Wang On Group Limited

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

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

If you have sold or transferred all your shares in Wang On Group Limited (the “Company”), you should at once hand this circular with the accompanying proxy form 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.

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

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(incorporated in Bermuda with limited liability)

MAJOR TRANSACTION

DISPOSAL OF 75.79% INDIRECT SHAREHOLDING IN WAI YUEN TONG MEDICINE COMPANY LIMITED

Joint financial advisers to Wang On Group Limited

KINGSTON CORPORATE FINANCE LIMITED

Kingsway Capital Limited

A notice convening a special general meeting of the shareholders of Wang On Group Limited to be held at 26th Floor, Asia Pacific Finance Tower, Citibank Plaza, 3 Garden Road, Hong Kong on Wednesday, 3rd July, 2002 at 9:30 a.m. is set out on pages 149 to 150 of this circular. Whether or not you intend to be present at the meeting, you are requested to complete and return the enclosed form of proxy in accordance with the instructions printed thereon and deposit with the Company’s Hong Kong branch share registrar, Tengis Limited, at 4th Floor, Hutchison House, 10 Harcourt Road, Central, Hong Kong as soon as possible but in any event not less than 48 hours before the time appointed for the holding of the meeting. Completion and return of the form of proxy will not preclude you from attending and voting in person at the meeting or at any adjourned meeting thereof should you so desire.

17th June, 2002

	Page
Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
Letter from the Board
Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	7
The Agreement dated 22nd May, 2002 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	8
Financial effect of the Wang On Disposal on the Wang On Group . . . . . . . . . . . . . . .	15
Information on Reliance City and Plenty Time . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	17
Information on the WYT Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	18
Information on Dailywin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	22
The Placing Agreement dated 13th June, 2002 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	25
Use of proceeds from the Placing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	26
Shareholding structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	26
Maintenance of the listing status of Dailywin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	29
Review of operations and prospects since 31st March, 2001 . . . . . . . . . . . . . . . . . . . .	30
Reasons for the Wang On Disposal. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	31
Whitewash Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	33
SGM. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	33
Recommendation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	34
Further information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	34
Appendix I – Financial information relating to Wang On Group . . . . . . . . . . . . .	35
Appendix II – Financial information relating to Dailywin . . . . . . . . . . . . . . . . . . . .	98
Appendix III – General information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	140
Notice of the SGM. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	149

– i –

DEFINITIONS

In this circular (other than in the notice of the SGM), the following expressions have the meanings respectively set opposite them unless the context otherwise requires:

“2003 WYT Audited Profit” the audited consolidated net profit after tax of the WYT Group for the year ending 31st March, 2003
“Agreement” the agreement dated 22nd May, 2002 entered into between Dailywin, Wang On and Town Health in respect of, among other things, the Disposal
“Announcement” the announcement dated 22nd May, 2002 issued jointly by Dailywin, Wang On and Town Health in respect of the Disposal
“associate(s)” has the meaning ascribed to it under the Listing Rules
“Business Day” a day (other than Saturday) on which banks are generally open for business in Hong Kong
“China Ocean” China Ocean Investments Limited, a company incorporated in Hong Kong
“Consideration Share(s)” 10,308,888,666 and 3,291,111,334 new Dailywin Share(s), which will rank pari passu in all respects, including the rights to receive any dividend or distribution, with all other Dailywin Shares in issue on the date of completion of the Disposal, to be issued as part of the consideration for the Disposal at the issue price of HK$0.01 per new Dailywin Share to Wang On and Town Health (or their respective nominees) respectively
“Conversion Shares” the new Dailywin Shares, which will rank pari passu in all respects, including the rights to receive any dividend or distribution, with all other Dailywin Shares in issue on the date of issue of the conversion notice, fall to be issued by Dailywin upon exercise of the conversion rights under the Convertible Notes
“Convertible Notes”
the convertible notes having aggregate principal amounts of HK$64 million and HK$20 million to be issued to Wang On and Town Health (or their respective nominee) respectively by Dailywin as part of the consideration for the Disposal

– 1 –

DEFINITIONS

“Dailywin”	Dailywin Group Limited, a company incorporated in Bermuda
	with limited liability and the shares of which are listed on the
	main board of the Stock Exchange
“Dailywin Group”	Dailywin and its subsidiaries
“Dailywin Share(s)”	shares of HK$0.01 each in the capital of Dailywin
“Director(s)”	director(s) of the Company
“Disposal”	the disposal by Wang On and Town Health of the entire issued
	share capital of Reliance City and Plenty Time respectively to
	Dailywin pursuant to the Agreement
“Executive”	the Executive Director of the Corporate Finance Division of the
	SFC or any of his delegates
“Existing Loans”	the various existing loans having an aggregate principal amount
	of HK$64,850,000 advanced by Rich Time to Dailywin and
	which remain outstanding
“GEM”	the Growth Enterprise Market of the Stock Exchange
“Guaranteed Profit”	HK$18 million, being the amount of the audited consolidated
	net profit after tax of the WYT Group for the year ending 31st
	March, 2003 guaranteed severally by each of Wang On and
	Town Health in the proportions of their respective indirect
	interests in WYT Medicine to be sold to Dailywin pursuant to
	the Agreement
“HK$”	Hong Kong Dollars, the lawful currency of Hong Kong
“Hong Kong”	the Hong Kong Special Administrative Region of the PRC
“Increase in Authorised	the increase in the authorised share capital of Dailywin from
Share Capital”	HK$80,000,000 to HK$600,000,000 by the creation of
	52,000,000,000 Dailywin Shares
“Independent Shareholders”	the shareholders of Dailywin (other than Wang On, the
	directors of Dailywin and their respective associates and parties
	acting in concert with them)

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DEFINITIONS

“Independent Third Parties”	parties not connected with the directors, chief executives or
	substantial shareholders of Wang On or any of its subsidiaries
	or an associate of any of them
“Issue Date”	the date of issue of the Convertible Notes
“Last Trading Day”	15th May, 2002, being the last trading day before the suspension
	of the trading of the Dailywin Shares on the Stock Exchange
	pending the publication of the Announcement
“Latest Practicable Date”	13th June, 2002, being the latest practicable date prior to the
	printing of this circular for the purpose of ascertaining certain
	information for inclusion in this circular
“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. Chan”	Mr. Chan Chun Hong, Thomas, the managing director of
	Dailywin and an executive Director
“Mr. Tang”	Mr. Tang Ching Ho, the chairman and a director of Dailywin,
	who together with his associates own approximately 19.37%
	shareholding interest in Wang On and who is also the chairman
	of the Company and a Director
“Option Deeds”	four option deeds each dated 28th February, 2001 executed by
	Royal Focus Limited, Bio-Project Limited and (except two of
	such option deeds) the sole shareholder of Bio-Project Limited
	in relation to the granting of certain call and put options in
	respect of shares in WYT Medicine, as detailed in the circular
	of Wang On dated 8th February, 2001
“Other Shareholders”	three individual shareholders of WYT Medicine, namely Messrs
	Ho Wai Gay, Poon Shu Keung and Poon Chun Wing, who are
	the off-springs of the founders or relatives of the founders of
	WYT Medicine and are independent of and not connected with
	the directors, chief executive and substantial shareholders of
	Wang On or its subsidiaries or an associate of any of them

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DEFINITIONS

“Placing”	the placement of the Placing Shares to Independent Third
	Parties by the Placing Agent at the Placing Price upon
	completion of the Wang On Disposal or the Disposal
“Placing Agent”	Kingston Securities Limited, a dealer registered under the
	Securities Ordinance (Chapter 333 of the Laws of Hong Kong)
	and which is not connected with the directors, chief executives
	or substantial shareholders of Wang On or any of its subsidiaries
	or an associate of any of them
“Placing Agreement”	the conditional placing agreement dated 13th June, 2002
	entered into between the Company and the Placing Agent in
	respect of the Placing
“Placing Price”	the placing price of HK$0.01 per Placing Share
“Placing Share(s)”	4,500,000,000 Dailywin Shares, or in the event that the Town
	Health Disposal does not proceed, 6,000,000,000 Dailywin
	Shares, indirectly held by Wang On immediately upon
	completion of the Wang On Disposal
“Plenty Time”	Plenty Time Investments Limited, a company incorporated in
	the British Virgin Islands with limited liability and a wholly-
	owned indirect subsidiary of Town Health
“PRC”	The People’s Republic of China
“Reliance City”	Reliance City Investments Limited, a company incorporated in
	the British Virgin Islands and a wholly-owned indirect subsidiary
	of Wang On
“Rich Time”	Rich Time Strategy Limited, a company incorporated in the
	British Virgin Islands and a wholly-owned subsidiary of Wang
	On. Rich Time currently owns approximately 20.27% of the
	issued share capital of Dailywin
“SDI Ordinance”	Securities (Disclosure of Interests) Ordinance (Chapter 396 of
	the Laws of Hong Kong)
“SFC”	The Securities and Futures Commission of Hong Kong

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DEFINITIONS

“SGM” the special general meeting of Wang On to be convened for considering and approving, among others, the Wang On Disposal (and all transactions to be entered into by Wang On under the Agreement) “Share(s)” share(s) of HK$0.01 each in the share capital of the Company “Stock Exchange” The Stock Exchange of Hong Kong Limited “Takeovers Code” the Hong Kong Code on Takeovers and Mergers “Town Health” Town Health International Holdings Company Limited, a company incorporated in the Cayman Islands with limited liability the shares of which are listed on GEM “Town Health Disposal” the disposal by Town Health of the entire issued share capital of Plenty Time pursuant to the Agreement, forming part of the Disposal “US” the United States of America “Wang On” or “the Company” Wang On Group Limited, a company incorporated in Bermuda with limited liability the shares of which are listed on the main board of the Stock Exchange “Wang On Disposal” the disposal by Wang On of the entire issued share capital of Reliance City pursuant to the Agreement, forming part of the Disposal “Wang On Group” Wang On and its subsidiaries “Whitewash Waiver” a waiver pursuant to Note 1 of the Notes on Dispensations from Rule 26 of the Takeovers Code of the obligation of Wang On and Town Health and parties acting in concert with them to make a mandatory general offer for all the issued Dailywin Shares and outstanding convertible bonds and share options of Dailywin not already owned or acquired by Wang On and Town Health and parties acting in concert with them as a result of the issue of the Consideration Shares or to make a general offer for all the issued Dailywin Shares and outstanding convertible bonds and share options of Dailywin (if any) and Convertible Notes (if any) not at that time owned by Wang On and Town Health and parties acting in concert with them as a result of the conversion of any of the Convertible Notes under Rule 26 of the Takeovers Code

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DEFINITIONS

“WYT Group”	WYT Medicine and its subsidiaries
“WYT Medicine”	Wai Yuen Tong Medicine Company Limited, a company
	incorporated in Hong Kong with limited liability
“HK$”	Hong Kong dollars, the lawful currency of Hong Kong
“£”	pound sterling
“%”	per cent.

In this circular, unless otherwise specifically provided, amounts in £ have been translated into Hong Kong dollars at the rate of £1 = HK$11.14. Such conversion rate is for the purpose of convenience and for indication and reference purposes only and should not be construed as any representation that the £ amounts or the Hong Kong dollar amounts have been, could have been or could be converted into £ or Hong Kong dollars, as the case may be, at the above rate or at all.

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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 Deputy Managing Director) Mr. Chan Chun Hong, Thomas

Registered office: Clarendon House 2 Church Street 41 Cedar Avenue Hamilton HM 11 Bermuda

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

17th June, 2002

To the Shareholders

Dear Sir or Madam,

MAJOR TRANSACTION DISPOSAL OF 75.79% INDIRECT SHAREHOLDING IN WAI YUEN TONG MEDICINE COMPANY LIMITED

INTRODUCTION

It was announced on 22nd May, 2002 that Wang On and Town Health had entered into the Agreement to sell to Dailywin the entire issued share capital of Reliance City and Plenty Time respectively for an aggregate consideration of HK$220 million. Reliance City and Plenty Time are beneficially interested in approximately 75.79% and 24% respectively of the entire issued voting share capital of WYT Medicine. The aggregate consideration of HK$220 million, of which approximately HK$167 million is receivable by the Wang On Group, will be satisfied as to HK$136 million by the issue of the Consideration Shares and as to HK$84 million by the issue of the Convertible Notes. The Consideration Shares and the Convertible Notes will be

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LETTER FROM THE BOARD

issued to Wang On and Town Health (or their respective nominees) in accordance with the approximate proportions of their respective indirect interests in WYT Medicine to be sold to Dailywin under the Agreement.

