Wang On Group Limited — Proxy Solicitation & Information Statement 2004

Nov 5, 2004

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

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

If you have sold or transferred all your shares in Wang On Group Limited, you should at once hand this circular and the accompanying form of proxy to the purchaser or transferee or to the bank, licensed securities dealer or other agent through whom the sale or transfer was effected for transmission to the purchaser or transferee.

The Stock Exchange of Hong Kong Limited takes no responsibility for the contents of this circular, 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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WANG ON GROUP LIMITED

( )[*]

(Incorporated in Bermuda with limited liability)

(Stock Code: 1222)

MAJOR AND CONNECTED TRANSACTIONS

PROPOSED ACQUISITION OF ENTIRE ISSUED SHARE CAPITAL AND SHAREHOLDER’S LOANS OF

(1) DRAGON RICHLY INVESTMENT LIMITED; (2) POLY TALENT INVESTMENT LIMITED; AND (3) PROFIT MILLION INVESTMENT LIMITED

Financial adviser

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Independent financial adviser to the Independent Board Committee and the Independent Shareholders

A letter dated 5 November 2004, from the Independent Board Committee (as defined herein) containing its advice to the Independent Shareholders (as defined herein) in respect of the terms of the DR Acquisition and the PT/PM Acquisition (as defined herein) is set out on pages 19 to 20 of this circular. A letter dated 5 November 2004 from Baron Capital Limited, the independent financial adviser to the Independent Board Committee and the Independent Shareholders, containing its advice in respect of the terms of the DR Acquisition and the PT/PM Acquisition is set out on pages 21 to 35 of this circular.

A notice convening a special general meeting of Wang On Group Limited to be held at 35th Floor, Two International Finance Centre, 8 Finance Street, Central, Hong Kong on 22 November 2004 at 9:30 a.m. is set out on pages 147 and 148 of this circular. A form of proxy for use in the special general meeting is enclosed. Whether or not you propose to attend the special general meeting, you are requested to complete and return the accompanying form of proxy in accordance with the instructions printed thereon as soon as possible and in any event not less than 48 hours before the time appointed for the holding of the special general meeting or any adjourned meeting thereof. Completion and return of the form of proxy will not preclude you from attending and voting in person at the special general meeting or any adjourned meeting thereof should you so wish.

• For identification purpose only

5 November 2004

CONTENTS

	Page
Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
Letter from the Board
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	6
The DR Acquisition Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	7
The PT/PM Acquisition Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	9
Information on the Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	11
Information on Dragon Richly, Poly Talent and Profit Million. . . . . . . . . . . . . .	11
Reasons for the DR Acquisition and the PT/PM Acquisition . . . . . . . . . . . . . . .	12
Implications under the Listing Rules and the SGM . . . . . . . . . . . . . . . . . . . . . .	16
Voting on poll . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	17
Financial and trading prospects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	18
Recommendation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	18
Additional information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	18
Letter from the Independent Board Committee . . . . . . . . . . . . . . . . . . . . . . . . . .	19
Letter from Baron . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	21
Appendix I – Accountants’ report on Dragon Richly . . . . . . . . . . . . . . . .	36
Appendix II – Accountants’ report on Poly Talent . . . . . . . . . . . . . . . . . .	44
Appendix III – Accountants’ report on Profit Million . . . . . . . . . . . . . . . .	51
Appendix IV – Financial information on the Group . . . . . . . . . . . . . . . . .	58
Appendix V – Financial information on the Enlarged Group . . . . . . . . .	110
Appendix VI – Comfort letter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	124
Appendix VII – Valuation report on 29 units in the
Kennedy Town Properties . . . . . . . . . . . . . . . . . . . . . . . .	126
Appendix VIII – Valuation report on the Yuen Long Properties. . . . . . . . . .	135
Appendix IX – General information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	139
Notice of SGM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	147

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DEFINITIONS

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

• “associate” has the meaning ascribed to it under the Listing Rules “Baron” Baron Capital Limited, which is a deemed licensed corporation under the SFO permitted to carry out types 1 and 6 regulated activity (as defined in the SFO) and the independent financial adviser to the Independent Board Committee

• “Board” the board of Directors “Company” Wang On Group Limited, a company incorporated in Bermuda and the shares of which are listed on the Stock Exchange

• “connected person” has the meaning ascribed to it under the Listing Rules “Directors” the directors of the Company “DR Acquisition” the sale and purchase of the entire issued share capital and shareholder’s loan of Dragon Richly pursuant to the DR Acquisition Agreement

• “DR Acquisition Agreement” the conditional agreement dated 27 September 2004 entered into between Suitbest, Mr. Tang and Dragon Richly in relation to the DR Acquisition

• “DR Consideration” the consideration for DR Acquisition to be paid in the manner set out in the paragraph headed “The DR Acquisition Agreement” on page 7 of this circular

• “Dragon Richly” Dragon Richly Investment Limited, a company wholly and beneficially owned by Mr. Tang

• “Enlarged Group” the Group, Dragon Richly, Poly Talent and Profit Million “Group” the Company and its subsidiaries “Hong Kong” the Hong Kong Special Administrative Region of the People’s Republic of China

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DEFINITIONS

• “Independent Board Committee”

• “Independent Shareholders”

• “Kennedy Town Formal Agreements”

• “Kennedy Town Properties”

• “Kennedy Town Property Vendors”

• “Kennedy Town Provisional Agreements”

an independent committee of the Board, comprising the independent non-executive Directors, namely Dr. Lee Peng Fei, Allen, CBE, JP, Mr. Wong Chun, Justein, MBE, JP, Dr. Siu Yim Kwan, Sidney, S.B.St.J. and Mr. Siu Kam Chau

• the shareholders of the Company other than Mr. Tang and his associates

the formal agreements to be entered into by Dragon Richly with the Kennedy Town Property Vendors in relation to the sale and purchase of 29 residential and commercial units in the Kennedy Town Properties, the subject of the Kennedy Town Provisional Agreements

the properties comprising a total of 31 units and representing the entirety of six blocks of 5-storey old residential buildings situated at Nos. 12, 14, 16, 18, 20 and 22, Davis Street, Kennedy Town, Hong Kong and occupying an aggregate site area of approximately 4,965 square feet and a total floor area of approximately 25,000 square feet

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

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

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

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DEFINITIONS

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

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

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

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

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

“Latest Practicable Date” 3 November 2004, being the latest practicable date for ascertaining certain information for inclusion in this circular “Listing Rules” the Rules Governing the Listing of Securities on the Stock Exchange “Mr. Tang” Mr. Tang Ching Ho, being the chairman and the managing director of the Company “Poly Talent” Poly Talent Investment Limited, a company wholly and beneficially owned by Mr. Tang “Profit Million” Profit Million Investment Limited, a company wholly and beneficially owned by Mr. Tang “PT/PM Acquisition” the sale and purchase of the entire issued share capital and shareholders’ loans of each of Profit Million and Poly Talent pursuant to the PT/PM Acquisition Agreement “PT/PM Acquisition Agreement” the conditional agreement dated 12 October 2004 entered into between Suitbest, Mr. Tang, Poly Talent and Profit Million in relation to the PT/PM Acquisition “PT/PM Consideration” the consideration for the PT/PM Acquisition to be paid in the manner set out in the paragraph headed “The PT/PM Acquisition Agreement” on page 9 of this circular

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DEFINITIONS

“SFO” the Securities of Futures Ordinance (Chapter 571 of the Laws of Hong Kong) “SGM” the special general meeting of the Company to be convened to approve the DR Acquisition Agreement and the PT/PM Acquisition Agreement “Share(s)” share(s) of HK$0.10 each in the capital of the Company “Shareholders” holders of the Shares “Stock Exchange” The Stock Exchange of Hong Kong Limited “Suitbest” Suitbest Investments Limited, a wholly-owned subsidiary of the Company “WYT” Wai Yuen Tong Medicine Holdings Limited, a company incorporated in Bermuda with limited liability and the shares of which are listed on the Stock Exchange (Stock Code: 897) “Yuen Long Formal Agreements” the Yuen Long Property A Formal Agreement and the Yuen Long Property B Formal Agreement “Yuen Long Properties” the properties comprising both the Yuen Long Property A and the Yuen Long Property B and occupying an aggregate site area of approximately 104,300 square feet “Yuen Long Property A” a plot of vacant land situated at Fairview Park Boulevard, Yuen Long, New Territories, adjoining the Yuen Long Property B and registered in the Land Registry as Lot No. 4781 in D.D. No. 104 with a total site area of approximately 92,700 square feet “Yuen Long Property A Formal the formal agreement to be entered into by Poly Talent or Agreement” its nominee(s) with the Yuen Long Property A Vendor in relation to the sale and purchase of the Yuen Long Property A “Yuen Long Property A the sale and purchase agreement entered into by Poly Provisional Agreement” Talent with the Yuen Long Property A Vendor on 11 October 2004 in respect of the Yuen Long Property A “Yuen Long Property A Vendor” Jet Complete Limited

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DEFINITIONS

• “Yuen Long Property B”

• “Yuen Long Property B Formal Agreement”

• “Yuen Long Property B Provisional Agreement”

• “Yuen Long Property B Vendor”

• “Yuen Long Property Vendors”

• “Yuen Long Provisional Agreements”

• “HK$”

a plot of vacant land situated at Fairview Park Boulevard, Yuen Long, New Territories, adjoining the Yuen Long Property A and registered in the Land Registry as the remaining portion of Lot No. 3254 in D.D. No. 104 with a total site area of approximately 11,600 square feet

the formal agreement to be entered into by Profit Million or its nominee(s) with the Yuen Long Property B Vendor in relation to the sale and purchase of the Yuen Long Property B

the sale and purchase agreement entered into by Profit Million with the Yuen Long Property B Vendor on 11 October 2004 in respect of the Yuen Long Property B

Hui Kam Hing

the Yuen Long Property A Vendor and the Yuen Long Property B Vendor. The Directors confirm that, to the best of their knowledge, information and belief having made all reasonable enquiry, each of the Yuen Long Property A Vendor and the Yuen Long Property B Vendor and its respective ultimate beneficial owners (in the case of the Yuen Long Property A Vendor), are independent third parties not being connected persons of the Company (as defined in the Listing Rules)

the Yuen Long Property A Provisional Agreement and the Yuen Long Property B Provisional Agreement

Hong Kong dollars, the lawful currency of Hong Kong

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LETTER FROM THE BOARD

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WANG ON GROUP LIMITED ( )[*]

(Incorporated in Bermuda with limited liability)

(Stock Code: 1222)

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, S.B.St.J. Mr. Siu Kam Chau

Head office and principal place of business: 5th Floor Wai Yuen Tong Medicine Building 9 Wang Kwong Road Kowloon Bay Kowloon Hong Kong

5 November 2004

To the Shareholders

Dear Sir or Madam,

MAJOR AND CONNECTED TRANSACTIONS

PROPOSED ACQUISITION OF ENTIRE ISSUED SHARE CAPITAL AND SHAREHOLDER’S LOANS OF

(1) DRAGON RICHLY INVESTMENT LIMITED; (2) POLY TALENT INVESTMENT LIMITED; AND (3) PROFIT MILLION INVESTMENT LIMITED

INTRODUCTION

On 30 September 2004, the Directors announced that on 27 September 2004, Suitbest, a wholly-owned subsidiary of the Company, Mr. Tang and Dragon Richly entered into the DR Acquisition Agreement, pursuant to which Suitbest had agreed to acquire from Mr. Tang the

• For identification purpose only

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LETTER FROM THE BOARD

entire issued share capital and shareholder’s loan of Dragon Richly at a consideration to be paid in the manner as set out in the section headed “The DR Acquisition Agreement” in this circular.

On 13 October 2004, the Directors announced that on 12 October 2004, Suitbest, a wholly-owned subsidiary of the Company, Mr. Tang, Poly Talent and Profit Million entered into the PT/PM Acquisition Agreement, pursuant to which Suitbest had agreed to acquire from Mr. Tang (a) the entire issued share capital and shareholder’s loan of Poly Talent; and (b) the entire issued share capital and shareholder’s loan of Profit Million at a consideration to be paid in the manner as set out in the section headed “The PT/PM Acquisition Agreement” in this circular.

The purpose of this circular is to provide you with, among other matters, (i) further information on the DR Acquisition and the PT/PM Acquisition; (ii) valuation reports on the 29 commercial and residential units in the Kennedy Town Properties and the Yuen Long Properties; (iii) accountants’ reports on Dragon Richly, Poly Talent and Profit Million; (iv) financial information of the Enlarged Group; (v) letter of advice from the Independent Board Committee; and (vi) letter of advice from Baron, the independent financial adviser to the Independent Board Committee; and to give you the notice convening the SGM to seek approval from the Independent Shareholders for the DR Acquisition and the PT/PM Acquisition.

THE DR ACQUISITION AGREEMENT

• Date: 27 September 2004 Parties: (i) Mr. Tang, who is the chairman and the managing director of the Company, as vendor;

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

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

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

• (ii) shareholder’s loan of Dragon Richly

The DR Consideration shall represent the face value of the entire issued share capital and shareholder’s loan of Dragon Richly as at completion of the DR Acquisition Agreement. As at the date of the DR Acquisition Agreement, the shareholder’s loan of Dragon Richly amounted to HK$720,000, which had been or will be applied as the initial deposits for the purchase of the 29 residential and commercial units in the Kennedy Town Properties. The DR Consideration shall be payable in cash and funded by internal resources of the Group.

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LETTER FROM THE BOARD

The DR Consideration shall be paid in the following manner:

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

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

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

On 27 September 2004, the sum of HK$720,001 refer to in (i) above was paid to Mr. Tang. On 11 October 2004, Suitbest paid Dragon Richly’s solicitors an aggregate amount of HK$7,095,000 upon request by Mr. Tang.

Conditions precedent:

The DR Acquisition Agreement is conditional upon the following conditions precedent:

• (i) the approval of the DR Acquisition Agreement and other transactions contemplated in or incidental to the DR Acquisition Agreement in the SGM of the Independent Shareholders in accordance with the Listing Rules; and

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

Completion of the DR Acquisition:

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

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LETTER FROM THE BOARD

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

Following completion of the DR Acquisition Agreement, the Company will own the entire issued share capital of Dragon Richly, which thus will become a wholly-owned subsidiary of the Company.

THE PT/PM ACQUISITION AGREEMENT

• Date: 12 October 2004 Parties: (i) Mr. Tang, who is the chairman and the managing director of the Company, as vendor;

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

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

• (iv) Profit Million, a limited liability company incorporated in Hong Kong and wholly and beneficially owned by Mr. Tang.

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

• (ii) one share of HK$1 each in the share capital of Profit Million, being the entire issued share capital of Profit Million; and

• (ii) shareholder’s loan of each of Poly Talent and Profit Million.

The PT/PM Consideration shall represent the face value of the entire issued share capital and shareholder’s loans of both Poly Talent and Profit Million as at completion of the PT/PM Acquisition Agreement. As at the date of the PT/PM Acquisition Agreement, the shareholder’s loan of each of Poly Talent and Profit Million amounted to HK$1,800,000 and HK$300,000 respectively, which had been paid as the initial deposits for the purchase of the Yuen Long Properties. The PT/PM Consideration shall be payable in cash and funded by internal resources of the Group.

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LETTER FROM THE BOARD

The PT/PM Consideration shall be paid in the following manner:

• (i) a sum of HK$2,100,002 will be paid to Mr. Tang on the signing of the PT/PM Acquisition Agreement (representing the amount of the total issued share capital and shareholder’s loans of both Poly Talent and Profit Million as at the date of the PT/PM Acquisition Agreement);

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

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

On 12 October 2004, the sum of HK$2,100,002 referred to in (i) above was paid to Mr. Tang.

Conditions precedent:

The PT/PM Acquisition Agreement is conditional upon the following conditions precedent:

• (i) the approval of the PT/PM Acquisition Agreement and other transactions contemplated in or incidental to the PT/PM Acquisition Agreement in the SGM of the Independent Shareholders in accordance with the Listing Rules; and

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

Completion of the PT/PM Acquisition:

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

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LETTER FROM THE BOARD

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

Following completion of the PT/PM Acquisition Agreement, the Company will own the entire issued share capital of Poly Talent and Profit Million, which thus will become wholly-owned subsidiaries of the Company.

INFORMATION ON THE GROUP

The Group is principally engaged in the management and sub-licensing of Chinese wet markets, shopping centres and car parks, retail business, property development and property investment. It also has interests in the pharmaceutical business through its investments in WYT. The Directors are optimistic about the property market in Hong Kong and perceive investment potentials of the Kennedy Town Properties and Yuen Long Properties for re-development and development respectively.

In the past 12 months prior to the Latest Practicable Date, the Group purchased (i) a piece of leasehold land located in Shatin, New Territories, Hong Kong and registered in the Land Registry of Hong Kong as Lot No. 1476 in D.D. No. 189 — known as STTL No. 465 for a consideration of approximately HK$103,800,000 on 26 March 2004 for development into a low density residential area as set out in the Company’s announcement dated 30 March 2004; (ii) two adjoining vacant residential lands located in Sai Kung, New Territories, Hong Kong and with one property registered in the Land Registry as Lot Nos. 400, 402, 403, 404, 405, 406A, 406RP, 407A, 407RP, 409A, 409RP and 418RP, all in D.D. No. 210 and Lot No. 1861A in D.D. No. 244 and the other property registered as Lot Nos. 407B, 409B, 410, 411, 412, 414 and 418A, all in D.D. No. 210 and Lot Nos. 1860 and 1861RP and in D.D. No. 244 for an aggregate consideration of HK$13.8 million on 21 October 2004 for development into a low density residential area.

INFORMATION ON DRAGON RICHLY, POLY TALENT AND PROFIT MILLION

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

Based on the accountants’ report of Dragon Richly, the audited net loss of Dragon Richly was HK$5,371, representing business registration fee, formation expenses as well as search, filing and secretarial fee, for the period from 1 September 2004 to 15 October 2004 and the

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LETTER FROM THE BOARD

audited net tangible liabilities of Dragon Richly as at 15 October 2004 were HK$5,370. Other than the payment for the purchase price pursuant to the Kennedy Town Provisional Agreements, Dragon Richly did not have any long term liability as at the Latest Practicable Date.

Poly Talent is a limited liability company incorporated in Hong Kong on 11 August 2004. Profit Million is a limited liability company incorporated in Hong Kong on 22 September 2004. Each of Poly Talent and Profit Million is wholly and beneficially owned by Mr. Tang. Both of Poly Talent and Profit Million are investment holding companies and have not carried out any other business activities since their incorporation other than the entering into the Yuen Long Provisional Agreements for the purpose of acquiring the Yuen Long Properties and the PT/PM Acquisition Agreement. Upon completion of the purchase of the Yuen Long Properties, the principal assets of both Poly Talent and Profit Million will be the Yuen Long Properties.

Based on the accountants’ report of Poly Talent set out in this circular, the audited net loss of Poly Talent was HK$5,367, representing business registration fee, formation expenses as well as search, filing and secretarial fee, for the period from 11 August 2004 to 15 October 2004 and the audited net tangible liabilities of Poly Talent as at 15 October 2004 was HK$5,366. Other than the payment for purchase price pursuant to the Yuen Long Property A Provisional Agreement, Poly Talent did not have any long term liability as at the Latest Practicable Date.

Based on the accountants’ report of Profit Million set out in this circular, the audited net loss of Profit Million was HK$5,367, representing business registration fee, formation expenses as well as search, filing and secretarial fee, for the period from 22 September 2004 to 15 October 2004 and the audited net tangible liabilities of Profit Million as at 15 October 2004 was HK$5,366. Other than the payment for purchase price pursuant to the Yuen Long Property B Provisional Agreement, Profit Million does not have any long term liability as at the Latest Practicable Date.

REASONS FOR THE DR ACQUISITION AND THE PT/PM ACQUISITION

In view of the time required for obtaining shareholders’ approval in relation to the acquisition of the Kennedy Town Properties and the Yuen Long Properties under the Listing Rules and in order to facilitate the purchase of the 29 units in the Kennedy Town Properties and the Yuen Long Properties from the Kennedy Town Property Vendors and the Yuen Long Property Vendors respectively, Mr. Tang, at the request of the Company, through Dragon Richly, Poly Talent and Profit million stepped in to acquire the Kennedy Town Properties and the Yuen Long Properties. Further particulars are set out below.

The DR Acquisition

Prior to the entering into the DR Acquisition Agreement, Dragon Richly entered into the Kennedy Town Provisional Agreements on 17 September 2004 for the sale and purchase of 29 residential and commercial units in the Kennedy Town Properties which shall occupy a total

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LETTER FROM THE BOARD

floor area of approximately 23,000 square feet. It is intended that apart from the 29 units to be acquired subject to the execution of the Kennedy Town Formal Agreements, Dragon Richly should further acquire one residential unit and one commercial unit (which have not been made the subject of the Kennedy Town Provisional Agreements) to complete the purchase of the Kennedy Town Properties as a whole. The Directors intend that following acquisition of the Kennedy Town Properties and the DR Acquisition, the Company should demolish the Kennedy Town Properties for redevelopment into new commercial or residential buildings.

As at the Latest Practicable Date, an amount of HK$660,000 had been paid by Dragon Richly, out of the shareholder’s loan of Dragon Richly amounting to HK$7,815,000, to the relevant the Kennedy Town Property Vendors as initial deposit pursuant to the terms of the Kennedy Town Provisional Agreements and HK$60,000 was placed with Dragon Richly’s solicitors for and on behalf of Dragon Richly. 11 sets of the Kennedy Town Formal Agreements were entered in the period between 20 October 2004 and 27 October 2004 and the remaining 18 sets of the Kennedy Town Formal Agreements would be entered into by Dragon Richly and the Kennedy Town Property Vendors in due course and further deposits in an aggregate amount of approximately HK$7.10 million had been paid by Dragon Richly. The balance for the purchase price of the 29 units in the Kennedy Town Properties are expected to be payable as to approximately HK$3.88 million on 15 November 2004, approximately HK$3.88 million on 15 December 2004 and approximately HK$62.04 million upon completion of the purchase of the 29 units in the Kennedy Town Properties pursuant to the Kennedy Town Provisional Agreements.

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

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

−13 −

LETTER FROM THE BOARD

Currently, Dragon Richly is in negotiation with the relevant owners of the aforesaid one residential unit (4th floor, No. 12 Davis Street, Kennedy Town, Hong Kong) and one commercial unit (ground floor, No. 22, Davis Street, Kennedy Town, Hong Kong) (which have not been made the subject of the Kennedy Town Provisional Agreements) on the entering into of provisional sale and purchase agreements but there is no assurance that Dragon Richly will succeed in concluding provisional sale and purchase agreements with the relevant owners and that the redevelopment plan of the Kennedy Town Properties can be implemented as intended. The Company will issue a further announcement regarding the valuation and particulars of the acquisition of the two units (which will include the view of the independent non-executive Directors and an independent financial adviser on the fairness of such acquisition) upon signing of the provisional sale and purchase agreements with the relevant owners and in compliance with the requirements of the Listing Rules. The Directors have indicated that if Dragon Richly fail to acquire the said outstanding units of the Kennedy Town Properties via commercial negotiation by 31 May 2005 (or such other date as agree by Dragon Richly and the Company), the Directors will consider to make an application to the Lands Tribunal under the Land (Compulsory Sale for Redevelopment) Ordinance for the compulsory sale of the Kennedy Town Properties (including the said outstanding units) by the owners or the Company may abandon the redevelopment plan of the Kennedy Town Properties.

