Wang On Group Limited — Capital/Financing Update 2004

Oct 4, 2004

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

==> picture [86 x 64] intentionally omitted <==

WANG ON GROUP LIMITED （宏安集團有限公司）[*]

(Incorporated in Bermuda with limited liability)

(Stock Code: 1222)

MAJOR AND CONNECTED TRANSACTION

On 27 September 2004, Suitbest, a wholly owned subsidiary of the Company, Mr. Tang and Dragon Richly entered into the Acquisition Agreement, pursuant to which Suitbest has agreed to acquire from Mr. Tang the entire issued share capital and shareholder’s loan of Dragon Richly.

Prior to the entering into the Acquisition Agreement, Dragon Richly entered into the Provisional Agreements on 17 September 2004 for the sale and purchase of 29 residential and commercial units in the Properties which a total floor area of approximately 23,000 square feet. It is intended that apart from the 29 units to be acquired subject to the execution of the Formal Agreements, Dragon Richly should further acquire one residential unit and one commercial unit (which have not been made the subject of the Provisional Agreements) to complete the purchase of the Properties as a whole. The Directors intend that following the acquisition of the Properties and the Acquisition, the Company should demolish the Properties for redevelopment into new commercial or residential buildings. As at the date of this announcement, an amount of HK$660,000 had been paid by Dragon Richly, out of the shareholder’s loan of Dragon Richly amounting to HK$720,000, to the relevant Property Vendors as initial deposit pursuant to the terms of the Provisional Agreements and HK$60,000 was placed with Dragon Richly’s solicitors for and on behalf of Dragon Richly.

Mr. Tang is the chairman and the managing director of the Company, and is therefore a connected person of the Company. Accordingly, the Acquisition constitutes a connected transaction under the Listing Rules. The Acquisition also constitutes a major transaction of the Company under the Listing Rules. The Acquisition is therefore subject to independent shareholders’ approval, voting by way of poll, under the Listing Rules. Mr. Tang and his associates will abstain from voting on the relevant resolution for the approval of the Acquisition.

The Directors (including the independent non-executive Directors) confirm that the Acquisition was negotiated on an arm’s length basis and agreed on normal commercial terms between the parties and that the terms of the Acquisition Agreement are fair and reasonable so far as the shareholders of the Company are concerned and are in the interest of the Company and its shareholders as a whole.

A circular containing, amongst other things, further information relating to the Acquisition, the accountants’ report of Dragon Richly, an advice from an independent financial adviser and a recommendation from the independent committee of the board of the Company, together with a notice convening the SGM will be despatched to the shareholders of the Company as soon as practicable.

1

An independent board committee of the Company will be established to advise the independent shareholders of the Company in relation to the Acquisition and Baron Capital Limited has been appointed as the independent financial adviser to advise the independent board committee and the independent shareholders of the Company in this regard.

Trading in the shares in the Company was suspended at the request of the Company with effect from 9:30 a.m. on 27 September 2004 pending the release of this announcement. Application has been made to the Stock Exchange for a resumption of trading in the shares in the Company with effect from 9:30 a.m. on 4 October 2004.

Shareholders and the investing public should note that completion of the Acquisition Agreement is conditional and they should exercise caution when dealing in the shares in the Company.

INTRODUCTION

On 27 September 2004, Suitbest, a wholly owned subsidiary of the Company, Mr. Tang and Dragon Richly entered into the Acquisition Agreement, pursuant to which Suitbest has agreed to acquire from Mr. Tang the entire issued share capital and shareholder’s loan of Dragon Richly.

THE ACQUISITION AGREEMENT

Date: 27 September 2004

• Parties: (i) Mr. Tang, who is the chairman and the managing director, as vendor;

• (ii) Suitbest Investments Limited, a wholly-owned subsidiary of the Company, as purchaser; and

• (iii) Dragon Richly, a limited liability company incorporated in Hong Kong and wholly and beneficially owned by Mr. Tang

• Assets to be acquired: (i) one share of HK$1 each in the share capital of Dragon Richly, being the entire issued share capital of Dragon Richly; and

• (ii) shareholder’s loan of Dragon Richly

The Consideration shall represent the face value of the entire issued share capital and shareholder’s loan of Dragon Richly as at Completion. As at the date of the Acquisition Agreement, the shareholder’s loan of Dragon Richly amounted to HK$720,000, which had been or will be applied as the initial deposits for the purchase of the Properties. The Consideration shall be payable in cash and funded by internal resources of the Group.