As announced on 13th June, 2002, Wang On and the Placing Agent entered into a conditional placing agreement pursuant to which the Placing Agent agreed to place the Placing Shares to Independent Third Parties at the Placing Price.

The Wang On Disposal constitutes a major transaction for the Company under the Listing Rules and is subject to shareholders’ approval at the SGM. To the best knowledge of the Directors, no shareholders of Wang On have any material interest in the Wang On Disposal which would require them to abstain from voting in respect of the resolution proposed at the SGM.

The purpose of this circular is to give you further information regarding, among other things, the Disposal and the Placing and to give you the notice convening the SGM to consider and approve, among other things, the Wang On Disposal (and all transactions to be entered into by Wang On under the Agreement).

THE AGREEMENT DATED 22ND MAY, 2002

Vendors : Wang On and Town Health

Town Health (through its wholly-owned subsidiary, Plenty Time) is a substantial shareholder of WYT Medicine having a 24% beneficial interest in its issued voting share capital. WYT Medicine is an approximately 75.79% indirect non wholly-owned subsidiary of Wang On. Accordingly, Town Health is a connected person of Wang On pursuant to the Listing Rules.

Wang On is a connected person of Dailywin pursuant to the Listing Rules since it is a substantial shareholder of Dailywin interested in approximately 20.27% of the total issued Dailywin Shares. Mr. Tang and Mr. Chan are the common directors of Dailywin and Wang On. To the best knowledge of the Directors, Wang On has no shareholder having an interest of 30% or more in its issued share capital. Mr. Tang, the chairman of Wang On and a Director, together with his associates, own an approximately 19.37% shareholding interest in Wang On. Mr. Tang is also the chairman and a director of Dailywin.

Purchaser : Dailywin

Assets involved : the entire issued share capital of Reliance City and Plenty Time

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LETTER FROM THE BOARD

Consideration

Pursuant to the Agreement, Dailywin has conditionally agreed to acquire the entire issued share capital of Reliance City and Plenty Time from Wang On and Town Health respectively for an aggregate consideration of HK$220 million. Reliance City and Plenty Time are beneficially interested in approximately 75.79% and 24% respectively in the entire issued voting shares of WYT Medicine. Save for their respective interests in WYT Medicine, Reliance City and Plenty Time do not carry on any business or have any outstanding liabilities or other assets. The aggregate consideration of HK$220 million for the Disposal will be satisfied as to HK$136 million by the issue of Consideration Shares and as to HK$84 million by the issue of the Convertible Notes. The Consideration Shares, which will be issued at HK$0.01 per Consideration Share, represent approximately 72 times the issued share capital of Dailywin as at the Latest Practicable Date and approximately 98.6% of the issued share capital of Dailywin as enlarged by the issue of the Consideration Shares.

The Consideration Shares and the Convertible Notes will be issued to Wang On and Town Health (or their nominees) in accordance with the approximate proportions of their respective indirect interests in WYT Medicine to be sold to Dailywin under the Agreement as follows:

Wang On Town Health Total	No. of % of Consideration Consideration Shares Shares 10,308,888,666 75.8% 3,291,111,334 24.2% 13,600,000,000 100.0%	Amount of % of Convertible Convertible Notes Notes HK$ 64,000,000 76.2% 20,000,000 23.8% 84,000,000 100.0%	Amount of % of Convertible Convertible Notes Notes HK$ 64,000,000 76.2% 20,000,000 23.8% 84,000,000 100.0%
			100.0%

The 10,308,888,666 Consideration Shares to be issued to Wang On (or its nominee) in connection with the Wang On Disposal represent approximately 54 times the issued share capital of Dailywin as at the Latest Practicable Date and approximately 74.76% of the issued share capital of Dailywin as enlarged by the issue of the Consideration Shares. The 3,291,111,334 Consideration Shares to be issued to Town Health (or its nominee) in connection with the Town Health Disposal represent approximately 17 times the issued share capital of Dailywin and approximately 23.86% of the issued share capital of Dailywin as enlarged by the issue of the Consideration Shares.

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LETTER FROM THE BOARD

The aggregate consideration of HK$220 million for the Disposal was arrived at after arm’s length negotiations between all parties to the Agreement by reference to the following:

the historical net profits of the WYT Group. For the year ended 31st December, 1999, the fifteen months ended 31st March, 2001 and the year ended 31st March, 2002, the WYT Group recorded an audited profit attributable to shareholders of approximately HK$9,136,000, HK$12,413,000 and HK$14,913,000 respectively;
the Guaranteed Profit of HK$18 million. In the event that the 2003 WYT Audited Profit is less than the Guaranteed Profit, Wang On and Town Health will pay to Dailywin a cash sum determined by the formulae as set out in the paragraph headed “Guaranteed Profit” below; and
the expected future growth potential of the WYT Group after taking into account the WYT Group’s well-known and established brand name of “Wai Yuen Tong”, the established distribution and retailing network of the WYT Group and the increased popularity of traditional Chinese medicines and herbs.

Based on the Guaranteed Profit, the aggregate consideration of HK$220 million represents a price-earnings ratio of approximately 12.248 times (being (HK$220 million/ 99.79%*)/HK$18 million).

(*being the aggregate shareholding interest of Wang On and Town Health in the issued voting share capital of WYT Medicine.)

The Consideration Shares to be issued to Wang On and Town Health will, upon issue, rank pari passu in all respects with all other Dailywin Shares in issue at that time.

Based on the closing price of HK$0.114 per Dailywin Share as quoted on the Stock Exchange on the Latest Practicable Date, and assuming the issue of the Consideration Shares upon the completion of both the Wang On Disposal and the Town Health Disposal and the full conversion of the Conversion Shares to be issued under the Convertible Notes at a conversion price of HK$0.01 per Dailywin Share, the aggregate value of the Consideration Shares and the Conversion Shares is HK$2,508 million (being HK$0.114 x (13,600 million Consideration Shares + 8,400 million Conversion Shares)).

Issue price and conversion price

The issue price per Consideration Share and the initial conversion price per Conversion Share is HK$0.01 which represents:

a discount of approximately 93.87% to the closing price of HK$0.163 per Dailywin Share as quoted on the Stock Exchange on the Last Trading Day;

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LETTER FROM THE BOARD

a discount of approximately 93.51% to the average closing price of HK$0.154 per Dailywin Share for the 10 trading days up to and including the Last Trading Day;
a discount of approximately 92.37% to the average closing price of HK$0.131 per Dailywin Share for the 30 trading days up to and including the Last Trading Day;
a discount of approximately 91.23% to the closing price of HK$0.114 per Dailywin Share as quoted on the Stock Exchange on the Latest Practicable Date;
a discount of approximately 91.27% to the average closing price of HK$0.1145 per Dailywin Share for the 10 trading days up to and including the Latest Practicable Date; and
a discount of approximately 92.58% to the average closing price of HK$0.1348 per Dailywin Share for the 30 trading days up to and including the Latest Practicable Date.

Principal terms of the Convertible Notes

Issuer : Dailywin

Principal amount : HK$84 million in aggregate will be issued to Wang On and Town Health (or their respective nominees)

Maturity date : the date falling on the last day of a period of 3 years from the Issue Date

Interest : 3.8% per annum, payable semi-annually in arrears Conversion : The conversion price will be HK$0.01 per Dailywin Share, subject to adjustments, and was agreed after arm’s length negotiations. Subject to the terms of the Convertible Notes, holders of the Convertible Notes have the rights to convert the whole or any part representing HK$500,000 or an integral multiple thereof of the outstanding principal amount of the Convertible Notes into Conversion Shares at any time from the Issue Date and prior to the maturity date of the Convertible Notes.

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LETTER FROM THE BOARD

Redemption : Dailywin may at any time after the Issue Date and before the maturity date, by giving written notice to the holders of the Convertible Notes, redeem all or part of the outstanding principal amount of the Convertible Notes (in an integral multiple of HK$500,000), without penalty, on a pro rata basis, to the holders of the Convertible Notes.
Conversion Shares : The Conversion Shares will rank pari passu in all respects with the Dailywin Shares in issue on the date on which notice of conversion is served by the holders of the Convertible Notes upon exercise of the conversion rights.
Based on the initial conversion price of HK$0.01 per Dailywin Share, 8,400,000,000 Conversion Shares, representing approximately 44 times the existing issued Dailywin Shares, approximately 60.9% of the issued share capital of Dailywin as enlarged by the issue of the Consideration Shares and approximately 37.9% of the issued share capital of Dailywin as enlarged by the issue of the Consideration Shares and the Conversion Shares, will be issued upon full conversion of the Convertible Notes.
Voting rights : The holders of the Convertible Notes will not be entitled to attend or vote at any general meeting of Dailywin by reason only of them being the holders of the Convertible Notes.
Transferability : Subject to all applicable laws and regulations, the Convertible Notes are freely transferable and may be transferred in its entirety or in parts representing a principal amount of HK$500,000 or an integral multiple thereof. (In the event that Dailywin is aware of any transfer of the Convertible Notes to any of its connected persons (as defined under the Listing Rules), it will notify the Stock Exchange details of such transfers as soon as possible.)
Events of default : Events of default include, among certain events which are common for transactions of a similar type, the cessation of the listing of the Dailywin Shares on the Stock Exchange or a recognized stock exchange for a continuous period of 14 Business Days due to the default of Dailywin.
Listing : No listing of the Convertible Notes will be sought on the Stock Exchange or any other stock exchanges.

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LETTER FROM THE BOARD

Guaranteed Profit

Each of Wang On and Town Health has agreed to severally warrant, guarantee and undertake to Dailywin that the 2003 WYT Audited Profit shall not be less than HK$18 million, representing the Guaranteed Profit.

In the event that the 2003 WYT Audited Profit is less than the Guaranteed Profit, Wang On and Town Health will pay to Dailywin a cash sum to be determined as follows:

in respect of Wang On:

(HK$18 million – 2003 WYT Audited Profit) x 12.248 x 75.79%/99.79%

in respect of Town Health:

(HK$18 million – 2003 WYT Audited Profit) x 12.248 x 24.00%/99.79%

In the event that the 2003 WYT Audited Profit is a negative figure, Dailywin is entitled to receive a cash sum up to a maximum amount of HK$220 million (being the total consideration for the Disposal).

In the event that Wang On and Town Health are required to pay to Dailywin the cash sums as calculated above, such liability will first be set-off against the principal amount then outstanding under the Convertible Notes held by them and any balance of such liability remaining after such set-off shall be paid by Wang On and Town Health in cash.

The Company will make an announcement if the Guaranteed Profit has not been met as soon as practicable after the audited account of WYT Group for the year ending 31st March, 2003 is available. The Company will also disclose in its annual report for the year ending 31st March, 2003 the following: (i) whether the Guaranteed Profit has been met; (ii) details of the shortfall (if any); and (iii) whether each of Wang On and Town Health has paid its respective portion of any shortfall of the 2003 WYT Audited Profit to the Guaranteed Profit.

Conditions precedent

Completion of the Disposal is subject to, among other things, the following conditions being fulfilled:

(a) the Independent Shareholders in general meeting approving by poll the Agreement, the issue of the Consideration Shares, the Convertible Notes and the Conversion Shares, the Whitewash Waiver and other transactions contemplated in or incidental to the Agreement in accordance with the Listing Rules and the Takeovers Code;

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LETTER FROM THE BOARD

(b) the shareholders of Dailywin in general meeting approving the Increase in Authorised Share Capital;
(c) the shareholders of Wang On approving the Wang On Disposal at the SGM;
(d) the shareholders of Town Health in general meeting approving the Town Health Disposal;
(e) the Executive granting the Whitewash Waiver;
(f) if so required, the Bermuda Monetary Authority having granted its permission for the issue of the Consideration Shares, the Conversion Shares and the Convertible Notes, and the free transferability of the Consideration Shares and the Conversion Shares; and
(g) the Stock Exchange having granted listing of and permission to deal in the Consideration Shares and the Conversion Shares.