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

The PT/PM Acquisition

Prior to the entering into the PT/PM Acquisition Agreement, Poly Talent and Profit Million separately entered into the Yuen Long Provisional Agreements with Yuen Long Property A Vendor and Yuen Long Property B Vendor on 11 October 2004 for the sale and purchase of the Yuen Long Properties comprising the Yuen Long Property A and the Yuen Long Property B. The Yuen Long Property A is a plot of vacant land situated at Fairview Park Boulevard, the Yuen Long, New Territories, adjoining the Yuen Long Property B and registered in the Land Registry as Lot No. 4781 in D.D. No. 104 with a total site area of approximately 92,700 square feet and the Yuen Long Property B is a plot of vacant land situated at Fairview Park Boulevard, Yuen Long, New Territories, adjoining the Yuen Long Property A and registered in the Land Registry as the remaining portion of Lot No. 3254 in D.D. No. 104 with a total site area of approximately 11,600 square feet. The Directors currently intend that following the PT/PM Acquisition, the Company should develop the Yuen Long Properties as a whole, depending on the then prevailing market conditions whereby the Yuen Long Property A would be developed into a low density residential and/or commercial area for sale and/or lease and the Yuen Long Property B will be afforested into a greenery area for certain individual houses as private gardens and/or common facilities for the development for the purposes of enhancing the market value of the low density residential and/or commercial area planned to be developed in the Yuen Long Property A.

−14 −

LETTER FROM THE BOARD

As at the Latest Practicable Date, an amount of HK$6,180,000, representing the total shareholder’s loan of Poly Talent as at the said date, had been paid by Poly Talent to the Yuen Long Property A Vendor as initial deposit and further deposit pursuant to the terms of the Yuen Long Property A Provisional Agreement entered on 11 October 2004 and the Yuen Long Property A Formal Agreement entered on 27 October 2004. The balance for the purchase price of the Yuen Long Property A is expected to be payable as to approximately HK$55,620,000 upon completion of the purchase of the Yuen Long Property A pursuant to the Yuen Long Property A Provisional Agreement and the Yuen Long Property A Formal Agreement which shall take place on or before 26 January 2005. Upon completion of the Yuen Long Property A Formal Agreement, Poly Talent will have to pay the full amount of HK$61,800,000 to the Yuen Long Property A Vendor. To the best of the Directors’ knowledge, the Yuen Long Property A Vendor is a property investment company and it and its respective ultimate beneficial owners are independent third parties not being connected persons of the Company (as defined in the Listing Rules).

As at the Latest Practicable Date, an amount of HK$653,000, representing the total shareholder’s loan of Profit Million as at the said date, had been paid by Profit Million to the Yuen Long Property B Vendor as initial deposit and further deposit pursuant to the terms of the Yuen Long Property B Provisional Agreement entered on 11 October 2004 and the Yuen Long Property B Formal Agreement entered on 27 October 2004. The balance for the purchase price of the Yuen Long Property B is expected to be payable as to approximately HK$5,877,000 upon completion of the purchase of the Yuen Long Property B pursuant to the Yuen Long Property B Provisional Agreement and the Yuen Long Property B Formal Agreement which shall take place on or before 26 February 2005. Upon completion of the Yuen Long Property B Formal Agreement, Profit Million will have to pay the full amount of HK$6,530,000 to the Yuen Long Property B Vendor. To the best of the Directors’ knowledge, The Yuen Long Property B Vendor is an individual and is independent third party not being a connected person of the Company (as defined in the Listing Rules).

It is provided in the Yuen Long Property B Provisional Agreement that, subject to the discretion of Profit Million, in the event that the purchase of the Yuen Long Property A cannot be completed, the Yuen Long Property B Provisional Agreement and the Yuen Long Property B Formal Agreement shall be cancelled and the Yuen Long Property B Vendor shall refund the deposit paid by Profit Million.

In view of the fact that Poly Talent and/or Profit Million had entered into the Yuen Long Provisional Agreements in respect of the Yuen Long Properties for an aggregate consideration of HK$68,330,000, which is determined based on the value of the Yuen Long Properties, as estimated by the Group’s property assessment expertise which considers such consideration to be the market price in the area adjacent to the Yuen Long Properties, and negotiated on an arm’s length basis and agreed on normal commercial terms between each of Poly Talent and Profit Million, and the relevant the Yuen Long Property Vendors, the Company entered into the PT/PM Acquisition Agreement to acquire Poly Talent and Profit Million from Mr. Tang, with no profit made or accrued to either parties, for the purpose of vesting its ultimate interests in the proposed acquisition of the Yuen Long Properties. To the best of knowledge, information and belief of the Directors, having made all reasonable enquiry, the Yuen Long Properties which are currently vacant will be acquired on an “as-is” basis.

−15 −

LETTER FROM THE BOARD

General

As the Group is principally engaged in, among other matters, property development and property investment, it has expertise and experience in building construction in Hong Kong. The Group has an expert team of staff specialized in property development, projects management, building construction, quantity surveying as well as the sales and marketing in property.

The Directors (including the independent non-executive Directors) are of the opinion that the DR Acquisition and the PT/PM Acquisition were negotiated on an arm’s length basis and agreed on normal commercial terms between the parties and that the terms of the DR Acquisition Agreement and the PT/PM Acquisition Agreement are fair and reasonable so far as the shareholders of the Company are concerned, and are of the view that the 29 units in the Kennedy Town Properties and the Yuen Long Properties were acquired at a fair market price which is determined based on the value of the said properties as estimated by the Group’s property assessment expert and once developed would have the potential for sale and/or lease and therefore consider that the DR Acquisition and the PT/PM Acquisition are in the interest of the Company and its shareholders as a whole.

On 30 September 2004, the Group entered into a conditional agreement to dispose of the whole block of 4-storey pre-war commercial and residential building situated at No. 32 Argyle Street, Kowloon, Hong Kong to an independent third party at a consideration of HK$73.8 million. Such disposal is subject to the approval of the shareholders of the Company at the special general meeting to be convened on 12 November 2004. Details of such disposal were set out in the Company’s announcement on 5 October 2004 and the circular dated 27 October 2004.

IMPLICATIONS UNDER THE LISTING RULES AND THE SGM

Mr. Tang is the chairman and the managing director of the Company, and is therefore a connected person of the Company. Accordingly, the DR Acquisition and the PT/PM Acquisition constitute connected transactions of the Company under the Listing Rules. The DR Acquisition and the PT/PM Acquisition also constitute major transactions of the Company under the Listing Rules. The DR Acquisition and the PT/PM Acquisition are subject to the Independent Shareholders’ approval, voting by way of poll, under the Listing Rules at the SGM. The procedure for demand for voting on poll at the SGM is set out in the paragraph headed “Voting on poll” below.

As at the Latest Practicable Date, Mr. Tang and his associates were altogether beneficially interested in 27,719,399 Shares (representing approximately 19.34% of the issued share capital of the Company), being the total number of Shares in respect of which Mr. Tang and his associates will control or will be entitled to exercise control over the voting rights at general meeting of the Company. Mr. Tang and his associates will abstain from voting on the ordinary resolutions to approve the DR Acquisition and the PT/PM Acquisition at the SGM in respect of all their Shares.

Set out on pages 147 and 148 is a notice convening the SGM to be held at 35th Floor, Two International Finance Centre, 8 Finance Street, Central, Hong Kong at 9:30 a.m. on 22 November 2004 at which ordinary resolutions will be proposed to the Independent Shareholders to consider and, if thought fit, approve the DR Acquisition and the PT/PM Acquisition.

−16 −

LETTER FROM THE BOARD

A form of proxy for use at the SGM is enclosed with this circular. Whether or not you are able to attend the SGM in person, you are requested to complete and return the form of proxy in accordance with the instructions printed thereon to Tengis Limited, the Company’s branch share registrar in Hong Kong at Ground Floor, Bank of East Asia Harbour View Centre, 56 Gloucester Road, Wanchai, Hong Kong, as soon as possible but in any event not later than 48 hours before the time appointed for the holding of the SGM or any adjourned meeting thereof. Completion and return of the form of proxy will not preclude you from attending and voting in person at the SGM or any adjourned meeting thereof should you so wish.

VOTING ON POLL

Pursuant to bye-law 66(C) of the existing bye-laws of the Company, at any general meeting a resolution put to the vote of the meeting shall be decided on a show of hands unless a poll is (before or after the declaration of the results of the show of hands or on the withdrawal of any other demand for a poll) demanded:

• (i) by the chairman of the meeting; or

• (ii) by at least 3 members present in person or by proxy (or in the case of a member being a corporation, by its representative duly authorised therefor) for the time being entitled to vote at the meeting; or

• (iii) by any member or members present in person or by proxy (or being a corporation, is present by a representative duly authorised therefor) and representing not less than one-tenth of the total voting rights of all the members having the right to attend and vote at the meeting; or

• (iv) by any member or members present in person or by proxy (or being a corporation, is present by a representative duly authorised therefor) and having the right to attend and vote at the meeting on which there have been paid up sums in the aggregate equal to not less than one-tenth of the total sum paid up on all the shares having that right.

By virtue of the existing bye-laws of the Company, unless a poll is so required or demanded and, in the latter case, the demand is not withdrawn, a declaration by the chairman that a resolution has on a show of hands been carried or carried unanimously, or by a particular majority, or lost, and an entry to that effect in the book containing the minutes of the proceedings of the Company shall be conclusive evidence of the fact without proof of the number or proportion of the votes recorded in favour of or against that resolution.

In compliance with the Listing Rules, the Company will procure the chairman of the SGM to demand for voting on poll, pursuant to bye-law 66(C) of the existing bye-laws of the Company, for the ordinary resolutions set out in the notice of the SGM in relation to the DR Acquisition and the PT/PM Acquisition.

−17 −

LETTER FROM THE BOARD

FINANCIAL AND TRADING PROSPECTS

The overall economy in Hong Kong in the past few months had recorded a strong rebound, particularly in the retail sector and property market. The Directors expect the overall economic and business environment in Hong Kong will continue to improve. Given the fact that the Enlarged Group is principally engaged in management and sub-licensing of Chinese wet markets, shopping centres and car parks, retail business, property development and property investment, the Directors are of the view that the Enlarged Group is well-positioned to benefit from the improvement in the general business environment in Hong Kong.

RECOMMENDATION

Your attention is drawn to the letter from the Independent Board Committee set out on pages 19 to 20 of this circular which contains its advice to the Independent Shareholders, and the letter from Baron on pages 21 to 35 of this circular which contains its advice to the Independent Board Committee and the Independent Shareholders as well as the principal factors and reasons taken into consideration in arriving at its advice.

For the reasons set out above, the Directors (including the independent non-executive Directors) consider that the terms of the DR Acquisition and the PT/PM Acquisition are fair and reasonable and in the interests of the Company and its shareholders as a whole, and therefore recommend the Independent Shareholders to vote in favour of the ordinary resolutions to be proposed at the SGM to approve the DR Acquisition and the PT/PM Acquisition. You are advised to read the letter from the Independent Board Committee and the letter from Baron mentioned above before deciding as to how to vote at the SGM.

ADDITIONAL INFORMATION

Your attention is also drawn to the additional information set out in the appendices to this circular.

Yours faithfully, For and on behalf of the Board Wang On Group Limited Tang Ching Ho Chairman and Managing Director

−18 −

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

==> picture [81 x 60] intentionally omitted <==

WANG ON GROUP LIMITED

( )[*]

(Incorporated in Bermuda with limited liability)

(Stock Code: 1222)

5 November 2004

To the Independent Shareholders

Dear Sir or Madam,

MAJOR AND CONNECTED TRANSACTIONS

PROPOSED ACQUISITION OF ENTIRE ISSUED SHARE CAPITAL AND SHAREHOLDER’S LOANS OF

(1) DRAGON RICHLY INVESTMENT LIMITED; (2) POLY TALENT INVESTMENT LIMITED; AND (3) PROFIT MILLION INVESTMENT LIMITED

We have been appointed as members of the independent board committee to advise you in connection with the captioned major and connected transactions, details of which are set out in the “Letter from the Board” in the circular dated 5 November 2004 (the “Circular”) of which this letter forms part. Defined terms used in this letter shall have the same meanings as given to them in the circular unless the context otherwise requires.

We, being the independent non-executive Directors constituting the Independent Board Committee, are writing to you to set out our opinion in respect of the DR Acquisition and the PT/PM Acquisition. The Independent Board Committee was set up to advise you, as the Independent Shareholders, whether in its view the terms of the DR Acquisition and the PT/PM Acquisition are in the interest of the Company and the Independent Shareholders and are fair and reasonable so far as the Independent Shareholders are concerned.

Baron Capital Limited has been appointed by the Company to advise us and the Independent Shareholders as to whether the terms of the DR Acquisition and the PT/PM Acquisition are fair and reasonable so far as the Independent Shareholders are concerned. Details of its advice, together with the principal factors taken into consideration in arriving at such advice, are set out on pages 21 to 35 of the Circular.

Your attention is also drawn to the “Letter from the Board” set out on pages 6 to 18 of the Circular and the additional information set out in the appendices to the Circular.

• For identification purpose only

−19 −

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

As referred to in the “Letter from the Board” of the Circular, Mr. Tang and his associates will abstain from voting on the ordinary resolutions to be proposed at the SGM to approve the DR Acquisition and the PT/PM Acquisition.

Having considered the terms of the DR Acquisition Agreement and the PT/PM Acquisition Agreement and taken into account the advice of Baron Capital Limited, we consider that both of the terms of the DR Acquisition and the PT/PM Acquisition are fair and reasonable as far as the Independent Shareholders are concerned and that the DR Acquisition and the PT/PM Acquisition are in the interest of the Company and the Independent Shareholders as a whole. Accordingly, we recommend the Independent Shareholders to vote in favour of the ordinary resolutions as set out in the notice of the SGM attached to this circular to approve the DR Acquisition and the PT/PM Acquisition.

Yours faithfully,

Independent Board Committee of

Wang On Group Limited

Dr. Lee Peng Fei, Allen , CBE, JP Independent Non-executive Director

Mr. Wong Chun, Justein , MBE, JP Independent Non-executive Director

Dr. Siu Yim Kwan, Sidney , S.B.St.J. Independent Non-executive Director

Mr. Siu Kam Chau

Independent Non-executive Director

−20 −

LETTER FROM BARON

The following is the text of a letter of advice to the Independent Board Committee from Baron Capital Limited dated 5 November 2004 prepared for the purpose of incorporation in this circular:

4/F, Aon China Building 29 Queen’s Road Central Central, Hong Kong

5 November 2004

To the Independent Board Committee of Wang On Group Limited

Dear Sirs,

MAJOR AND CONNECTED TRANSACTIONS

PROPOSED ACQUISITION OF ENTIRE ISSUED SHARE CAPITAL AND SHAREHOLDER’S LOANS OF

(1) DRAGON RICHLY INVESTMENT LIMITED; (2) POLY TALENT INVESTMENT LIMITED; AND (3) PROFIT MILLION INVESTMENT LIMITED

INTRODUCTION

We refer to the circular dated 5 November 2004 (the “Circular”) issued by the Company to its Shareholders and to our appointment as independent financial adviser to the Independent Board Committee in respect of the DR Acquisition and the PT/PM Acquisition, details of which are set out in the “Letter from the Board” contained in this Circular. Capitalized terms used in this letter shall have the same meanings ascribed to them in the Circular unless the context otherwise requires.

On 30 September 2004, the Company announced that Suitbest, a wholly-owned subsidiary of the Company, has entered into the DR Acquisition Agreement with Mr. Tang on 27 September 2004, pursuant to which Suitbest has agreed to acquire from Mr. Tang the entire issued share capital and shareholder’s loan of Dragon Richly. In addition, prior to entering into the DR Acquisition Agreement, Dragon Richly entered into the Kennedy Town Provisional Agreements on 17 September 2004 for the sale and purchase of 29 residential and commercial units in the Kennedy Town Properties. Dragon Richly intends to further purchase one residential unit and one commercial unit (which are not the subject of the Kennedy Town Provisional Agreements) to complete the purchase of the Kennedy Town Properties, which the Company intends to demolish for redevelopment.

−21 −

LETTER FROM BARON

On 13 October 2004, the Company announced that Suitbest, a wholly-owned subsidiary of the Company, has entered into the PT/PM Acquisition Agreement with Mr. Tang on 12 October 2004, pursuant to which Suitbest has agreed to acquire from Mr. Tang (a) the entire issued share capital and shareholder’s loan of Poly Talent; and (b) the entire issued share capital and shareholder’s loan of Profit Million. Prior to entering into the PT/PM Acquisition Agreement, Poly Talent and Profit Million separately entered into Yuen Long Provisional Agreements for the sale and purchase of Yuen Long Properties comprising the Yuen Long Property A and the Yuen Long Property B. The Directors currently intend that following the acquisition of Yuen Long Properties by Poly Talent and Profit Million and the PT/PM Acquisition, the Company should develop Yuen Long Properties as a whole.

Each of the DR Acquisition and the PT/PM Acquisition constitutes a major transaction under the Listing Rules. Since Mr. Tang is the chairman and the managing director of the Company, and is therefore a connected person of the Company, both the DR Acquisition and the PT/PM Acquisition constitute a connected transaction under Chapter 14A of the Listing Rules and are therefore subject to Independent Shareholders’ approval, voting by way of poll, under the Listing Rules. Mr. Tang and his associates will abstain from voting on the relevant resolutions for the approval of the DR Acquisition and the PT/PM Acquisition.

The Independent Board Committee has been appointed to advise the Independent Shareholders in relation to the DR Acquisition and the PT/PM Acquisition. Baron has been appointed to advise the Independent Board Committee in this respect.

BASIS OF OUR OPINION

In arriving at our opinion and recommendation, we have relied on the information supplied and the opinion expressed by the Directors and the management of the Company. We have assumed that the information contained and representations made to us or referred to in the Circular are true, accurate and complete at the time they were made and continue to be so at the date of the Circular. We have also relied on the information and representations provided by the Chesterton Petty Limited, an independent valuer regarding the valuation of 29 units in the Kennedy Town Properties (the “Valuation Report A”), and Vigers Appraisal & Consulting Limited, an independent valuer regarding the valuation of Yuen Long Properties (the “Valuation Report B”), and assumed that the bases and assumptions made in determining the valuations by the independent valuers are fair and reasonable.

We consider that we have been provided with sufficient information on which to form a reasonable basis for our opinion. We have no reason to suspect that any relevant information has been withheld, nor are we aware of any fact or circumstance which would render the information provided and representations and opinions made to us untrue, inaccurate or misleading.

Having made all reasonable enquiries, the Directors have collectively and individually accepted full responsibility for the accuracy of the information contained in the Circular and further confirmed that, to the best of their knowledge, they believe there are no other facts or representations the omission of which would make any statement in the Circular, including this letter, misleading.

−22 −

LETTER FROM BARON

We have not, however, carried out any independent verification of the information provided by the Directors and the management of the Company, nor have we conducted an independent investigation into the business and affairs of the Company and on the Valuation Report A and Valuation Report B, nor have we considered the taxation implication on the Group or the shareholders of the Company as a result of the DR Acquisition and the PT/PM Acquisition.

PRINCIPAL FACTORS AND REASONS CONSIDERED

In formulating our opinion on the DR Acquisition and the PT/PM Acquisition, we have considered the following principal factors and reasons:

A. Background of the Group

The Group is principally engaged in the management and sub-licensing of Chinese wet markets, shopping centers and car parks, retail business, property development and property investment. It also has interests in the pharmaceutical business through its investments in Wai Yuen Tong Medicine Holdings Limited, a company listed on the Stock Exchange. The Group has substantial experience in property development, projects management, building construction, quantity surveying as well as the sales and marketing in property.

B. The DR Acquisition

1. Background of Dragon Richly

As stated in the “Letter from the Board”, Dragon Richly is a company incorporated in Hong Kong on 1 September 2004 with limited liability and is beneficially wholly-owned by Mr. Tang. Dragon Richly is an investment holding company and has not carried out any business activities since its incorporation other than entering into the Kennedy Town Provisional Agreements for the purpose of acquiring 29 units in the Kennedy Town Properties and the DR Acquisition Agreement. Based on the accountants’ report of Dragon Richly, the audited net loss of Dragon Richly was HK$5,371, representing business registration fee, formation expenses, as well as search, filing and secretarial fee, for the period from 1 September 2004 to 15 October 2004. The audited net tangible liabilities of Dragon Richly as at 15 October 2004 were HK$5,370. Other than the payment for the purchase price pursuant to the Kennedy Town Provisional Agreements, Dragon Richly does not have any long-term liability as at the Latest Practicable Date.

2. Background and details of the DR Acquisition

Pursuant to the DR Acquisition Agreement, Suitbest has agreed to acquire from Mr. Tang the entire issued share capital and shareholder’s loan of Dragon Richly, details of which are set out in the “Letter from the Board”. The consideration for the DR Acquisition shall represent the face value of the entire issued share capital and shareholder’s loan of Dragon Richly as at the completion of the DR Acquisition Agreement. The DR Acquisition Agreement is conditional upon, amongst other things, the approval of the DR Acquisition Agreement in the SGM by the Independent Shareholders.

−23 −

LETTER FROM BARON

Prior to entering into the DR Acquisition Agreement, Dragon Richly entered into the Kennedy Town Provisional Agreements for the sale and purchase of 29 residential and commercial units in the Kennedy Town Properties. In addition to those 29 units, the Directors intend to further acquire, through Dragon Richly, one residential unit and one commercial unit (which have not been the subject of the Kennedy Town Provisional Agreements) (the “Outstanding Units”) to complete the purchase of the entirety of the Kennedy Town Properties. As stated in the “Letter from the Board”, upon signing of the provisional sale and purchase agreements with the relevant owners of the Outstanding Units, the Company will issue a further announcement regarding the valuation and particulars of the acquisition of the Outstanding Units (which will include the views of the independent non-executive Directors and an independent financial adviser on the fairness of such acquisition) and in compliance with the requirements of the Listing Rules.

As stated in the “Letter from the Board”, the Company will be ultimately interested in all the 31 units of the Kennedy Town Properties with the intention that the Kennedy Town Properties will be redeveloped into new commercial or residential buildings. In case the Company purchases the Kennedy Town Properties one by one directly from their respective owners, the purchases would be aggregated and constitute a major transaction of the Company under Chapter 14 of the Listing Rules. As a result, Shareholders’ approval in a special general meeting of the Company will be required, which may become a time-consuming condition that is not acceptable to respective individual sellers of the Kennedy Town Properties. In order to facilitate the purchase of the Kennedy Town Properties by the Company and at the request of the Company, Mr. Tang entered into the Kennedy Town Provisional Agreements through Dragon Richly for the purchase of 29 residential and commercial units in the Kennedy Town Properties (with the intention of purchasing the Outstanding Units) and then sold the entire issued share capital and shareholders’ loan of Dragon Richly to the Company at face value, in which Mr. Tang will not make any profit on his own. We consider that this arrangement is a more efficient and effective method for the Company to purchase the Kennedy Town Properties in a situation involving many separate negotiations with a large number of different counter-parties. Shareholders should note that there is no assurance that Dragon Richly will succeed in concluding the Kennedy Town Provisional Agreements with the relevant owners and that the redevelopment plan of the Kennedy Town Properties can be implemented as intended.