The Consideration shall be paid in the following manner:

• (i) a sum of HK$720,001 will be paid to Mr. Tang on the signing of the Acquisition Agreement (representing the amount of the issued share capital and the shareholder’s loan of Dragon Richly as at the date of the Acquisition Agreement);

2

• (ii) whenever Dragon Richly shall be required to pay any amounts in accordance with any Provisional Agreement or Formal Agreement after the signing of the Acquisition Agreement, Suitbest shall, upon request by Mr. Tang, pay to Dragon Richly (or such other person(s) as directed by Mr. Tang) such same amounts of money, which shall be deemed to be advanced by Mr. Tang to Dragon Richly as additional shareholders’ loan and be applied by Dragon Richly in accordance with the Provisional Agreements or Formal Agreements; and

• (iii) the balance of consideration (if any) shall be paid to Mr. Tang (or such other person(s) as directed by Mr. Tang) upon Completion.

As at the date of this announcement, the sum of HK$720,001 refer to in (i) above had been paid to Mr. Tang.

Conditions precedent:

The Acquisition Agreement is conditional upon, amongst other things, the following conditions precedent:

• (i) the approval of the Acquisition Agreement and other transactions contemplated in or incidental to the Acquisition Agreement in the SGM of the independent shareholders of the Company in accordance with the Listing Rules; and

• (ii) all other necessary waivers, consents and approvals (if required) from the relevant governmental or regulatory authorities in Hong Kong and Bermuda required for the Acquisition Agreement and the transactions contemplated herein in relation to Suitbest and the Company being obtained.

Completion:

Completion shall take place on the next business day after fulfillment of the conditions precedent of the Acquisition Agreement set out above or at such time and date as the parties may agree.

The parties have agreed to use their best endeavours to ensure that the conditions precedent set out above are fulfilled by 5:00 p.m. on 31 March 2005 (or such later date as the parties may agree), failing which the Acquisition Agreement and everything contained therein shall, subject to the liability of any party to the other in respect of any antecedent breach of any of the terms hereof, be null and void and of no effect and Mr. Tang shall refund the deposit paid by Suitbest as set out above.

INFORMATION ON DRAGON RICHLY

Dragon Richly is a limited liability company incorporated in Hong Kong on 1 September 2004 and is wholly and beneficially owned by Mr. Tang, who is the chairman and the managing director. Dragon Richly is an investment holding company and has not carried in any other business activities since its incorporation other than the entering into the Provisional Agreements for the purpose of acquiring the Properties and the Acquisition Agreement. Upon completion of the purchase of the Properties, the principal asset of Dragon Richly will be the Properties.

Based on the management account of Dragon Richly, the unaudited net losses of Dragon Richly was HK$5,371, representing business registration fee, formation expenses as well as search, filing and secretarial fee, for the period from 1 September 2004 to 27 September 2004 and the unaudited net tangible liabilities of Dragon Richly as at 27 September 2004 was HK$5,370. Other than the payment for purchase price pursuant to the Provisional Agreements, Dragon Richly did not have any long term liability as at the date of this Announcement.

3

REASONS FOR THE ACQUISITION

In view of the time required for obtaining shareholders’ approval in relation to the acquisition of the Properties under the Listing Rules and in order to facilitate the purchase of the Properties from the Property Vendors, Mr. Tang, at the request of the Company, through Dragon Richly stepped in to acquire the Properties. Prior to the entering into the Acquisition Agreement, Dragon Richly entered into the Provisional Agreements on 17 September 2004 for the sale and purchase of 29 residential and commercial units in the Properties which shall occupy a total floor area of approximately 23,000 square feet. It is intended that apart from the 29 units to be acquired subject to the execution of the Formal Agreements, Dragon Richly should further acquire one residential unit and one commercial unit (which have not been made the subject of the Provisional Agreements) to complete the purchase of the Properties as a whole. The Directors intend that following the acquisition of the Properties and the Acquisition, the Company should demolish the Properties for redevelopment into new commercial or residential buildings. As the Group is principally engaged in, among other matters, property development and property investment, it has expertise and experience in building construction in Hong Kong. The Group has an expert team of staff specialised in property development, projects management, building construction, quantity surveying as well as the sales and marketing in property.