In the event that any of the above conditions (other than the condition in paragraph (d) above) has not been fulfilled on or before 31st August, 2002 (or such later dates as may be agreed between the parties), Dailywin, Wang On and Town Health shall not be bound to proceed with the Disposal and the Agreement shall cease to be of any effect save in respect of claims arising out of any antecedent breach of the Agreement. A separate announcement will be made if the Agreement lapses by reason of the non-fulfillment of the conditions.

Pursuant to the Agreement, condition (e) stated above cannot be waived. If all of the conditions are fulfilled by the above date other than condition (d) as stated above, the Wang On Disposal will proceed but not the Town Health Disposal.

Completion

Completion of the Disposal or the Wang On Disposal (as the case may be) shall take place on the seventh Business Day after the fulfillment of the conditions, or such other date as the relevant parties may agree in writing prior to completion.

Subject to the conditions stated above, the Agreement provides that (i) completion of the Wang On Disposal, being part of the Disposal, will take place if approval from its shareholders has been obtained by Wang On even where the condition as to the approval of the shareholders of Town Health is not fulfilled and the Town Health Disposal does not proceed; and (ii) the Disposal (including the Town Health Disposal) will not proceed if Wang On fails to obtain the necessary approval from its shareholders at the SGM.

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LETTER FROM THE BOARD

The board of directors of Dailywin is currently made up of 6 directors, comprising 3 executive directors and 3 independent non-executive directors. Mr. Tang and Mr. Chan are the common directors of Dailywin and Wang On. As stated in the Announcement, the board of directors of Dailywin has no present intention to change the composition of the board.

FINANCIAL EFFECT OF THE WANG ON DISPOSAL ON THE WANG ON GROUP

The unaudited pro forma adjusted combined net tangible asset value of the Wang On Group immediately following the completion of the Wang On Disposal, the Town Health Disposal and the Placing will be approximately HK$496.3 million, equivalent to approximately HK$0.042 per Share. This represents an increase of approximately 25% as compared to the unaudited pro forma adjusted consolidated net tangible assets of the Wang On Group immediately before the Wang On Disposal and the Town Health Disposal of approximately HK$396.8 million, equivalent to approximately HK$0.034 per Share.

The unaudited pro forma adjusted combined net tangible asset value of the Wang On Group immediately following the completion of the Wang On Disposal (but assuming that the Town Health Disposal cannot proceed) and the Placing will be approximately HK$496.8 million, equivalent to approximately HK$0.042 per Share. This represents an increase of approximately 25% as compared to the unaudited pro forma adjusted consolidated net tangible assets of the Wang On Group immediately before the Wang On Disposal.

The Directors estimated that a gain of approximately HK$36 million will arise after completion of the Wang On Disposal and the Placing. And such gain will be subject to adjustments on the relevant pre-disposal profit of WYT Group and the costs incurred by the

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LETTER FROM THE BOARD

Company in relation to the Disposal. The respective calculation of the estimated gain is as follows:

	Scenario I
	Assuming both the	Scenario II
	Wang On Disposal	Assuming only
	and the Town Health	the Wang On
	Disposal proceed	Disposal proceeds
	HK$’000	HK$’000
Profit on disposal of WYT Group_(Note 1)_	69,450	69,450
Estimated deferred profits of Wang On Group
from disposal of WYT Group_(Note 1)_	(29,500)	(28,800)
	39,950	40,650
Release of the respective portion of the original
goodwill in Dailywin Group by the
Wang On Group upon the Placing	(3,915)	(5,219)
Excess of: share of net assets of Dailywin Group
disposed of_(Note 2)_	(44,840)	(59,776)
Over: gross proceeds from the Placing	45,000	60,000
	160	224
Estimated gain	36,195	35,655

Note 1: Please refer to Note 4 of the unaudited pro forma statement of adjusted combined net tangible assets of the Wang On Group as set out in Appendix I to this circular.

Note: 2: The share of net assets of Dailywin Group disposed of is derived from Wang On Group’s cost of investment in Dailywin Group (net of the value of the Convertible Notes attributable to the Wang On Group) times the relevant portion of interest disposed of under the placement in Scenario I and Scenario II, respectively.

Details of the unaudited pro forma statement of adjusted combined net tangible assets of the Wang On Group are set out in Appendix I to this circular.

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LETTER FROM THE BOARD

INFORMATION ON RELIANCE CITY AND PLENTY TIME

Reliance City, an indirect wholly-owned subsidiary of Wang On, is an investment holding company. The sole asset of Reliance City is the holding of 16,474,363 ordinary shares in WYT Medicine, representing approximately 75.79% of the entire issued voting share capital of WYT Medicine, and 1,316,725 non-voting deferred shares in WYT Medicine. Save for its interest in WYT Medicine, Reliance City does not carry on any business or have any outstanding liabilities or other assets.

The audited combined results of Reliance City, which are calculated using the consolidated concept, for the period from 19th December, 2000 (being the date of acquisition of WYT Medicine by the Wang On Group) to 31st March, 2001 and the year ended 31st March, 2002 (as extracted from Appendix III to Dailywin’s circular dated 17th June, 2002) are set out as follows:

	19th December, 2000	1st April, 2001
	to	to
	31st March, 2001	31st March, 2002
	HK$’000	HK$’000
Turnover	8,959	72,384
Profit before taxation	1,074	17,466
Net profit for the year/period	891	11,303

Plenty Time, an indirect wholly-owned subsidiary of Town Health, is an investment holding company. The sole asset of Plenty Time is the holding of 5,216,970 ordinary shares in WYT Medicine, representing 24% of the entire issued voting share capital of WYT Medicine, and 416,970 non-voting deferred shares in WYT Medicine. Save for its interest in WYT Medicine, Plenty Time does not carry on any business or have any outstanding liabilities or other assets.

The audited results of Plenty Time, which are calculated on a single company level, for the period from 20th December, 2000 (being the date of its incorporation) to 31st March, 2001 and the year ended 31st March, 2002 (as extracted from Appendix III to Dailywin’s circular dated 17th June, 2002) are set out as follows:

	20th December, 2000	1st April, 2001
	to	to
	31st March, 2001	31st March, 2002
	HK$’000	HK$’000
Turnover	–	1,586
(Loss)/Profit before taxation	(10)	1,582
(Loss)/Profit for the year/period	(10)	1,582

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LETTER FROM THE BOARD

INFORMATION ON THE WYT GROUP

The incorporation of the first company within the WYT Group dated back to 28th March, 1980 when WYT Medicine was incorporated in Hong Kong. However, as informed by the founding shareholders of WYT Medicine, the Directors and the directors of Dailywin and Town Health believe that the “Wai Yuen Tong” brand name has a history of over 100 years.

The WYT Group is principally engaged in the business of manufacturing, processing and retailing of traditional Chinese medicine which includes Chinese medicinal products sold under its own brand name “Wai Yuen Tong” and a range of products manufactured by selected medicinal materials with traditional prescription. The WYT Group also retails other herbs and medicinal products and operates a number of traditional Chinese medicine consultation centers.

The audited consolidated results of the WYT Group for the year ended 31st December, 1999 and fifteen months ended 31st March, 2001 and the year ended 31st March, 2002 are set out as follows:

			Fifteen months
		Year ended	ended	Year ended
	31st December,		31st March,	31st March,
		1999	2001	2002
			Note
		HK$’000	HK$’000	HK$’000
Turnover		33,909	39,391	72,384
Profit before taxation		10,947	14,436	17,466
Net profit for the year/period		9,136	12,413	14,913

Note: As a result of Wang On becoming its controlling shareholder in February 2001, WYT Medicine changed its financial year-end date from 31st December to 31st March in February 2001, in order to be consistent with the financial year-end date of Wang On.

The audited consolidated net assets of the WYT Group as at 31st March, 2002 was approximately HK$39,989,000 and the audited consolidated net tangible asset value of the WYT Group as at 31st March, 2002 was approximately HK$39,756,000. The excess of the consideration receivable by Wang On for the Wang On Disposal (i.e., approximately HK$167,089,000) over the audited consolidated net assets of Reliance City as at 31st March, 2002 (i.e., approximately HK$30,308,000 as extracted from Appendix III to Dailywin’s circular dated 17th June, 2002) is approximately HK$136,781,000.

Immediately prior to the Disposal, the issued voting share capital of WYT Medicine was owned as to approximately 75.79% by Reliance City, as to 24% by Plenty Time and as to approximately 0.21% by the Other Shareholders. Wang On, through its wholly-owned

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LETTER FROM THE BOARD

subsidiary, Royal Focus Limited, entered into an agreement to acquire an approximately 99.79% equity interest in WYT Medicine on 19th December, 2000 at a consideration of approximately HK$127 million and subsequently disposed of a 24% interest in WYT Medicine to Plenty Time in March 2001 at a consideration of approximately HK$30 million. Royal Focus Limited transferred its entire shareholding in WYT Medicine to Reliance City on 22nd May, 2002. The Option Deeds entered into by Royal Focus Limited at the time of its original acquisition of an approximately 99.79% interest in WYT Medicine were cancelled immediately before the execution of the Agreement. No additional consideration will be payable by Royal Focus Limited, Bio-Project Limited or the other party to the Option Deeds in connection with the cancellation of the Option Deeds other than the mutual release of each other’s obligations. After completion of the Disposal, Dailywin will have an approximately 99.79% interest in the voting issued share capital of WYT Medicine. The remaining 0.21% interest in the issued voting share capital of WYT Medicine is held by the Other Shareholders and will not be acquired by Dailywin under the Agreement.

The key terms of the Option Deeds as mentioned above were as follows:

Option Deed #1

Option: A call option granted by Bio-Project Limited (“BPL”) to Royal Focus Limited (“RFL”) entitling RFL to purchase from BPL shares in WYT Medicine (if any) which BPL or its nominee had purchased from RFL (the “Sale Shares”) as a result of the exercise of the call options and/ or the put option pursuant to an option deed lapsed on 28th February, 2001 (the “Lapsed Option Deed”).

Exercise right: Exercisable if the consolidated net profit after tax of WYT Medicine falls short of the warranted profit after tax for each of the financial years ended 31st March, 2002 and ending 31st March, 2003 by 10% or more. May be exercised only once within one month from the date of issue of the audited consolidated accounts of WYT Medicine either for the financial year ended 31st March, 2002 or for the financial year ending 31st March, 2003.

Consideration:

HK$125,000,000 x (A/99.79) x (100% - 2 x B)

where A = % represented by the Sale Shares in the entire issued share capital of WYT Medicine
B = % in which the net profits after tax falls short of the warranted profits after tax of HK$14,500,000 for the financial year 2002 or HK$16,000,000 for the financial year 2003, as the case may be.

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LETTER FROM THE BOARD

In the event that the net profit after tax of WYT Medicine from 1st January, 2001 to 31st March, 2001 falls short of HK$2,000,000, BPL shall pay to RFL an amount calculated to be

Amount of shortfall x 76% x 99.79%

Option Deed #2

Option: A call option granted by RFL to BPL entitling BPL or such other party as may be nominated by BPL to purchase all of the shares in WYT Medicine owned by RFL other than those which had been sold to BPL or its nominee pursuant to the exercise of the call options and the put option pursuant to the Lapsed Option Deed (the “Called Shares”).

Exercise right: Exercisable either from 14th February, 2002 up to and including 31st March, 2002 (the “First Call Option”) or if the First Call Option is not exercised, from 14th February, 2003 up to and including 31st March, 2003 (the “Second Call Option”).

Consideration: HK$125,000,000 x (A/99.79)

where A = % represented by the Called Shares in the entire issued share capital of WYT Medicine plus interest at the rate of 40% per annum (in the case of the First Call Option) and 23.9% per annum (in the case of the Second Call Option) upon exercise of the First Call Option or the Second Call Option.

Option Deed #3

Option: A put option granted by BPL to RFL entitling RFL to sell all of the shares in WYT Medicine owned by RFL at the time of the exercise of the put option (the “Sale Shares”) to BPL.

Exercise right: Exercisable from 1st February, 2001 up to and including 15th August, 2003.