3. Description of the Kennedy Town Properties

As described in the “Letter from the Board”, the Kennedy Town Properties comprise a total of 31 units and represent an entirety of six blocks of 5-storey old residential buildings situated in Numbers 12, 14, 16, 18, 20 and 22 of Davis Street, Kennedy Town, Hong Kong. The Kennedy Town Properties occupy an aggregate site area of approximately 4,960 square feet and a total floor area of approximately 25,000 square feet. The 29 residential and commercial units, which have been the subject of the Kennedy Town Provisional Agreements, represent a total floor area of approximately 23,000 square feet.

−24 −

LETTER FROM BARON

4. Reasons for the DR Acquisition

The Directors intended that, following the purchase of the Kennedy Town Properties as a whole, the Company should demolish the Kennedy Town Properties for redevelopment into new commercial or residential buildings. As stated in the “Letter from the Board”, the Directors are optimistic about the property market in Hong Kong and perceive investment potentials of the Kennedy Town Properties for redevelopment.

The following chart illustrates the rental indices for Hong Kong property market compiled by the Rating and Valuation Department, HKSAR from 1st January 1997 to 30th June 2004:

RENTAL INDICES FOR HONG KONG PROPERTY MARKET (1999 = 100)

==> picture [381 x 249] intentionally omitted <==

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

Index
DOMESTIC
160
OFFICE
RETAIL
140
FLATTED FACTORIES
120
100
80
60
0
1 4 7 10 1 4 7 10 1 4 7 10 1 4 7 10 1 4 7 10 1 4 7 10 1 4 7 10 1 4
1997 1998 1999 2000 2001 2002 2003 2004
----- End of picture text -----

(Source: Monthly market statistics, Rating and Valuation Department, HKSAR)

−25 −

LETTER FROM BARON

As shown in the above chart, the rental indices for the Hong Kong property market has been on the downward trend since the end of 1997 and has rebounded since the second quarter of 2003.

==> picture [270 x 22] intentionally omitted <==

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

PRICE INDICES FOR HONG KONG PROPERTY MARKET
(1999 = 100)
----- End of picture text -----

==> picture [388 x 252] intentionally omitted <==

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

Index
250
DOMESTIC
OFFICE
200
RETAIL
FLATTED FACTORIES
150
100
50
0
1 4 7 10 1 4 7 10 1 4 7 10 1 4 7 10 1 4 7 10 1 4 7 10 1 4 7 10 1 4
1997 1998 1999 2000 2001 2002 2003 2004
----- End of picture text -----

(Source: Monthly market statistics, Rating and Valuation Department, HKSAR)

Similarly, from the above chart, the price indices for the Hong Kong property market has been on the downward trend since mid-1997 and has rebounded since the first quarter of 2003. Having considered the above data, we concur with Director’s optimistic view on the property investment environment in the coming years.

We believe that the DR Acquisition, which includes the acquisition of the Kennedy Town Properties, shall further enhance and strengthen the property portfolio of the Company and provide a solid future income stream to the Company. On that basis, we consider the DR Acquisition to be complimentary to the Company’s development and in the interests of the Company and the Shareholders as a whole.

5. Terms and conditions of the DR Acquisition

Essentially, the Company is purchasing the 29 residential and commercial units in the Kennedy Town Properties through Dragon Richly. The DR Acquisition Agreement is conditional upon, amongst other things, the approval of the DR Acquisition Agreement in the SGM by the Independent Shareholders.

−26 −

LETTER FROM BARON

According to the terms of the Kennedy Town Provisional Agreements, in the event that Dragon Richly fails to (i) enter into provisional sale and purchase agreement with the relevant owner of any of the 31 units in the Kennedy Town Properties on or before 15 October 2004 (or such date as may be extended by Dragon Richly); or (ii) complete the purchase of any unit in the Kennedy Town Properties on or before 31 May 2005 (or such date as may be extended by Dragon Richly), Dragon Richly shall be entitled to terminate the Kennedy Town Provisional Agreements and the Kennedy Town Property Vendors shall refund Dragon Richly 100% of the deposit paid by it pursuant to the Kennedy Town Provisional Agreements. As at the Latest Practicable Date, the Company has successfully entered into Kennedy Town Provisional Agreements to acquire 29 units out of the 31 units in the Kennedy Town Properties.

As stated in the “Letter from the Board”, Dragon Richly is currently in negotiations with the relevant owners of the Outstanding Units with respect to the entering into of provisional sale and purchase agreements but there is no assurance that Dragon Richly will succeed in concluding all provisional sale and purchase agreements with the relevant owners and that the redevelopment plan of the Kennedy Town Properties can be implemented as intended.

The Directors have indicated that, should Dragon Richly fail to acquire the Outstanding Units via commercial negotiation, the Directors will consider to make an application to the Lands Tribunal under the Land (Compulsory Sale for Redevelopment) Ordinance for compulsory sale of the Kennedy Town Properties (including the Outstanding Units) by the owners or the Company may abandon the redevelopment plan of the Kennedy Town Properties. In the event that the Company acquires Dragon Richly and then subsequently decides to abandon the redevelopment plan of the Kennedy Town Properties, Dragon Richly may terminate the Kennedy Town Provisional Agreements and will be refunded 100% of the deposit paid to the Kennedy Town Property Vendors in accordance with the Kennedy Town Provisional Agreements. Apart from the nominal value of HK$1.00 it paid to acquire the entire issued share capital of Dragon Richly, the Company will not incur any cost as a result of abandoning the redevelopment plan of the Kennedy Town Properties due to the failure to acquire the Outstanding Units, save for the professional fees incurred in relation to the execution of the DR Acquisition and the announcement costs. In addition, under the DR Acquisition Agreement, Mr. Tang does not stand to make any profit from the sale and purchase of Dragon Richly and the Kennedy Town Properties (to be explained in further details below under “Consideration for the DR Acquisition”). In view of the above, we consider the terms and conditions of the DR Acquisition to be fair and reasonable so far as the Shareholders are concerned.

6. Consideration for the DR Acquisition

As detailed in the “Letter from the Board”, the consideration for the DR Acquisition shall represent the nominal value of the entire issued share capital and shareholder’s loan of Dragon Richly as at the completion of the DR Acquisition Agreement and shall be paid in the following manner:

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

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LETTER FROM BARON

• (ii) whenever Dragon Richly shall be required to pay any amounts in accordance with the Kennedy Town Provisional Agreements or the Kennedy Town Formal Agreements after the signing of the DR Acquisition Agreement, Suitbest shall, upon request by Mr. Tang, pay to Dragon Richly (or such other person(s) as directed by Mr. Tang) such same amounts of money, which shall be deemed to be advanced by Mr. Tang to Dragon Richly as additional shareholders’ loan (amounted to HK$7,815,000 as at the Latest Practicable Date) and be applied by Dragon Richly in accordance with the Kennedy Town Provisional Agreements or the Kennedy Town Formal Agreements. As at the Latest Practicable Date, an amount of HK$660,000 had been paid by Dragon Richly, out of the shareholder’s loan of Dragon Richly amounting to HK$7,815,000, to the relevant the Kennedy Town Property Vendors as initial deposit pursuant to the terms of the Kennedy Town Provisional Agreements and HK$60,000 was placed with Dragon Richly’s solicitors for and on behalf of Dragon Richly. Eleven sets of the Kennedy Town Formal Agreements were entered in the period between 20 October 2004 and 27 October 2004 and the remaining 18 sets of the Kennedy Town Formal Agreements would be entered into by Dragon Richly and the respective Kennedy Town Property Vendors in due course and further deposits in an aggregate amount of approximately HK$7.10 million had been paid by Dragon Richly. The balance for the purchase price of the 29 units in the Kennedy Town Properties are expected to be payable as to approximately HK$3.88 million on 15 November 2004, approximately HK$3.88 million on 15 December 2004 and approximately HK$62.04 million upon completion of the purchase of the 29 units in the Kennedy Town Properties pursuant to the Kennedy Town Provisional Agreements; and

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

The above settlement mechanism for the DR Consideration can be interpreted as a direct transfer of payments for the sale and purchase of the Kennedy Town Properties, whereby Suitbest, the wholly-owned subsidiary of the Company, pays the Kennedy Town Property Vendors through Dragon Richly.

Prior to the signing of the DR Acquisition Agreement, Dragon Richly entered into the Kennedy Town Provisional Agreements with the Kennedy Town Property Vendors in respect of the sale and purchase of the 29 units of the Kennedy Town Properties. For the purpose of settling the initial deposit for the sale and purchase of the Kennedy Town Properties, a shareholder’s loan of HK$720,000 was advanced to Dragon Richly from Mr. Tang, of which HK$660,000 was paid to the Kennedy Town Property Vendors and HK$60,000, the expected amount of initial deposits required for the sale and purchase of the Outstanding Units, was held on escrow with Dragon Richly’s solicitors for and on behalf of Dragon Richly. As at the date of the DR Acquisition Agreement, the shareholder’s loan of Dragon Richly amounted to HK$720,000. Upon the signing of the DR Acquisition Agreement, Suitbest paid to Mr. Tang an amount of HK$720,001. The amount represents (a) the entire issued share capital of Dragon

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LETTER FROM BARON

Richly with a face value of HK$1.00, and (b) the shareholder’s loan of HK$720,000, which is equivalent to the initial deposits of HK$660,000 paid to the Kennedy Town Property Vendors for the sale and purchase of the 29 units of the Kennedy Town Properties and the expected amount of initial deposits of HK$60,000 for the sale and purchase of the Outstanding Units, currently held on escrow with Dragon Richly’s solicitors. Mr. Tang did not make any profit in the process.

Following the signing of the DR Acquisition Agreement, whenever Dragon Richly is required to settle any amounts pursuant to the Kennedy Town Provisional Agreements or the Kennedy Town Formal Agreements, Suitbest shall, upon request by Mr. Tang pay to Dragon Richly (or such other person(s) as directed by Mr. Tang) such same amounts of money, which shall be deemed to be advanced by Mr. Tang to Dragon Richly as additional shareholders’ loan and be applied by Dragon Richly, in accordance with Kennedy Town Provisional Agreements or Kennedy Town Formal Agreements as to settle those payments. Again, Mr. Tang does not stand to make any profit in the process. Given that (a) the DR Consideration represents the face value of the entire issued share capital of Dragon Richly and the amount required for the sale and purchase of the Kennedy Town Properties; (b) we consider the consideration for the sale and purchase of the 29 units of the Kennedy Town Properties under the Kennedy Town Provisional Agreements to be fair and reasonable (please refer to further details below); and (c) Mr. Tang does not stand to make any profit in the settlement process for DR Consideration, we are of the opinion that the DR Consideration is fair and reasonable.

7. Basis of consideration for the sale and purchase of the Kennedy Town Properties

A valuation report on the 29 units of the Kennedy Town Properties under the Kennedy Town Provisional Agreements is set out in Appendix VII of this Circular. Valuation Report A was prepared by Chesterton Petty Limited, an independent valuer. As described above, the Kennedy Town Properties comprised a total of 31 units and represent an entirety of six blocks of 5-storey old residential buildings situated in Numbers 12, 14, 16, 18, 20 and 22 of Davis Street, Kennedy Town, Hong Kong. The 29 units of the Kennedy Town Properties under the Kennedy Town Provisional Agreements represent the entirety of 4 blocks of residential buildings, and the other two blocks of the Kennedy Town Properties, save for one of the two Outstanding Units within each of those two blocks. According to Valuation Report A, the open market value of the 29 units of the Kennedy Town Properties is based on (a) the redevelopment value of the 4 blocks of residential buildings; (b) the existing value of the two other blocks, without the Outstanding Units; and (c) a nominal value to reflect the possibility of joint redevelopment and merger with neighboring lots. We concur with the independent valuer’s basis of valuation, given that the approach is in line with the Director’s intention of acquiring the Kennedy Town Properties for redevelopment purpose.

According to Valuation Report A, the open market value of the 29 units of the Kennedy Town Properties under the Kennedy Town Provisional Agreements is HK$80 million. Dragon Richly entered into the Kennedy Town Provisional Agreements with the Kennedy Town Property Vendors to acquire 29 units of the Kennedy Town Properties at a total consideration of HK$77.5 million. We take into account that (a) it is the intention of the Company to

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LETTER FROM BARON

purchase all 31 units of the Kennedy Town Properties for redevelopment; (b) in the event that the Company fails to acquire the Outstanding Units, the Company may abandon the redevelopment of the Kennedy Town Properties and accordingly, the Company will be refunded in full the amount it paid for the sale and purchase of the 29 units of the Kennedy Town Properties; (c) the owners of the 29 units are independent third parties of the Company; and (d) the total consideration of HK$77.5 million for those 29 units is less than the open market value of the 29 units, as determined by the independent valuer. On such basis, we consider the total consideration for the 29 units of the Kennedy Town Properties to be fair and reasonable.

C. The PT/PM Acquisition

1. Background of Poly Talent and Profit Million

As stated in the “Letter from the Board”, Poly Talent is a company incorporated in Hong Kong on 11 August 2004 with limited liability and ProfitMillion is a company incorporated in Hong Kong on 22 September 2004 with limited liability. Each of Poly Talent and Profit Million is beneficially wholly-owned by Mr. Tang. Poly Talent and Profit Million are both investment holding companies and have not carried out any business activities since their incorporation other than entering into Yuen Long Provisional Agreements for the purpose of acquiring Yuen Long Properties and the PT/PM Acquisition Agreement. Based on the audited accountants’ report of Poly Talent, the audited net loss of Poly Talent was HK$5,367, representing the business registration fee, formation expenses, as well as search, filing and secretarial fee, for the period from 11 August 2004 to 15 October 2004. The audited net tangible liabilities of Poly Talent as at 15 October 2004 were HK$5,366. Other than the payment for the purchase price of Yuen Long Property A pursuant to the Yuen Long Property A Provisional Agreement, Poly Talent does not have any long term liability.

Based on the audited accountants’ report of Profit Million, the audited net loss of Profit Million was HK$5,367, representing the business registration fee, formation expenses, as well as search, filing and secretarial fee, for the period from 22 September 2004 to 15 October 2004. The audited net tangible liabilities of Profit Million as at 15 October 2004 were HK$5,366. Other than the payment for the purchase price of the Yuen Long Property B pursuant to the Yuen Long Property B Provisional Agreement, Profit Million does not have any long-term liability.

2. Background and details of the PT/PM Acquisition

Pursuant to the PT/PM Acquisition Agreement, Suitbest has agreed to acquire from Mr. Tang (a) the entire issued share capital and shareholder’s loan of Poly Talent; and (b) the entire issued share capital and shareholder’s loan of Profit Million, details of which are set out in the “Letter from the Board”. The consideration for the PT/PM Acquisition shall represent the face value of the entire issued share capital and shareholder’s loans of both Poly Talent and Profit Million as at the completion of the PT/PM Acquisition Agreement. The PT/PM Acquisition Agreement is conditional upon, amongst other things, the approval of the PT/PM Acquisition Agreement in the SGM by the Independent Shareholders.

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LETTER FROM BARON

Prior to entering into the PT/PM Acquisition Agreement, Poly Talent and Profit Million separately entered into the Yuen Long Provisional Agreements for the sale and purchase of the Yuen Long Properties comprising the Yuen Long Property A and the Yuen Long Property B. As stated in the “Letter from the Board”, following the acquisition of Yuen Long Properties and the PT/PM Acquisition, the Company intends to develop Yuen Long Properties as a whole, whereby Yuen Long Property A will be developed into a low density residential and/or commercial area for sale and/or lease whereas Yuen Long Property B will be afforested into a greenery area for certain individual houses as private gardens and/or common facilities for development for the purposes of enhancing the market value of the low density residential and/or commercial area planned to be developed in the Yuen Long Property A.

In the event the Company purchases the Yuen Long Properties one by one directly from their respective owners, the purchases would be aggregated and constitute a major transaction of the Company under Chapter 14 of the Listing Rules. As a result, Shareholders’ approval in a special general meeting of the Company will be required, which may become a timeconsuming condition that is not acceptable to the respective individual sellers of the Yuen Long Properties. In order to facilitate the purchase of the Yuen Long Properties by the Company and at the request of the Company, Mr. Tang entered into the Yuen Long Provisional Agreements through Poly Talent and Profit Million for the purchase of the Yuen Long Properties from the Yuen Long Property Vendors and then sold the entire issued share capital and shareholder’s loans of both Poly Talent and Profit Million to the Company at face value, in which Mr. Tang will not make any profit on his own. We consider that this arrangement is a more efficient and effective method for the Company to purchase the Yuen Long Properties.

3. Description of Yuen Long Properties

As described in the “Letter from the Board”, the Yuen Long Properties comprise Yuen Long Property A and Yuen Long Property B. Yuen Long Property A is a plot of vacant land situated at Fairview Park Boulevard, Yuen Long, New Territories, adjoining the Yuen Long Property B and registered in the Land Registry as Lot No. 4781 in D.D. No 104 with the total site area of approximately 92,700 square feet. Yuen Long Property B is a plot of vacant land situated at Fairview Park Boulevard, Yuen Long, New Territories, adjoining Yuen Long Property A and registered in the Land Registry as the remaining portion of Lot No. 3254 in D.D. No 104 with the total site area of approximately 11,600 square feet.

4. Reasons for the PT/PM Acquisition

The Directors currently intend that following the acquisition of the Yuen Long Properties by Poly Talent and Profit Million and the PT/PM Acquisition, the Company should develop the Yuen Long Properties as a whole. As stated in the “Letter from the Board”, the Directors are optimistic about the property market in Hong Kong and perceive investment potentials of Yuen Long Properties for development. As mentioned above, we concur with the Director’s optimistic view on the property investment environment. As described in the “Letter from the Board”, the Group is principally engaged in, among other matters, property development and property investments; it has expertise and experience in building construction in Hong Kong. The Group also has an expert team of staff specialized in property development, projects management, building construction, quantity surveying as well as the sales and marketing in

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LETTER FROM BARON

property. We believe that the PT/PM Acquisition will further enhance and strengthen the property portfolio of the Company and provide a stable future income stream to the Company. On that basis, we consider the PT/PM Acquisition to be complimentary to the Company’s development and in the interests of the Company and the Shareholders as a whole.

The Directors (including the independent non-executive Directors) confirm that the PT/PM Acquisition was negotiated on an arm’s length basis and agreed on normal commercial terms between the parties and that the terms of the PT/PM Acquisition Agreement are fair and reasonable so far as the Shareholders are concerned, and are of the view that Yuen Long Properties are acquired at a fair market price and that Yuen Long Properties once developed would have potential for sale and/or lease. To the best of the Directors’ knowledge, the Yuen Long Property A Vendor together with its respective ultimate beneficial owners and the Yuen Long Property B Vendor are independent third parties not being connected persons of the Company. Taken into account the independence of the Yuen Long Property A Vendor and the Yuen Long Property B Vendor, we consider that the PT/PM Acquisition is fair and reasonable so far as the Independent Shareholders are concerned.

5. Terms and conditions of the PT/PM Acquisition

Essentially, the Company is purchasing the Yuen Long Property A and the Yuen Long Property B through Poly Talent and Profit Million. The PT/PM Acquisition Agreement is conditional upon, amongst other things, the approval of The PT/PM Acquisition Agreement in the SGM by the Independent Shareholders.

According to the terms of the PT/PM Acquisition Agreement, in the event that any of the conditions as stated in the PT/PM Acquisition Agreement is not fulfilled, Suitbest shall be entitled to be refunded 100% of the deposit paid to Mr. Tang pursuant to the PT/PM Acquisition Agreement.

According to the Yuen Long Property B Provisional Agreement, subject to the discretion of Profit Million, in the event that the purchase of the Yuen Long Property A cannot be completed, the Yuen Long Property B Provisional Agreement and the Yuen Long Property B Formal Agreement shall be cancelled the Yuen Long Property B Vendor shall refund the deposit paid by Profit Million.

6. Consideration for the PT/PM Acquisition

As detailed in the “Letter from the Board”, the consideration for the PT/PM Acquisition shall represent the nominal value of the entire issued share capital and shareholder’s loans of Poly Talent and Profit Million as at the completion of the PT/PM Acquisition Agreement and shall be paid in the following manner:

• (i) a sum of HK$2,100,002 was paid to Mr. Tang on the signing of the PT/PM Acquisition Agreement (representing the amount of the total issued share capital and the shareholder’s loans of both Poly Talent and Profit Million as at the date of the PT/PM Acquisition Agreement);

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LETTER FROM BARON

• (ii) whenever Poly Talent and/or Profit Million shall be required to pay any amounts in accordance with Yuen Long Provisional Agreements or Yuen Long Formal Agreements after the signing of the PT/PM Acquisition Agreement, Suitbest shall, upon request by Mr. Tang, pay to Poly Talent and/or Profit Million (or such other person(s) as directed by Mr. Tang) such same amounts of money, which shall be deemed to be advanced by Mr. Tang to Poly Talent and Profit Million as additional shareholders’ loan in which the amount of such shareholders’ loan to Poly Talent and/or Profit Million is HK$68,330,000 and be applied by Poly Talent and/or Profit Million in accordance with Yuen Long Provisional Agreements or Yuen Long Formal Agreements. Pursuant to Yuen Long Property A Provisional Agreement and the Yuen Long Property A Formal Agreement, Poly Talent is expected to pay the balance of the purchase price of Yuen Long Property A as to approximately HK$55,620,000 on 26 January 2005 upon the completion of the purchase of Yuen Long Property A. Pursuant to Yuen Long Property B Provisional Agreement and the Yuen Long Property B Formal Agreement, Profit Million is expected to pay the balance of the purchase price of Yuen Long Property B as to approximately HK$5,887,000 on 26 February 2005 upon the completion of the purchase of Yuen Long Property B; and

• (iii) the balance of consideration (if any) shall be paid to Mr. Tang (or such other person(s) as directed by Mr. Tang) upon the completion of the PT/PM Acquisition Agreement.

The above settlement mechanism for the PT/PM Consideration can be interpreted as a direct transfer of payments for the sale and purchase of the Yuen Long Properties, whereby Suitbest, the wholly-owned subsidiary of the Company, pays the Yuen Long Property A Vendor and the Yuen Long Property B Vendor through Poly Talent and Profit Million.

Prior to the signing of the PT/PM Acquisition Agreement, Poly Talent and Profit Million separately entered into the Yuen Long Provisional Agreements with the Yuen Long Property A Vendor and the Yuen Long Property B Vendor in respect of the sale and purchase of the Yuen Long Property A and the Yuen Long Property B at a consideration of HK$61,800,000 and HK$6,530,000 respectively. As at 11 October 2004, HK$1,800,000 was paid by Poly Talent and HK$300,000 was paid by Profit Million as the initial deposits to the Yuen Long Property A Vendor and the Yuen Long Property B Vendor respectively. Upon signing of the PT/PM Acquisition Agreement, Suitbest paid Mr. Tang an amount of HK$2,100,002, representing (a) the entire issued share capital of Poly Talent and Profit Million with a face value of HK$1.00 each; and (b) the shareholder’s loan of Poly Talent and Profit Million of HK$2,100,000, which is exactly equal to the total initial deposits paid to the Yuen Long Property A Vendor and the Yuen Long Property B Vendor. As a result, Mr. Tang did not make any profit in the process.

