Wang On Group Limited — Earnings Release 2001

Jul 9, 2001

WANG ON GROUP LIMITED

(Incorporated in Bermuda with limited liability)

ANNOUNCEMENT OF ANNUAL RESULTS

FOR THE YEAR ENDED 31 MARCH 2001

The Board of Directors (the "Board") of Wang On Group Limited (the "Company") announces the audited consolidated results of the Company and its subsidiaries (the "Group") for the year ended 31 March 2001, together with the comparative figures for the previous year, are as follows:

CONSOLIDATED INCOME STATEMENT

Year ended 31 March

2001 2000

Notes HK$'000 HK$'000

TURNOVER 1 211,998 342,646

Cost of sales (201,625 ) (281,232 )

Gross profit 10,373 61,414

Other revenue 24,190 14,156

Selling and distribution costs (2,637 ) -

Administrative expenses (40,114 ) (46,264 )

Other operating expenses (18,084 ) (8,250 )

Provision for impairment of investments (20,715 ) -

PROFIT/(LOSS) FROM OPERATING

ACTIVITIES 2 (46,987 ) 21,056

Finance costs (1,850 ) (5,989 )

Share of profits less losses of associates 899 5,595

PROFIT /(LOSS) BEFORE TAX (47,938 ) 20,662

Tax 3 138 389

PROFIT/(LOSS) BEFORE MINORITY

INTERESTS (47,800 ) 21,051

Minority interests 287 -

NET PROFIT/(LOSS) FROM ORDINARY

ACTIVITIES ATTRIBUTABLE TO

SHAREHOLDERS (47,513 ) 21,051

Dividend 4 - (8,176 )

RETAINED PROFITS/(ACCUMULATED

LOSSES) FOR THE YEAR (47,513 ) 12,875

EARNINGS/(LOSS) PER SHARE 5

Basic (6.08 cents ) 4.55 cents

Diluted N/A 4.39 cents

NOTES TO CONSOLIDATED INCOME STATEMENT

1. Analysis of turnover and contribution to profit/(loss)

Contribution

to profit/(loss) from

Turnover operating activities

2001 2000 2001 2000

HK$'000 HK$'000 HK$'000 HK$'000

By activity:

Management and sub-licensing of

Chinese wet markets 104,923 60,358 7,712 6,828

Management and sub-licensing of

shopping centres 20,558 21,390 (9,085 ) 3,030

Management of car parks 70,109 77,594 (4,629 ) 14,300

Sale of Chinese medicine, herbs and

other medicinal products 9,036 - 959 -

Sales of investment properties and

properties held for resale 1,230 74,900 641 (4,121 )

Building related contracting business 1,515 86,671 (12,452 ) 6,732

Trading of building materials - 19,425 - 4,475

Technology-related business - - (14,241 ) (11,635 )

Others 4,627 2,308 (15,892 ) 1,447

211,998 342,646 (46,987 ) 21,056

The Group's turnover and contribution to profit /(loss) from operating activities were principally derived in Hong Kong and accordingly, an analysis of such activities by geographical area is not shown.

2. Profit/(loss) from operating activities

2001 2000

HK$'000 HK$'000

The Group's profit/(loss) from operating activities is arrived at

after charging/(crediting) the following items:

Cost of inventories sold 3,398 96,289

Depreciation:

Owned fixed assets 10,791 8,830

Leased fixed assets 113 210

Provision for contingency, net 8,927 1,200

Provision for doubtful debts 5,182 3,480

Provision/(amount released) for onerous contracts 26,676 (1,706 )

Provision for impairment of investments 20,715 -

Loss/(gain) on disposal of properties held for re-sale (641 ) 2,074

Gain on disposal of investment, net (2,281 ) -

Net holding gain on investments (215 ) -

Interest income from investments (2,142 ) -

Interest income (12,172 ) (6,240 )

3. 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 was made because the Group had no estimated assessable profits arising in Hong Kong.

2001 2000

HK$'000 HK$'000

Group:

Hong Kong profits tax 411 -

Overprovision in the prior year (1,644 ) (725 )

Deferred 919 (450 )

(314 ) (1,175 )

Share of tax attributable to:

Associates 176 786

Tax credit for the year (138 ) (389 )

4. Dividend

2001 2000

HK$'000 HK$'000

Proposed final - Nil cent (2000: 1 cent)

per ordinary share - 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.