Consideration:

HK$125,000,000 x (A/99.79)

where A = % of the Sale Shares in the entire issued share capital of WYT Medicine plus interest at the rate of 15% per annum.

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LETTER FROM THE BOARD

Option Deed #4

Option: A put option granted by RFL to BPL which will entitle BPL to sell all of the shares in WYT Medicine owned by BPL or its nominee at the time of the exercise of the put option to RFL.

Exercise right: Exercisable at any time within a period of three (3) months after the termination of the management agreement dated 29th November, 2000 between BPL and WYT Medicine in respect of the appointment of BPL as an independent contractor for the provision of certain management services (the “Management Agreement”) by WYT Medicine if at the time of such termination RFL controls a majority of the board of directors of WYT Medicine (that is, at least 3 out of 5 directors are appointed by RFL). Under the Management Agreement, WYT Medicine may terminate at its sole discretion the agreement at any time after 31st March, 2004 if the audited profit after tax of WYT Medicine for a financial year after 31st March, 2004 showed an increment of less than 10% from the audited profit after taxation of the immediately preceding financial year or a loss (as the case may be).

Consideration: 7 x A x I

where A = latest audited profit after tax of WYT Medicine

I = % holding of BPL or its nominee in WYT Medicine as at the date of the exercise of the put option.

The management of Wang On has been involved in the operation of WYT Medicine for over a year. The board of directors of Dailywin is currently made up of six directors, comprising three executive directors and three independent non-executive directors. Two out of the three executive directors of Dailywin, namely Mr. Tang and Mr. Chan, are nominated by and are also directors of Wang On. Both Mr. Tang and Mr. Chan have been participating in the operation and management of the WYT Group after Wang On acquired the controlling interest in February 2001.

The Company, through Rich Time, is a substantial shareholder of Dailywin and is interested in approximately 20.27% of the total issued Dailywin Shares. As disclosed in the Announcement, Town Health (through its wholly-owned subsidiary, Plenty Time) is a substantial shareholder of WYT Medicine having a 24% beneficial interest in its issued voting share capital. WYT Medicine is an indirect non wholly-owned subsidiary of Wang On. Accordingly, Town Health is a connected person of Wang On pursuant to the Listing Rules.

– 21 –

LETTER FROM THE BOARD

INFORMATION ON DAILYWIN

Review of operations and prospect

The Dailywin Group is principally engaged in the manufacturing and sale of watches and bags and the principal markets for its products are the US and the PRC. During the past few years, the Dailywin Group has been experiencing a negative impact on its financial condition owing to the worldwide sluggish economy, particularly the US market, and it faces price pressure from customers and keen competition from other suppliers. For the two years ended 31st March, 2001, the Dailywin Group recorded audited net losses of approximately HK$6,925,000 and approximately HK$31,491,000 respectively. The Dailywin Group further recorded an unaudited net loss after taxation of approximately HK$15,479,000 for the six months ended 30th September, 2001. As disclosed in the unaudited interim results of the Dailywin Group for the six months ended 30th September, 2001, the Dailywin Group recorded a loss attributed to shareholders of approximately HK$15.5 million for the six months ended 30th September, 2001. As of 30th September, 2001, the unaudited consolidated net liabilities of the Dailywin Group were approximately HK$28.75 million. The directors of Dailywin expect the Dailywin Group to continue to record a loss for the six months ended 31st March, 2002.

As disclosed in Dailywin’s annual report for the year ended 31st March, 2001, as a result of the highly competitive market conditions faced by the Dailywin Group, the turnover in respect of business of the assembly of watches and manufacture of cases of the Dailywin Group declined from HK$169,294,000 for the year ended 31st March, 2000 to HK$160,655,000 in the year ended 31st March, 2001. Whilst in the US market, sales improved by HK$14,854,000. Such improvement was more than offset by the significant decline in sales to the French and Indian markets. Operating loss from this division for the year ended 31st March, 2001 was HK$12,937,000 as compared to an operating profit of HK$3,041,000 in the previous year, which was mainly caused by deterioration in profit margins and stock provision.

As for the retail sales of watches and bags in the PRC, the turnover of this division was HK$77,940,000 for the year ended 31st March, 2001, representing an increase of HK$17,661,000 (or approximately 29%) as compared to the previous year. Such an increase was mainly as a result of the net opening of 27 TimeZone outlets and the full year sales effect of the rollout of Q.bags outlet in that year. However, whilst turnover from this division showed a promising increase, the division incurred an operating loss of HK$11,767,000 for the year ended 31st March, 2002 as compared to an operating loss of HK$2,922,000 in the previous year. The decrease in profitability was mainly as a result of the reallocation of expenses in respect of Hong Kong personnel and stock provision.

As for the trading of watch movements, it was discontinued with effect from 31st May, 2000.

– 22 –

LETTER FROM THE BOARD

The difficult environment in which the Dailywin Group operated during the year ended 31st March, 2001 was reflected in its results for the same year. As advised by the directors of Dailywin, it was expected that the market for assembly of watches and manufacture of cases and retail sales of watches and bags in the PRC would continue to be very tough and the profit margins would stay under the strong pressure due to the highly competitive market and strong price competition.

As advised by the directors of Dailywin, in order to operate under the current depressed market conditions and to turn around the difficulties presently faced by the Dailywin Group, the Dailywin Group intends to seek to enhance its collective bargaining power and negotiate with suppliers in order to achieve savings in components’ costs. It is the intention of the directors of Dailywin to continue the operation of the existing watch and bag businesses and to maintain it as one of the Dailywin Group’s principal businesses. Apart from continuing with its existing business and with a view to strengthening its financial condition, the Dailywin Group has been exploring new business opportunities which will generate revenue and cash flow stream to the Dailywin Group.

Other financial information

As disclosed in Dailywin’s annual report for the year ended 31st March, 2001, the Dailywin Group had bank borrowings which carry interest at market rates in Hong Kong of approximately HK$653,000, of which approximately HK$134,000 were repayable within one year or on demand. The Dailywin Group also had obligations under finance leases and hire purchase contracts totaling approximately HK$327,000, of which approximately HK$144,000 were repayable within one year. The Dailywin Group had pledged assets consisting of land and buildings, investment properties and plant and machinery with an aggregate net book value of approximately HK$15,467,000 to a bank to secure general banking facilities granted to the Dailywin Group. The Dailywin Group also had contingent liabilities consisting of bills discounted with recourse amounting to approximately HK$2,093,000, and Dailywin had guarantees given to banks in respect of banking facilities granted to subsidiaries amounting to approximately HK$3,500,000.

As at 31st March, 2001, the debt ratio of the Dailywin Group was approximately 112% (calculated as the ratio of the audited total liabilities of the Dailywin Group to the audited total assets of the Dailywin Group of approximately HK$124,452,000 and approximately HK$111,182,000 respectively). As at 31st March, 2001, Dailywin Group’s gearing ratio, which is defined as the audited total liabilities to the audited shareholders’ funds, was approximately HK$124,452,000 to shareholders’ deficit of approximately HK$13,270,000.

As disclosed in Dailywin’s annual report for the year ended 31st March, 2001, the aggregate cost of persons employed by the Dailywin Group was approximately HK$38,965,000 and the average weekly number of persons employed was 1,174. As at the Latest Practicable Date, options in respect of 5,980,000 Dailywin Shares (representing (i) approximately 3.15% of

– 23 –

LETTER FROM THE BOARD

the total Dailywin Shares in issue as at the Latest Practicable Date; and (ii) approximately 0.04% of the total Dailywin Shares in issue immediately after completion of the Disposal (or approximately 0.06% if only the Wang On Disposal proceeds but not the Town Health Disposal) but before any conversion of the Convertible Notes) that were granted and unexercised under a share option scheme of Dailywin remained outstanding.

As disclosed in the unaudited interim results of the Dailywin Group for the six months ended 30th September, 2001 in Appendix II to this circular, the Dailywin Group recorded a loss attributed to shareholders of approximately HK$15.5 million for the six months ended 30th September, 2001.

As at 31st March, 2001, the date to which the latest audited financial statements of Dailywin were made up, Dailywin had outstanding convertible loan stock of approximately £2,756,816 (equivalent to approximately HK$30.7 million), which were redeemable at par on 30th September, 2008. As mentioned in Dailywin’s announcement date 26th November, 2001, a petition for the winding up of Dailywin was served on Dailywin on 26th November, 2001 on behalf of the trustee for the holders of the convertible loan stocks (“Trustee”). As mentioned in Dailywin’s announcement dated 7th February 2002, Dailywin, the Trustee, Rich Time and Dynamission Investments Limited (“Dynamission”), both wholly-owned subsidiaries of Wang On, reached an agreement in February 2002 in respect of the settlement of the winding up petition against Dailywin. Pursuant to this settlement agreement, Dynamission acquired from the holders of the convertible loan stocks £2,270,710 (equivalent to approximately HK$25.3 million) of the then outstanding amount of the convertible loan stocks, as a result of which the winding up petition against Dailywin was dismissed and Dynamission became interested in approximately 98.95% of the total outstanding amount of the convertible loan stocks.

As mentioned in Dailywin’s announcement dated 25th March 2002, with a view to improve the financial stability of the Dailywin Group, a 18-month unsecured term loan at the interest rate of prime plus 2% per annum was granted by Rich Time, which would principally be used for the repayment of the convertible loan stocks. Relevant notice was then sent to the Trustee in relation to the repayment. Up to the Latest Practicable Date, holders of £2,749,786 of the convertible loan stocks responded and was repaid in full, leaving £7,030 outstanding.

Initial acquisition of interest in Dailywin

As disclosed in the announcements made by the Company on 16th August, 2001 and 29th August, 2001, the Wang On Group had acquired an approximate 29% equity interest in Dailywin, at a consideration of HK$7.7 million, and a loan of HK$21 million was also made to Dailywin. Subsequent to the above acquisition, further loans amounting to approximately HK$43.9 million were made to Dailywin as at the Latest Practicable Date. Mr. Tang and Mr. Chan nominated by the Wang On 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 Wang On Group.

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LETTER FROM THE BOARD

Subsequent to the aforesaid acquisition by the Wang On Group, Dailywin entered into two placing agreements dated 3rd April, 2002 and 29th April, 2002 to place 26,370,000 and 31,650,000 new shares respectively and the placings had been completed. After completion of the above placings, the equity interest of Wang On in Dailywin became approximately 20.27%.

The aggregate of the remuneration payable to and benefits in kind receivable by the Directors will not be varied in consequence of the Disposal.

THE PLACING AGREEMENT DATED 13TH JUNE, 2002

Parties

The Company and the Placing Agent

Basis of Placing

The Placing Agent will place, or procure the placing of, the Placing Shares to Independent Third Parties on a fully underwritten basis.

Number of Placing Shares

Assuming both the Wang On Disposal and the Town Health Disposal proceed:

4,500,000,000 Dailywin Shares directly or indirectly owned by Wang On, representing approximately 32.64% of the total Dailywin Shares in issue immediately after the completion of the Disposal but before any conversion of the Convertible Notes.

Assuming the Wang On Disposal proceeds, but not the Town Health Disposal:

6,000,000,000 Dailywin Shares directly or indirectly owned by Wang On, representing approximately 57.15% of the total Dailywin Shares in issue immediately after the completion of the Wang On Disposal but before any conversion of the Convertible Notes.

Placing Price

HK$0.01 per Placing Share

The Placing Price, which is equivalent to the issue price per Consideration Share, represents a discount of approximately 91.23% to the closing price of HK$0.114 per Dailywin Share as quoted on the Stock Exchange on the Latest Practicable Date and a discount of approximately 91.27% to the average closing price of HK$0.1145 per Dailywin Share for the ten trading days up to and including the Latest Practicable Date. The Placing Price was determined with reference to the issue price per Consideration Share and the general market conditions and after arm’s length negotiations between the Placing Agent and the Company.

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LETTER FROM THE BOARD

The Placing Price is an increase as compared to the unaudited consolidated net tangible liabilities per Dailywin Share of HK$0.58 (if both the Wang On Disposal and the Town Health Disposal proceed and HK$0.64 (if only the Wang On Disposal proceeds) as shown in Appendix II to Dailywin’s circular dated 17th June, 2002.

