents Cash and cash equivalents at beginning of the period Cash and cash equivalents at end of the period Analysis of the balances of cash and cash equivalents Bank balances and cash Secured bank overdrafts	2001 HK$’000 (21,551) (2,654) (2,476) (26,681) 31,973 5,292 154 5,446 5,446 – 5,446	2000 HK$’000 398 (2,995) (3,968) (6,565) 907 (5,658) 5,023 (635) 3,695 (4,330) (635)

– 122 –

APPENDIX II FINANCIAL INFORMATION RELATING TO DAILYWIN

NOTES TO THE UNAUDITED INTERIM FINANCIAL STATEMENTS

(1) BASIS OF PREPARATION

(a) In preparing the condensed financial statements, the directors have given careful consideration to the going concern status of the Group in light of the Group’s net current liabilities of approximately HK$39,017,000 and the Group’s continuing losses. Also, as explained in note 15, the Company has received a winding up petition from the holders of convertible unsecured loan stock 2008 (“CB Loan”) demanding immediate repayment of the Group’s outstanding CB Loan which together with accrual interest totalled approximately HK$33,065,000 as at 30 September 2001.

Against this background, the directors are currently in negotiation with the CB Loan holders for the restructuring of the CB Loan. At the same time, the directors are actively pursuing opportunities for introducing new funding, including equity funding, into the Group. Provided that agreement with the CB Loan holders for the restructuring of the CB Loan can be reached and provided that sufficient additional funding can be obtained, the directors consider that the Group will be able to meet in full its financial obligations as they fall due in the foreseeable future. Accordingly, the condensed financial statements have been prepared on a going concern basis.

(b) The condensed financial statements have been prepared in accordance with the disclosure requirements of the Rules Governing the Listing of Securities on the Stock Exchange of Hong Kong Limited (the “Listing Rules”) and Statement of Standard Accounting Practice (“SSAP”) No. 25 “Interim Financial Reporting”.

(2) PRINCIPAL ACCOUNTING POLICIES

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

The condensed financial statements have been prepared in accordance with accounting principles generally accepted in Hong Kong. United Kingdom accounting requirements that are applicable to the Group do not differ materially from those accounting principles adopted by the Group except that:

the revision of FRS1 “Cash Flow Statements” in 1996 would result in a different format for presentation of the condensed cash flow statement;
the turnover and operating loss have been analysed between continuing operations and discontinued operation in notes 3 and 6 and not on the face of the condensed income statement as required by FRS 3 “Reporting financial performance”;
the disclosures as required by FRS 13 “Derivatives and other financial instruments: disclosures”; and
the treatment of deficit on revaluation of investment properties as required by UK SSAP 19 “Investment properties” for which the effect of non-adoption has been to increase the loss for the period ended 30 September 2001 by HK$400,000.

– 123 –

FINANCIAL INFORMATION RELATING TO DAILYWIN

APPENDIX II

The accounting policies adopted are consistent with those followed in the preparation of the Group’s financial statements for the year ended 31 March 2001, except that in the current period, the Group has adopted SSAP 30 “Business Combinations” and has elected not to restate goodwill (negative goodwill) previously eliminated against (credited to) reserves. Accordingly, goodwill arising on acquisitions prior to 1 April 2001 is held in reserves and will be charged to income statement at the time of disposal of the relevant subsidiary or associate. Negative goodwill arising on acquisitions prior to 1 April 2001 will be credited to income at the time of disposal of the relevant subsidiary or associate. Any goodwill arising on acquisitions of subsidiaries or associates after 1 April 2001 is capitalised and amortised over its estimated useful life. Any negative goodwill arising on acquisitions after 1 April 2001 will be presented as a deduction from assets and will be released to income based on an analysis of the circumstances from which the balance resulted.

The other new or revised SSAPs adopted during the period have not had any significant impact on the Group.

(3) ANALYSIS OF TURNOVER AND SEGMENT INFORMATION

The Group’s turnover and operating loss are analysed as follows:

Class of business Continuing operations: Assembly of watches and manufacture of cases Retail of watches and bags Property investment and property holding Discontinued operation: Trading of watch movements	Turnover Six months ended 30 September 2001 2000 (Unaudited) (Unaudited) HK$’000 HK$’000 91,979 82,576 37,613 39,505 69 96 129,661 122,177 – 1,569 129,661 123,746	Operating loss Six months ended 30 September 2001 2000 (Unaudited) (Unaudited) HK$’000 HK$’000 (448) (1,175) (11,858) (1,559) (513) (43) (12,819) (2,777) – 88 (12,819) (2,689)