5. 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.

PUBLICATION OF ANNUAL REPORT ON THE STOCK EXCHANGE'S WEBSITE

The 2001 annual report of the Group containing the information required by paragraphs 45(1) to 45(3) of Appendix 16 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the "Listing Rules") will be released on the website of The Stock Exchange of Hong Kong Limited (www.hkex.com.hk) in due course.

RESULTS

The Group's turnover for the year ended 31 March 2001 amounted to HK$212 million (2000: HK$342.6 million). Net loss attributable to shareholders amounted to HK$47.5 million (2000: net profit of HK$21.1 million).

DIVIDENDS

No interim dividend was paid during the year under review (2000: Nil). The directors do not recommend the payment of a final dividend (2000: 1 cent per share).

REVIEW OF OPERATIONS

The year under review was a year of changes, restructuring and consolidation for the Group. The drop in turnover was mainly due to the further slow down of the Group's property investment and contracting businesses as a result of the sluggish property market, while the loss was mainly attributable to the write-off of investment in the Group's technology-related business and the provisions on contracting business, investments and certain onerous contracts relating to the Group's commercial management business.

With the "burst" of the "technology bubble" during the year, after due and careful review of the future possible profitability and cashflow of the Group's technology-related business, the Board decided not to continue with the China Culture Information Net project and the co-operation with Institute of Computing Technology of the Chinese Academy of Sciences.

Sub-licensing and Management of Chinese Wet Markets

The Group currently operates 11 Chinese wet markets in Hong Kong with a total area of over 215,000 sq. ft. I am also pleased to announce that the Hong Kong Housing Authority has recently granted to the Group the lease for the Chinese wet market at Tin Chak Shopping Cente, Tin Shui Wai, with a floor area of over 38,000 sq. ft.. Being the largest single private operator of Chinese wet markets in Hong Kong, the Group's business in this area continues to grow and provide steady profit contribution to the Group.

Sub-licensing and Management of Shopping Centres

The Group currently manages and operates 10 shopping centres with a total floor area of over 1.7 million sq. ft. which provide steady profit contribution to the Group. However, the Group's loss reported for the year under review was mainly attributable to the provision for an onerous contract in relation to a shopping centre.

Car Park Management

The car park occupancy rate at the car parks operated by the Group recorded a decline due to the sluggish economy. In accordance with the Group's accounting policy, appropriate provisions for certain onerous contracts were made during the year under review. Barring unforeseen circumstances, a positive contribution to Group result is expected in the coming years.

Pharmaceutical Business

With a view to securing the Group's long-term profit base, apart from the continued expansion of the Group's commercial management business, the Board had decided to diversify into the pharmaceutical business.

The Group's efforts to diversify into the pharmaceutical business were rewarded by the acquisition of the controlling interest in Wai Yuen Tong Medicine Company Limited ("WYT Medicine"), which was completed in February 2001. With its reputable and long-established business, the directors are confident that WYT Medicine will generate a steady and stable income for the Group.

Since the acquisition of WYT Medicine, the Group has taken further steps in its strategy to diversify into the pharmaceutical business. In April 2001, the Group acquired an approximately 19% interest in Luxembourg Medicine Company Limited, which is principally engaged in the manufacturing and sale of medical products under the brand name of "Madam Pearl". More recently, as detailed in the announcement made by the Group on 18 June 2001, the Group has entered into an agreement under which it would subscribe for a 22% interest in a company which will hold a 80% equity interest in Hunan Xiangya Pharmaceutical Company Limited, a joint venture in Hunan Province with an affiliate of Hunan Medical University.

Investments

Due to the change in market conditions and in accordance with the Group's accounting policy, certain investments (including the Group's shareholding in Town Health International Holdings Company Limited and investment in Whampoa Gourmet Place at Hunghom) were written down to their market/recoverable value.

Building Related Contracting Business

The falling property market had caused this area of business to slow down further. Due to some unexpected claims on certain projects, further provisions were made during the year.