Following the signing of the PT/PM Acquisition Agreement, whenever Poly Talent and Profit Million are required to settle any amounts pursuant to Yuen Long Provisional Agreements or the Yuen Long Formal Agreements, Suitbest shall, upon request by Mr. Tang, pay to Poly Talent and/or Profit Million (or such other person(s) as directed by Mr. Tang) such same amounts of money, which shall be deemed to be advanced by Mr. Tang to Poly Talent

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LETTER FROM BARON

and/or Profit Million as additional shareholders’ loan and be applied by Poly Talent and/or Profit Million in accordance with the Yuen Long Provisional Agreements or Yuen Long Formal Agreements. Again, Mr. Tang does not stand to make any profit in the process. Given that (a) the PT/PM Consideration represents the face value of the entire issued share capital of Profit Talent and Profit Million and the amount required for the sale and purchase of the Yuen Long Properties; (b) the fact that we consider the consideration for the sale and purchase of the Yuen Long Properties under Yuen Long Provisional Agreements to be fair and reasonable (please refer to further details below); and (c) Mr. Tang does not stand to make any profit in the settlement process for the PT/PM Consideration; and (d) to the best of the Directors’ knowledge, the Yuen Long Property A Vendor together with its respective ultimate beneficial owners and the Yuen Long Property B Vendor are independent third parties, and we consider the PT/PM Consideration to be fair and reasonable so far as the Independent Shareholders are concerned.

7. Basis of consideration for the purchase of Yuen Long Properties

A valuation report on the Yuen Long Properties under Yuen Long Provisional Agreements are set out in Appendix VIII of this Circular. Valuation Report B was prepared by Vigers Appraisal & Consulting Limited, an independent valuer. As described above, Yuen Long Properties comprised both the Yuen Long Property A and the Yuen Long Property B. The Yuen Long Property A is a plot of vacant land, adjourning the Yuen Long Property B, registered as Lot No. 4781 in D.D. No. 104 and situated at Fairview Park Boulevard, Yuen Long, Hong Kong. In addition, the Yuen Long Property B is a plot of vacant land, adjourning the Yuen Long Property A, registered as Lot No. 3254 in D.D. No. 104 and situated at Fairview Park Boulevard, Yuen Long, Hong Kong. Poly Talent and Profit Million entered into the Yuen Long Property A Provisional Agreement and Yuen Long Property B Provisional Agreement respectively to purchase the Yuen Long Property A and the Yuen Long Property B for a total consideration of HK$68.33 million. According to Valuation Report B, the open market value of the Yuen Long Properties is HK$68.4 million. Given that (a) the total consideration of HK$68.33 million for the Yuen Long Properties is slightly less than the open market value of the Yuen Long Properties, as determined by Vigers Appraisal & Consulting Limited, the independent valuer; and (b) the Yuen Long Property A Vendor and the Yuen Long Property B Vendor are both independent third parties of the Company, we consider the total consideration for the Yuen Long Properties to be fair and reasonable.

D. Financial effects of the DR Acquisition and the PT/PM Acquisition

Effect on Net Assets

We refer to the paragraph headed “Unaudited Pro Forma Statement of Assets and Liabilities of the Enlarged Group” in Appendix V of this Circular, the audited consolidated net assets of the Group as at 31 March 2004 was approximately HK$680.58 million and the unaudited consolidated net assets of the Enlarged Group as at 15 October 2004 was approximately HK$680.58 million. Therefore, there will be no material impact on the pro forma net tangible assets of the Group immediately following the completion of the DR Acquisition and the PT/PM Acquisition.

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LETTER FROM BARON

Effect on Gearing

Given that the consideration for both the DR Acquisition and the PT/PM Acquisition will be payable in cash and funded by internal resources of the Group, the Group will not take on additional indebtedness as a result of the DR Acquisition and the PT/PM Acquisition. There will be no material effect on the gearing ratio of the Group.

Effect on Liquidity

The DR Acquisition and the PT/PM Acquisition will be settled in cash and funded by internal resources of the Company. As at the Latest Practicable Date, the total consideration for the DR Acquisition and the PT/PM Acquisition is approximately HK$146 million. According to the financial information of the Group as contained in Appendix IV of this Circular, the Group has approximately HK$289.37 million of cash and cash equivalent as at 31 March 2004. While the completion of both the DR Acquisition and the PT/PM Acquisition will deplete the liquidity position of the Group by approximately 50%, we are of the opinion that the Group will have sufficient working capital for its existing operations immediately following the completion of both the DR Acquisition and the PT/PM Acquisition. As such, there will be no material adverse effect on the liquidity position of the Group.

RECOMMENDATION

Having considered the above principal factors and reasons, we are of the opinion that (i) the DR Acquisition is in the interest of the Company and the terms of which are fair and reasonable so far as the Independent Shareholders are concerned; and (ii) the PT/PM Acquisition is in the interest of the Company and the terms of which are fair and reasonable so far as the Independent Shareholders are concerned. Accordingly, we advise the Independent Board Committee to recommend the Independent Shareholders to vote in favor of the relevant ordinary resolutions to be proposed at the SGM to approve the DR Acquisition and the PT/PM Acquisition.

Yours faithfully, For and on behalf of Baron Capital Limited Chiu Sui Keung, Thomas Managing Director

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ACCOUNTANTS’ REPORT ON DRAGON RICHLY

APPENDIX I

15th Floor

Hutchison House 10 Harcourt Road Central Hong Kong

5 November 2004

The Directors Wang On Group Limited Kingston Corporate Finance Limited

Dear Sirs,

We set out below our report on the financial information regarding Dragon Richly Investment Limited (“Dragon Richly”) for the period from 1 September 2004 (date of incorporation) to 15 October 2004 (the “Relevant Period”), prepared on the basis set out in Section 1 below, for inclusion in the circular of Wang On Group Limited (the “Company”) dated 5 November 2004 (the “Circular”) in connection with the proposed acquisition of the entire issued share capital and a shareholder’s loan of Dragon Richly by Suitbest Investments Limited (“Suitbest”), a wholly-owned subsidiary of the Company, pursuant to a conditional agreement (the “Acquisition Agreement”) dated 27 September 2004 entered into between Suitbest, Mr. Tang Ching Ho, the director and substantial shareholder of the Company and the sole shareholder of Dragon Richly, and Dragon Richly.

Dragon Richly was incorporated with limited liability in Hong Kong on 1 September 2004 and it is wholly and beneficially owned by Mr. Tang Ching Ho, the director of the Company. Dragon Richly is an investment holding company and has not carried out any other business activities since its incorporation other than entering into provisional agreements for the purpose of acquiring certain properties (the “Provisional Agreements”) and the Acquisition Agreement.

Dragon Richly entered into the Provisional Agreements on 17 September 2004 for the sale and purchase of 29 residential and commercial units in certain properties. It is intended that apart from the 29 units to be acquired subject to the execution of formal agreements, Dragon Richly should further acquire one residential unit and one commercial unit (which are not the subject of the Provisional Agreements) to complete the purchase of the properties as a whole.

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ACCOUNTANTS’ REPORT ON DRAGON RICHLY

APPENDIX I

We have audited the financial statements of Dragon Richly for the Relevant Period, which were prepared in accordance with Hong Kong Financial Reporting Standards (“HKFRSs”) and accounting principles generally accepted in Hong Kong.

The financial information of the results, statement of changes in equity and cash flows of Dragon Richly for the Relevant Period and the balance sheet of Dragon Richly as at 15 October 2004, together with the notes thereon (the “Financial Information”), set out in this report has been prepared from the audited financial statements and no adjustments are considered necessary. We have examined the Financial Information in accordance with the Auditing Guideline “Prospectuses and the reporting accountant” issued by the Hong Kong Institute of Certified Public Accountants.

The director of Dragon Richly is responsible for the Financial Information. In preparing the Financial Information which gives a true and fair view, it is fundamental that appropriate accounting policies are selected and applied consistently. It is our responsibility to form an independent opinion, based on our examination, on the Financial Information and to report our opinion thereon.

In our opinion, the Financial Information, for the purpose of this report, and on the basis of preparation set out below gives a true and fair view of the results and cash flows of Dragon Richly for the Relevant Period, and of the balance sheet of Dragon Richly as at 15 October 2004.

1. BASIS OF PREPARATION

The Financial Information has been prepared under the going concern concept despite the net current liabilities and deficiency in shareholder’s equity of Dragon Richly because:

1. Dragon Richly’s sole beneficial owner, Mr. Tang Ching Ho, has agreed to provide continual financial support and adequate funds to Dragon Richly to meet its liabilities until the completion of the Acquisition Agreement; and

2. The Company has agreed to provide continual financial support and adequate funds to Dragon Richly to meet its liabilities after the completion of the Acquisition Agreement.

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ACCOUNTANTS’ REPORT ON DRAGON RICHLY

APPENDIX I

2. PRINCIPAL ACCOUNTING POLICIES

The principal accounting policies adopted by Dragon Richly in arriving at the Financial Information set out in this report, which conform with accounting principles generally accepted in Hong Kong and HKFRSs, are as follows. The Financial Information is prepared under the historical cost convention.

Impairment of assets

An assessment is made at each balance sheet date of whether there is any indication of impairment of any asset, or whether there is any indication that an impairment loss previously recognised for an asset in prior years may no longer exist or may have decreased. If any such indication exists, the asset’s recoverable amount is estimated. An asset’s recoverable amount is calculated as the higher of the asset’s value in use or its net selling price.

An impairment loss is recognised only if the carrying amount of an asset exceeds its recoverable amount. An impairment loss is charged to the profit and loss account in the period in which it arises.

A previously recognised impairment loss is reversed only if there has been a change in the estimates used to determine the recoverable amount of an asset, however not to an amount higher than the carrying amount that would have been determined, had no impairment loss been recognised for the asset in prior years. A reversal of an impairment loss is credited to the profit and loss account in the period in which it arises.

Income tax

Income tax comprises current and deferred tax. Income tax is recognised in the profit and loss account or in equity if it relates to items that are recognised in the same or a different period directly in equity.

Deferred tax is provided, using the liability method, on all temporary differences at the balance sheet date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes. Tax rates enacted or substantively enacted by the balance sheet date are used to determine deferred tax.

Deferred tax liabilities are provided in full on all taxable temporary differences while deferred tax assets are recognised to the extent that it is probable that future taxable profit will be available against which the deductible temporary differences can be utilised.

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ACCOUNTANTS’ REPORT ON DRAGON RICHLY

APPENDIX I

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.

3. RESULTS

The following is a summary of the results of Dragon Richly for the Relevant Period prepared on the basis set out in Section 1 above:

Note TURNOVER Administrative expenses NET LOSS FOR THE PERIOD (a) Notes: (a) Net loss for the period Dragon Richly’s net loss for the period is arrived at after charging: Director’s remuneration Auditors’ remuneration The auditors’ remuneration was borne by the Company.	HK$ – (5,371) (5,371) HK$ – –

(b) Tax

No provision for Hong Kong profits tax has been made as Dragon Richly did not generate any assessable profits arising in Hong Kong during the Relevant Period.

There was no material unprovided deferred tax in respect of the Relevant Period and as at the balance sheet date.

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ACCOUNTANTS’ REPORT ON DRAGON RICHLY

APPENDIX I

4. BALANCE SHEET

The following is a summary of the balance sheet of Dragon Richly as at 15 October 2004 prepared on the basis set out in Section 1 above:

Notes CURRENT ASSETS Deposits on acquisition of properties Cash on hand CURRENT LIABILITIES Other payables and accruals Shareholder’s loan (a) DEFICIENCY IN SHAREHOLDER’S EQUITY Issued capital (b) Accumulated losses Notes: (a) Shareholder’s loan The shareholder’s loan is unsecured, interest-free and is repayable on demand. (b) Share capital Authorised: 10,000 ordinary shares of HK$1 each Issued and fully paid: 1 ordinary share of HK$1

HK$ 7,815,000 1 7,815,001 5,371 7,815,000 7,820,371 (5,370) 1 (5,371) (5,370) HK$ 10,000 1

The Company was incorporated on 1 September 2004 with an authorised share capital of HK$10,000 divided into 10,000 ordinary shares of HK$1 each. On 1 September 2004, 1 ordinary share of HK$1 was issued at par for cash.

(c) Capital commitment

Dragon Richly had contracted, but not provided for the purchase of properties in the amount of HK$69,795,000 at the balance sheet date.

−40 −

ACCOUNTANTS’ REPORT ON DRAGON RICHLY

APPENDIX I

5. STATEMENT OF CHANGES IN EQUITY

The changes in the shareholder’s equity of Dragon Richly for the Relevant Period, prepared on the basis set out in Section 1 above, are as follows:

Issue of share Net loss for the period At 15 October 2004	Issued share capital Accumulated losses HK$ HK$ 1 – – (5,371) 1 (5,371)	Total HK$ 1 (5,371) (5,370)

−41 −

ACCOUNTANTS’ REPORT ON DRAGON RICHLY

APPENDIX I

6. CASH FLOW STATEMENT

The cash flow statement of Dragon Richly for the Relevant Period prepared on the basis set out in Section 1 above is as follows:

CASH FLOWS FROM OPERATING ACTIVITIES Loss before tax Operating loss before working capital changes Increase in other payables and accruals Net cash inflow from operating activities CASH FLOWS FROM INVESTING ACTIVITIES Deposits paid on acquisition of properties Net cash outflow from investing activities CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from issue of share capital New shareholder’s loan Net cash inflow from financing activities NET INCREASE IN CASH AND CASH EQUIVALENTS CASH AND CASH EQUIVALENTS AT END OF PERIOD ANALYSIS OF BALANCES OF CASH AND CASH EQUIVALENTS Cash on hand

HK$ (5,371) (5,371) 5,371 – (7,815,000) (7,815,000) 1 7,815,000 7,815,001 1 1 1

7. DIRECTOR’S EMOLUMENTS

No emoluments have been paid or are payable in respect of the Relevant Period referred to in this report by Dragon Richly to the director of Dragon Richly.

−42 −

APPENDIX I ACCOUNTANTS’ REPORT ON DRAGON RICHLY

8. RELATED PARTY TRANSACTION

During the Relevant Period, Mr. Tang Ching Ho, the shareholder of Dragon Richly, advanced a loan of HK$7,815,000 to Dragon Richly.

Save for the aforesaid and as disclosed elsewhere in this report, Dragon Richly did not have any significant related party transactions during the Relevant Period.

9. SUBSEQUENT EVENTS

No significant events have taken place subsequent to 15 October 2004.

10. SUBSEQUENT FINANCIAL STATEMENTS

No audited financial statements have been prepared by Dragon Richly in respect of any period subsequent to 15 October 2004.

Yours faithfully, Ernst & Young Certified Public Accountants Hong Kong

−43 −

ACCOUNTANTS’ REPORT ON POLY TALENT

APPENDIX II

15th Floor

Hutchison House 10 Harcourt Road Central Hong Kong

5 November 2004

The Directors Wang On Group Limited Kingston Corporate Finance Limited

Dear Sirs,

We set out below our report on the financial information regarding Poly Talent Investment Limited (“Poly Talent”) for the period from 11 August 2004 (date of incorporation) to 15 October 2004 (the “Relevant Period”), prepared on the basis set out in Section 1 below, for inclusion in the circular of Wang On Group Limited (the “Company”) dated 5 November 2004 (the “Circular”) in connection with the proposed acquisition of the entire issued share capital and a shareholder’s loan of each of Poly Talent and Profit Million Investment Limited (“Profit Million”) by Suitbest Investments Limited (“Suitbest”), a wholly-owned subsidiary of the Company, pursuant to a conditional agreement (the “Acquisition Agreement”) dated 12 October 2004 entered into between Suitbest, Mr. Tang Ching Ho, the director and substantial shareholder of the Company and the sole shareholder of each of Poly Talent and Profit Million, Poly Talent and Profit Million.

Poly Talent was incorporated with limited liability in Hong Kong on 11 August 2004 and it is wholly and beneficially owned by Mr. Tang Ching Ho, the director of the Company. Poly Talent is an investment holding company and has not carried out any other business activities since its incorporation other than entering into a provisional agreement for the purpose of acquiring a plot of land (the “Provisional Agreement”) on 11 October 2004 and the Acquisition Agreement.

We have audited the financial statements of Poly Talent for the Relevant Period, which were prepared in accordance with Hong Kong Financial Reporting Standards (“HKFRSs”) and accounting principles generally accepted in Hong Kong.

The financial information of the results, statement of changes in equity and cash flows of Poly Talent for the Relevant Period and the balance sheet of Poly Talent as at 15 October 2004, together with the notes thereon (the “Financial Information”), set out in this report has been prepared from the audited financial statements and no adjustments are considered necessary. We have examined the Financial Information in accordance with the Auditing Guideline “Prospectuses and the reporting accountant” issued by the Hong Kong Institute of Certified Public Accountants.

−44 −

ACCOUNTANTS’ REPORT ON POLY TALENT

APPENDIX II

The director of Poly Talent is responsible for the Financial Information. In preparing the Financial Information which gives a true and fair view, it is fundamental that appropriate accounting policies are selected and applied consistently. It is our responsibility to form an independent opinion, based on our examination, on the Financial Information and to report our opinion thereon.

In our opinion, the Financial Information, for the purpose of this report, and on the basis of preparation set out below gives a true and fair view of the results and cash flows of Poly Talent for the Relevant Period, and of the balance sheet of Poly Talent as at 15 October 2004.

1. BASIS OF PREPARATION

The Financial Information has been prepared under the going concern concept despite the net current liabilities and deficiency in shareholder’s equity of Poly Talent because:

1. Poly Talent’s sole beneficial owner, Mr. Tang Ching Ho, has agreed to provide continual financial support and adequate funds to Poly Talent to meet its liabilities until the completion of the Acquisition Agreement; and

2. The Company has agreed to provide continual financial support and adequate funds to Poly Talent to meet its liabilities after the completion of the Acquisition Agreement.

2. PRINCIPAL ACCOUNTING POLICIES

The principal accounting policies adopted by Poly Talent in arriving at the Financial Information set out in this report, which conform with accounting principles generally accepted in Hong Kong and HKFRSs, are as follows. The Financial Information is prepared under the historical cost convention.

Impairment of assets

An assessment is made at each balance sheet date of whether there is any indication of impairment of any asset, or whether there is any indication that an impairment loss previously recognised for an asset in prior years may no longer exist or may have decreased. If any such indication exists, the asset’s recoverable amount is estimated. An asset’s recoverable amount is calculated as the higher of the asset’s value in use or its net selling price.

An impairment loss is recognised only if the carrying amount of an asset exceeds its recoverable amount. An impairment loss is charged to the profit and loss account in the period in which it arises.

A previously recognised impairment loss is reversed only if there has been a change in the estimates used to determine the recoverable amount of an asset, however not to an amount higher than the carrying amount that would have been determined, had no impairment loss been recognised for the asset in prior years. A reversal of an impairment loss is credited to the profit and loss account in the period in which it arises.

−45 −

ACCOUNTANTS’ REPORT ON POLY TALENT

APPENDIX II

Income tax

Income tax comprises current and deferred tax. Income tax is recognised in the profit and loss account or in equity if it relates to items that are recognised in the same or a different period directly in equity.

Deferred tax is provided, using the liability method, on all temporary differences at the balance sheet date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes. Tax rates enacted or substantively enacted by the balance sheet date are used to determine deferred tax.

Deferred tax liabilities are provided in full on all taxable temporary differences while deferred tax assets are recognised to the extent that it is probable that future taxable profit will be available against which the deductible temporary differences can be utilised.

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.

3. RESULTS

The following is a summary of the results of Poly Talent for the Relevant Period prepared on the basis set out in Section 1 above:

Note TURNOVER Administrative expenses NET LOSS FOR THE PERIOD (a)	HK$ – (5,367) (5,367)

−46 −

ACCOUNTANTS’ REPORT ON POLY TALENT

APPENDIX II

Notes:

(a) Net loss for the period

Poly Talent’s net loss for the period is arrived at after charging:

		HK$
Director’s	remuneration	–
Auditors’	remuneration	–

The auditors’ remuneration was borne by the Company.

(b) Tax

No provision for Hong Kong profits tax has been made as Poly Talent did not generate any assessable profits arising in Hong Kong during the Relevant Period.

There was no material unprovided deferred tax in respect of the Relevant Period and as at the balance sheet date.

4. BALANCE SHEET

The following is a summary of the balance sheet of Poly Talent as at 15 October 2004 prepared on the basis set out in Section 1 above:

Notes CURRENT ASSETS Deposit on acquisition of land Cash on hand CURRENT LIABILITIES Other payables and accruals Shareholder’s loan (a) DEFICIENCY IN SHAREHOLDER’S EQUITY Issued capital (b) Accumulated losses	HK$ 1,800,000 1 1,800,001 5,367 1,800,000 1,805,367 (5,366) 1 (5,367) (5,366)

−47 −

ACCOUNTANTS’ REPORT ON POLY TALENT

APPENDIX II

Notes:

(a) Shareholder’s loan

The shareholder’s loan is unsecured, interest-free and is repayable on demand.

(b) Share capital

HK$

Authorised: 10,000 ordinary shares of HK$1 each Issued and fully paid: 1 ordinary share of HK$1	10,000
	1

The Company was incorporated on 11 August 2004 with an authorised share capital of HK$10,000 divided into 10,000 ordinary shares of HK$1 each. On 11 August 2004, 1 ordinary share of HK$1 was issued at par for cash.

(c) Capital commitment

Poly Talent had contracted, but not provided for the purchase of a plot of land in the amount of HK$60,000,000 at the balance sheet date.

5. STATEMENT OF CHANGES IN EQUITY

The changes in the shareholder’s equity of Poly Talent for the Relevant Period, prepared on the basis set out in Section 1 above, are as follows:

Issue of share Net loss for the period At 15 October 2004	Issued share capital Accumulated losses HK$ HK$ 1 – – (5,367) 1 (5,367)	Total HK$ 1 (5,367)
		(5,366)

−48 −

ACCOUNTANTS’ REPORT ON POLY TALENT

APPENDIX II

6. CASH FLOW STATEMENT

The cash flow statement of Poly Talent for the Relevant Period prepared on the basis set out in Section 1 above is as follows:

CASH FLOWS FROM OPERATING ACTIVITIES Loss before tax Operating loss before working capital changes Increase in other payables and accruals Net cash inflow from operating activities CASH FLOWS FROM INVESTING ACTIVITIES Deposit paid on acquisition of land Net cash outflow from investing activities CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from issue of share capital New shareholder’s loan Net cash inflow from financing activities NET INCREASE IN CASH AND CASH EQUIVALENTS CASH AND CASH EQUIVALENTS AT END OF PERIOD ANALYSIS OF BALANCES OF CASH AND CASH EQUIVALENTS Cash on hand

HK$ (5,367) (5,367) 5,367 – (1,800,000) (1,800,000) 1 1,800,000 1,800,001 1 1 1

7. DIRECTOR’S EMOLUMENTS

No emoluments have been paid or are payable in respect of the Relevant Period referred to in this report by Poly Talent to the director of Poly Talent.