– 124 –

FINANCIAL INFORMATION RELATING TO DAILYWIN

APPENDIX II

Geographical markets United States of America People’s Republic of China (“PRC”) Hong Kong Special Administrative Region Switzerland India France United Kingdom Others	Turnover by destination Six months ended 30 September 2001 2000 (Unaudited) (Unaudited) HK$’000 HK$’000 69,663 58,024 37,701 39,505 6,477 6,449 5,984 6,099 2,375 3,635 1,830 3,493 1,199 1,834 4,432 4,707 129,661 123,746	Operating loss by destination Six months ended 30 September 2001 2000 (Unaudited) (Unaudited) HK$’000 HK$’000 (339) (825) (11,858) (1,559) (544) (23) (29) (87) (12) (52) (9) (50) (6) (26) (22) (67) (12,819) (2,689)	Operating loss by destination Six months ended 30 September 2001 2000 (Unaudited) (Unaudited) HK$’000 HK$’000 (339) (825) (11,858) (1,559) (544) (23) (29) (87) (12) (52) (9) (50) (6) (26) (22) (67) (12,819) (2,689)
			(2,689)

(4) OPERATING LOSS

Operating loss has been arrived at after charging: Amortisation of issue cost of convertible loan stock Depreciation and amortisation of property, plant and equipment	Six months ended 30 September 2001 2000 (Unaudited) (Unaudited) HK$’000 HK$’000 221 1,622 7,069 5,520	Six months ended 30 September 2001 2000 (Unaudited) (Unaudited) HK$’000 HK$’000 221 1,622 7,069 5,520

		5,520

(5) TAXATION

The charge represents Hong Kong Profits Tax which is calculated at 16% on the estimated assessable profit for the period.

No provision for PRC income tax has been made as there was no assessable profit subject to PRC income tax for the period.

– 125 –

APPENDIX II FINANCIAL INFORMATION RELATING TO DAILYWIN

(6) DISCONTINUED OPERATION

During the period ended 30 September 2000, the Group ceased trading in watch movements.

The results of the trading of watch movements for the period ended 30 September 2000, which have been included in the unaudited consolidated income statement, were as follows:

Turnover Cost of sales Gross profit Distribution costs Administrative expenses Operating profit Net interest payable Profit before taxation Taxation Profit for the period	30 September 2001 2000 (Unaudited) (Unaudited) HK$’000 HK$’000 – 1,569 – (1,503) – 66 – 23 – (1) – 88 – (52) – 36 – – – 36

(7) LOSS PER ORDINARY SHARE

The calculation of basic loss per ordinary share is based on the loss for the period of HK$15,479,000 (2000: HK$5,688,000) and on the weighted average of 131,899,864 (2000: 128,720,073) ordinary shares in issue during the period.

The computation of diluted loss per ordinary share has not assumed the exercise of conversion rights under the convertible loan stock which would result in the issue of dilutive potential ordinary shares because the exercise of them would result in a reduction in the loss per ordinary share in both periods.

– 126 –

APPENDIX II FINANCIAL INFORMATION RELATING TO DAILYWIN

(8) INVESTMENT PROPERTIES

At 1 April 2001 Deficit arising on revaluation At 30 September 2001	HK$’000 4,600 (400) 4,200

The investment properties were held under medium-term leases and were revalued on 30 September 2001 by Chesterton Petty Limited, a firm of independent professional valuers, on an open market, existing use basis. The deficit arising on revaluation has been charged to the income statement.

(9) PROPERTY, PLANT AND EQUIPMENT

During the period, the Group acquired property, plant and equipment amounting to approximately HK$3,642,000.

In previous years, leasehold improvement, furniture and equipment and computer system were depreciated at 20% per annum. The directors have re-assessed the useful lives of these fixed assets and have decided to that with effect from 1 April 2001, these assets are to be depreciated at 33[1] ⁄3% per annum. The change in depreciation rate has increased the depreciation charged for the period by approximately HK$3,301,000.

(10) TRADE RECEIVABLES

The Group allows an average credit period of 60 days to its trade customers. An aging analysis of trade receivables is as follows:

30 September 2001 (Unaudited) HK$’000 0 – 30 days 22,572 31 – 60 days 14,113 61 – 120 days 2,645 Over 120 days 1,765 41,095 Less: Provision (844) 40,251	31 March 2001 (Audited) HK$’000 18,837 6,247 2,174 87 27,345 (494) 26,851

– 127 –

APPENDIX II FINANCIAL INFORMATION RELATING TO DAILYWIN

(11) TRADE PAYABLES

An aging analysis of trade payables is as follows:

30 September 2001 (Unaudited) HK$’000 0 – 30 days 12,317 31 – 60 days 11,139 61 – 120 days 15,676 Over 120 days 3,913 43,045	31 March 2001 (Audited) HK$’000 14,582 6,714 13,997 5,762
	41,055

(12) CONVERTIBLE LOAN STOCK

As explained in note 15, following a non-payment of interest, the Group has received a winding up petition from the CB Loan holders demanding immediate repayment of the outstanding CB Loan liabilities. Whilst the validity of the demand for immediate payment is being contested in legal proceedings before the Court, these CB Loan liabilities have been reclassified as current liabilities for prudence.