Financial Resources and Liquidity

The audited consolidated balance sheet shows net current assets of over HK$122.9 million as at 31 March 2001 and the Group currently maintains bank deposits of over HK$189 million and long-term financial investments of approximately US$1.6 million. The Group's gearing ratio as at 31 March 2001 was approximately 0.28 (based on the Group's total borrowings and total capital and reserves of approximately HK$44.4 million and HK$159.9 million, respectively, as at 31 March 2001).

PROSPECTS

With the strong financial resources available, the Group continues actively to seek further high quality investments which the Board believes will enhance the Group's financial position and return.

AUDIT COMMITTEE

Pursuant to the requirements of the revised Code of Best Practice set out in Appendix 14 of the Listing Rules, the Company set up an audit committee with written terms of reference, comprising two independent non-executive directors of the Company. A meeting of the audit committee was held to review the Group's annual results for year ended 31 March 2001 before they were presented to the Board for approval.

PURCHASE, REDEMPTION OR SALE OF LISTED SECURITIES

Neither the Company, nor any of its subsidiaries purchased, sold or redeemed any of the Company's listed securities during the year.

COMPLIANCE WITH THE CODE OF BEST PRACTICE

In the opinion of the directors, the Company has complied with the Code of Best Practice as set out in Appendix 14 of the Listing Rules throughout the accounting period, save that the independent non-executive directors of the Company are not appointed for specific terms, but are subject to retirement by rotation and re-election at the annual general meeting of the Company in accordance with the Company's bye-laws.

By Order of the Board

Tang Ching Ho

Chairman and Managing Director

Hong Kong, 6 July 2001

NOTICE OF ANNUAL GENERAL MEETING

NOTICE IS HEREBY GIVEN that the Annual General Meeting of the Members of the Company will be held at Garden Rooms A-B, 2nd Floor, Hotel Nikko Hongkong, 72 Mody Road, Tsimshatsui East, Kowloon, Hong Kong on Monday, 13 August 2001 at 3:00 p.m. for the following purposes:-

1. To receive and consider the Audited Consolidated Financial Statements and the Reports of the Directors and Auditors for the year ended 31 March 2001.

2. To re-elect Mr. Chan Chun Hong, Thomas as an executive director.

3. To re-elect Dr. Lee Peng Fei, Allen as an independent non-executive director.

4. To re-appoint Auditors and to authorise the Board of Directors to fix their remuneration.

5. As special business, consider and, if thought fit, pass with or without amendments the following resolutions as Ordinary Resolutions:

(A) "THAT:

(a) subject to paragraph (c) below, the exercise by the directors of the Company ("Directors") during the Relevant Period (as hereinafter defined) of all the powers of the Company to allot, issue and deal with additional shares of HK$0.01 each in the capital of the Company ("Shares") or securities convertible into Shares, or options, warrants or similar rights to subscribe for any Shares, and to make or grant offers, agreements and options which might require the exercise of such power, subject to and in accordance with all applicable laws, be and is hereby generally and unconditionally approved;

(b) the approval in paragraph (a) above shall be in addition to any other authorisations given to the Directors and shall authorise the Directors during the Relevant Period to make or grant offers, agreements and options which might require the exercise of such power after the end of the Relevant Period;

(c) the aggregate nominal amount of share capital allotted or agreed conditionally or unconditionally to be allotted (whether pursuant to an option or otherwise) by the Directors pursuant to the approval in paragraph (a) above, otherwise than pursuant to:

(i) a Rights Issue (as hereinafter defined);

(ii) the exercise of rights of subscription or conversion under terms of any warrants issued by the Company or any securities which are convertible into Shares;

(iii) the exercise of any option under the share option scheme or similar arrangement for the time being adopted for the grant or issue to officers and/or employees of the Company and/or any of its subsidiaries of Shares or rights to acquire Shares; and

(iv) any scrip dividend or similar arrangement providing for the allotment of shares in lieu of the whole or part of a dividend on the Shares in accordance with the bye-laws of the Company in force from time to time,

shall not exceed 20 per cent. of the aggregate nominal amount of share capital of the Company in issue at the date of passing this Resolution and the said approval shall be limited accordingly;

(d) subject to the passing of each of the paragraphs (a), (b) and (c) of this Resolution, any prior approvals of the kind referred to in paragraphs (a), (b) and (c) of this Resolution which had been granted to the Directors and which are still in effect be and are hereby revoked; and