−49 −

ACCOUNTANTS’ REPORT ON POLY TALENT

APPENDIX II

8. RELATED PARTY TRANSACTION

During the Relevant Period, Mr. Tang Ching Ho, the shareholder of Poly Talent, advanced a loan of HK$1,800,000 to Poly Talent.

Save for the aforesaid and as disclosed elsewhere in this report, Poly Talent did not have any significant related party transactions during the Relevant Period.

9. SUBSEQUENT EVENTS

No significant events have taken place subsequent to 15 October 2004.

10. SUBSEQUENT FINANCIAL STATEMENTS

No audited financial statements have been prepared by Poly Talent in respect of any period subsequent to 15 October 2004.

Yours faithfully, Ernst & Young Certified Public Accountants Hong Kong

−50 −

ACCOUNTANTS’ REPORT ON PROFIT MILLION

APPENDIX III

15th Floor

Hutchison House 10 Harcourt Road Central Hong Kong

5 November 2004

The Directors Wang On Group Limited Kingston Corporate Finance Limited

Dear Sirs,

We set out below our report on the financial information regarding Profit Million Investment Limited (“Profit Million”) for the period from 22 September 2004 (date of incorporation) to 15 October 2004 (the “Relevant Period”), prepared on the basis set out in Section 1 below, for inclusion in the circular of Wang On Group Limited (the “Company”) dated 5 November 2004 (the “Circular”) in connection with the proposed acquisition of the entire issued share capital and a shareholder’s loan of each of Profit Million and Poly Talent Investment Limited (“Poly Talent”) by Suitbest Investments Limited (“Suitbest”), a whollyowned subsidiary of the Company, pursuant to a conditional agreement (the “Acquisition Agreement”) dated 12 October 2004 entered into between Suitbest, Mr. Tang Ching Ho, the director and substantial shareholder of the Company and the sole shareholder of each of Profit Million and Poly Talent, Profit Million and Poly Talent.

Profit Million was incorporated with limited liability in Hong Kong on 22 September 2004 and it is wholly and beneficially owned by Mr. Tang Ching Ho, the director of the Company. Profit Million is an investment holding company and has not carried out any other business activities since its incorporation other than entering into a provisional agreement for the purpose of acquiring a plot of land (the “Provisional Agreement”) on 11 October 2004 and the Acquisition Agreement.

We have audited the financial statements of Profit Million for the Relevant Period, which were prepared in accordance with Hong Kong Financial Reporting Standards (“HKFRSs”) and accounting principles generally accepted in Hong Kong.

The financial information of the results, statement of changes in equity and cash flows of Profit Million for the Relevant Period and the balance sheet of Profit Million as at 15 October 2004, together with the notes thereon (the “Financial Information”), set out in this report has been prepared from the audited financial statements and no adjustments are considered necessary. We have examined the Financial Information in accordance with the Auditing Guideline “Prospectuses and the reporting accountant” issued by the Hong Kong Institute of Certified Public Accountants.

−51 −

ACCOUNTANTS’ REPORT ON PROFIT MILLION

APPENDIX III

The director of Profit Million is responsible for the Financial Information. In preparing the Financial Information which gives a true and fair view, it is fundamental that appropriate accounting policies are selected and applied consistently. It is our responsibility to form an independent opinion, based on our examination, on the Financial Information and to report our opinion thereon.

In our opinion, the Financial Information, for the purpose of this report, and on the basis of preparation set out below gives a true and fair view of the results and cash flows of Profit Million for the Relevant Period, and of the balance sheet of Profit Million as at 15 October 2004.

1. BASIS OF PREPARATION

The Financial Information has been prepared under the going concern concept despite the net current liabilities and deficiency in shareholder’s equity of Profit Million because:

1. Profit Million’s sole beneficial owner, Mr. Tang Ching Ho, has agreed to provide continual financial support and adequate funds to Profit Million to meet its liabilities until the completion of the Acquisition Agreement; and

2. The Company has agreed to provide continual financial support and adequate funds to Profit Million to meet its liabilities after the completion of the Acquisition Agreement.

2. PRINCIPAL ACCOUNTING POLICIES

The principal accounting policies adopted by Profit Million in arriving at the Financial Information set out in this report, which conform with accounting principles generally accepted in Hong Kong and HKFRSs, are as follows. The Financial Information is prepared under the historical cost convention.

Impairment of assets

An assessment is made at each balance sheet date of whether there is any indication of impairment of any asset, or whether there is any indication that an impairment loss previously recognised for an asset in prior years may no longer exist or may have decreased. If any such indication exists, the asset’s recoverable amount is estimated. An asset’s recoverable amount is calculated as the higher of the asset’s value in use or its net selling price.

An impairment loss is recognised only if the carrying amount of an asset exceeds its recoverable amount. An impairment loss is charged to the profit and loss account in the period in which it arises.

−52 −

ACCOUNTANTS’ REPORT ON PROFIT MILLION

APPENDIX III

A previously recognised impairment loss is reversed only if there has been a change in the estimates used to determine the recoverable amount of an asset, however not to an amount higher than the carrying amount that would have been determined, had no impairment loss been recognised for the asset in prior years. A reversal of an impairment loss is credited to the profit and loss account in the period in which it arises.

Income tax

Income tax comprises current and deferred tax. Income tax is recognised in the profit and loss account or in equity if it relates to items that are recognised in the same or a different period directly in equity.

Deferred tax is provided, using the liability method, on all temporary differences at the balance sheet date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes. Tax rates enacted or substantively enacted by the balance sheet date are used to determine deferred tax.

Deferred tax liabilities are provided in full on all taxable temporary differences while deferred tax assets are recognised to the extent that it is probable that future taxable profit will be available against which the deductible temporary differences can be utilised.

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.

3. RESULTS

The following is a summary of the results of Profit Million for the Relevant Period prepared on the basis set out in Section 1 above:

Note TURNOVER Administrative expenses NET LOSS FOR THE PERIOD (a)	HK$ – (5,367) (5,367)

−53 −

APPENDIX III ACCOUNTANTS’ REPORT ON PROFIT MILLION

Notes:

(a) Net loss for the period

Profit Million’s net loss for the period is arrived at after charging:

HK$

Director’s	remuneration	–
Auditors’	remuneration	–

The auditors’ remuneration was borne by the Company.

(b) Tax

No provision for Hong Kong profits tax has been made as Profit Million did not generate any assessable profits arising in Hong Kong during the Relevant Period.

There was no material unprovided deferred tax in respect of the Relevant Period and as at the balance sheet date.

4. BALANCE SHEET

The following is a summary of the balance sheet of Profit Million as at 15 October 2004 prepared on the basis set out in Section 1 above:

Notes CURRENT ASSETS Deposit on acquisition of land Cash on hand CURRENT LIABILITIES Other payables and accruals Shareholder’s loan (a) DEFICIENCY IN SHAREHOLDER’S EQUITY Issued capital (b) Accumulated losses	HK$ 300,000 1 300,001 5,367 300,000 305,367 (5,366) 1 (5,367) (5,366)

−54 −

ACCOUNTANTS’ REPORT ON PROFIT MILLION

APPENDIX III

Notes:

(a) Shareholder’s loan

The shareholder’s loan is unsecured, interest-free and is repayable on demand.

(b) Share capital

HK$

Authorised: 10,000 ordinary shares of HK$1 each Issued and fully paid: 1 ordinary share of HK$1	10,000
	1

The Company was incorporated on 22 September 2004 with an authorised share capital of HK$10,000 divided into 10,000 ordinary shares of HK$1 each. On 22 September 2004, 1 ordinary share of HK$1 was issued at par for cash.

(c) Capital commitment

Profit Million had contracted, but not provided for the purchase of a plot of land in the amount of HK$6,230,000 at the balance sheet date.

5. STATEMENT OF CHANGES IN EQUITY

The changes in the shareholder’s equity of Profit Million for the Relevant Period, prepared on the basis set out in Section 1 above, are as follows:

Issue of share Net loss for the period At 15 October 2004	Issued share capital Accumulated losses HK$ HK$ 1 – – (5,367) 1 (5,367)	Total HK$ 1 (5,367)
		(5,366)

−55 −

APPENDIX III ACCOUNTANTS’ REPORT ON PROFIT MILLION

6. CASH FLOW STATEMENT

The cash flow statement of Profit Million for the Relevant Period prepared on the basis set out in Section 1 above is as follows:

CASH FLOWS FROM OPERATING ACTIVITIES Loss before tax Operating loss before working capital changes Increase in other payables and accruals Net cash inflow from operating activities CASH FLOWS FROM INVESTING ACTIVITIES Deposit paid on acquisition of land Net cash outflow from investing activities CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from issue of share capital New shareholder’s loan Net cash inflow from financing activities NET INCREASE IN CASH AND CASH EQUIVALENTS CASH AND CASH EQUIVALENTS AT END OF PERIOD ANALYSIS OF BALANCES OF CASH AND CASH EQUIVALENTS Cash on hand

HK$ (5,367) (5,367) 5,367 – (300,000) (300,000) 1 300,000 300,001 1 1 1

7. DIRECTOR’S EMOLUMENTS

No emoluments have been paid or are payable in respect of the Relevant Period referred to in this report by Profit Million to the director of Profit Million.

−56 −

APPENDIX III ACCOUNTANTS’ REPORT ON PROFIT MILLION

8. RELATED PARTY TRANSACTION

During the Relevant Period, Mr. Tang Ching Ho, the shareholder of Profit Million advanced a loan of HK$300,000 to Profit Million.

Save for the aforesaid and as disclosed elsewhere in this report, Profit Million did not have any significant related party transactions during the Relevant Period.

9. SUBSEQUENT EVENTS

No significant events have taken place subsequent to 15 October 2004.

10. SUBSEQUENT FINANCIAL STATEMENTS

No audited financial statements have been prepared by Profit Million in respect of any period subsequent to 15 October 2004.

Yours faithfully, Ernst & Young Certified Public Accountants Hong Kong

−57 −

FINANCIAL INFORMATION ON THE GROUP

APPENDIX IV

1. SUMMARY OF AUDITED FINANCIAL INFORMATION

The following is a summary of the results and financial position of the Group for the three years ended 31 March 2004, as extracted from the annual report of the Company for the year ended 31 March 2004. The amounts in 2002 and 2003 have been adjusted for the effects of the retrospective change in accounting policy affecting income tax.

Results

TURNOVER PROFIT FROM OPERATING ACTIVITIES AFTER FINANCE COSTS Share of profits and losses of associates Amortisation of goodwill of associates Provision for impairment of goodwill of an associate PROFIT BEFORE TAX Tax PROFIT BEFORE MINORITY INTERESTS Minority interests NET PROFIT FROM ORDINARY ACTIVITIES ATTRIBUTABLE TO SHAREHOLDERS Assets, liabilities and minority interests TOTAL ASSETS TOTAL LIABILITIES MINORITY INTERESTS	Year ended 31 March 2004 2003 2002 HK$’000 HK$’000 HK$’000 (Restated) (Restated) 296,565 292,156 320,047 51,671 80,004 35,274 (10,307) (11,409) 3,331 (7,656) (16,454) (4,482) – (7,000) – 33,708 45,141 34,123 (4,334) (3,361) (3,531) 29,374 41,780 30,592 (89) (641) (2,789) 29,285 41,139 27,803 31 March 2004 2003 2002 HK$’000 HK$’000 HK$’000 (Restated) (Restated) 857,417 781,578 649,144 (176,434) (157,766) (167,430) (401) (324) (10,569) 680,582 623,488 471,145	Year ended 31 March 2004 2003 2002 HK$’000 HK$’000 HK$’000 (Restated) (Restated) 296,565 292,156 320,047 51,671 80,004 35,274 (10,307) (11,409) 3,331 (7,656) (16,454) (4,482) – (7,000) – 33,708 45,141 34,123 (4,334) (3,361) (3,531) 29,374 41,780 30,592 (89) (641) (2,789) 29,285 41,139 27,803 31 March 2004 2003 2002 HK$’000 HK$’000 HK$’000 (Restated) (Restated) 857,417 781,578 649,144 (176,434) (157,766) (167,430) (401) (324) (10,569) 680,582 623,488 471,145	Year ended 31 March 2004 2003 2002 HK$’000 HK$’000 HK$’000 (Restated) (Restated) 296,565 292,156 320,047 51,671 80,004 35,274 (10,307) (11,409) 3,331 (7,656) (16,454) (4,482) – (7,000) – 33,708 45,141 34,123 (4,334) (3,361) (3,531) 29,374 41,780 30,592 (89) (641) (2,789) 29,285 41,139 27,803 31 March 2004 2003 2002 HK$’000 HK$’000 HK$’000 (Restated) (Restated) 857,417 781,578 649,144 (176,434) (157,766) (167,430) (401) (324) (10,569) 680,582 623,488 471,145
	51,671 (10,307) (7,656) – 33,708 (4,334) 29,374 (89)	80,004 (11,409) (16,454) (7,000) 45,141 (3,361) 41,780 (641)	35,274 3,331 (4,482 –
			34,123 (3,531
			30,592 (2,789
	29,285 2004 HK$’000 857,417 (176,434) (401) 680,582	41,139 31 March 2003 HK$’000 (Restated) 781,578 (157,766) (324) 623,488

−58 −

FINANCIAL INFORMATION ON THE GROUP

APPENDIX IV

2. EXTRACT OF THE FINANCIAL STATEMENTS

Set out below are the audited consolidated profit and loss account of the Group for the two years ended 31 March 2004, the audited consolidated balance sheet of the Group as at 31 March 2003 and 31 March 2004, the audited consolidated statement of changes in equity of the Group for the two years ended 31 March 2004 and the audited consolidated cash flow statement of the Group for the two years ended 31 March 2004, the balance sheet of the Company as at 31 March 2003 and 31 March 2004 together with the relevant notes in the accounts, as extracted from the annual report of the Company for the year ended 31 March 2004.

Consolidated Profit and Loss Account

Year ended 31 March 2004

Notes TURNOVER 5 Cost of sales Gross profit Other revenue and gains 5 Selling and distribution costs Administrative expenses Other operating expenses Gain/(loss) on disposal of subsidiaries Gain on disposals of interests in associates Surplus/(deficit) on revaluation of investment properties 6, 14 Provision for an amount due from an associate PROFIT FROM OPERATING ACTIVITIES 6 Finance costs 7 Share of profits and losses of associates Amortisation of goodwill of associates Provision for impairment of goodwill of an associate PROFIT BEFORE TAX Tax 10 PROFIT BEFORE MINORITY INTERESTS Minority interests NET PROFIT FROM ORDINARY ACTIVITIES ATTRIBUTABLE TO SHAREHOLDERS 11 DIVIDENDS 12 Interim Proposed final EARNINGS PER SHARE 13 Basic Diluted	2004 HK$’000 296,565 (227,559)	2003 HK$’000 (Restated) 292,156 (230,432) 61,724 24,415 (17,695) (57,032) (10,168) 17,031 73,891 (6,210) (3,400) 82,556 (2,552) (11,409) (16,454) (7,000) 45,141 (3,361) 41,780 (641) 41,139 – – – HK$0.355 N/A
	69,006 35,839 (10,439) (44,841) (14,947) (1,020) 13,048 7,066 – 53,712 (2,041) (10,307) (7,656) – 33,708 (4,334) 29,374 (89)	61,724 24,415 (17,695 (57,032 (10,168 17,031 73,891 (6,210 (3,400
		82,556 (2,552 (11,409 (16,454 (7,000
		45,141 (3,361
		41,780 (641
	29,285
	3,544 10,032	– –
	13,576 HK$0.241 HK$0.228

−59 −

FINANCIAL INFORMATION ON THE GROUP

APPENDIX IV

Consolidated Balance Sheet

31 March 2004

Notes NON-CURRENT ASSETS Fixed assets 14 Goodwill 15 Interests in associates 17 Long term investments 18(a) Loans receivable Rental deposits paid Other deposits Deferred tax assets 29 CURRENT ASSETS Short term investments 18(b) Inventories 19 Trade receivables 20 Prepayments, deposits and other receivables 21 Tax recoverable Cash and cash equivalents 22 CURRENT LIABILITIES Trade payables 23 Other payables and accruals 24 Deposits received and receipts in advance Interest-bearing bank and other borrowings 25 Provisions for onerous contracts 26 Tax payable NET CURRENT ASSETS	2004 HK$’000 292,779 5,459 136,602 34,843 1,741 7,556 30,630 1,418	2003 HK$’000 (Restated) 188,635 135,608 187,454 14,700 4,625 7,739 – 2,227
	511,028 37,428 73 5,551 13,972 – 289,365 346,389 188 12,997 40,299 24,575 9,112 4,729 91,900 254,489	540,988
		3,344 2,563 8,303 12,134 55 214,191
		240,590
		1,600 16,719 39,914 25,182 7,709 3,324
		94,448
		146,142

−60 −

FINANCIAL INFORMATION ON THE GROUP

APPENDIX IV

Notes TOTAL ASSETS LESS CURRENT LIABILITIES NON-CURRENT LIABILITIES Interest-bearing bank loans 27 Finance lease payable 28 Provisions for onerous contracts 26 MINORITY INTERESTS CAPITAL AND RESERVES Issued capital 30 Reserves 32(a)	2004 HK$’000 765,517 80,073 – 4,461 84,534 401 680,582 14,332 666,250 680,582	2003 HK$’000 (Restated) 687,130 50,836 52 12,430
		63,318
		324
		623,488
		11,815 611,673
		623,488

−61 −

FINANCIAL INFORMATION ON THE GROUP

APPENDIX IV

Consolidated Statement of Changes in Equity

Year ended 31 March 2004

Notes At 1 April 2002: As previously reported Prior year adjustment: SSAP 12 – restatement of deferred tax 29 As restated Placement of shares 30 Capital reorganisation 30 Warrant issue 30 Warrant issue expenses Share issue expenses 30 Deficit on revaluation of investment properties and net loss not recognised in the profit and loss account Release of goodwill on disposal of subsidiaries 33(d) Net profit for the year (as restated) Transfer from retained profits At 31 March 2003 At 1 April 2003: As previously reported Prior year adjustment: SSAP 12 – restatement of deferred tax 29 As restated Placement of shares 30 Expiry of warrants 30 Share issue expenses 30 Surplus on revaluation of investment properties and net gain not recognised in the profit and loss account 14 Net profit for the year Interim 2004 dividend 12, 30 Proposed final 2004 dividend 12 Transfer to retained profits At 31 March 2004	Issued share capital HK$’000 98,644 –	Share premium account Contributed surplus HK$’000 HK$’000 331,114 – – –	Share premium account Contributed surplus HK$’000 HK$’000 331,114 – – –	Warrant reserve HK$’000 – –	Capital reserve HK$’000 – –	Investment property revaluation reserve HK$’000 2,243 –	Retained profits HK$’000 35,998 3,146	Proposed final dividend HK$’000 – –	Total HK$’000 467,999 3,146
	98,644 19,500 (106,329) – – – – – – –	331,114 19,500 – – – (2,392) – – – –	– – 106,329 – – – – – – –	– – – 2,000 (265) – – – – –	– – – – – – – – – 1,511	2,243 – – – – – (2,243) – – –	39,144 – – – – – – 75,104 41,139 (1,511)	– – – – – – – – – –	471,145
									39,000 – 2,000 (265 (2,392 (2,243 75,104 41,139 –
	11,815	348,222	106,329	1,735	1,511	–	153,876	–	623,488
	11,815 – 11,815 2,360 – – – – 157 – –	348,222 – 348,222 23,600 – (810) – – 1,350 – –	106,329 – 106,329 – – – – – – – –	1,735 – 1,735 – (1,735) – – – – – –	1,511 – 1,511 – – – – – – – (1,511)	– – – – – – 4,696 – – – –	150,884 2,992 153,876 – 1,735 – – 29,285 (3,544) (10,032) 1,511	– – – – – – – – – 10,032 –	620,496 2,992
									623,488
									25,960 – (810 4,696 29,285 (2,037 – –
	14,332	372,362*	106,329*	–*	–*	4,696*	172,831*	10,032*	680,582

• These reserve accounts comprise the consolidated reserves of HK$666,250,000 (2003 (restated): HK$611,673,000) in the consolidated balance sheet.