(13) LOAN FROM A DIRECTOR

The amount is unsecured, carries interest at prevailing market rate and is repayable within one year.

(14) LOANS FROM A SHAREHOLDER

The amounts are unsecured, carry interest at prevailing market rate and are not repayable within one year.

(15) LITIGATION

As a result of the non-payment of the relevant interest to the CB Loan holders in September 2001, statutory demands were made by a trustee of the stockholders (the “Trustee”) for the full payment of principal and interest outstanding. In November 2001, an application for a petition for winding up of the Company was issued by the Trustee.

The directors have been advised by legal counsel that the statutory demands made were defective and an originating summons was issued against the Trustee whereby a court declaration as to the invalidity of the demands was sought.

– 128 –

GENERAL INFORMATION

APPENDIX III

1. RESPONSIBILITY STATEMENT

This prospectus 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 prospectus 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 prospectus, the omission of which would make any statement herein misleading.

2. SHARE CAPITAL

The authorised and issued share capital of the Company following completion of the Rights Issue (assuming the Rights Issue becoming unconditional) will be as follows:

Authorised: 10,000,000,000 Shares as at the Latest Practicable Date 20,000,000,000 Shares following completion of the Rights Issue_(Note) _Shares issued and to be issued as fully-paid or credited as fully-paid: 1,644,060,933 Shares as at the Latest Practicable Date 6,576,243,732 Rights Shares 1,644,060,933 Shares to be issued by way of bonus with the Rights Shares 9,864,365,598 Shares in issue immediately following the completion of the Rights Issue	HK$ 100,000,000

	200,000,000

	16,440,609 65,762,437 16,440,609
	98,643,655

Note: Assuming the Shareholders have approved the resolution to increase the authorised share capital of the Company proposed at the special general meeting of the Company held on 28th February, 2002.

As at the Latest Practicable Date, save for the outstanding options granted under the Share Option Scheme carrying the rights to subscribe up to an aggregate of 43,800,000 Shares, no capital of any member of the Group is under option or agreed conditionally or unconditionally to be put under option.

– 129 –

GENERAL INFORMATION

APPENDIX III

3. PARTICULARS OF DIRECTORS

Address

Name Address Tang Ching Ho House No. 15, Greenery Villas, Phase II, Ma Lok Path, Kau To, Shatin, New Territories Yau Yuk Yin House No. 15, Greenery Villas, Phase II, Ma Lok Path, Kau, To, Shatin, New Territories Chan Chun Hong, Thomas Flat F, 5/F, Block 3, Whampoa Garden Site 4, Hunghom Kowloon, Hong Kong Lee Peng Fei, Allen 11 Windsor Park, Ma Ling Path, Kau To, Shatin, New Territories Wong Chun, Justein 18D, Laurel Court, Worldwide Garden, Shatin, New Territories Siu Yim Kwan, Sidney Flat D3, Lung Tang Court, 88 Castle Peak Road, Tsing Lung Tau, New Territories

The qualifications and experience of the Directors are set out below:

Executive Directors

Mr. Tang Ching Ho , aged 39, is a co-founder of the Group (which was established in 1987), and the chairman and managing director of the Company. Mr. Tang is responsible for the strategic planning, policy making and business development of the Group. He has over 15 years’ experience in the decoration and building industry and also has extensive experience in business management. Mr. Tang is also a director of Caister Limited, one of the Substantial Shareholders.

Ms. Yau Yuk Yin , aged 39, is a co-founder of the Group, and deputy chairman and deputy managing director of the Company. She is responsible for the overall human resources and administration of the Group. She has over 10 years’ experience in the decoration and building industry. She is the wife of Mr. Tang.

Mr. Chan Chun Hong, Thomas , aged 37, joined the Group in March 1997 as a finance Director and a company secretary of the Group. He is responsible for managing the finance, accounting, company secretarial functions and legal matters of the Group. He graduated from the Hong Kong Polytechnic University with a degree in accountancy and is a fellow of The Association of Chartered Certified Accountants and an associate of The Hong Kong Society of Accountants. He is also a certified public accountant.