Condition

The Placing Agreement is conditional upon the completion of the Disposal or (in the event that the Town Health Disposal does not proceed) the Wang On Disposal.

Completion

Completion shall take place on or before the fifth Business Day after completion of the Wang On Disposal (or at such other date as the parties may otherwise agree).

USE OF PROCEEDS FROM THE PLACING

The gross proceeds from the Placing will amount to HK$45 million (or HK$60 million, if the Town Health Disposal does not proceed). It is expected that the net proceeds from the Placing of approximately HK$42 million (or HK$56.5 million, if the Town Health Disposal does not proceed) will be applied as to HK$30 million for future acquisitions of investment properties (although no specific property has yet been identified by Wang On) and the remaining HK$12 million (or HK$26.5 million, if the Town Health Disposal does not proceed) as general working capital for the Wang On Group.

SHAREHOLDING STRUCTURE

Below are the charts which illustrate the shareholding structure of WYT Medicine and Dailywin as at the Latest Practicable Date, immediately upon completion of the Disposal (or the Wang On Disposal) but before the Placing, and immediately upon completion of the Disposal (or the Wang On Disposal) and the Placing but before the conversion of the Convertible Notes.

As at the Latest Practicable Date:

==> picture [314 x 133] intentionally omitted <==

----- Start of picture text -----

Other
Town Health Wang On
Shareholders
24% 0.21% 75.79%
100%
WYT Medicine
Rich Time Public
20.27% 79.73%
Dailywin
----- End of picture text -----

– 26 –

LETTER FROM THE BOARD

Immediately upon completion of the Disposal but before the Placing:

==> picture [183 x 159] intentionally omitted <==

----- Start of picture text -----

Wang On
100%
Rich Time Town Health Public
75.04% 23.86% 1.10%
Other
Dailywin
Shareholders
99.79% 0.21%
WYT Medicine
----- End of picture text -----

Immediately upon completion of the Wang On Disposal but before the Placing (assuming the Town Health Disposal does not proceed):

==> picture [163 x 160] intentionally omitted <==

----- Start of picture text -----

Wang On
100%
Rich Time Public
98.56% 1.44%
Other
Dailywin
Shareholders
99.79% 0.21%
WYT Medicine
----- End of picture text -----

Immediately upon completion of the Disposal and the Placing but before the conversion of the Convertible Notes:

==> picture [182 x 160] intentionally omitted <==

----- Start of picture text -----

Wang On
100%
Rich Time Town Health Public
42.40% 12.99% 44.61%
Other
Dailywin
Shareholders
99.79% 0.21%
WYT Medicine
----- End of picture text -----

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LETTER FROM THE BOARD

Immediately upon completion of the Wang On Disposal and the Placing but before the conversion of the Convertible Notes:

==> picture [163 x 159] intentionally omitted <==

----- Start of picture text -----

Wang On
100%
Rich Time Public
41.41% 58.59%
Other
Dailywin
Shareholders
99.79% 0.21%
WYT Medicine
----- End of picture text -----

Immediately upon completion of the Wang On Disposal, the Town Health Disposal and the Placing and assuming full conversion of the Convertible Notes at a conversion price of HK$0.01 per Dailywin Share, the number of Dailywin Shares held shall be as follows:

Notes Rich Time 1 Rich Time 2 Town Health 3 Public	Immediately Existing after the completion of the Shareholding Disposal and the Placing No. of Dailywin No. of Dailywin Shares held % Shares held % 38,500,000 20.27 38,500,000 0.28 – – 5,808,888,666 42.12 38,500,000 20.27 5,847,388,666 42.40 – – 1,791,111,334 12.99 151,419,864 79.73 6,151,419,864 44.61 189,919,864 100.00 13,789,919,864 100.00	Upon full conversion of the Convertible Notes No. of Dailywin Shares held % 38,500,000 0.17 12,208,888,666 55.02 12,247,388,666 55.19 3,791,111,334 17.09 6,151,419,864 27.72 22,189,919,864 100.00	Upon full conversion of the Convertible Notes No. of Dailywin Shares held % 38,500,000 0.17 12,208,888,666 55.02 12,247,388,666 55.19 3,791,111,334 17.09 6,151,419,864 27.72 22,189,919,864 100.00
			55.19 17.09 27.72
			100.00

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LETTER FROM THE BOARD

Immediately upon completion of the Wang On Disposal (but assuming that the Town Health Disposal does not proceed) and the Placing and assuming full conversion of the Convertible Notes at a conversion price of HK$0.01 per Dailywin Share, the number of Dailywin Shares held shall be as follows:

Notes Rich Time 1 Rich Time 2 Public	Immediately after the Existing completion of the Wang On Shareholding Disposal and the Placing No. of Dailywin No. of Dailywin Shares held % Shares held % 38,500,000 20.27 38,500,000 0.37 – – 4,308,888,666 41.04 38,500,000 20.27 4,347,388,666 41.41 151,419,864 79.73 6,151,419,864 58.59 189,919,864 100.00 10,498,808,530 100.00	Upon full conversion of the Convertible Notes No. of Dailywin Shares held % 38,500,000 0.23 10,708,888,666 63.37 10,747,388,666 63.60 6,151,419,864 36.40 16,898,808,530 100.00	Upon full conversion of the Convertible Notes No. of Dailywin Shares held % 38,500,000 0.23 10,708,888,666 63.37 10,747,388,666 63.60 6,151,419,864 36.40 16,898,808,530 100.00
			63.60 36.40
			100.00

Notes:

represents the Dailywin Shares held by Rich Time as at the Latest Practicable Date.
represents the Consideration Shares and the Conversion Shares to be issued to Rich Time, as nominee of Wang On.
represents the Consideration Shares and the Conversion Shares to be issued to Town Health or its nominee.

MAINTENANCE OF THE LISTING STATUS OF DAILYWIN

It is the intention of Wang On and Town Health to maintain the listing status of Dailywin after the Disposal. The Company together with Dailywin and Town Health (Town Health’s undertaking will only apply in case the Town Health Disposal having completed pursuant to the Agreement) have undertaken to the Stock Exchange that each of the Company, Dailywin and Town Health will take appropriate steps, including the appointment of placing agents to place down their respective shareholding interests in Dailywin, to ensure that not less than 25% of the Dailywin Shares will be held by the public within 30 days of the completion of the Disposal in compliance with the minimum public float requirement of the Listing Rules.

As mentioned in the Announcement, the Directors intend, subject to the market conditions prevailing at the time of the Placing, to reduce its shareholding interest in Dailywin to less than 50% following the Disposal. The Placing will ensure that not less than 25% of the issued Dailywin Shares will be held by the public in compliance with the minimum public float

– 29 –

LETTER FROM THE BOARD

requirement of the Listing Rules and will increase the shareholder base of Dailywin which in turn will enhance the liquidity of Dailywin Shares. Upon completion of the Placing, not less than 25% of the Dailywin Shares will be held by the public and the attributable interest of the Wang On Group in the issued share capital of Dailywin immediately after completion of the Disposal (or the Wang On Disposal only) will be reduced to approximately 42.40% (or 41.41% assuming that the Town Health Disposal does not proceed) (in either case, before any conversion of the Convertible Notes).

The Stock Exchange has stated that, if less than 25% of the issued Dailywin Shares are in public hands following the completion of the Agreement, or if the Stock Exchange believes that a false market exists or may exist in the trading of the Dailywin Shares or there are insufficient Dailywin Shares in public hands to maintain an orderly market, it will consider exercising its discretion to suspend dealing in the Dailywin Shares.

REVIEW OF OPERATIONS AND PROSPECTS SINCE 31ST MARCH, 2001

Business review

The Wang On 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 Wang On Group’s management and sub-licensing of Chinese wet markets business and the turnover generated by WYT Medicine, a subsidiary of the Company acquired in February 2001. The increase in net profit attributable to shareholders was mainly due to the profit from operating activities generated by WYT Medicine (representing approximately 48% of the Wang On Group’s profit from operating activities for the period) and the reduction in the amount of provision which had to be made for technologyrelated and building related contracting businesses in the six-month period ended 30th September, 2001.

The Directors expect that after completion of the Wang On Disposal and the Placing, the Company’s business of management and sub-licensing of Chinese wet markets and shopping centres will be the main contributor to the profit from the operating activities of the Wang On Group.

– 30 –

LETTER FROM THE BOARD

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 Wang On 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 Wang On 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 Wang On Group’s total turnover.

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

The Wang On Group currently manages and operates 8 shopping centres with a floor area of over 1.4 million sq.ft. and over 3,400 car parking bays which generate a steady source of income of the Wang On Group.

Investments in pharmaceutical business other than WYT

As disclosed in the Wang On Group’s 2001 annual report, the Wang On 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 Wang On Group recently acquired a further approximate 3.6%, 19% and 5.95% equity interest in Luxembourg Medicine in November 2001, December 2001 and March 2002 respectively, which resulted in Luxembourg Medicine becoming an associate of the Wang On Group.

As at the Latest Practicable Date, Wang On and Town Health have indirect interests in Luxembourg Medicine of approximately 47.5% and approximately 49.9% respectively. The remaining 2.6% interest is held by 5 persons who are Independent Third Parties. Out of the 5 members of the board of Luxembourg Medicine, 2 are Wang On representatives, 1 is a Town Health representative and the remaining 2 are full-time salaried employees of Luxembourg Medicine.

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

REASONS FOR THE WANG ON DISPOSAL

The Wang On 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 and property investment. The Directors intend that the business focus of Wang On after the Wang On Disposal will not change.

– 31 –

LETTER FROM THE BOARD

Royal Focus Limited, a company incorporated in Hong Kong and a wholly-owned subsidiary of Wang On, acquired an approximate 99.79% equity interest in WYT Medicine in February 2001 for a cash consideration of approximately HK$127 million. Details of such transaction, which was a major transaction for Wang On under the Listing Rules, were disclosed in Wang On’s circular dated 8th February, 2001 to its shareholders. In March 2001, Royal Focus Limited disposed of a 24% equity interest in WYT Medicine to Plenty Time for a cash consideration of approximately HK$30 million. After the aforesaid transactions, Royal Focus Limited held an approximately 75.79% equity interest in WYT Medicine. As the Directors consider it is more convenient for the sale by Wang On of its interests in WYT Medicine to be structured as the sale of the issued share capital of a British Virgin Islands company, the Wang On Group conducted a group restructuring exercise prior to the Disposal such that Royal Focus Limited transferred its entire equity interest in WYT Medicine to Reliance City on 22nd May, 2002.

The principal amount of Existing Loans advanced to Dailywin by the Wang On Group, which are all repayable by Dailywin in 2002 or 2003, amounts to HK$64,850,000. For the two years ended 31st March, 2001, the Dailywin Group recorded audited net losses after taxation of approximately HK$6,925,000 and approximately HK$31,491,000 respectively. The Dailywin Group further recorded an unaudited net loss after taxation of approximately HK$15,479,000 for the six months ended 30th September, 2001. As at 30th September, 2001, the unaudited consolidated net liabilities of Dailywin was approximately HK$28.75 million. In view of the difficulties presently faced by the Dailywin Group and the financial exposure of the Wang On Group to the Dailywin Group through the Existing Loans, the Directors consider it is essential for the Wang On Group to assist the Dailywin Group to improve its financial performance so that it can repay its indebtedness to the Wang On Group.

Taking into account the growth prospects of the WYT Group, the Directors are of the view that the Wang On Disposal should be able to bring additional cash flows and earnings to the Dailywin Group, thereby improving its financial position. After completion of the Wang On Disposal and the Placing, and assuming full conversion of the Convertible Notes at a conversion price of HK$0.01 per Dailywin Share, the Wang On Group will be interested in 12,247,388,666 Dailywin Shares which represent approximately 55.19% of the issued share capital of Dailywin as enlarged by the issue of the Consideration Shares and the Conversion Shares. As mentioned in the section headed “Maintenance of the listing status of Dailywin” above, the Directors intend to reduce the shareholding of the Wang On Group in Dailywin to less than 50% immediately following the Disposal. Wang On Group’s interest in the issued share capital of Dailywin will increase from 20.27% to approximately 42.40% immediately after completion of the Disposal, or the Wang On Disposal, and the Placing (or approximately 41.41% if the Town Health Disposal does not proceed). Notwithstanding that the public will hold approximately 44.61% of the Dailywin Shares immediately after completion of the Disposal, or the Wang On Disposal, and the Placing (or approximately 58.59% if the Town Health Disposal does not proceed), Wang On Group will remain the single largest shareholder

– 32 –

LETTER FROM THE BOARD

in Dailywin holding more than 40% of the Dailywin Shares and is unable to control the board of Dailywin. Accordingly, Wang On would account for Dailywin as an associated company. The Wang On Group will, through its long-term shareholding in Dailywin, continue to enjoy the benefit generated from any future growth of the WYT Group after completion of the Wang On Disposal and the Placing. In view of the above, the Directors consider the terms of the Wang On Disposal to be fair and reasonable and in the interests of the shareholders of Wang On as a whole.