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APPENDIX IV

FINANCIAL INFORMATION ON THE GROUP

Reserves retained by: Company and subsidiaries Associates At 31 March 2004 Company and subsidiaries Associates At 31 March 2003	Issued share capital HK$’000 14,332 – 14,332 11,815 – 11,815	Share premium account Contributed surplus HK$’000 HK$’000 372,362 106,329 – – 372,362 106,329 348,222 106,329 – – 348,222 106,329	Warrant reserve HK$’000 – – – 1,735 – 1,735	Capital reserve HK$’000 – – – 1,511 – 1,511	Investment property revaluation reserve Retained profits/ (accumulated losses) HK$’000 HK$’000 4,696 193,083 – (20,252) 4,696 172,831 – 163,305 – (9,429) – 153,876	Proposed final dividend HK$’000 10,032 – 10,032 – – –	Total HK$’000 700,834 (20,252)
							680,582
							632,917 (9,429)
							623,488

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FINANCIAL INFORMATION ON THE GROUP

APPENDIX IV

Consolidated Cash Flow Statement

Year ended 31 March 2004

Notes CASH FLOWS FROM OPERATING ACTIVITIES Profit before tax Adjustments for: Finance costs 7 Share of profits and losses of associates Provision for impairment of goodwill of an associate Provision for an amount due from an associate Amortisation of goodwill of associates 15 Net holding loss/(gain) on investments 6 Interest income from investments 5 Interest income 5 Dividend income from listed securities 5 Loss/(gain) on disposal of subsidiaries 33(d) Gain on disposal of interests in an associate Gain on disposal of investments, net 5 Gain on disposal of convertible notes due from an associate 5 Provision for and write-off of bad and doubtful debts 6 Provision for impairment of long term investments 6 Depreciation 6, 14 Amortisation of trademarks and patents 6 Amortisation of goodwill of subsidiaries 6, 15 Loss on disposal/write-off of fixed assets 6 Deficit/(surplus) on revaluation of investment properties 6, 14 Recognition of deferred gain on disposal of subsidiaries 5 Operating profit before working capital changes Decrease/(increase) in trade receivables, prepayments, deposits and other receivables Increase in inventories Decrease in properties held for re-sale Increase/(decrease) in trade payables, other payables and accruals Decrease in deposits received and receipts in advance Decrease in provisions for onerous contracts 6, 26 Increase in deferred income Cash generated from operations Hong Kong profits tax refunded/(paid) Net cash inflow from operating activities	2004 HK$’000 33,708 2,041 10,307 – – 7,656 (570) (2,386) (8,428) (128) 1,020 (13,048) (109) (17,883) 6,821 1,641 12,595 – 6,246 200 (7,066) (688)	2003 HK$’000 45,141 2,552 11,409 7,000 3,400 16,454 570 (1,865) (9,007) (93) (17,031) (73,891) (200) – 5,158 637 15,000 5 947 1,061 6,210 (944) 12,513 18,162 (171) 1,167 (7,845) (13,405) (6,878) 294 3,837 29 3,866
	31,929 (11,721) (887) – 2,202 (1,420) (6,566) – 13,537 (909)	12,513 18,162 (171 1,167 (7,845 (13,405 (6,878 294
		3,837 29
	12,628

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FINANCIAL INFORMATION ON THE GROUP

APPENDIX IV

Notes Net cash inflow from operating activities CASH FLOWS FROM INVESTING ACTIVITIES Interest received Dividend income from listed securities Dividend income from an associate Interest income from investments Decrease/(increase) in amounts due from associates Increase in amounts due to associates Acquisition of a subsidiary 33(b) Acquisitions of additional shares in a subsidiary 33(c) Acquisition of an associate Acquisitions of additional shares in associates Net outflow of cash and cash equivalents in respect of the disposal of subsidiaries 33(d) Proceeds from disposal of interests in an associate Increase in other deposits Purchases of fixed assets Purchases of investment properties Proceeds from disposal of an investment property Proceeds from disposal of fixed assets Proceeds from disposal of a short term investment Proceeds from disposal of convertible notes New loans to an associate Settlement of loans to an associate Settlement of convertible notes due from an associate Purchases of long term investments Purchases of short term investments Net cash inflow/(outflow) from investing activities CASH FLOWS FROM FINANCING ACTIVITIES Interest paid Dividend paid Dividend paid to minority shareholders Proceeds from issue of shares 30 Share issue expenses 30 Proceeds from issue of warrants 30 Warrant issue expenses Repayment of bank loans New bank loans Capital element of finance lease rental payments Net cash inflow from financing activities	2004 HK$’000 12,628	2003 HK$’000 3,866 9,007 93 3,409 1,865 (18,498) – (5,073) 300 (2,500) (28,935) (8,227) 41,521 – (60,622) (88,646) – – 5,200 – – – – (14,337) – (165,443) (2,552) – (2,226) 39,000 (2,392) 2,000 (265) (24,145) 52,600 (58) 61,962
	8,295 128 – 2,386 208 19 – (1,929) – – (3,904) – (30,630) (11,678) (95,807) 1,925 217 4,784 102,383 (9,000) 87,750 13,000 (21,784) (38,189) 8,174 (2,041) (2,037) – 25,960 (810) – – (27,065) 60,475 (110)	9,007 93 3,409 1,865 (18,498 – (5,073 300 (2,500 (28,935 (8,227 41,521 – (60,622 (88,646 – – 5,200 – – – – (14,337 –
		(165,443
		(2,552 – (2,226 39,000 (2,392 2,000 (265 (24,145 52,600 (58
	54,372

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FINANCIAL INFORMATION ON THE GROUP

APPENDIX IV

Notes NET 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 22 Non-pledged time deposits with original maturity of less than three months when acquired 22	2004 HK$’000 75,174 214,191 289,365 25,931 263,434 289,365	2003 HK$’000 (99,615) 313,806 214,191 40,947 173,244 214,191

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FINANCIAL INFORMATION ON THE GROUP

APPENDIX IV

Balance Sheet

31 March 2004

Notes NON-CURRENT ASSETS Fixed assets 14 Interests in subsidiaries 16 Interests in associates 17 Long term investments 18(a) CURRENT ASSETS Short term investments 18(b) Prepayments, deposits and other receivables 21 Cash and cash equivalents 22 CURRENT LIABILITIES Other payables and accruals 24 NET CURRENT ASSETS CAPITAL AND RESERVES Issued capital 30 Reserves 32(b)	2004 HK$’000 5 356,632 219 15,534	2003 HK$’000 8 406,830 219 11,700
	372,390 12,105 1,088 238,389 251,582 241 241 251,341	418,757
		– 587 175,484
		176,071
		376
		376
		175,695
	623,731	594,452
	14,332 609,399	11,815 582,637
	623,731	594,452

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FINANCIAL INFORMATION ON THE GROUP

APPENDIX IV

Notes to the Financial Statements

31 March 2004

1. CORPORATE INFORMATION

The head office and principal place of business of Wang On Group Limited is located at 5th Floor, 9 Wang Kwong Road, Kowloon Bay, 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

• production and sale of cough syrup and health care products

• property investment

• retailing of pork stalls

2. IMPACT OF A REVISED STATEMENT OF STANDARD ACCOUNTING PRACTICE (“SSAP”)

The following new and revised SSAP and Interpretation are effective for the first time for the current year’s financial statements and have had a significant impact thereon:

• SSAP 12 (Revised): “Income taxes”

• Interpretation 20: “Income taxes – Recovery of revalued non-depreciable assets”

These SSAP and Interpretation prescribe new accounting measurement and disclosure practices. The major effects on the Group’s accounting policies and on the amounts disclosed in these financial statements of adopting these SSAP and Interpretation are summarised as follows:

SSAP 12 prescribes the accounting for income taxes payable or recoverable, arising from the taxable profit or loss for the current period (current tax); and income taxes payable or recoverable in future periods, principally arising from taxable and deductible temporary differences and the carryforward of unused tax losses (deferred tax).

The principal impact of the revision of this SSAP on these financial statements is described below:

Measurement and recognition:

• deferred tax assets and liabilities relating to the differences between capital allowances for tax purposes and depreciation for financial reporting purposes and other taxable and deductible temporary differences are generally fully provided for, whereas previously the deferred tax was recognised for timing differences only to the extent that it was probable that the deferred tax asset or liability would crystallise in the foreseeable future;

• a deferred tax asset has been recognised for provisions for onerous contracts made in the current/prior periods; and

• a deferred tax asset has been recognised for tax losses arising in the current/prior periods to the extent that it is probable that there will be sufficient future taxable profits against which such losses can be utilised.

Disclosures:

• deferred tax assets and liabilities are presented separately on the balance sheet, whereas previously they were presented on a net basis; and

• the related note disclosures are now more extensive than previously required. These disclosures are presented in notes 10 and 29 to the financial statements and include a reconciliation between the accounting profit and the tax expense for the year.

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FINANCIAL INFORMATION ON THE GROUP

APPENDIX IV

2. IMPACT OF A REVISED STATEMENT OF STANDARD ACCOUNTING PRACTICE (“SSAP”) (Cont’d)

Further details of these changes and the prior year adjustments arising from them are included in the accounting policy for deferred tax in note 3 and in note 29 to the financial statements.

Interpretation 20 requires that a deferred tax asset or liability that arises from the revaluation of certain non-depreciable assets and investment properties is measured based on the tax consequences that would follow from the recovery of the carrying amount of that asset through sale. This policy has been applied by the Group in respect of the revaluation of its investment properties in the deferred tax calculated under SSAP 12.

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of preparation

These financial statements have been prepared in accordance with Hong Kong Statements of Standard Accounting Practice, 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 periodic remeasurement of investment properties and certain investments, 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 2004. The results of the subsidiaries 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.

Minority interests represent the interests of outside shareholders in the results and net assets of the Company’s subsidiaries.

Subsidiaries

A subsidiary is a company whose financial and operating policies the Company controls, directly or indirectly, so as to obtain benefits from its activities.

The results of subsidiaries are included in the Company’s profit and loss account to the extent of dividends received and receivable. The Company’s interests in subsidiaries are stated at cost less any impairment losses.

Associates

An associate is a company, not being a subsidiary or a jointly-controlled entity, in which the Group has a long term interest of generally not less than 20% of the equity voting rights 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 impairment losses. Goodwill or negative goodwill arising from the acquisition of associates, which was not previously eliminated or recognised in the consolidated reserves, is included as part of the Group’s interests in associates.

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 treated as long term assets and are stated at cost less any impairment losses.

Deferred gain represents the unrealised profit resulting from downstream transactions with an associate eliminated to the extent of the Group’s interest in that associate. Deferred gain is recognised in the consolidated balance sheet as part of the Group’s interests in associates and is amortised on the straight-line basis of not more than 20 years, being the estimated useful life of the goodwill recorded by the associate arising from the transactions.

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FINANCIAL INFORMATION ON THE GROUP

APPENDIX IV

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont’d)

Goodwill

Goodwill arising on the acquisition of subsidiaries and associates represents the excess of the cost of the acquisition over the Group’s share of the fair values of the identifiable assets and liabilities acquired as at the date of acquisition.

Goodwill arising on acquisition is recognised in the consolidated balance sheet as an asset and amortised on the straight-line basis over its estimated useful life of not more than 20 years. In the case of associates, any unamortised goodwill is included in the carrying amount thereof, rather than as a separately identified asset on the consolidated balance sheet.

Prior to the adoption of SSAP 30 “Business combinations” in 2002, goodwill arising on acquisitions was eliminated against consolidated reserves in the year of acquisition. On the adoption of SSAP 30, the Group applied the transitional provision of the SSAP that permitted such goodwill to remain eliminated against consolidated reserves. Goodwill on acquisitions subsequent to the adoption of the SSAP is treated according to the SSAP 30 goodwill accounting policy above.

On disposal of subsidiaries or associates, the gain or loss on disposal is calculated by reference to the net assets at the date of disposal, including the attributable amount of goodwill which remains unamortised and any relevant reserves, as appropriate. Any attributable goodwill previously eliminated against consolidated reserves at the time of acquisition is written back and included in the calculation of the gain or loss on disposal.

The carrying amount of goodwill, including goodwill remaining eliminated against consolidated reserves, is reviewed annually and written down for impairment when it is considered necessary. A previously recognised impairment loss for goodwill is not reversed unless the impairment loss was caused by a specific external event of an exceptional nature that was not expected to recur, and subsequent external events have occurred which have reversed the effect of that event.

Negative goodwill

Negative goodwill arising on the acquisition of subsidiaries and associates represents the excess of the Group’s share of the fair values of the identifiable assets and liabilities acquired as at the date of acquisition, over the cost of the acquisition.

To the extent that negative goodwill relates to expectations of future losses and expenses that are identified in the acquisition plan and that can be measured reliably, but which do not represent identifiable liabilities as at the date of acquisition, that portion of negative goodwill is recognised as income in the consolidated profit and loss account when the future losses and expenses are recognised.

To the extent that negative goodwill does not relate to identifiable expected future losses and expenses as at the date of acquisition, negative goodwill is recognised in the consolidated profit and loss account on a systematic basis over the remaining average useful life of the acquired depreciable/amortisable assets. The amount of any negative goodwill in excess of the fair values of the acquired non-monetary assets is recognised as income immediately.

In the case of associates, any negative goodwill not yet recognised in the consolidated profit and loss account is included in the carrying amount thereof, rather than as a separately identified item on the consolidated balance sheet.

Prior to the adoption of SSAP 30 “Business combinations” in 2002, negative goodwill arising on acquisitions was credited to the capital reserve in the year of acquisition. On the adoption of SSAP 30, the Group applied the transitional provision of the SSAP that permitted such negative goodwill to remain credited to the capital reserve. Negative goodwill on acquisitions subsequent to the adoption of the SSAP is treated according to the SSAP 30 negative goodwill accounting policy above.

On disposal of subsidiaries or associates, the gain or loss on disposal is calculated by reference to the net assets at the date of disposal, including the attributable amount of negative goodwill which has not been recognised in the consolidated profit and loss account and any relevant reserves as appropriate. Any attributable negative goodwill previously credited to the capital reserve at the time of acquisition is written back and included in the calculation of the gain or loss on disposal.

−70 −

FINANCIAL INFORMATION ON THE GROUP

APPENDIX IV

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont’d)

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.

Impairment of assets

An assessment is made at each balance sheet date of whether there is any indication of impairment of any asset, or whether there is any indication that an impairment loss previously recognised for an asset in prior years may no longer exist or may have decreased. If any such indication exists, the asset’s recoverable amount is estimated. An asset’s recoverable amount is calculated at the higher of the asset’s value in use or its net selling price.

An impairment loss is recognised only if the carrying amount of an asset exceeds its recoverable amount. An impairment loss is charged to the profit and loss account in the period in which it arises, unless the asset is carried at a revalued amount, when the impairment loss is accounted for in accordance with the relevant accounting policy for that revalued asset.

A previously recognised impairment loss is reversed only if there has been a change in the estimates used to determine the recoverable amount of an asset, however not to an amount higher than the carrying amount that would have been determined (net of any depreciation/amortisation), had no impairment loss been recognised for the asset in prior years. A reversal of an impairment loss is credited to the profit and loss account in the period in which it arises, unless the asset is carried at a revalued amount, when the reversal of the impairment loss is accounted for in accordance with the relevant accounting policy for that revalued asset.

Fixed assets and depreciation

Fixed assets, other than investment properties and construction in progress, are stated at cost less accumulated depreciation and any impairment losses. 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%
Machineries	15% – 20%
Furniture, fixtures and office equipment	15% – 20%
Motor vehicles	20% – 30%
Computer equipment	15% – 30%

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.

Construction in progress represents building under construction and renovation works, which is stated at cost less any impairment losses, and is not depreciated. Cost comprises the direct costs of construction and renovation works during the period of construction and renovation. Construction in progress is reclassified to the appropriate category of fixed assets when completed and ready for use.

−71 −

FINANCIAL INFORMATION ON THE GROUP

APPENDIX IV

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont’d)

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 is charged to the profit and loss account. Any subsequent revaluation surplus is credited to the profit and loss account to the extent of the deficit previously charged.

On 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.

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 capitalised 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 provide 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. Where the Group is the lessor, assets leased by the Group under operating leases are included in non-current assets and rentals receivable under the operating leases are credited to the profit and loss account on the straight-line basis over the lease terms. Where the Group is the lessee, rentals payable under the operating leases are charged to the profit and loss account on the straight-line basis over the lease terms.

Investments

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

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 impairment losses, on an individual investment basis.

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, equity securities, unit trusts and certificate of deposit, intended to be held for a continuing strategic or identified long term purpose, are stated at cost less any impairment losses, on an individual investment basis.

When a decline in the fair value of an investment security below its carrying amount has occurred, unless there is evidence that the decline is temporary, the carrying amount of the security is reduced to its fair value, as estimated by the directors. The amount of the impairment is charged to the profit and loss account for the period in which it arises.

−72 −

FINANCIAL INFORMATION ON THE GROUP

APPENDIX IV

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont’d)

Investments (Cont’d)

Other investments

Investments in equity securities which are not intended to be held for an identified long term purpose are included in short term investments and 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 the fair values of such investments are credited or charged to the profit and loss account in the period in which they arise.

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, and is calculated as the difference between the net sales proceeds and the carrying amount of the investment.

Provisions against the carrying amounts 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.

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, comprises direct materials, direct labour and an appropriate proportion of overheads. Net realisable value is based on estimated selling prices less any estimated costs to be incurred to completion and disposal.

Cash and cash equivalents

For the purpose of the consolidated cash flow statement, cash and cash equivalents comprise cash on hand and demand deposits, and short term highly liquid investments which are readily convertible into known amounts of cash and which are subject to an insignificant risk of changes in value, and have a short maturity of generally within three months when acquired, less bank overdrafts which are repayable on demand and form an integral part of the Group’s cash management.

For the purpose of the balance sheet, cash and cash equivalents comprise cash on hand and at banks, including term deposits, and assets similar in nature to cash, which are not restricted as to use.

Provisions

A provision is recognised when a present obligation (legal or constructive) has arisen as a result of a past event and it is probable that a future outflow of resources will be required to settle the obligation, provided that a reliable estimate can be made of the amount of the obligation.

When the effect of discounting is material, the amount recognised for a provision is the present value at the balance sheet date of the future expenditures expected to be required to settle the obligation. The increase in the discounted present value amount arising from the passage of time is included in finance costs in the profit and loss account.

Provisions for onerous contracts

Onerous contracts represent lease contracts for certain Hong Kong properties and projects where the unavoidable costs of meeting the obligations under the contracts exceed the economic benefits expected to be received under them. Provisions for onerous contracts are recognised based on the difference between the rental payments receivable by the Group and those unavoidable rental payments payable by the Group under the contracts, together with any compensation or penalties arising from the failure to fulfil the contracts, discounted to their present value as appropriate.

−73 −

FINANCIAL INFORMATION ON THE GROUP

APPENDIX IV

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont’d)

Income tax

Income tax comprises current and deferred tax. Income tax is recognised in the profit and loss account or in equity if it relates to items that are recognised in the same or a different period, directly in equity.

Deferred tax is provided, using the liability method, on all temporary differences at the balance sheet date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes.

Deferred tax liabilities are recognised for all taxable temporary differences:

• except where the deferred tax liability arises from the initial recognition of an asset or liability and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and

• in respect of taxable temporary differences associated with investments in subsidiaries and associates, except where the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future.

Deferred tax assets are recognised for all deductible temporary differences, carryforward of unused tax assets and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carryforward of unused tax assets and unused tax losses can be utilised:

• except where the deferred tax asset relating to the deductible temporary differences arises from the initial recognition of an asset or liability and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and

• in respect of deductible temporary differences associated with investments in subsidiaries, and associates, deferred tax assets are only recognised to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilised.

The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilised. Conversely, previously unrecognised deferred tax assets are recognised to the extent that it is probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilised.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the balance sheet date.

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) rental and sub-licensing fee income, on an accrual basis;

• (b) from the provision of management services, when the 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) from the provision of project management and agency services, when the services are rendered;

• (f) franchise fee income, on a time proportion basis over the franchise period;

−74 −

FINANCIAL INFORMATION ON THE GROUP

APPENDIX IV

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont’d)

Revenue recognition (Cont’d)

• (g) interest income, on a time proportion basis taking into account the principal outstanding and the effective interest rate applicable; and

• (h) dividend income, where the shareholders’ right to receive payment has been established.

Employee benefits

Employment Ordinance long service payments

Certain of the Group’s employees have completed the required number of years of service to the Group in order to be eligible for long service payments under the Hong Kong Employment Ordinance in the event of the termination of their employment. The Group is liable to make such payments in the event that such a termination of employment meets the circumstances specified in the Employment Ordinance.

A contingent liability is disclosed in respect of possible future long service payments to employees, as a number of current employees have achieved the required number of years of service to the Group, to the balance sheet date, in order to be eligible for long service payments under the Employment Ordinance if their employment is terminated in the circumstances specified. A provision has not been recognised in respect of such possible payments, as it is not considered probable that the situation will result in a material future outflow of resources from the Group.

Retirement benefits scheme

The Group operates a defined contribution Mandatory Provident Fund retirement benefits scheme (the “Scheme”) under the Mandatory Provident Fund Schemes Ordinance, for those employees who are eligible to participate in the Scheme. 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.

Share option schemes

The Company operates share option schemes for the purpose of providing incentives and rewards to eligible participants who contribute to the success of the Group’s operations. The financial impact of share options granted under the share option schemes is not recorded in the Company’s or the Group’s balance sheet until such time as the options are exercised, and no charge is recorded in the profit and loss account or balance sheet for their cost. Upon the exercise of share options, the resulting shares issued are recorded by the Company as additional share capital at the nominal value of the shares, and the excess of the exercise price per share over the nominal value of the shares is recorded by the Company in the share premium account. Options which are cancelled prior to their exercise date, or which lapse, are deleted from the register of outstanding options.

Dividends

Final dividends proposed by the directors are classified as a separate allocation of retained profits within the capital and reserves section of the balance sheet, until they have been approved by the shareholders in a general meeting. When these dividends have been approved by the shareholders and declared, they are recognised as a liability.

Interim dividends are simultaneously proposed and declared, because bye-law 140 of the Company’s bye-laws grants the directors the authority to declare interim dividends. Consequently, interim dividends are recognised immediately as a liability when they are proposed and declared.

−75 −

FINANCIAL INFORMATION ON THE GROUP

APPENDIX IV

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont’d)

Foreign currencies

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

On consolidation, the financial statements of overseas subsidiaries and associates are translated into Hong Kong dollars using the net investment method. The profit and loss accounts of overseas subsidiaries and associates are translated into Hong Kong dollars at the weighted average exchange rates for the year, and their balance sheets are translated into Hong Kong dollars at the exchange rates ruling at the balance sheet date. The resulting translation differences are included in the exchange fluctuation reserve.

For the purpose of the consolidated cash flow statement, the cash flows of overseas subsidiaries are translated into Hong Kong dollars at the exchange rates ruling at the dates of the cash flows. Frequently recurring cash flows of overseas subsidiaries which arise throughout the year are translated into Hong Kong dollars at the weighted average exchange rates for the year.

4. SEGMENT INFORMATION

Segment information is presented by way of two segment formats: (i) on a primary segment reporting basis, by business segment; and (ii) on a secondary segment reporting basis, by geographical segment.

Segment information is presented by way of the Group’s primary segment reporting basis, by business segment. In determining the Group’s geographical segments, revenues are attributed to the segments based on the location of the customers, and assets are attributed to the segments based on the location of the assets. No further geographical segment information is presented as over 90% of the Group’s revenue is derived from customers based in Hong Kong, and over 90% of the Group’s assets are located in Hong Kong.

The Group’s operating businesses are structured and managed separately, according to the nature of their operations and the products and services they provide. Each of the Group’s business segments represents a strategic business unit that offers products and services which are subject to risks and returns that are different from those of the other business segments. Summary details of the business segments are as follows:

• (a) the Chinese wet markets segment engages in the management and sub-licensing of Chinese wet markets;

• (b) the shopping centres and car parks segment engages in the management and sub-licensing of shopping centres and car parks;

• (c) the pharmaceutical segment engages in the production and sale of cough syrup and health care products;

• (d) the property investment segment invests in industrial and commercial premises and residential units for rental income;

• (e) the retail business segment engages in the retailing of pork; and

• (f) the corporate and others segment comprises the Group’s management service business. This segment also includes corporate income and expense items.

Intersegment sales and transfers are transacted with reference to the selling prices used for sales made to third parties at the then prevailing market prices.