(e) for the purpose of this Resolution:

"Relevant Period" means the period from the passing of this Resolution until whichever is the earlier of:-

(i) the conclusion of the next annual general meeting of the Company;

(ii) the expiration of the period within which the next annual general meeting of the Company is required by any applicable law or the bye-laws of the Company to be held; or

(iii) the revocation or variation of the authority given under this Resolution by ordinary resolution of the shareholders of the Company in general meeting; and

"Rights Issue" means the allotment, issue or grant of Shares pursuant to an offer of Shares open for a period fixed by the Directors to holders of the Shares or any class thereof on the register on a fixed record date in proportion to their then holdings of such Shares or class thereof (subject to such exclusion or other arrangements as the Directors may deem necessary or expedient in relation to fractional entitlements or having regard to any restrictions or obligations under the laws of, or the requirements of, any recognised regulatory body or stock exchange in any territory applicable to the Company)."

(B) "THAT:

(a) subject to paragraph (b) below, the exercise by the directors of the Company ("Directors") during the Relevant Period (as hereinafter defined) of all the powers of the Company to repurchase shares of HK$0.01 each in the capital of the Company ("Shares") on The Stock Exchange of Hong Kong Limited or on any other stock exchange on which the Shares may be listed and recognised for this purpose by the Securities and Futures Commission and The Stock Exchange of Hong Kong Limited for this purpose ("Reorganised Stock Exchange") and, subject to and in accordance with all applicable laws and the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited or those of any other Reorganised Stock Exchange, be and is hereby generally and unconditionally approved;

(b) the aggregate nominal amount of the Shares which may be repurchased by the Company pursuant to the approval in paragraph (a) above shall not exceed 10 per cent. of the aggregate nominal amount of the share capital of the Company in issue at the date of passing of this Resolution, and the said approval shall be limited accordingly;

(c) subject to the passing of each of the paragraphs (a) and (b) of this Resolution, any prior approvals of the kind referred to in paragraphs (a) and (b) of this Resolution which had been granted to the Directors and which are still in effect be and are hereby revoked; and

(d) for the purpose of this Resolution:

"Relevant Period" means the period from the passing of this Resolution until whichever is the earlier of:-

(i) the conclusion of the next annual general meeting of the Company;

(ii) the expiration of the period within which the next annual general meeting of the Company is required by any applicable laws or bye-laws of the Company to be held; or

(iii) the revocation or variation of the authority given under this Resolution by ordinary resolution of the shareholders of the Company in general meeting."

(C) "THAT conditional upon the resolutions set out in paragraphs (A) and (B) of item 5 in the notice convening of this meeting ("Notice"), the general mandate granted to the directors of the Company ("Directors") to exercise the powers of the Company to allot, issue and otherwise deal with shares of the Company pursuant to resolution set out in paragraph (A) of item 5 set out in the Notice be and is hereby extended by the addition to the aggregate nominal amount of the share capital of the Company which may be allotted by the Directors pursuant to such general mandate an amount representing the aggregate nominal amount of the share capital of the Company repurchased by the Company under the authority granted pursuant to resolution set out in paragraph (B) of item 5 set out in the Notice, provided that such amount shall not exceed 10 per cent. of the aggregate nominal amount of the share capital of the Company in issue at the date of passing of this Resolution."

By Order of the Board

Chan Chun Hong Thomas

Director and Company Secretary

Hong Kong, 6 July 2001

Notes:

(a) A member entitled to attend and vote at the above Meeting is entitled to appoint one or more proxies to attend and, on a poll, vote in his stead. A proxy need not be a member of the Company.

(b) To be valid, a proxy form together with any power of attorney or other authority, if any, under which it is signed, or a notarially certified copy of such power or authority, must be lodged with the Company's Share Registrars in Hong Kong, Tengis Limited, 4th Floor, Hutchison House, 10 Harcourt Road, Central, Hong Kong not less than 48 hours before the time fixed for holding the Meeting.

1. Concerning the resolution set out in paragraph (A) of item 5 of this Notice, the Directors of the Company wish to state that they have no immediate plans to issue new shares of the Company.

Please also refer to the published version of this announcement in the i-Mail.