WHITEWASH WAIVER

As at the Latest Practicable Date, Wang On, through Rich Time, had an interest in approximately 20.27% interest in the issued share capital of Dailywin, and Town Health had no interest in any Dailywin Shares. The aggregate shareholding of Wang On and Town Health and parties acting in concert with them in Dailywin immediately after the completion of the Disposal and upon full conversion of the Convertible Notes will increase from approximately 20.27% to approximately 99.32%. Accordingly, unless the Whitewash Waiver is granted, Wang On and Town Health and parties acting in concert with them would, under Rule 26 of the Takeovers Code, incur an obligation, upon completion of the Disposal, to make a mandatory general offer for all the issued Dailywin Shares and the outstanding convertible bonds and share options of Dailywin not already owned or acquired by Wang On and Town Health and parties acting in concert with them as a result of the issue of the Consideration Shares; they would also incur an obligation, upon conversion of the Convertible Notes, to make a mandatory general offer for all the issued Dailywin Shares and the outstanding convertible bonds and share options of Dailywin (if any) or Convertible Notes (if any) not at that time owned by Wang On and Town Health and parties acting in concert with them as a result of the issue of Conversion Shares upon the conversion of the Convertible Notes. An application has been made to the Executive for the granting of the Whitewash Waiver.

The Executive has agreed to grant the Whitewash Waiver subject to the approval of the Independent Shareholders who are not interested in or involved in the Disposal at general meeting by way of a poll. The Company, Rich Time and Town Health and their respective associates will abstain from voting on the resolution to be proposed at general meeting of Dailywin to approve the Whitewash Waiver. The Company and Rich Time and parties acting in concert with them (including Town Health) have not acquired any voting rights in Dailywin in the six-month period prior to the date of the Agreement.

SGM

The Wang On Disposal constitutes a major transaction for Wang On under the Listing Rules and is subject to shareholders’ approval at the SGM. To the best knowledge of the Directors, no shareholders of the Company have a material interest in the Wang On Disposal which would require them to abstain from voting in respect of the resolution proposed at the SGM.

– 33 –

LETTER FROM THE BOARD

Set out on pages 149 to 150 of this circular is a notice convening the SGM to be held on Wednesday, 3rd July, 2002 at 9:30 a.m. at 26th Floor, Asia Pacific Finance Tower, Citibank Plaza, 3 Garden Road, Hong Kong, at which a resolution will be proposed to consider and, if thought fit, approve, among other things, the Wang On Disposal.

You will find enclosed a form of proxy for use at the SGM. Whether or not you intend to be present at the meeting, you are requested to complete and return the form of proxy to the Company’s Hong Kong branch share registrar, Tengis Limited, at 4th Floor, Hutchison House, 10 Harcourt Road, Central, Hong Kong, as soon as possible but in any event not less than 48 hours before the time appointed for the holding of the SGM. Completion and return of the form of proxy will not preclude you from attending and voting in person at the SGM or at any adjourned meeting thereof should you so desire.

RECOMMENDATION

The Directors believe that the Wang On Disposal and all transactions to be entered into by Wang On as contemplated in the Agreement are in the best interest of the Company and its shareholders as a whole. Accordingly, the Directors recommend the shareholders of the Company to vote in favour of the resolution to be proposed at the SGM.

FURTHER INFORMATION

Your attention is also drawn to the appendices to this circular.

By order of the board Wang On Group Limited Tang Ching Ho Chairman and Managing Director

– 34 –

APPENDIX I FINANCIAL INFORMATION RELATING TO WANG ON GROUP

1. THREE YEAR INCOME STATEMENT SUMMARY

Set out below is a summary of the audited consolidated profit and loss account of Wang On Group for the three years ended 31st March, 2001 and the audited consolidated assets and liabilities of Wang On 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

– 35 –

APPENDIX I FINANCIAL INFORMATION RELATING TO WANG ON 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 Wang On 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

– 36 –

APPENDIX I FINANCIAL INFORMATION RELATING TO WANG ON 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

– 37 –

APPENDIX I FINANCIAL INFORMATION RELATING TO WANG ON 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

– 38 –

APPENDIX I FINANCIAL INFORMATION RELATING TO WANG ON 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

– 39 –

APPENDIX I FINANCIAL INFORMATION RELATING TO WANG ON 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)

– 40 –

APPENDIX I FINANCIAL INFORMATION RELATING TO WANG ON 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

– 41 –

APPENDIX I FINANCIAL INFORMATION RELATING TO WANG ON 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

– 42 –

APPENDIX I FINANCIAL INFORMATION RELATING TO WANG ON 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.

– 43 –

APPENDIX I FINANCIAL INFORMATION RELATING TO WANG ON 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%

– 44 –

APPENDIX I FINANCIAL INFORMATION RELATING TO WANG ON 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.

– 45 –

APPENDIX I FINANCIAL INFORMATION RELATING TO WANG ON 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.

– 46 –

APPENDIX I FINANCIAL INFORMATION RELATING TO WANG ON 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.

– 47 –

APPENDIX I FINANCIAL INFORMATION RELATING TO WANG ON 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.

– 48 –

APPENDIX I FINANCIAL INFORMATION RELATING TO WANG ON 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

– 49 –

APPENDIX I FINANCIAL INFORMATION RELATING TO WANG ON 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)

– 50 –

APPENDIX I FINANCIAL INFORMATION RELATING TO WANG ON 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.

– 51 –

APPENDIX I FINANCIAL INFORMATION RELATING TO WANG ON 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

– 52 –

APPENDIX I FINANCIAL INFORMATION RELATING TO WANG ON 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.

– 53 –

APPENDIX I FINANCIAL INFORMATION RELATING TO WANG ON GROUP

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

– 54 –

APPENDIX I FINANCIAL INFORMATION RELATING TO WANG ON 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).

– 55 –

APPENDIX I FINANCIAL INFORMATION RELATING TO WANG ON 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

– 56 –

APPENDIX I FINANCIAL INFORMATION RELATING TO WANG ON 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

– 57 –

APPENDIX I FINANCIAL INFORMATION RELATING TO WANG ON 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

– 58 –

APPENDIX I FINANCIAL INFORMATION RELATING TO WANG ON 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.

– 59 –

APPENDIX I FINANCIAL INFORMATION RELATING TO WANG ON 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.

– 60 –

APPENDIX I FINANCIAL INFORMATION RELATING TO WANG ON GROUP

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.

– 61 –

APPENDIX I FINANCIAL INFORMATION RELATING TO WANG ON 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

– 62 –

APPENDIX I FINANCIAL INFORMATION RELATING TO WANG ON 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.

– 63 –

APPENDIX I FINANCIAL INFORMATION RELATING TO WANG ON 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

– 64 –

APPENDIX I FINANCIAL INFORMATION RELATING TO WANG ON 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.

– 65 –

APPENDIX I FINANCIAL INFORMATION RELATING TO WANG ON 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.

– 66 –

APPENDIX I FINANCIAL INFORMATION RELATING TO WANG ON 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.

– 67 –

APPENDIX I FINANCIAL INFORMATION RELATING TO WANG ON 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

– 68 –

APPENDIX I FINANCIAL INFORMATION RELATING TO WANG ON 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.

– 69 –

APPENDIX I FINANCIAL INFORMATION RELATING TO WANG ON 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

– 70 –

APPENDIX I FINANCIAL INFORMATION RELATING TO WANG ON 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.

– 71 –

APPENDIX I FINANCIAL INFORMATION RELATING TO WANG ON 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.

– 72 –

APPENDIX I FINANCIAL INFORMATION RELATING TO WANG ON 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.

– 73 –

APPENDIX I FINANCIAL INFORMATION RELATING TO WANG ON 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

– 74 –

APPENDIX I FINANCIAL INFORMATION RELATING TO WANG ON 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.

– 75 –

APPENDIX I FINANCIAL INFORMATION RELATING TO WANG ON GROUP

34. COMMITMENTS

(a) Capital commitments

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

– 76 –

APPENDIX I FINANCIAL INFORMATION RELATING TO WANG ON GROUP

36. RELATED PARTY TRANSACTIONS

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

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

(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.

– 77 –

APPENDIX I FINANCIAL INFORMATION RELATING TO WANG ON 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 Wang On Group for the six months ended 30th September, 2000 and 30th September, 2001 , the unaudited consolidated balance sheet of the Wang On Group as at 30th September, 2001 and the audited consolidated balance sheet of the Wang On 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

– 78 –

APPENDIX I FINANCIAL INFORMATION RELATING TO WANG ON 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)

– 79 –

APPENDIX I FINANCIAL INFORMATION RELATING TO WANG ON 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 -------------

– 80 –

APPENDIX I FINANCIAL INFORMATION RELATING TO WANG ON 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

– 81 –

APPENDIX I FINANCIAL INFORMATION RELATING TO WANG ON 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

– 82 –

APPENDIX I FINANCIAL INFORMATION RELATING TO WANG ON 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.

– 83 –

APPENDIX I FINANCIAL INFORMATION RELATING TO WANG ON GROUP

3. ANALYSIS OF TURNOVER AND CONTRIBUTION TO PROFIT

By principal activities:

Unaudited Six months ended 30 September

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	Turnover 2001 2000 HK$’000 HK$’000 75,169 39,431 43,154 44,253 23,721 – 1,010 171 – – 2,828 3,771 145,882 87,626	Contribution to profit from operating activities 2001 2000 HK$’000 HK$’000 9,256 9,063 262 886 6,252 – (1,784) (2,665 – (8,199 (1,013) 3,666 12,973 2,751	Contribution to profit from operating activities 2001 2000 HK$’000 HK$’000 9,256 9,063 262 886 6,252 – (1,784) (2,665 – (8,199 (1,013) 3,666 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

– 84 –

APPENDIX I FINANCIAL INFORMATION RELATING TO WANG ON 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	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

5. 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 2,074 – 189 – 38 60 2,301 60	Unaudited Six months ended 30 September 2001 2000 HK$’000 HK$’000 2,074 – 189 – 38 60 2,301 60
		60

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.

– 85 –

APPENDIX I FINANCIAL INFORMATION RELATING TO WANG ON 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

– 86 –

APPENDIX I FINANCIAL INFORMATION RELATING TO WANG ON 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

– 87 –

APPENDIX I FINANCIAL INFORMATION RELATING TO WANG ON GROUP

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

– 88 –

APPENDIX I FINANCIAL INFORMATION RELATING TO WANG ON 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

– 89 –

APPENDIX I FINANCIAL INFORMATION RELATING TO WANG ON 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

– 90 –

APPENDIX I FINANCIAL INFORMATION RELATING TO WANG ON GROUP

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

– 91 –

APPENDIX I FINANCIAL INFORMATION RELATING TO WANG ON 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.

– 92 –

APPENDIX I FINANCIAL INFORMATION RELATING TO WANG ON GROUP

(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 losses 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.

– 93 –

APPENDIX I FINANCIAL INFORMATION RELATING TO WANG ON GROUP

4. INDEBTEDNESS

Borrowings

As at 30th April, 2002, the Wang On Group had outstanding borrowings of approximately HK$45.42 million comprising secured bank loans of approximately HK$14.76 million, unsecured bank loans of approximately HK$30.50 million and obligation under finance leases of approximately HK$0.16 million.

Securities

As at 30th April, 2002, the Wang On Group’s facilities were secured by certain of the Wang On Group’s investment properties, rental income from certain of the Wang On Group’s sub-licensing operations of Chinese wet markets and shopping centers and corporate guarantees given by the Company.