−76 −

FINANCIAL INFORMATION ON THE GROUP

APPENDIX IV

Chinese wet Shopping centres Property Corporate and	markets and car parks Pharmaceutical investment Retail business others Eliminations Consolidated*	2004 2003 2004 2003 2004 2003 2004 2003 2004 2003 2004 2003 2004 2003 2004 2003	HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000	(Restated)	Segment revenue:	Sales to external customers 137,858 145,981 89,334 77,349 18,555 27,167 8,138 4,515 36,950 31,885 5,730 5,259 – – 296,565 292,156	Intersegment sales 3,189 3,921 967 873 – – 346 – – – 9,029 – (13,531) (4,794) – –	Other revenue 641 919 2,361 3,248 45 333 7,308 123 81 155 34,703 99,687 – – 45,139 104,465	Total 141,688 150,821 92,662 81,470 18,600 27,500 15,792 4,638 37,031 32,040 49,462 104,946 (13,531) (4,794) 341,704 396,621		Segment results 15,840 7,323 5,411 3,814 6,023 6,475 11,923 (4,265) 761 (2,363) 10,336 70,290 – 892 50,294 82,166		Unallocated expenses (7,396) (10,482)	Interest income 10,814 10,872	Profit from operating activities 53,712 82,556	Finance costs (2,041) (2,552)	Share of profits and losses of	associates (including	amortisation of goodwill) (17,963) (27,863)	Provision for impairment of	goodwill of an associate – (7,000)	Profit before tax 33,708 45,141	Tax (4,334) (3,361)	Profit before minority interests 29,374 41,780	Minority interests (89) (641)	Net profit from ordinary activities	attributable to shareholders 29,285 41,139

==> picture [4 x 6] intentionally omitted <==

−77 −

FINANCIAL INFORMATION ON THE GROUP

APPENDIX IV

Chinese wet Shopping centres Property Corporate and	markets and car parks Pharmaceutical investment Retail business others Eliminations Consolidated	2004 2003 2004 2003 2004 2003 2004 2003 2004 2003 2004 2003 2004 2003 2004 2003	HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000	62,601 59,323 40,460 34,113 – 7,918 264,457 166,870 3,484 3,218 647,885 547,615 (299,490) (227,215) 719,397 591,842	– – – – – – – – – – – – – – 136,602 187,454	– – – – – – – – – – – – – – 1,418 2,282	62,601 59,323 40,460 34,113 – 7,918 264,457 166,870 3,484 3,218 647,885 547,615 (299,490) (227,215) 857,417 781,578		(62,662) (57,747) (47,586) (52,924) – (5,994) (224,452) (160,778) (2,877) (3,678) (28,970) (24,466) 299,490 227,215 (67,057) (78,372)	– – – – – – – – – – – – – – (109,377) (79,394)	(62,662) (57,747) (47,586) (52,924) – (5,994) (224,452) (160,778) (2,877) (3,678) (28,970) (24,466) 299,490 227,215 (176,434) (157,766)			6,830 9,466 2,973 3,956 88 572 – – 134 116 2,570 890 – – 12,595 15,000		– – – – – 592 – – – – 6,246 355 – – 6,246 947	– – – – – 5 – – – – – – – – – 5	– 50 21 5 – – – 6,198 – – 8,462 17,783 – – 8,483 24,036	748 4,082 3,545 64 57 – 102,266 148,165 163 825 706 132 – – 107,485 153,268
				Segment assets	Interests in associates	Unallocated assets	Total assets		Segment liabilities	Unallocated liabilities	Total liabilities		Other segment information:	Depreciation	Amortisation:	Goodwill	Intangible assets	Other non-cash expenses	Capital expenditure

−78 −

FINANCIAL INFORMATION ON THE GROUP

APPENDIX IV

5. TURNOVER, REVENUE AND GAINS

Turnover represents management and sub-licensing fee income received and receivable; the invoiced value of goods sold, after allowances for returns and trade discounts; the invoiced value of services rendered; the gross rental income received and receivable from investment properties and proceeds from the disposal of property held for re-sale during the year.

An analysis of turnover, other revenue and gains is as follows:

Turnover Sub-licensing fee income Management income Sale of goods Rendering of services Gross rental income Sale of property held for re-sale Other revenue Interest income Interest income from investments Dividend income from listed securities Franchise income Others Gains Gain on disposal of convertible notes due from an associate Gain on disposal of investments, net Exchange gains, net Recognition of deferred gain on disposal of subsidiaries Other revenue and gains	Group 2004 2003 HK$’000 HK$’000 213,335 216,965 13,454 4,160 55,679 59,053 5,959 7,463 8,138 2,835 – 1,680 296,565 292,156	Group 2004 2003 HK$’000 HK$’000 213,335 216,965 13,454 4,160 55,679 59,053 5,959 7,463 8,138 2,835 – 1,680 296,565 292,156
		292,156
	8,428 2,386 128 – 4,653 15,595 17,883 109 1,564 688 20,244	9,007 1,865 93 35 8,201
		19,201
		– 200 4,070 944
		5,214
	35,839	24,415

−79 −

FINANCIAL INFORMATION ON THE GROUP

APPENDIX IV

6. PROFIT FROM OPERATING ACTIVITIES

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

Notes Amortisation of trademarks and patents Amortisation of goodwill of subsidiaries* 15 Auditors’ remuneration Cost of inventories sold Cost of services provided Depreciation 14 Deficit/(surplus) on revaluation of investment properties 14 Loss on disposal of an investment property Loss on disposal of other fixed assets Fixed assets written off Net holding loss/(gain) on investments Minimum lease payments under operating leases for land and buildings Provision for impairment of long term investments Provision for and write-off of bad and doubtful debts Staff costs (including directors’ remuneration (Note 8)): Wages and salaries Pension scheme contributions Total staff costs Amount released for onerous contracts 26 Gain on disposal of properties held for re-sale Net rental income	Group 2004 2003 HK$’000 HK$’000 – 5 6,246 947 785 768 30,235 21,924 208,935 200,093 12,595 15,000 (7,066) 6,210 15 – 164 – 21 1,061 (570) 570 121,176 141,953 1,641 637 6,821 5,158 56,104 58,030 2,114 2,030 58,218 60,060 (6,566) (6,878) – (493) (8,060) (2,794)	Group 2004 2003 HK$’000 HK$’000 – 5 6,246 947 785 768 30,235 21,924 208,935 200,093 12,595 15,000 (7,066) 6,210 15 – 164 – 21 1,061 (570) 570 121,176 141,953 1,641 637 6,821 5,158 56,104 58,030 2,114 2,030 58,218 60,060 (6,566) (6,878) – (493) (8,060) (2,794)
		60,060
		(6,878) (493) (2,794)

• The amortisation of trademarks and patents was included in “Selling and distribution costs” on the face of the consolidated profit and loss account.

** The amortisation of goodwill of subsidiaries is included in “Other operating expenses” on the face of the consolidated profit and loss account.

7. FINANCE COSTS

						Group
						2004	2003
						HK$’000	HK$’000
Interest	on	bank	loans	and	overdrafts	2,041	2,552

−80 −

FINANCIAL INFORMATION ON THE GROUP

APPENDIX IV

8. DIRECTORS’ REMUNERATION

Directors’ remuneration for the year, 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 2004 2003 HK$’000 HK$’000 – – 631 631 9,975 10,115 36 36 10,642 10,782	Group 2004 2003 HK$’000 HK$’000 – – 631 631 9,975 10,115 36 36 10,642 10,782
		10,782

The number of directors whose remuneration fell within the following bands is as follows:

Nil to HK$1,000,000 HK$1,500,001 to HK$2,000,000 HK$2,000,001 to HK$2,500,000 HK$3,500,001 to HK$4,000,000 HK$4,000,001 to HK$4,500,000	Number of 2004 3 – 1 1 1 6	directors 2003 3 1 – – 2
		6

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

9. FIVE HIGHEST PAID EMPLOYEES

The five highest paid employees during the year included three (2003: three) directors, details of whose remuneration are disclosed in note 8 above. Details of the remuneration of the remaining two (2003: two) non-director, highest paid employees for the year are as follows:

Salaries and allowances Pension scheme contributions	Group 2004 2003 HK$’000 HK$’000 1,567 2,889 37 209 1,604 3,098	Group 2004 2003 HK$’000 HK$’000 1,567 2,889 37 209 1,604 3,098
		3,098

−81 −

FINANCIAL INFORMATION ON THE GROUP

APPENDIX IV

9. FIVE HIGHEST PAID EMPLOYEES (Cont’d)

The number of non-director, highest paid employees whose remuneration fell within the following bands is as follows:

HK$500,001 to HK$1,000,000 HK$1,000,001 to HK$1,500,000 HK$1,500,001 to HK$2,000,000	Number of employees 2004 2003 1 – 1 – – 2 2 2	Number of employees 2004 2003 1 – 1 – – 2 2 2
		2

During the year, 1,100,000 share options of the Company were granted to the two non-director, highest paid employees in respect of their services to the Group, further details of which are set out in note 31 to the financial statements. No value in respect of the share options granted during the year has been charged to the profit and loss account, or is otherwise included in the above non-director, highest paid employees’ remuneration disclosures.

10. TAX

Hong Kong profits tax has been provided at the rate of 17.5% (2003: 16%) on the estimated assessable profits arising in Hong Kong during the year. The increased Hong Kong profits tax rate became effective from the year of assessment 2003/2004, and so is applicable to the assessable profits arising in Hong Kong for the whole of the year ended 31 March 2004.

Group: Current – Hong Kong Charge for the year Underprovision in the prior years Deferred (Note 29) Share of tax attributable to associates Total tax charge for the year	2004 HK$’000 2,796 213 809	2003 HK$’000 (Restated) 2,246 37 154
	3,818 516	2,437 924
	4,334	3,361

−82 −

FINANCIAL INFORMATION ON THE GROUP

APPENDIX IV

10. TAX (Cont’d)

A reconciliation of the tax expense applicable to profit before tax using the statutory rates for the countries in which the Company and its subsidiaries and associates are domiciled to the tax expense at the effective tax rates, and a reconciliation of the applicable rates (i.e. the statutory tax rates) to the effective tax rates, are as follows:

Group

Profit before tax Tax at the statutory tax rate Effect on opening deferred tax of increase in rate Adjustments in respect of current tax of previous periods Income not subject to tax Expenses not deductible for tax Tax losses utilised from previous periods Tax losses not recognised Tax charge at the Group’s effective rate	2004 HK$’000 % 33,708	2004 HK$’000 % 33,708	2003 HK$’000 % 45,141	2003 HK$’000 % 45,141
	5,899 – 213 (20,968) 20,358 (4,967) 3,799	17.5 – 0.6 (62.2) 60.4 (14.7) 11.3	7,223 (203) 37 (17,572) 12,456 (1,056) 2,476	16.0 (0.5) 0.1 (38.9) 27.6 (2.4) 5.5
	4,334	12.9	3,361	7.4

11. NET PROFIT FROM ORDINARY ACTIVITIES ATTRIBUTABLE TO SHAREHOLDERS

The net profit from ordinary activities attributable to shareholders for the year ended 31 March 2004 dealt with in the financial statements of the Company was HK$6,166,000 (2003: HK$108,216,000).

12. DIVIDENDS

Interim – HK3 cents (2003: Nil) per ordinary share Proposed final – HK7 cents (2003: Nil) per ordinary share	2004 HK$’000 3,544 10,032 13,576	2003 HK$’000 – –
		–

The proposed final dividend for the year is subject to the approval of the Company’s shareholders at the forthcoming annual general meeting.

13. EARNINGS PER SHARE

The calculation of basic earnings per share is based on the net profit attributable to shareholders for the year of HK$29,285,000 (2003 (restated): HK$41,139,000), and the weighted average of 121,746,522 (2003: 115,739,546) ordinary shares in issue during the year, as adjusted to reflect the capital reorganisation during the year.

The calculation of diluted earnings per share is based on the net profit attributable to shareholders for the year of HK$29,285,000. The weighted average number of ordinary shares used in the calculation is the 121,746,522 ordinary shares in issue during the year, as used in the basic earnings per share calculation and the weighted average of 6,807,774 ordinary shares assumed to have been issued at no consideration on the deemed exercise of all the share options during the year.

The diluted earnings per share for the year ended 31 March 2003 has not been shown as the share options and warrants outstanding had no dilutive effect on the basic earnings per share.

−83 −

FINANCIAL INFORMATION ON THE GROUP

APPENDIX IV

14. FIXED ASSETS

Group

Cost or valuation: At beginning of year Additions Acquisition of subsidiaries (Note 33(c)) Disposals and write-off Disposal of subsidiaries (Note 33(d)) Transfer Surplus on revaluation At 31 March 2004 Accumulated depreciation: At beginning of year Provided during the year Disposals and write-off Disposal of subsidiaries (Note 33(d)) At 31 March 2004 Net book value: At 31 March 2004 At 31 March 2003 Analysis of cost or valuation: At cost At 31 March 2004 valuation	Investment properties Leasehold improvements Machineries HK$’000 HK$’000 HK$’000 128,790 40,905 4,522 95,807 801 3,370 – – 96 (1,940) (762) (2,361) – – (111) 25,981 12,340 – 11,762 – – 260,400 53,284 5,516	Investment properties Leasehold improvements Machineries HK$’000 HK$’000 HK$’000 128,790 40,905 4,522 95,807 801 3,370 – – 96 (1,940) (762) (2,361) – – (111) 25,981 12,340 – 11,762 – – 260,400 53,284 5,516	Investment properties Leasehold improvements Machineries HK$’000 HK$’000 HK$’000 128,790 40,905 4,522 95,807 801 3,370 – – 96 (1,940) (762) (2,361) – – (111) 25,981 12,340 – 11,762 – – 260,400 53,284 5,516	Furniture, fixtures and office equipment Motor vehicles HK$’000 HK$’000 55,512 699 629 22 2 59 (6,740) (22) (623) – 479 – – – 49,259 758	Furniture, fixtures and office equipment Motor vehicles HK$’000 HK$’000 55,512 699 629 22 2 59 (6,740) (22) (623) – 479 – – – 49,259 758	Computer equipment Construction in progress Total HK$’000 HK$’000 HK$’000 1,167 32,559 264,154 599 6,257 107,485 1 – 158 (16) – (11,841 – – (734 16 (38,816) – – – 11,762 1,767 – 370,984	Computer equipment Construction in progress Total HK$’000 HK$’000 HK$’000 1,167 32,559 264,154 599 6,257 107,485 1 – 158 (16) – (11,841 – – (734 16 (38,816) – – – 11,762 1,767 – 370,984	Computer equipment Construction in progress Total HK$’000 HK$’000 HK$’000 1,167 32,559 264,154 599 6,257 107,485 1 – 158 (16) – (11,841 – – (734 16 (38,816) – – – 11,762 1,767 – 370,984
				49,259	758		–	370,984
	– – – –	24,148 6,393 (726) –	3,209 1,029 (2,145) (21)	46,830 463 4,814 113 (6,621) (2) (389) –		869 246 (5) –	– – – –	75,519 12,595 (9,499 (410
	– 260,400 128,790	29,815 23,469 16,757	2,072 3,444 1,313	44,634	574	1,110 657 298	–	78,205
				4,625	184		–	292,779
				8,682	236		32,559	188,635
	– 260,400	53,284 –	5,516 –	49,259 –	758 –	1,767 –	– –	110,584 260,400
	260,400	53,284	5,516	49,259	758	1,767	–	370,984

−84 −

FINANCIAL INFORMATION ON THE GROUP

APPENDIX IV

14. FIXED ASSETS (Cont’d)

Company

Furniture, fixtures and office equipment HK$’000 Cost: At 1 April 2003 and 31 March 2004 15 Accumulated depreciation: At beginning of year 7 Provided during the year 3 At 31 March 2004 10 Net book value: At 31 March 2004 5 At 31 March 2003 8	Computer equipment HK$’000 66 66 – 66 – –	Total HK$’000 81
		73 3
		76
		5
		8

The net book value of the fixed assets of the Group held under finance leases included in the total amount of furniture, fixtures and office equipment at 31 March 2004 amounted to HK$Nil (2003: HK$112,800).

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

The Group’s investment properties were revalued on 31 March 2004 by Vigers Appraisal & Consulting Limited, independent professionally qualified valuers, on an open market, existing use basis. An aggregate amount of revaluation surplus of HK$11,762,000 resulting from the revaluation has been credited to the investment property revaluation reserve for HK$4,696,000 and the profit and loss account for HK$7,066,000. The investment properties are leased to a director of the Company, third parties and associates under operating leases, further details of which are included in notes 35 and 38 to the financial statements.

At 31 March 2004, the Group’s investment properties with an aggregate value of HK$260,400,000 and certain rental income generated therefrom were pledged to secure the Group’s general banking facilities, of which approximately HK$140,735,000 had been utilised as at 31 March 2004.

Further particulars of the Group’s investment properties are included on page 91 to 92.

−85 −

FINANCIAL INFORMATION ON THE GROUP

APPENDIX IV

15. GOODWILL

The amounts of the goodwill capitalised as an asset in the consolidated balance sheet, arising from the acquisition of subsidiaries and associates, are as follows:

Group

		Goodwill arising
	Goodwill arising	on acquisition of
	on acquisition of	associates
	subsidiaries	(Note 17)
	HK$’000	HK$’000
Cost:
At beginning of year	144,839	41,785
Acquisitions during the year (Note 33(c))	2,191	17,204
Disposal of subsidiaries (Note 33(d))	(139,934)	–
Disposal of interests in an associate	–	(23,333)
At 31 March 2004	7,096	35,656
Accumulated amortisation and impairment:
At beginning of year	(9,231)	(19,498)
Amortisation provided during the year	(6,246)	(7,656)
Disposal of subsidiaries (Note 33(d))	13,840	–
Disposal of interests in an associate	–	3,155
At 31 March 2004	(1,637)	23,999
Net book value:
At 31 March 2004	5,459	11,657
At 31 March 2003	135,608	22,287

As detailed in note 3 to the financial statements, on the adoption of SSAP 30 in 2002, the Group applied the transitional provision of SSAP 30 that permitted goodwill and negative goodwill in respect of acquisitions which occurred prior to the adoption of the SSAP, to remain eliminated against consolidated reserves or credited to the capital reserve, respectively.

The amounts of goodwill recorded at cost in consolidated reserves, arising from the acquisition of subsidiaries prior to the adoption of SSAP 30 in 2002 were HK$20,829,000, as at 1 April 2003. During the year, upon the acquisition of additional interest in an associate, which became a subsidiary thereafter, the entire goodwill recorded at cost in consolidated reserves as at 1 April 2003, arising from the acquisition of an associate prior to the adoption of SSAP 30 in 2002 of HK$926,000 was reclassified as goodwill arising on acquisition of subsidiaries. Accordingly, the goodwill remaining in consolidated reserve as at 31 March 2004 were HK$21,755,000.

The amount of negative goodwill recorded at cost in consolidated reserves as at 31 March 2003 and 2004, arising from the acquisition of a subsidiary prior to the adoption of SSAP 30 in 2002, was HK$8,112,000.

−86 −

FINANCIAL INFORMATION ON THE GROUP

APPENDIX IV

16. INTERESTS IN SUBSIDIARIES

Unlisted shares, at cost Due from subsidiaries (Note (i)) Loans to subsidiaries (Note (ii)) Due to subsidiaries (Note (i)) Less: Provisions for impairment	Company 2004 2003 HK$’000 HK$’000 71,000 71,000 655,101 712,203 83,461 81,133 (33,481) (38,057) 776,081 826,279 (419,449) (419,449) 356,632 406,830

Notes:

• (i) The amounts are unsecured and have no fixed terms of repayment. Except for a balance of HK$7,000,000 advanced to a subsidiary which bears interest at 2% per annum, the remaining balances are interest-free.

• (ii) The amounts are unsecured and have no fixed terms of repayment. Except for a loan to a subsidiary of HK$17,217,000 which bears interest at 3% per annum, the remaining balances are interest-free.

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

			Percentage	Percentage	Percentage
	Place of	Nominal value of	**of **	equity
	incorporation/	issued ordinary	**attributable **		to
Name	operations	share capital	the Company			Principal activities
			Direct	Indirect
			%		%
Advance Century	Hong Kong	Ordinary	–		100	Investment holding
Limited		HK$2
Charter Golden Design	Hong Kong	Ordinary	–		100	Property development
& Contracting		HK$2
Limited
Century Fortune Hong	Hong Kong	Ordinary	–		100	Property investment
Kong Limited		HK$2
China Coin	Hong Kong	Ordinary	–		100	Property investment
Management Limited		HK$1,000
Conway Consultants	Hong Kong	Ordinary	–		70	Provision of medical
Limited		HK$1,400,000				consultation
		Non-voting				services
		preference (Note 2)
		HK$600,000

−87 −

FINANCIAL INFORMATION ON THE GROUP

APPENDIX IV

16. INTERESTS IN SUBSIDIARIES (Cont’d)

			Percentage	Percentage	Percentage
	Place of	Nominal value of	**of **	equity
	incorporation/	issued ordinary	**attributable **		to
Name	operations	share capital	the Company			Principal activities
			Direct	Indirect
			%		%
Denox Management	Hong Kong	Ordinary	–		100	Management and sub-
Limited		HK$2				letting of properties
Fenny Planning &	Hong Kong	Ordinary	–		100	Promotion of Chinese
Project Management		HK$100				wet markets
Limited
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$2,800,100				shopping centres
Grand Quality	Hong Kong	Ordinary	–		100	Property investment
Development Limited		HK$2
Greatest Wealth Limited	Hong Kong	Ordinary	–		100	Management of pork
		HK$100				stalls and butcher
						shops
Join China Investment	Hong Kong	Ordinary	–		100	Investment holding
Limited		HK$2
Lead Fortune Limited	Hong Kong	Ordinary HK$1,000	–		100	Property investment
Lica Parking Company	Hong Kong	Ordinary	–		99	Management and sub-
Limited		HK$25,500,000				licensing of car parks
Majorluck Limited	Hong Kong	Ordinary	–		100	Management and sub-
		HK$10,000				licensing of Chinese
						wet markets
Parking Lot	Hong Kong	Ordinary	–		100	Management and sub-
Management Limited		HK$700,002				licensing of car parks
Rich Time Strategy	British Virgin	Ordinary	–		100	Investment holding
Limited	Islands/ Hong	US$1
	Kong

−88 −

FINANCIAL INFORMATION ON THE GROUP

APPENDIX IV

16. INTERESTS IN SUBSIDIARIES (Cont’d)

			Percentage	Percentage	Percentage
	Place of	Nominal value of	**of **	equity
	incorporation/	issued ordinary	**attributable **		to
Name	operations	share capital	the Company			Principal activities
			Direct	Indirect
			%		%
Richly Gold Ltd.	Hong Kong	Ordinary	–		100	Investment holding
		HK$2
Tse’s Waxing &	Hong Kong	Ordinary	–		100	Provision of cleaning
Cleaning Company		HK$2				services
Limited (“Tse’s”)
WOB Investments	Hong Kong	Ordinary	–		100	Property investment
Limited		HK$2
Wang On Commercial	British Virgin	Ordinary	–		100	Investment holding
Management Limited	Islands/ Hong	US$2
	Kong
WOD Investments	Hong Kong	Ordinary	–		100	Property investment
Limited (“WOD”)		HK$1,000,000
WEH Investments	Hong Kong	Ordinary HK$477	–		100	Property investment
Limited		Non-voting deferred
		(Note 3)
		HK$1,262,523
Wang On Enterprises	British Virgin	Ordinary	100		–	Investment holding
(BVI) Limited	Islands/ Hong	US$1
	Kong
Wang On Majorluck	Hong Kong	Ordinary HK$1,000	–		100	Management and sub-
Limited						licensing of Chinese
						wet markets
Wang On Shopping	Hong Kong	Ordinary	–		100	Management and sub-
Centre Management		HK$2				licensing of shopping
Limited						centres
Willing Dental	Hong Kong	Ordinary HK$100	–		100	Provision of dental
Consultants Limited						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 of the Group. To give details of other subsidiaries would, in the opinion of the directors, result in particulars of excessive length.

−89 −

FINANCIAL INFORMATION ON THE GROUP

APPENDIX IV

16. INTERESTS IN SUBSIDIARIES (Cont’d)

• (2) The non-voting preference shares carry no voting rights but the holders have the right to receive an annual cash dividend equivalent to 30% of the audited net profit after tax. On the winding-up of the company, the holders rank in priority to the ordinary shareholders provided that the assets of the company available for distribution to its members shall be applied first towards arrears or accruals of the dividend.

• (3) The non-voting deferred shares carry no voting rights or rights to dividends. On the winding-up of the companies, the holders of non-voting deferred shares have a right to repayment in proportion to the amounts of all paid-up ordinary and deferred shares after the first HK$1,000,000,000,000 thereof has been distributed among the holders of the ordinary shares.