– 130 –

GENERAL INFORMATION

APPENDIX III

Independent non-executive Directors

Dr. Lee Peng Fei, Allen CBE, JP, aged 61, joined the Group in November 1993 as a nonexecutive Director. He is a Deputy, HKSAR, the 9th National People’s Congress and a Member of Commission on Strategic Development, HKSAR. He was a member of the Executive Council of Hong Kong from 1985 to 1992 and a member of the Legislative Council of Hong Kong from 1978 to 1997.

Mr. Wong Chun, Justein , MBE, JP, aged 48, joined the Group in November 1993 as a nonexecutive Director. He holds a bachelor’s degree in commerce and computing science from Simon Fraser University, Canada. He was a member of the Fight Crime Committee, the Independent Police Complaints Council and is currently a member of the Shatin District Council, the Advisory Committee Against Narcotics and other government advisory bodies.

Dr. Siu Yim Kwan, Sidney , S.B.ST.J., aged 55, joined the Group in November 1993 as a non-executive Director. He holds a doctorate degree in management from Pacific Southern University in the United States. He is also an executive member of a number of charitable organizations and sports associations.

4. CORPORATE INFORMATION AND PARTIES INVOLVED IN THE RIGHTS ISSUE

Registered office Clarendon House 2 Church Street Hamilton HM 11 Bermuda Head office and principal 12th Floor, Tower 1 place of business South Seas Centre No. 75 Mody Road Tsimshatsui East Kowloon Hong Kong Auditors Ernst & Young Certified Public Accountants 15th Floor Hutchison House 10 Harcourt Road Central Hong Kong

– 131 –

GENERAL INFORMATION

APPENDIX III

Financial adviser to the Company

Underwriters

Kingsway Capital Limited 5th Floor Hutchison House 10 Harcourt Road Central Hong Kong Kingsway SW Securities Limited 5th Floor Hutchison House 10 Harcourt Road Central Hong Kong Kingston Securities Limited 28th Floor One International Finance Centre 1 Harbour View Street Central Hong Kong Great China Brokerage Limited 6/F & 15/F Crocodile House 1 50 Connaught Road Central Hong Kong GC Capital (Asia) Limited Unit 6501-06, The Center 99 Queen’s Road Central Hong Kong Luen Fat Securities Co. Ltd. 23/F, Euro Trade Centre 21-23 Des Voeux Road Central Hong Kong

Ms. Tang 12th Floor, Tower 1 South Seas Centre No.75 Mody Road Tsimshatsui East Kowloon Hong Kong

– 132 –

GENERAL INFORMATION

APPENDIX III

Hong Kong legal adviser to the Company and the Rights Issue

Bermuda legal adviser to the Company

Principal bankers

Chao and Chung 26/F, Asia Pacific Finance Tower Citibank Plaza 3 Garden Road Hong Kong

Conyers Dill & Pearman 2901 One Exchange Square 8 Connaught Place Central Hong Kong The Hongkong and Shanghai Banking Corporation Limited 10/F., HSBC Building Tsim Sha Tsui 82-84 Nathan Road Tsim Sha Tsui Kowloon

Dah Sing Bank, Limited 35/F., Dah Sing Financial Centre 108 Gloucester Road Hong Kong First Pacific Bank Limited G/F., 60 Percival Street Causeway Bay Hong Kong

Fortis Bank Asia H.K. 27/F., Fortis Bank Tower 77-79 Gloucester Road Hong Kong

International Bank of Asia Limited G/F., Shop No. 1 President Commercial Centre 602-608 Nathan Road Kowloon

– 133 –

GENERAL INFORMATION

APPENDIX III

Société Générale 38/F., Edinburgh Tower 15 Queen’s Road Central Hong Kong Hong Kong branch share registrar Tengis Limited and transfer office 4th Floor Hutchison House 10 Harcourt Road Central Hong Kong Authorised representatives Mr. Tang Ching Ho to the Stock Exchange Mr. Chan Chun Hong, Thomas

5. DISCLOSURE OF DIRECTORS’ INTERESTS

As at the Latest Practicable Date, the interests of the Directors and their associates in the share capital of the Company and its associated corporations (within the meaning of the SDI Ordinance) which were recorded in the register kept by the Company pursuant to section 29 of the SDI Ordinance were as follows:

(i) Interests in Shares

Name of Director	Nature of interest	Number of	% of the issued
		Shares held	share capital
Mr. Tang	Corporate_(Note 1)_	36,314,000	2.21%
	Personal	9,927,645	0.60%
	Family_(Note 2)_	9,927,645	0.60%
	Other_(Note 3)_	144,447,827	8.78%
Ms. Yau	Personal	9,927,645	0.60%
	Family_(Note 4)_	46,241,645	2.81%
	Other_(Note 4)_	144,447,827	8.78%
Dr. Siu Yim Kwan,	Personal	100,000	0.01%
Sidney

– 134 –

GENERAL INFORMATION

APPENDIX III

Notes:

Mr. Tang was interested in these Shares through Caister Limited, a company which is wholly and beneficially owned by Mr. Tang.
Mr. Tang was taken to be interested under the SDI Ordinance in those Shares in which his spouse, Ms. Yau, was interested.
Agreements were entered into between Middlemore Limited, a company wholly and beneficially owned by Mr. Tang, and (i) Ms. Tang Mui Fong; (ii) Ms. Tang and (iii) Mr. Yau Yuk Tong, all being the relatives of Mr. Tang, as a result of which, and for the purpose of Sections 9 and 10 of the SDI Ordinance, Mr. Tang was taken (for purpose of the duty of disclosure only) to be interested in the Shares owned by them.
Ms. Yau was taken to be interested under the SDI Ordinance in those Shares in which her spouse, Mr. Tang, was interested.

Apart from the 56,169,290 issued Shares held by Mr. Tang and Ms. Yau pursuant to Sections 4 and 8 of the SDI Ordinance, they were taken (for purpose of the duty of disclosure only) to be interested in all the Shares referred to in Note 3 above pursuant to Sections 9 and 10 of the SDI Ordinance.

(ii) Interests in share options granted under the Share Option Scheme

	Number of	Exercise price
Name of Director	share options	per Share	Exercise period
Mr. Tang	10,900,000	HK$0.13	6th March, 2001 to
			5th February, 2005
Ms. Yau	10,900,000	HK$0.13	6th March, 2001 to
			5th February, 2005

Save as disclosed herein and other than certain nominee shares in subsidiaries held by the Directors in trust for the Company or its subsidiaries, as at the Latest Practicable Date, none of the Directors and chief executive of the Company had any interest in the equity or debt securities of the Company or any associated corporations (within the meaning of the SDI Ordinance) which have to be notified to the Company and the Stock Exchange pursuant to Section 28 of the SDI Ordinance (including the interests which they were deemed or taken to have under Section 31 or Part I of the Schedule to the SDI Ordinance) or which are required, pursuant to Section 29 of the SDI Ordinance, to be entered in the register referred to therein, or which are required pursuant to the Model Code for Securities Transactions by Directors of Listed Companies, to have been notified to the Company and the Stock Exchange.

– 135 –

GENERAL INFORMATION

APPENDIX III

Save as disclosed herein, as at the Latest Practicable Date, none of the Directors had any direct or indirect interest in any assets which had been acquired or disposed of by or leased to any member of the Group since 31st March, 2001 (the date to which the latest published audited consolidated accounts of the Company were made up) or proposed to be so acquired, disposed of or leased.

There is no contract or arrangement subsisting at the Latest Practicable Date in which any of the Directors was materially interested and which was significant in relation to the business of the Group taken as a whole.

6. SUBSTANTIAL SHAREHOLDERS

As at the Latest Practicable Date, the following interests of 10% or more in the issued share capital of the Company were recorded in the register of interests required to be kept by the Company pursuant to Section 16(1) of the SDI Ordinance:

		Approximate % of the
Name of Shareholder	Number of Shares	issued share capital
Caister Limited	36,314,000	2.21%
Mr. Tang	9,927,645	0.60%
Ms. Yau	9,927,645	0.60%
Ms. Tang Mui Fong	65,904,095	4.01%
Mr. Yau Yuk Tong	41,506,825	2.52%
Ms. Tang	37,036,907	2.25%
	200,617,117	12.20%

The shareholdings of Caister Limited, Ms. Tang Mui Fong, Mr. Yau Yuk Tong and Ms. Tang are also disclosed above as corporate and other interests of Mr. Tang under the heading “Disclosure of Directors’ interests” in this appendix.

Pursuant to Sections 9 and 10 of the SDI Ordinance, Caister Limited, Mr. Tang, Ms. Yau, Ms. Tang Mui Fong, Mr. Yau Yuk Tong and Ms. Tang were taken (for purpose of the duty of disclosure only) to be interested in a total of 200,617,117 Shares.

– 136 –

GENERAL INFORMATION

APPENDIX III

Save as disclosed above, no persons had registered an interest in the share capital of the Company that was required to be recorded under Section 16(1) of the SDI Ordinance as at the Latest Practicable Date.