Contingent liabilities

As at 30th April, 2002, the Wang On Group had the following outstanding litigations:

During 2000, a sub-contractor claimed against a wholly-owned subsidiary of the Wang On 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.

In addition, the Wang On Group had contingent liabilities of approximately HK$42.6 million comprising guarantees in respect of performance bonds given to third parties of approximately HK$20.93 million and guarantees given in lieu of utility and property rental deposits of approximately HK$21.67 million.

Save as aforesaid or as otherwise disclosed herein, and apart from intra-group liabilities, the Wang On Group did not have at the close of business on 30th April, 2002 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.

– 94 –

APPENDIX I FINANCIAL INFORMATION RELATING TO WANG ON GROUP

5. WORKING CAPITAL

Taking into account the internal resources of the Wang On Group, the Directors are of the opinion that the Wang On Group has sufficient working capital for its present requirements.

6. UNAUDITED PRO FORMA STATEMENT OF ADJUSTED COMBINED NET TANGIBLE ASSETS OF THE WANG ON GROUP

Wang On Group’s interest in the issued share capital of Dailywin will increase from 20.27% to approximately 42.40% immediately after completion of the Disposal, or the Wang On Disposal, and the Placing (or approximately 41.41% if the Town Health Disposal does not proceed). Notwithstanding that the public will hold approximately 44.61% of the Dailywin Shares immediately after completion of the Disposal, or the Wang On Disposal, and the Placing (or approximately 58.59% if the Town Health Disposal does not proceed), Wang On Group will remain the single largest shareholder in Dailywin holding more than 40% of the Dailywin Shares and is unable to control the board of Dailywin. Accordingly, Wang On would account for Dailywin as an associated company. The following is a statement of the unaudited pro forma adjusted combined net tangible assets of the Wang On Group. It is based on the unaudited consolidated net assets of the Wang On Group as at 30th September, 2001, adjusted for the effect of certain events subsequently taken place.

			Scenario I	Scenario II
			Assuming both the	Assuming only
			Wang On Disposal	the Wang On
			and the Town Health	Disposal
			Disposal proceed	proceeds
			HK$’000	HK$’000
Unaudited consolidated net assets of the
Wang On Group as at 30th September, 2001		(Note 1)	197,056	197,056
Less:	Intangible assets as at 30th September, 2001		(15,908)	(15,908)
			181,148	181,148
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)		12,300	12,300
	1st November, 2001 (Shares were issued and
	allotted on 9th and 12th November, 2001)		20,000	20,000
	19th December, 2001 (Shares were issued and
	allotted on 28th and 31st December, 2001)		24,000	24,000
	2nd May, 2002 (Shares were issued and
	allotted on 15th May, 2002)		36,500	36,500

– 95 –

APPENDIX I FINANCIAL INFORMATION RELATING TO WANG ON GROUP

			Scenario I		Scenario II
			Assuming both the	Assuming only
			Wang On Disposal		the Wang On
			and the Town Health		Disposal
			Disposal proceed		proceeds
			HK$’000		HK$’000
	Net proceeds from the rights issue as set out
	in the Company’s circular dated 28th February, 2002		190,600		190,600
	Unaudited profits of WYT Group from 1st October, 2001	to
	31st March, 2002 attributable to Wang On Group		2,286		2,286
Less:	Estimated goodwill on acquisition of shares in Luxembourg
	Medicine and China Ocean		(70,000)		(70,000)
Unaudited pro forma adjusted consolidated net tangible assets of		the
Wang On Group immediately before the Wang On Disposal			396,834		396,834
Less:	Audited consolidated net assets of WYT Group
	attributable to the Wang On Group as at
	31st March, 2002	(Note 2)	(30,308)		(30,308)
Add:	Final dividend receivable from WYT Group		6,969		6,969
	Unaudited pro forma adjusted combined net assets of
	Dailywin Group attributable to the
	Wang On Group	(Note 3)	46,299		31,589
	Estimated deferred profits arising from disposal of
	WYT Group to Dailywin	(Note 4)	(29,500)		(28,800)
	Convertible Notes receivable from Dailywin as part
	of the consideration for the Wang On Disposal		64,000		64,000
	Estimated net proceeds from the Placing		42,000		56,500
Unaudited pro forma adjusted combined net tangible assets
of	the Wang On Group immediately following the completion
of	the Wang On Disposal		496,294		496,784

Unaudited pro forma adjusted consolidated net tangible asset value
of	the Wang On Group per Share immediately before the
completion of the Wang On Disposal		(Note 5)	3.36 cents		3.36 cents

Unaudited pro forma adjusted combined net tangible asset value
of	the Wang On Group per Share immediately following the
completion of the Wang On Disposal		(Note 5)	4.20 cents		4.20 cents

– 96 –

APPENDIX I FINANCIAL INFORMATION RELATING TO WANG ON GROUP

Note 1 The unaudited consolidated net assets of the Wang On Group as at 30th September, 2001 is extracted from the interim report of the Company dated 14th December, 2001.
Note 2 The audited consolidated net tangible assets of WYT Group attributable to Wang On Group as at 31st March, 2002 represent the Wang On Group’s share of 75.79% of the audited consolidated net tangible assets of WYT Group which is extracted from Dailywin’s circular dated 17th June, 2002.
Note 3 The unaudited pro forma adjusted combined net assets of Dailywin Group attributable to the Wang On Group represents the Wang On Group’s share of 42.40% and 41.41% of the unaudited pro forma adjusted combined net assets of Dailywin Group in scenario I and scenario II, respectively, as shown in Dailywin’s circular dated 17th June, 2002. Given Wang On Group’s interest in Dailywin Group represents not more than half of the voting power of Dailywin Group and that Wang On Group has no power to cast the majority of votes at meetings of the board of directors of Dailywin Group, Dailywin Group would be accounted for as an associated company of Wang On Group using the equity method of accounting. The unaudited pro forma adjusted combined net assets of Dailywin Group will be subject to adjustment on the relevant pre-disposal profit of WYT Group.
Note 4 The estimated deferred profits arising from the disposal of WYT Group will be subject to adjustment on the relevant pre-disposal profit of WYT Group. The respective calculation is as follows:

Consideration on disposal of WYT Group attributable to the Wang On Group Cost of investment in WYT Group Profit on disposal Estimated deferred profits arising from disposal of WYT Group in respect of – Scenario I (at 42.40%) approximately – Scenario II (at 41.41%) approximately	HK$’000 167,089 (97,639) 69,450 29,500 28,800

Note 5 The unaudited pro forma adjusted consolidated/combined net tangible asset value of the Wang On Group per Share before and after the completion of the Wang On Disposal were calculated on the basis of 11,814,365,596 Shares in issue as at the Latest Practicable Date.

– 97 –

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.

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)

– 98 –

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)

– 99 –

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

– 100 –

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

– 101 –

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

– 102 –

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

– 103 –

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
RECONCILIATION OF MOVEMENTS IN CONSOLIDATED
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
2000
HK$’000
HK$’000
(160)
160
(31,491)
(6,925)
(31,651)
(6,765)
SHAREHOLDERS’
2001
2000
HK$’000
HK$’000
(31,491)
(6,925)
–
2,216
15,200
–
113
507
(1,743)
–
(17,921)
(4,202)
(160)
160
(18,081)
(4,042)
4,811
8,853
(13,270)
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.

– 104 –

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.

– 105 –

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.

– 106 –

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.

– 107 –

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.

– 108 –

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, first-out 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.

– 109 –

FINANCIAL INFORMATION RELATING TO DAILYWIN

APPENDIX II

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

– 110 –

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

– 111 –

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 The average weekly number of persons employed was as follows: Office and management Manufacturing and distribution	2001 HK$’000 37,482 1,483 38,965 2001 Number 351 823 1,174	2000 HK$’000 33,561 1,161
		34,722

		2000 Number 352 831
		1,183

– 112 –

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

– 113 –

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.

– 114 –

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.

– 115 –

APPENDIX II

FINANCIAL INFORMATION RELATING TO DAILYWIN

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).

– 116 –

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

– 117 –

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.

– 118 –

FINANCIAL INFORMATION RELATING TO DAILYWIN

APPENDIX II

20. SHARE CAPITAL

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

– 119 –

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.

– 120 –

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.

– 121 –

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.

– 122 –

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

– 123 –

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

– 124 –

APPENDIX II FINANCIAL INFORMATION RELATING TO DAILYWIN

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

– 125 –

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.

– 126 –

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).

– 127 –

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

– 128 –

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.

– 129 –

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.

– 130 –

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

– 131 –

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

– 132 –

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)

– 133 –

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.

– 134 –

APPENDIX II

FINANCIAL INFORMATION RELATING TO DAILYWIN

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)

– 135 –

APPENDIX II

FINANCIAL INFORMATION RELATING TO DAILYWIN

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

OPERATING LOSS
					Six months ended
					30 September
					2001	2000
					(Unaudited)	(Unaudited)
					HK$’000	HK$’000
Operating loss has been arrived at after charging:
Amortisation of issue cost of convertible loan stock					221	1,622

Depreciation and amortisation of property, plant and
equipment					7,069	5,520

(4) OPERATING LOSS

(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.

– 136 –

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.

– 137 –

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

– 138 –

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.

– 139 –

GENERAL INFORMATION

APPENDIX III

1. RESPONSIBILITY STATEMENT

This circular includes particulars given in compliance with the Listing Rules for the purpose of giving information with regard to the Company. The Directors collectively and individually accept full responsibility for the accuracy of the information contained in this circular and confirm, have made all reasonable enquires, that to the best of their knowledge and behalf, there are no other facts not contained in this circular, the omission of which would make any statement herein misleading.

2. DISCLOSURE OF 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)_	217,884,000	1.84%
	Personal	59,565,870	0.50%
	Family_(Note 2)_	59,565,870	0.50%
	Other_(Note 3)_	1,950,857,379	16.51%
Ms. Yau Yuk Yin	Personal	59,565,870	0.50%
	Family_(Note 4)_	277,449,870	2.35%
	Other_(Note 4)_	1,950,857,379	16.51%
Dr. Siu Yim Kwan,	Personal	600,000	0.005%
Sidney

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 Yuk Yin, 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 Mui Fun 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.

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Ms. Yau Yuk Yin was taken to be interested under the SDI Ordinance in those Shares in which her spouse, Mr. Tang, was interested.

Apart from the 337,015,740 issued Shares held by Mr. Tang and Ms. Yau Yuk Yin 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 of the Company

	Number of	Exercise price
Name of Director	share options	per Share	Exercise period
Mr. Tang	65,400,000_(Note1)_	HK$0.0217_(Note 1)_	6th March, 2001 to
			5th February, 2005
Ms. Yau Yuk Yin	65,400,000_(Note 2)_	HK$0.0217_(Note 2)_	6th March, 2001 to
			5th February, 2005

Notes:

Mr. Tang has been granted an option to subscribe a total of 10,900,000 Shares at an exercise price of HK$0.13 per Share by the Company under the old share option scheme of the Company adopted on 6th February, 1995 (“Old Scheme”) before the Old Scheme was terminated and replaced by a new share option scheme of the Company adopted on 3rd May, 2002. As a result of the rights issue of the Company in February, 2002, relevant adjustments were made to the above share options pursuant to the terms of the Old Scheme. Accordingly, the number of share options held by Mr. Tang were adjusted to 65,400,000 share options with an exercise price of HK$0.0217 per Share.
Ms. Yau Yuk Yin has been granted an option to subscribe a total of 10,900,000 Shares at an exercise price of HK$0.13 per Share by the Company under the Old Scheme before the Old Scheme was terminated and replaced by a new share option scheme of the Company adopted on 3rd May, 2002. As a result of the rights issue of the Company in February, 2002, relevant adjustments were made to the above share options pursuant to the terms of the Old Scheme. Accordingly, the number of share options held by Ms. Yau Yuk Yin were adjusted to 65,400,000 share options with an exercise price of HK$0.0217 per Share.

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

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APPENDIX III

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.

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 is materially interested and which is significant in relation to the business of the Group taken as a whole.