As at the date of this announcement, an amount of HK$660,000 had been paid by Dragon Richly, out of the shareholder’s loan of Dragon Richly amounting to HK$720,000, to the relevant Property Vendors as initial deposit pursuant to the terms of the Provisional Agreements and HK$60,000 was placed with Dragon Richly’s solicitors for and on behalf of Dragon Richly. The Formal Agreements are expected to be entered into by Dragon Richly and the Property Vendors on 15 October 2004 upon which further deposits in an aggregate amount of approximately HK$7.10 million shall be payable by Dragon Richly. The balance for the purchase price of the Properties are expected to be payable as to approximately HK$3.88 million on 15 November 2004, approximately HK$3.88 million on 15 December 2004 and approximately HK$62.04 million upon completion of the purchase of the Properties pursuant to the Provisional Agreement.

It is provided in the Provisional Agreements that in the event that Dragon Richly fails to (i) enter into provisional sale and purchase agreement with the relevant owner of any of the units in the Properties on or before 15 October 2004 (or such date as may be extended by Dragon Richly); or (ii) complete the purchase of any unit in the Properties on or before 31 May 2005 (or such date as may be extended by Dragon Richly), Dragon Richly shall be entitled to terminate the Provisional Agreements and the Property Vendors shall refund the deposit paid by Dragon Richly pursuant to the Provisional Agreements.

In view of the fact that Dragon Richly had entered into the Provisional Agreements in respect of 29 residential and commercial units in the Properties for an aggregate consideration of HK$77.55 million, which is determined based on the estimated value of the Properties and negotiated on an arm’s length basis and agreed on normal commercial terms between Dragon Richly and the Property Vendors, the Company entered into the Acquisition Agreement to acquire Dragon Richly from Mr. Tang, with no profit made or accrued to either parties, for the purpose of vesting its ultimate interests in the proposed acquisition of the Properties. To the best of knowledge, information and belief of the Directors, having made all reasonable enquiry, among the 29 units, 6 units are currently under lease while the remaining units are either vacant or occupied by the owners thereof. Pursuant to the Provisional Agreements, the Property Vendors shall deliver vacant possession of the relevant units upon completion of the sale and purchase of these units, the failure of which will constitute a breach of the Provisional Agreement.

4

Currently, Dragon Richly is in negotiation with the relevant owners of the aforesaid one residential unit and one commercial unit (which have not been made the subject of the Provisional Agreements) on the entering into of provisional sale and purchase agreements but there is no assurance that Dragon Richly will succeed in concluding provisional sale and purchase agreements with the relevant owners and that the redevelopment plan of the Properties can be implemented as intended . The Company will issue a further announcement regarding the particulars of the acquisition of the two units (which will include the view of the independent non-executive Directors and an independent financial adviser on the fairness of such acquisition) as and when appropriate and in compliance with the requirements of the Listing Rules.

At this stage, the Company has not yet formulated any concrete redevelopment plan in respect of the Properties as redevelopment of the Properties involves not only the acquisition of the Properties as a whole (as disclosed above, two units in the Properties are still not subject to the Provisional Agreements) but also applications and negotiations with various governmental departments, including Town Planning Board, Buildings Department in Hong Kong which takes time to deal with, and therefore the projected cost for redevelopment of the Properties will be subject to further studies and appraisals by the Company.

The Directors (including the independent non-executive Directors) confirm that the Acquisition was negotiated on an arm’s length basis and agreed on normal commercial terms between the parties and that the terms of the Acquisition Agreement are fair and reasonable so far as the shareholders of the Company are concerned and are in the interest of the Company and its shareholders as a whole.

GENERAL

The Group is principally engaged in the management and sub-licensing of Chinese wet markets, shopping centres and car parks, retail business, property development and property investment. It also has interests in the pharmaceutical business through its investments in Wai Yuen Tong Medicine Holdings Limited, a company listed on the Stock Exchange. The Directors are optimistic about the property market in Hong Kong and perceive investment potentials of the Properties for re-development.

Mr. Tang is the chairman and the managing director, and is therefore a connected person of the Company. Accordingly, the Acquisition constitutes a connected transaction of the Company under the Listing Rules. The Acquisition also constitutes a major transaction of the Company under the Listing Rules. The Acquisition is subject to independent shareholders’ approval, voting by way of poll, under the Listing Rules. Mr. Tang and his associates will abstain from voting on the relevant resolution for the approval of the Acquisition.

A circular containing, amongst other things, further information relating to the Acquisition, the accountants’ report of Dragon Richly, an advice from an independent financial adviser and a recommendation from the independent committee of the board of the Company, together with a notice convening the SGM will be despatched to the shareholders of the Company as soon as practicable.