As at the Latest Practicable Date, so far as is known to, or can be ascertained after reasonable enquiry by, the Directors or chief executive of the Company, no person (not being a Director or the chief executive of the Company) was directly or indirectly interested in 10% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of any member of the Group or held any options in respect of any such capital.

7. MATERIAL CONTRACTS

The following contracts, not being contracts in the ordinary course of business, have been entered into by the Group within 2 years preceding the date of this prospectus and are or may be material:

(a) (i) a placing agreement dated 14th March, 2000 entered into by Mr. Yau Yuk Tong, Ms. Tang, Ms. Tang Mui Fong, Middlemore Limited, Caister Limited and Kingsway SW Securities Limited for the placement of a total of 100,000,000 Shares at a price of HK$0.72 per Share to certain independent third parties; and (ii) a subscription agreement dated 14th March, 2000 entered into by Mr. Yau Yuk Tong, Ms. Tang, Ms. Tang Mui Fong and the Company for the subscription of a total of 90,000,000 Shares at a price of HK$0.72 per Share;
(b) (i) a placing agreement dated 29th June, 2000 entered into by Mr. Yau Yuk Tong, Ms. Tang, Ms. Tang Mui Fong, Caister Limited and Kingsway SW Securities Limited for the placement of a total of 135,000,000 Shares at a price of HK$0.29 per Share to certain independent third parties; and (ii) a subscription agreement dated 29th June, 2000 entered into by Mr. Yau Yuk Tong, Ms. Tang, Ms. Tang Mui Fong, Caister Limited and the Company for the subscription of a total of 135,000,000 Shares at a price of HK$0.29 per Share;
(c) a sale and purchase agreement dated 19th December, 2000 between Bio-Project Limited, Royal Focus Limited (an indirect wholly-owned subsidiary of the Company) and the sole shareholder of Bio-Project Limited in respect of the conditional sale and purchase of a 99.79% shareholding in Wai Yuen Tong;

– 137 –

GENERAL INFORMATION

APPENDIX III

(d) an agreement dated 12th April, 2001 made between Macro Pacific Investment Limited (an indirect wholly-owned subsidiary of the Company, “Macro Pacific”) and a company which is a third party independent of, and not connected with the directors, chief executives or substantial shareholders of the Company and any of its subsidiaries or any of their associates, relating to the sale and purchase of an approximate 19% shareholding in Luxembourg Medicine;
(e) an agreement dated 10th July, 2001 made between Advance Century Limited (an indirect wholly-owned subsidiary of the Company) and certain independent third parties who are independent of and not connected with the directors, chief executives or substantial shareholders of the Company and any of its subsidiaries or any of their respective associates, in relation to an investment in a sino-foreign equity joint venture pharmaceutical enterprise in Changsha, Hunan Province known as 湖南湘雅製藥有限公司 (Hunan Xiangya Pharmaceutical Co., Ltd.);
(f) a conditional agreement dated 24th July, 2001 entered into between the Company and Kingsway SW Securities Limited in respect of the placing of convertible bonds in the aggregate principal amount of HK$30,080,000 issued by the Company to certain independent third parties;
(g) a conditional share purchase agreement dated 15th August, 2001 made between Rich Time and Mr. Leung Wai Ho for the sale and purchase of a total of 38,500,000 shares of HK$0.10 each in the capital of Dailywin together with the heads of agreement dated 13th August, 2001 signed by the same parties;
(h) (i) a placing agreement dated 25th September, 2001 entered into by the Company, Mr. Yau Yuk Tong, Ms. Tang, Ms. Tang Mui Fong and Kingsway SW Securities Limited for the placement of a total of 148,500,000 Shares at a price of HK$0.08 per Share to certain independent third parties; and (ii) a subscription agreement dated 25th September, 2001 entered into by Mr. Yau Yuk Tong, Ms. Tang, Ms. Tang Mui Fong and the Company for the subscription of a total of 116,500,000 Shares at a price of HK$0.08 per Share;
(i) (i) a placing agreement dated 1st November, 2001 entered into by the Company, Mr. Yau Yuk Tong, Ms. Tang, Ms. Tang Mui Fong and Kingsway SW Securities Limited for the placement of a total of 214,700,000 Shares at a price of HK$0.09 per Share to certain independent third parties; and (ii) a subscription agreement dated 1st November, 2001 entered into by Mr. Yau Yuk Tong, Ms. Tang, Ms. Tang Mui Fong and the Company for the subscription of a total of 131,100,000 Shares at a price of HK$0.09 per Share;