3. 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	217,884,000	1.84%
Mr. Tang	59,565,870	0.50%
Ms. Yau Yuk Yin	59,565,870	0.50%
Ms. Tang Mui Fong	468,424,570	3.96%
Mr. Yau Yuk Tong	298,040,950	2.52%
Ms. Tang Mui Fun	1,184,391,859	10.03%
	2,287,873,119	19.37%

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

Pursuant to Sections 9 and 10 of the SDI Ordinance, Caister Limited, Mr. Tang, Ms. Yau Yuk Yin, Ms. Tang Mui Fong, Mr. Yau Yuk Tong and Ms. Tang Mui Fun were taken (for purpose of the duty of disclosure only) to be interested in a total of 2,287,873,119 Shares.

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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.

4. MATERIAL CONTRACTS

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

(a) (i) a placing agreement dated 29th June, 2000 entered into by Mr. Yau Yuk Tong, Ms. Tang Mui Fun, 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; (ii) a subscription agreement dated 29th June, 2000 entered into by Mr. Yau Yuk Tong, Ms. Tang Mui Fun, 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;
(b) 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 WYT Medicine;
(c) 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 approximately 19% shareholding in Luxembourg Medicine;
(d) 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

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venture pharmaceutical enterprise in Changsha, Hunan Province known as 湖南湘雅製藥有限公司 (Hunan Xiangya Pharmaceutical Co., Ltd.);

(e) a conditional agreement dated 24th July, 2001 entered into between the Company and Kingsway SW Securities Limited in respect of the placing of the convertible bond in the aggregate principal amount of HK$30,080,000 issued by the Company to certain independent third parties;
(f) 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;
(g) (i) a placing agreement dated 25th September, 2001 entered into by the Company, Mr. Yau Yuk Tong, Ms. Tang Mui Fun, 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 Mui Fun, 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;
(h) (i) a placing agreement dated 1st November, 2001 entered into by the Company, Mr. Yau Yuk Tong, Ms. Tang Mui Fun, 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 Mui Fun, 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;
(i) 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;
(j) 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,

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GENERAL INFORMATION

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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;

(k) 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;
(l) (i) placing agreement dated 19th December, 2001 entered into by the Company, Mr. Yau Yuk Tong, Ms. Tang Mui Fun, 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; (ii) a subscription agreement dated 19th December, 2001 entered into by Mr. Yau Yuk Tong, Ms. Tang Mui Fun, 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;
(m) the agreement dated 15th January, 2002 entered into between the Company and Kingsway SW Securities Limited, Kingston Securities Limited, Great China Brokerage Limited, GC Capital (Asia) Limited, Luen Fat Securities Co. Ltd and Mr. Tang Mui Fun, as underwriters, in relation to the underwriting and certain other arrangements in respect of the rights issue of 6,576,243,732 Shares and 1,644,060,933 Shares by way of bonus of the Company, details of which were included in the circular dated 6th February, 2002 and prospectus dated 28th February, 2002 despatched to the shareholders of the Company;
(n) an agreement dated 21st March, 2002 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 5.95% shareholding in Luxembourg Medicine;
(o) (i) a placing agreement dated 2nd May, 2002 entered into by Mr. Yau Yuk Tong, Ms. Tang Mui Fong, Ms. Tang Mui Fun and Kingston Securities Limited for the placement of a total of 1,635,000,000 Shares at a price of HK$0.02 per Share to certain independent third parties; and (ii) a subscription agreement dated 2nd May, 2002 entered into by Mr. Yau Yuk Tong, Ms. Tang Mui Fong, Ms. Tang Mui Fun and the Company for the subscription of a total of 1,950,000,000 Shares at a price of HK$0.02 per Share;
(p) the Agreement; and
(q) the Placing Agreement.

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5. MATERIAL ADVERSE CHANGE

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

6. LITIGATION

As reported in the Wang On Group’s 2001/2002 interim report, in the prior year, a subcontractor claimed against a wholly-owned subsidiary of the Wang On 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.

As also reported in the Wang On Group’s 2001/2002 interim report, in the prior year, 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 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 Wang On 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 Wang On Group.

7. 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 Wang On Group (excluding contracts expiring or determinable by the Company within one year without payment of compensation other than statutory compensation).

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8. EXPERTS

The following are the qualifications of the experts which have given their opinion or advice which are contained in this circular:

Name

Qualification

Kingsway Capital Limited

Investment adviser registered under the Securities Ordinance (Chapter 333 of the Laws of Hong Kong)

Kingston Corporate Finance Limited

Investment adviser registered under the Securities Ordinance (Chapter 333 of the Laws of Hong Kong)

Each of Kingsway Capital Limited and Kingston Corporate Finance Limited has given and has not withdrawn its written consent to the issue of this circular with the inclusion of the references to its name in the form and context in which it appears.

Each of Kingsway Capital Limited and Kingston Corporate Finance Limited confirms that it does not have any shareholding in the Company or any of its subsidiaries or any right (whether legally enforceable or not) to subscribe for or to nominate persons to subscribe for securities in any member of the Wang On Group.

Each of Kingsway Capital Limited and Kingston Corporate Finance Limited also confirms that it does not have any interest, direct or indirect, in any assets which have been, since 31st March, 2001 (being the date to which the latest published audited accounts of the Company were made up), acquired or disposed of by or leased to any member of the Wang On Group, or are proposed to be acquired or disposed of by or leased to any member of the Wang On Group.

9. ARRANGEMENTS AFFECTING DIRECTORS

Save as disclosed herein, there is no agreement or arrangement between the Company or parties acting in concert with it and any of the Directors, which are conditional upon the completion of the Wang On Disposal and/or the Disposal and/or the Whitewash Waiver or otherwise connected with the Wang On Disposal and/or the Whitewash Waiver.

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10. 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. 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.
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 this document shall prevail over the Chinese text in the case of inconsistency.

11. 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) from the date of this circular up to and including the date of the SGM:

(i) the memorandum of association and bye-laws of the Company;
(ii) the annual reports of the Company for each of the two financial years ended 31st March, 2001;
(iii) the interim report of the Company for the six months ended 30th September, 2001;
(iv) the material contracts referred to in the section headed “Material contracts” of this appendix;
(v) the written consents referred to in paragraph 8 of this appendix;
(vi) the circulars and prospectus addressed to the Shareholders dated 9th January, 2002, 6th February, 2002 and 28th February, 2002 respectively.

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NOTICE OF THE SGM

==> picture [56 x 41] intentionally omitted <==

WANG ON GROUP LIMITED

(incorporated in Bermuda with limited liability)

NOTICE IS HEREBY GIVEN that a special general meeting of Wang On Group Limited (the “Company”) will be held at 26th Floor, Asia Pacific Finance Tower, Citibank Plaza, 3 Garden Road on Wednesday, 3rd July, 2002 at 9:30 a.m., Hong Kong for the purpose of considering and, if thought fit, passing the following resolution as an ordinary resolution of the Company:

ORDINARY RESOLUTION

“ THAT

(a) the conditional agreement (the “Agreement”, a copy of which has been produced to the meeting marked “A” and signed by the chairman of the meeting for the purpose of identification) dated 22nd May, 2002 made between the Company, Town Health International Holdings Company Limited (“Town Health’) and Dailywin Group Limited (“Dailywin”), pursuant to which, among other things, the Company agreed to sell, and Dailywin agreed to purchase, the entire issued share capital of Reliance City Investments Limited, a wholly-owned indirect subsidiary of the Company, for a total consideration of HK$167,088,886.66 which would be satisfied (i) as to HK$103,088,886.66 by the issue of 10,308,888,666 new shares of HK$0.01 each in the share capital of Dailywin (“Consideration Shares”) by Dailywin to the Company (or its nominee(s)); and (ii) as to HK$64,000,000 by the issue of convertible notes (“Convertible Notes”) having an aggregate principal amount of HK$64,000,000 by Dailywin to the Company (or its nominee(s)) with an initial conversion price of HK$0.01 (subject to adjustments) per share of HK$0.01 each of Dailywin which may fall to be issued by Dailywin upon exercise of the conversion rights under the Convertible Notes (the “Disposal”), details of which are set out in a circular issued by the Company to shareholders dated 17th June 2002, be and is hereby approved, ratified and confirmed;
(b) all transactions to be entered into by the Company under the Agreement (including, without limitation, the Disposal) be and are hereby approved; and
(c) the directors of the Company be and they are hereby authorised on behalf of the Company to sign, seal, execute, perfect and deliver all such documents and deeds and do all such acts, matters and things as they may in their absolute discretion consider necessary or desirable for the purpose of and in connection with the implementation of the Agreement

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NOTICE OF THE SGM

and the exercise and enforcement of any of the Company’s rights under the Agreement including, inter alia, upon the Agreement becoming unconditional or otherwise provided in the Agreement, to complete and/or to procure completion of the Disposal and to make and agree such variations of the terms of the Agreement as they may in their absolute discretion consider to be necessary or desirable and in the interests of the Company.”

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

Hong Kong, 17th June, 2002

Head office and principal place of business:

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

Notes:

(1) A member entitled to attend and vote at the above meeting is entitled to appoint one or more than one proxy to attend and to vote instead of him. A proxy need not be a member of the Company.
(2) A form of proxy of the meeting is enclosed. If the appointer is a corporation, the form of proxy must be under its common seal or, under the hand of an officer or attorney duly authorised on its behalf.
(3) To be valid, a form of proxy must be deposited at the Company’s Hong Kong branch share registrar, Tengis Limited, at 4th Floor, Hutchison House, 10 Harcourt Road, Central, Hong Kong, as soon as possible and in any event not later than 48 hours before the time appointed for the holding of the special general meeting or any adjournment thereof.

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AI assistant

Wang On Group Limited — Proxy Solicitation & Information Statement 2002

49778_rns_2002-06-18_12db3e0b-1d3f-4d32-a03d-54b342934a53.pdf

WANG ON GROUP LIMITED

MAJOR TRANSACTION

DISPOSAL OF 75.79% INDIRECT SHAREHOLDING IN WAI YUEN TONG MEDICINE COMPANY LIMITED

CONTENTS

DEFINITIONS

DEFINITIONS

DEFINITIONS

DEFINITIONS

DEFINITIONS

DEFINITIONS

LETTER FROM THE BOARD

WANG ON GROUP LIMITED

MAJOR TRANSACTION DISPOSAL OF 75.79% INDIRECT SHAREHOLDING IN WAI YUEN TONG MEDICINE COMPANY LIMITED

INTRODUCTION

THE AGREEMENT DATED 22ND MAY, 2002

LETTER FROM THE BOARD

Consideration

Issue price and conversion price

LETTER FROM THE BOARD

Principal terms of the Convertible Notes

LETTER FROM THE BOARD

LETTER FROM THE BOARD

Guaranteed Profit

Conditions precedent

LETTER FROM THE BOARD

Completion

LETTER FROM THE BOARD

FINANCIAL EFFECT OF THE WANG ON DISPOSAL ON THE WANG ON GROUP

INFORMATION ON RELIANCE CITY AND PLENTY TIME

INFORMATION ON THE WYT GROUP

LETTER FROM THE BOARD

Option Deed #1

LETTER FROM THE BOARD

LETTER FROM THE BOARD

LETTER FROM THE BOARD

INFORMATION ON DAILYWIN

Review of operations and prospect

LETTER FROM THE BOARD

Other financial information

LETTER FROM THE BOARD

Initial acquisition of interest in Dailywin

LETTER FROM THE BOARD

THE PLACING AGREEMENT DATED 13TH JUNE, 2002

Parties

Basis of Placing

Number of Placing Shares

Placing Price

LETTER FROM THE BOARD

Condition

Completion

USE OF PROCEEDS FROM THE PLACING

SHAREHOLDING STRUCTURE

As at the Latest Practicable Date:

LETTER FROM THE BOARD

LETTER FROM THE BOARD

MAINTENANCE OF THE LISTING STATUS OF DAILYWIN

LETTER FROM THE BOARD

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

Investments in pharmaceutical business other than WYT

REASONS FOR THE WANG ON DISPOSAL

LETTER FROM THE BOARD

LETTER FROM THE BOARD

WHITEWASH WAIVER

SGM

LETTER FROM THE BOARD

RECOMMENDATION

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

Wang On Group Limited Proxy Solicitation & Information Statement 2002