An independent board committee of the Company will be established to advise the independent shareholders of the Company in relation to the Acquisition and Baron Capital Limited has been appointed as the independent financial adviser to advise the independent board committee and the independent shareholders of the Company in this regard.

Trading in the shares in the Company was suspended at the request of the Company with effect from 9:30 a.m. on 27 September 2004 pending the release of this announcement. Application has been made to the Stock Exchange for a resumption of trading in the shares in the Company with effect from 9:30 a.m. on 4 October 2004.

5

Shareholders and the investing public should note that completion of the Acquisition Agreement is conditional and they should exercise caution when dealing in the shares in the Company.

As at the date of this announcement, the Board comprises three executive Directors, namely Mr. Tang Ching Ho, Ms. Yau Yuk Yin and Mr. Chan Chun Hong, Thomas, and four independent non-executive Directors, namely Dr. Lee Peng Fei, Allen, Mr. Wong Chun, Justein, Dr. Siu Yim Kwan, Sidney and Mr. Siu Kam Chau.

DEFINITIONS

In this announcement, the following terms have the following meanings:

“Acquisition”	the sale and purchase of the entire issued share capital and shareholder’s
	loan of Dragon Richly pursuant to the Acquisition Agreement
“Acquisition Agreement”	the conditional agreement dated 27 September 2004 entered into between
	Suitbest, Mr. Tang and Dragon Richly in relation to the Acquisition
“Board”	the board of Directors
“Company”	Wang On Group Limited, a company incorporated in Bermuda and the
	shares of which are listed on the Stock Exchange
“Completion”	completion of the Acquisition pursuant to the Acquisition Agreement
“Consideration”	the consideration for the Acquisition
“Directors”	the directors of the Company
“Dragon Richly”	Dragon Richly Investment Limited, a company wholly and beneficially
	owned by Mr. Tang
“Group”	the Company and its subsidiaries
“Formal Agreements”	the formal agreements to be entered into by Dragon Richly with the
	Property Vendors in relation to the sale and purchase of 29 residential
	and commercial units in the Properties, the subject of the Provisions
	Agreements
“Listing Rules”	the Rules Governing the Listing of Securities on the Stock Exchange
“Mr. Tang”	Mr. Tang Ching Ho, being the chairman and the managing director of
	the Company
“Properties”	the properties comprising a total of 31 units and representing the entirety
	of six blocks of 5-storey old residential buildings situated at Nos. 12,
	14, 16, 18, 20 and 22, Davis Street, Kennedy Town, Hong Kong and
	occupying an aggregate site area of approximately 4,965 square feet and
	a total floor area of approximately 25,000 square feet

6

“Property Vendors”

various vendors of 29 residential and commercial units in the Properties under the Provisional Agreements. The Directors confirm that, to the best of their knowledge, information and belief having made all reasonable enquiry, these vendors and their ultimate beneficial owner (if relevant), are independent third parties not being connected persons of the Company (as defined in the Listing Rules)

“Provisional Agreements”

the 29 provisional sale and purchase agreements entered into by Dragon Richly with the Property Vendors on 17 September 2004 in respect of the following 29 residential and commercial units in the Properties:

• (i) Unit A on ground floor & cockloft and unit B on ground floor, and 1st to 3rd floor, No. 12, Davis Street, Kennedy Town, Hong Kong

• (ii) ground floor & cockloft, and 1st to 4th floor, No. 14, Davis Street, Kennedy Town, Hong Kong

• (iii) ground floor & cockloft, and 1st to 4th floor, No. 16, Davis Street, Kennedy Town, Hong Kong

• (iv) ground floor, and 1st to 4th floor, No. 18, Davis Street, Kennedy Town, Hong Kong

• (v) ground floor & cockloft, and 1st to 4th floor, No. 20, Davis Street, Kennedy Town, Hong Kong; and

• (vi) 1st to 4th floor, No. 22, Davis Street, Kennedy Town, Hong Kong

“SGM”

the special general meeting of the Company to be convened to approve the Acquisition Agreement and other transactions contemplated in or incidental to the Acquisition Agreement

“Stock Exchange”

The Stock Exchange of Hong Kong Limited

• “Suitbest”

Suitbest Investments Limited, a wholly-owned subsidiary of the Company

“HK$”

Hong Kong dollars, the lawful currency of Hong Kong

By Order of the Board Wang On Group Limited Tang Ching Ho Chairman and Managing Director

Hong Kong, 30 September 2004

• For identification purpose only

• “Please also refer to the published version of this announcement in The Standard”

7