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GENERAL INFORMATION

APPENDIX III

(j) an agreement dated 16th November, 2001 made between Macro Pacific and an independent third party not connected with the directors, chief executive or substantial shareholders of the Company and any of its subsidiaries or any of their respective associates relating to the sale and purchase of an approximate 3.6% shareholding in Luxembourg Medicine;
(k) an acquisition agreement dated 18th December, 2001 made between Wang On Design & Contracting Limited (an indirect wholly-owned subsidiary of the Company) and a company incorporated in Hong Kong which is a third party independent of, and not connected with the directors, chief executive or substantial shareholders of the Company and any of its subsidiaries or any of their respective associates, in respect of the acquisition of the industrial building located at No.9 Wang Kwong Road, Kowloon, Hong Kong comprising the Ground Floor, the Upper Ground Floor, the First Floor, the Second Floor, the Third Floor, the Fourth Floor, the Fifth Floor and the Roof of such industrial building;
(l) an agreement dated 19th December, 2001 made between Macro Pacific and a company incorporated in Hong Kong which is a third party independent of, and not connected with the directors, chief executive or substantial shareholders of the Company and any of its subsidiaries or any of their respective associates, relating to the sale and purchase of an approximate 19% shareholding in Luxembourg Medicine;
(m) (i) a placing agreement dated 19th December, 2001 entered into by the Company, Mr. Yau Yuk Tong, Ms. Tang, Ms. Tang Mui Fong and Kingsway SW Securities Limited for the placement of a total of 260,700,000 Shares at a price of HK$0.09 per Share to certain independent third parties; and (ii) a subscription agreement dated 19th December, 2001 entered into by Mr. Yau Yuk Tong, Ms. Tang, Ms. Tang Mui Fong and the Company for the subscription of a total of 144,400,000 Shares at a price of HK$0.09 per Share; and
(n) the Underwriting Agreement.

8. MATERIAL ADVERSE CHANGE

The Directors are not aware of any material adverse change in the financial or trading position of the Group since 31st March, 2001, being the date to which the latest published audited accounts of the Group were made up of.

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GENERAL INFORMATION

APPENDIX III

9. LITIGATION

As reported in the Group’s 2001/2002 interim report, during 2000, a sub-contractor claimed against a wholly-owned subsidiary of the Group (the “Subsidiary”) for recovery of approximately HK$900,000 for works performed. In turn, the Subsidiary instigated litigation against the main contractor for recovery of approximately HK$6,000,000 on works performed. The main contractor then made a counter claim against the Subsidiary for overpayment by the main contractor to the Subsidiary of approximately HK$4,900,000.

As also reported in the Group’s 2001/2002 interim report, during 2000, the Subsidiary also instigated litigation against another sub-contractor for an amount of approximately HK$120,000 for delay in completion of works performed. The sub-contractor made a counter claim against the Subsidiary of approximately HK$1,000,000 on works performed.

The Directors, having reviewed the claims and obtained legal advices, consider that the alleged claims and counter claims from the main contractor and sub-contractors referred to above are without grounds. Therefore, no provision had been made for the alleged claims or counter claims in the financial statements.

Save as disclosed above, as at the Latest Practicable Date, no member of the Group is 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 any member of the Group.

10. SERVICE CONTRACTS

As at the Latest Practicable Date, none of the Directors had any existing or proposed service contracts with the Company or any member of the Group (excluding contracts expiring or determinable by the Company within one year without payment of compensation other than statutory compensation).

11. LEGAL EFFECT

This prospectus and the enclosed PAL and EAF and all acceptances of any offer or application contained in such documents are governed by and shall be construed in accordance with the laws of Hong Kong. Where an application is made in pursuance of any such documents, the relevant document(s) shall have the effect of rendering all persons concerned bound by the provisions, other than the penal provisions, of Sections 44A and 44B of the Companies Ordinance (Chapter 32 of the Laws of Hong Kong), insofar as it is applicable.

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GENERAL INFORMATION

APPENDIX III

12. DOCUMENTS DELIVERED TO THE REGISTRARS OF COMPANIES

A copy of this prospectus, together with copies of the PAL and the EAF, have been registered by the Registrar of Companies in Hong Kong as required by Section 342C of the Companies Ordinance (Chapter 32 of the Laws of Hong Kong) and has been filed with the Registrar of Companies in Bermuda pursuant to the Companies Act 1981 of Bermuda.

13. EXPENSES

The expenses in connection with the Rights Issue, including the financial advisory fee, underwriting commission, printing, registration, translation, legal and accounting charges, are estimated to amount to approximately HK$5.9 million and will be payable by the Company.

14. MISCELLANEOUS

The registered office of the Company is at Clarendon House, 2 Church Street, Hamilton HM 11, Bermuda.
The head office and principal place of business of the Company in Hong Kong is at 12th Floor, Tower 1, South Seas Centre, No. 75 Mody Road, Tsimshatsui East, Kowloon, Hong Kong.
The company secretary of the Company is Mr. Chan Chun Hong, Thomas. He graduated from the Hong Kong Polytechnic University with a degree in accountancy and is a fellow of The Association of Chartered Certified Accountants and an associate of The Hong Kong Society of Accountants. He is a certified public accountant.
The branch share registrar of the Company in Hong Kong is Tengis Limited, at 4th Floor, Hutchison House, 10 Harcourt Road, Central, Hong Kong.
The English text of the Prospectus Documents shall prevail over the Chinese text in the case of inconsistency.

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GENERAL INFORMATION

APPENDIX III

15. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents are available for inspection at the principal place of business of the Company, at 12th Floor, Tower 1, South Seas Centre, No. 75 Mody Road, Tsimshatsui East, Kowloon, Hong Kong during normal business hours on any weekday (public holidays excepted) up to and including 14th March, 2002:

(i) the memorandum of association and bye-laws of the Company;
(ii) the annual reports of the Company and Dailywin for each of the two financial years ended 31st March, 2001;
(iii) the material contracts referred to in the section headed “Material contracts” of this appendix; and
(iv) the circular addressed to the Shareholders dated 9th January, 2002.

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AI assistant

Wang On Group Limited — Capital/Financing Update 2002

49778_rns_2002-02-28_1db9fe4f-e92d-42e6-8287-2625ca8aa4e2.pdf

WANG ON GROUP LIMITED

CONTENTS

which:

EXPECTED TIMETABLE

DEFINITIONS

DEFINITIONS

WANG ON GROUP LIMITED

To the Qualifying Shareholders and,

INTRODUCTION

ISSUE STATISTICS

TERMS OF THE RIGHTS ISSUE

Basis of provisional allotment

Subscription price for the Rights Shares

Status of the Rights Shares and the Bonus Shares

Certificates for Rights Shares and Bonus Shares

LETTER FROM THE BOARD

Qualifying Shareholders

Rights of Non-Qualifying Shareholders

LETTER FROM THE BOARD

UNDERWRITING ARRANGEMENTS

Undertakings from Substantial Shareholders

Underwriting Agreement

LETTER FROM THE BOARD

Termination of the Underwriting Agreement

which:

CONDITIONS OF THE RIGHTS ISSUE

SHAREHOLDING STRUCTURE OF THE COMPANY

REVIEW OF OPERATIONS AND PROSPECTS SINCE 31ST MARCH, 2001

Business review

Management and sub-licensing of Chinese wet markets

Management and sub-licensing of shopping centres and car parks management

Wai Yuen Tong

Other investments in pharmaceutical business

Investment in Dailywin

LETTER FROM THE BOARD

Business trend and prospects of the Group since 31st March, 2001

Business trend and prospects of the Dailywin Group since 31st March, 2001

REASONS FOR THE RIGHTS ISSUE AND USE OF PROCEEDS

PROCEDURES FOR ACCEPTANCE AND TRANSFER

LETTER FROM THE BOARD

APPLICATION FOR EXCESS RIGHTS SHARES

LETTER FROM THE BOARD

LISTING AND DEALINGS

LETTER FROM THE BOARD

PERMISSION OF THE BMA

WARNING OF THE RISKS OF DEALINGS IN SHARES AND RIGHTS SHARES

FURTHER INFORMATION

1. THREE YEAR INCOME STATEMENT SUMMARY

2. FINANCIAL INFORMATION FOR EACH OF THE TWO YEARS ENDED 31ST MARCH, 2001

CONSOLIDATED PROFIT AND LOSS ACCOUNT

CONSOLIDATED STATEMENT OF RECOGNISED GAINS AND LOSSES

CONSOLIDATED BALANCE SHEET

CONSOLIDATED CASH FLOW STATEMENT

BALANCE SHEET

NOTES TO FINANCIAL STATEMENTS

1. CORPORATE INFORMATION

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of preparation

Basis of consolidation

Subsidiaries

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Associates

Goodwill or capital reserve

Fixed assets and depreciation

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Investment properties

Provision for onerous contracts

Leased assets

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Investments

Held-to-maturity securities

Investment securities

Other investments

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Inventories

Construction, renovation and decoration contracts

Website development cost

Wang On Group Limited Capital/Financing Update 2002