17. INTERESTS IN ASSOCIATES

Share of net assets Deferred gain Goodwill on acquisition (Note 15) Due from associates (Note (i)) Due to associates (Note (i)) Loans to associates (Note (ii)) Convertible notes due from an associate (Note (iii)) Less: Provisions for impairment	Group 2004 2003 HK$’000 HK$’000 69,713 32,259 (8,785) (16,058) 11,657 22,287	Group 2004 2003 HK$’000 HK$’000 69,713 32,259 (8,785) (16,058) 11,657 22,287	Company 2004 2003 HK$’000 HK$’000 – – – – – –	Company 2004 2003 HK$’000 HK$’000 – – – – – –
	72,585 539 (19) 7,000 56,500 136,605 (3)	38,488 7,874 – 80,495 64,000 190,857 (3,403)	– 219 – – – 219 –	– 219 – – –
				219 –
	136,602	187,454	219	219

Notes:

• (i) The amounts with associates are unsecured and interest-free. Except for an amount due from an associate of HK$319,000 which was repaid on 29 June 2004, the remaining balance has no fixed terms of repayment.

• (ii) A loan to an associate of HK$7,000,000 as at 31 March 2004 is unsecured, bears interest at 2% per annum and was repaid on 29 June 2004.

• (iii) The convertible notes of HK$36,500,000 carry interest at 3.8% per annum with a right to convert into ordinary shares of Wai Yuen Tong Medicine Holdings Limited (“WYTH”) at an initial conversion price of HK$0.01 per share during the period from 9 July 2002 to 8 July 2005. The initial conversion price of HK$0.01 per share was increased to HK$1 per share as a result of the capital reorganisation of WYTH effective on 20 October 2003.

The convertible notes of HK$20,000,000 carry interest at 3% per annum with a right to convert into ordinary shares of WYTH at an initial conversion price of HK$0.7 per share during the period from 31 March 2004 to 30 March 2006.

All the convertible notes were repaid on 29 June 2004.

−90 −

FINANCIAL INFORMATION ON THE GROUP

APPENDIX IV

17. INTERESTS IN ASSOCIATES (Cont’d)

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

					Percentage of	Percentage of
				Place of	ownership interest
			Business	incorporation/	**attributable **	to
Name			structure	operations	the Group		Principal activities
					2004	2003
					(Note 2)
WYTH*	_(Note _	3)	Corporate	Hong Kong	19.62	30.87	Production and sale
							of Chinese and western
							medicine, and health
							care products

Notes:

• (1) The above table lists the associate of the Group which, in the opinion of the directors, principally affected the results for the year or formed a substantial portion of the net assets of the Group. To give details of other associates would, in the opinion of the directors, result in particulars of excessive length.

• (2) During the year, the interest in WYTH was diluted as a result of placements of shares and the exercise of convertible notes and share options in the investee company.

• (3) The financial statements of the company are not audited by Ernst & Young Hong Kong or other Ernst & Young International member firms.

• Listed on The Stock Exchange of Hong Kong Limited.

Extracts of the financial information of the Group’s principal associate are as follows:

Profit and loss account Turnover Loss for the year Balance sheet Non-current assets Current assets Current liabilities Non-current liabilities Minority interests Net assets	WYTH 2004 2003 HK$’000 HK$’000 349,225 259,824 (30,006) (28,946) 343,339 216,510 126,017 103,175 (44,784) (99,736) (70,667) (133,821) (212) (94) 353,693 86,034	WYTH 2004 2003 HK$’000 HK$’000 349,225 259,824 (30,006) (28,946) 343,339 216,510 126,017 103,175 (44,784) (99,736) (70,667) (133,821) (212) (94) 353,693 86,034
	343,339 126,017 (44,784) (70,667) (212)	216,510 103,175 (99,736 (133,821 (94
	353,693

−91 −

FINANCIAL INFORMATION ON THE GROUP

APPENDIX IV

18. INVESTMENTS

(a) Long term investments

Held-to-maturity securities: Hong Kong unlisted dated debt securities, at amortised cost Investment securities: Hong Kong unlisted certificate of deposit, at cost Hong Kong unlisted unit trusts, at cost Hong Kong unlisted equity shares, at cost Less: Provisions for impairment	Group 2004 2003 HK$’000 HK$’000 15,534 –	Group 2004 2003 HK$’000 HK$’000 15,534 –	Company 2004 2003 HK$’000 HK$’000 15,534 –	Company 2004 2003 HK$’000 HK$’000 15,534 –
	– 4,010 30,098 34,108 (14,799) 19,309	11,700 3,000 13,158 27,858 (13,158) 14,700	– – – – – –	11,700 – –
				11,700 –
				11,700
	34,843	14,700	15,534	11,700

(b) Short term investments

Held-to-maturity securities: Hong Kong unlisted unit trusts, at cost Investment security: Hong Kong unlisted certificate of deposit, at cost Other investments: Listed equity securities, at fair value Hong Kong Elsewhere	Group 2004 2003 HK$’000 HK$’000 19,403 – 11,650 – 5,920 3,344 455 – 37,428 3,344	Company 2004 2003 HK$’000 HK$’000 – – 11,650 – – – 455 – 12,105 –	Company 2004 2003 HK$’000 HK$’000 – – 11,650 – – – 455 – 12,105 –
			–

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FINANCIAL INFORMATION ON THE GROUP

APPENDIX IV

19. INVENTORIES

Raw materials Packing materials Finished goods	Group 2004 2003 HK$’000 HK$’000 – 944 – 987 73 632 73 2,563	Group 2004 2003 HK$’000 HK$’000 – 944 – 987 73 632 73 2,563
		2,563

None of the inventories included in the above was carried at net realisable value as at the balance sheet date (2003: Nil).

20. TRADE RECEIVABLES

An aged analysis of the trade receivables as at the balance sheet date, based on invoice date, is as follows:

Within 90 days 91 days to 180 days Over 180 days Less: Provision for doubtful debts	Group 2004 2003 HK$’000 Percentage HK$’000 Percentage 5,297 94 7,546 89 253 4 720 8 86 2 251 3 5,636 100 8,517 100 (85) (214)	Group 2004 2003 HK$’000 Percentage HK$’000 Percentage 5,297 94 7,546 89 253 4 720 8 86 2 251 3 5,636 100 8,517 100 (85) (214)	Group 2004 2003 HK$’000 Percentage HK$’000 Percentage 5,297 94 7,546 89 253 4 720 8 86 2 251 3 5,636 100 8,517 100 (85) (214)	Group 2004 2003 HK$’000 Percentage HK$’000 Percentage 5,297 94 7,546 89 253 4 720 8 86 2 251 3 5,636 100 8,517 100 (85) (214)	Group 2004 2003 HK$’000 Percentage HK$’000 Percentage 5,297 94 7,546 89 253 4 720 8 86 2 251 3 5,636 100 8,517 100 (85) (214)
					100
		)		(214)
	5,551			8,303

The Group’s businesses generally do not grant any credit to customers, except for the Group’s pharmaceutical business which provides credit terms of 30 to 180 days.

21. PREPAYMENTS, DEPOSITS AND OTHER RECEIVABLES

Prepayments Deposits Other receivables	Group 2004 2003 HK$’000 HK$’000 2,978 2,939 6,269 6,176 4,725 3,019 13,972 12,134	Company 2004 2003 HK$’000 HK$’000 814 509 47 – 227 78 1,088 587	Company 2004 2003 HK$’000 HK$’000 814 509 47 – 227 78 1,088 587
			587

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FINANCIAL INFORMATION ON THE GROUP

APPENDIX IV

22. CASH AND CASH EQUIVALENTS

Cash and bank balances Time deposits	Group 2004 2003 HK$’000 HK$’000 25,931 40,947 263,434 173,244 289,365 214,191	Company 2004 2003 HK$’000 HK$’000 2,189 22,261 236,200 153,223 238,389 175,484	Company 2004 2003 HK$’000 HK$’000 2,189 22,261 236,200 153,223 238,389 175,484
			175,484

23. TRADE PAYABLES

An aged analysis of the trade payables as at the balance sheet date, based on invoice date, is as follows:

Within 90 days Over 180 days	Group 2004 2003 HK$’000 HK$’000 188 1,140 – 460 188 1,600	Group 2004 2003 HK$’000 HK$’000 188 1,140 – 460 188 1,600
		1,600

24. OTHER PAYABLES AND ACCRUALS

Other payables Accruals	Group 2004 2003 HK$’000 HK$’000 4,010 7,508 8,987 9,211 12,997 16,719	Company 2004 2003 HK$’000 HK$’000 110 110 131 266 241 376	Company 2004 2003 HK$’000 HK$’000 110 110 131 266 241 376
			376

25. INTEREST-BEARING BANK AND OTHER BORROWINGS

Notes Current portion of bank loans and overdrafts 27 Current portion of finance lease payable 28	Group 2004 2003 HK$’000 HK$’000 24,575 25,124 – 58 24,575 25,182	Group 2004 2003 HK$’000 HK$’000 24,575 25,124 – 58 24,575 25,182
		25,182

−94 −

FINANCIAL INFORMATION ON THE GROUP

APPENDIX IV

26. PROVISIONS FOR ONEROUS CONTRACTS

At beginning of year Write back of provision Amount utilised during the year At 31 March Portion classified as current liabilities Long term portion INTEREST-BEARING BANK LOANS Bank loans: Secured (Note) Unsecured 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 2004 2003 HK$’000 HK$’000 20,139 27,017 (420) (313) (6,146) (6,565) 13,573 20,139 (9,112) (7,709) 4,461 12,430 Group 2004 2003 HK$’000 HK$’000 104,648 60,193 – 15,767 104,648 75,960 24,575 25,124 9,734 11,355 24,890 29,061 45,449 10,420 104,648 75,960 (24,575) (25,124) 80,073 50,836	Group 2004 2003 HK$’000 HK$’000 20,139 27,017 (420) (313) (6,146) (6,565) 13,573 20,139 (9,112) (7,709) 4,461 12,430 Group 2004 2003 HK$’000 HK$’000 104,648 60,193 – 15,767 104,648 75,960 24,575 25,124 9,734 11,355 24,890 29,061 45,449 10,420 104,648 75,960 (24,575) (25,124) 80,073 50,836
	24,575 9,734 24,890 45,449 104,648 (24,575)	25,124 11,355 29,061 10,420
		75,960
		(25,124
	80,073

27. INTEREST-BEARING BANK LOANS

Note: Certain of the Group’s bank loans are secured by the Group’s investment properties (note 14).

−95 −

FINANCIAL INFORMATION ON THE GROUP

APPENDIX IV

28. FINANCE LEASE PAYABLE

The Group leased certain of its office equipment. These leases were classified as finance leases and have been terminated during the year.

At the balance sheet date, the total future minimum lease payments under finance leases and their present values were as follows:

Group

Amounts repayable: Within one year In the second year Total minimum finance lease payments Future finance charges Total net finance lease payables Portion classified as current liabilities (Note 25) Long term portion	Minimum lease payments 2004 2003 HK$’000 HK$’000 – 58 – 52 – 110 – – – 110 – (58) – 52	Present value of minimum lease payments 2004 2003 HK$’000 HK$’000 – 58 – 52 – 110	Present value of minimum lease payments 2004 2003 HK$’000 HK$’000 – 58 – 52 – 110
			110

−96 −

FINANCIAL INFORMATION ON THE GROUP

APPENDIX IV

29. DEFERRED TAX

The movement in deferred tax liabilities and assets during the year is as follows:

Deferred tax assets

Group

At 1 April 2002 As previously reported Prior year adjustment: SSAP 12 – restatement of deferred tax As restated Disposal of subsidiaries (Note 33(d)) Deferred tax credited/(charged) to the profit and loss account during the year, including a credit of HK$203,000 due to the effect of a change in tax rate (Note 10) Deferred tax assets/(liabilities) at 31 March 2003	Accelerated tax depreciation HK$’000 (983) 725	Provisions for onerous contracts HK$’000 – 1,500	2003 Revaluation of properties Losses available for offset against future taxable profit HK$’000 HK$’000 – – – 921	2003 Revaluation of properties Losses available for offset against future taxable profit HK$’000 HK$’000 – – – 921	Others HK$’000 – –	Total HK$’000 (983) 3,146
	(258) 218 (1,724)	1,500 – –	– – 78	921 – 1,472	– – 20	2,163 218 (154)
	(1,764)	1,500	78	2,393	20	2,227

−97 −

FINANCIAL INFORMATION ON THE GROUP

APPENDIX IV

29. DEFERRED TAX (Cont’d)

Group

At 1 April 2003 As previously reported Prior year adjustment: SSAP 12 – restatement of deferred tax As restated Deferred tax credited/(charged) to the profit and loss account during the year (Note 10) Deferred tax assets/(liabilities) at 31 March 2004	Accelerated tax depreciation HK$’000 (765) (999)	Provisions for onerous contracts HK$’000 – 1,500	2004 Revaluation of properties Losses available for offset against future taxable profit HK$’000 HK$’000 – – 78 2,393	2004 Revaluation of properties Losses available for offset against future taxable profit HK$’000 HK$’000 – – 78 2,393	Others HK$’000 – 20	Total HK$’000 (765) 2,992
	(1,764) (962)	1,500 (254)	78 (59)	2,393 476	20 (10)	2,227 (809)
	(2,726)	1,246	19	2,869	10	1,418

The Group has tax losses arising in Hong Kong of HK$121,230,000 (2003: HK$127,361,000) that are available indefinitely for offsetting against future taxable profits of the companies in which the losses arose. Deferred tax assets have not been recognised in respect of these losses as they have arisen in subsidiaries that have been loss-making for some time.

At 31 March 2004, there is no significant unrecognised deferred tax liability (2003: Nil) for taxes that would be payable on the unremitted earnings of certain of the Group’s subsidiaries or associates as the Group has no liability to additional tax should such amounts be remitted.

There are no income tax consequences attaching to the payment of dividends by the Company to its shareholders.

SSAP 12 (revised) was adopted during the year, as further explained in note 2 to the financial statements. This change in accounting policy has resulted in an increase in the Group’s deferred tax assets as at 31 March 2004 and 2003 by HK$2,183,000 and HK$2,992,000, respectively. As a consequence, the consolidated net profits attributable to shareholders for the years ended 31 March 2004 and 2003 have been decreased by HK$809,000 and HK$154,000, respectively, and the consolidated retained profits at 1 April 2003 and 2002 have been increased by HK$2,992,000 and HK$3,146,000, respectively, as detailed in the consolidated statement of changes in equity.

−98 −

FINANCIAL INFORMATION ON THE GROUP

APPENDIX IV

30. SHARE CAPITAL

Shares

Authorised: 2,000,000,000 ordinary shares of HK$0.10 each Issued and fully paid: 143,320,366 (2003: 118,143,655) ordinary shares of HK$0.10 each	2004 HK$’000 200,000 14,332	2003 HK$’000 200,000
		11,815

During the year, the movements in the Company’s share capital were as follows:

• (a) On 19 December 2003, the Group declared an interim dividend of HK$0.03 per share, with a scrip alternative, to its shareholders whose names appear on the register of members on 9 January 2004. Accordingly, 1,576,711 ordinary shares of HK$0.10 each were issued at an issue price of HK$0.9558 each to the shareholders who elected to receive dividend, wholly or partly, by way of allotment of shares on 3 February 2004, resulting in the transfer of HK$157,000 and HK$1,350,000 from retained profits to issued capital and share premium account, respectively.

• (b) On 9 February 2004, a top-up placement of 23,600,000 ordinary shares of HK$0.10 each was made at an issue price of HK$1.10 each. The net proceeds were used for the purchase of investment properties.

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

At 1 April 2002 Placement of shares Capital reorganisation Share issue expenses At 31 March and 1 April 2003 Interim 2004 dividend (a) Placement of shares (b) Share issue expenses At 31 March 2004	Number of shares in issue 9,864,365,596 1,950,000,000 (11,696,221,941) –	Issued share capital HK$’000 98,644 19,500 (106,329) –	Share premium account HK$’000 331,114 19,500 – (2,392)	Total HK$’000 429,758 39,000 (106,329) (2,392)
	118,143,655 1,576,711 23,600,000 –	11,815 157 2,360 –	348,222 1,350 23,600 (810)	360,037 1,507 25,960 (810)
	143,320,366	14,332	372,362	386,694

Share options

Details of the Company’s share option schemes are set out in note 31 to the financial statements.

−99 −

FINANCIAL INFORMATION ON THE GROUP

APPENDIX IV

30. SHARE CAPITAL (Cont’d)

Warrants

On 3 July 2002, 2,000,000,000 warrants were issued at HK$0.001 each for a total proceed, before expenses, of HK$2,000,000. The warrant-holders were entitled to subscribe for one ordinary share of the Company of HK$0.01 each at a subscription price of HK$0.017 per share (subject to adjustment) at any time during the period from the date of issue to 31 July 2003 (the “Expiry Date”). As a result of a capital reorganisation effective on 4 October 2002 (the “Capital Reorganisation”), the number of warrants was reduced from 2,000,000,000 to 20,000,000. The subscription price was increased from HK$0.017 each to HK$1.7 each. No warrant was exercised up to the Expiry Date. Accordingly, the warrant reserve as at 31 March 2003 of approximately HK$1,735,000 was transferred to retained profits on the Expiry Date.

31. SHARE OPTION SCHEMES

The Company operates share option schemes for the purpose of providing incentives and rewards to eligible participants who contribute to the success of the Group’s operations. On 6 February 1995, the Company approved a share option scheme (the “Old Scheme”) under which the directors of the Company may, at their discretion, invite any executive directors or full-time employees of the Group to take up share options to subscribe for shares of the Company at any time during the 10 years from the date of approval of the Old Scheme. The Old Scheme became effective upon the listing of the Company’s shares on The Stock Exchange of Hong Kong Limited (the “Stock Exchange”) on 28 February 1995.

In compliance with the amended Chapter 17 of the Listing Rules, the Old Scheme was terminated on 3 May 2002 and a new share option scheme (the “New Scheme”) was adopted pursuant to an ordinary resolution passed at a special general meeting of the Company on 3 May 2002. As a result, the Company will no longer grant any further share options under the Old Scheme. However, all share options granted prior to the termination of the Old Scheme will remain in full force and effect. As at 31 March 2004, there were 2,628,000 (adjusted for the Capital Reorganisation) share options granted under the Old Scheme which remained outstanding as at the same date.

Under the New Scheme, eligible participants include any director or proposed director (whether executive or non-executive, including independent non-executive director), employee or proposed employee (whether full-time or part-time), secondee, any holder of securities issued by any member of the Group, any business or joint venture partner, contractor, agent or representative, any person or entity that provides research, development or other technology support or advisory, consultancy, professional or other services to the Group, any supplier, producer or licensor of goods or services to the Group, any customer, licencee (including any sub-licencee) or distributor of goods or services of the Group, or any landlord or tenant (including any sub-tenant) of the Group or any substantial shareholder or company controlled by a substantial shareholder, or any company controlled by one or more persons belonging to any of the above classes of participants. The New Scheme became effective on 3 May 2002 and, unless otherwise terminated earlier by shareholders in a general meeting, will remain in force for a period of 10 years from that date.

Pursuant to the New Scheme, the maximum number of share options that may be granted under the New Scheme and any other share option schemes of the Company is an amount equivalent, upon their exercise, not in aggregate exceed 10% of the issued share capital of the Company from time to time, excluding any shares issued on the exercise of share options. As at 31 March 2004, the number of shares issuable under the share options granted under the Old Scheme and the New Scheme were 2,628,000 and 9,800,000, respectively, which in aggregate represented approximately 8.7% of the Company’s shares in issue as at that date.

The maximum number of shares issuable under share options to each eligible participant (except for a substantial shareholder or an independent non-executive director or any of their respective associates) under the New Scheme within any 12-month period is limited to 1% of the shares of the Company in issue at any time. Any further grant of share options in excess of such limit must be separately approved by shareholders with such eligible participant and his associates abstaining from voting.

−100 −

FINANCIAL INFORMATION ON THE GROUP

APPENDIX IV

31. SHARE OPTION SCHEMES (Cont’d)

Share options granted to a director, chief executive or substantial shareholder of the Company (or any of their respective associates) must be approved by the independent non-executive directors (excluding any independent non-executive director who is the grantee of the option). Where any grant of share options to a substantial shareholder or an independent non-executive director (or any of their respective associates) will result in the total number of shares issued and to be issued upon exercise of share options already granted and to be granted to such person under the New Scheme and any other share option schemes of the Company (including options exercised, cancelled and outstanding) in any 12-month period up to and including the date of grant representing in aggregate over 0.1% of the shares in issue, and having an aggregate value, based on the closing price of the Company’s shares at each date of grant, in excess of HK$5 million, such further grant of share options is required to be approved by shareholders in a general meeting in accordance with the Listing Rules. Any change in the terms of a share option granted to a substantial shareholder or an independent non-executive director (or any of their respective associates) is also required to be approved by shareholders.

An offer for the grant of share options must be accepted within 30 days from the date on which such offer was made. The amount payable by the grantee of a share option to the Company on acceptance of the offer of the grant is HK$1.00.

The option price per share payable on the exercise of an option is determined by the directors provided that it shall be at least the higher of (i) the closing price of the shares as stated in the daily quotation sheet issued by the Stock Exchange at the date of offer of grant (which is deemed to be the date of grant if the offer for the grant of a share option is accepted by the eligible person), which must be a business day; and (ii) the average closing price of the shares as stated in the daily quotation sheets issued by the Stock Exchange for the five business days immediately preceding the date of offer of grant, provided that the option price per share shall in no event be less than the nominal amount of one share.

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

The following share options were outstanding under the two share option schemes during the year:

Name or category of participant Directors Tang Ching Ho Yau Yuk Yin Other employees In aggregate (under the old scheme) In aggregate (under the new scheme)	Number of share options At 1 April 2003 Granted during the year At 31 March 2004 Date of grant of share options Exercise period of share options Exercise price of share options HK$ 654,000 – 654,000 6-3-2001 6-3-2001 to 5-2-2005 2.17 654,000 – 654,000 6-3-2001 6-3-2001 to 5-2-2005 2.17 1,320,000 – 1,320,000 6-3-2001 6-3-2001 to 5-2-2005 2.17 – 9,800,000 9,800,000 * 2,628,000 9,800,000 12,428,000

• These represented options granted to employees with exercise prices ranging from HK$0.968 to HK$1.070 per share and an exercise period starting on the earliest on 7 October 2003 and ending on the latest on 8 January 2014. The weighted average price of the Company’s share at exercise date of options is HK$1.01.

At the balance sheet date, the Company had 2,628,000 (2003: 2,628,000) and 9,800,000 (2003: Nil) share options outstanding under the Old Scheme and the New Scheme, respectively. The exercise in full of the share options would, under the present capital structure of the Company, result in the issue of 12,428,000 (2003: 2,628,000) additional ordinary shares of the Company and additional share capital of HK$1,242,800 (2003: HK$262,800) and share premium of HK$14,323,760 (2003: HK$5,440,000) (before issue expenses).

−101 −

FINANCIAL INFORMATION ON THE GROUP

APPENDIX IV

32. RESERVES

(a) Group

The amounts of the Group’s reserves and the movements therein for the current and prior years are presented in the consolidated statement of changes in equity on pages 28 to 30 of the financial statements.

Certain amounts of goodwill and negative goodwill arising on the acquisition of subsidiaries and associates in prior years remain eliminated against consolidated retained profits and credited to the capital reserve, respectively, as explained in note 15 to the financial statements.

(b) Company

Notes At 1 April 2002 Placement of shares 30 Capital Reorganisation 30 Warrant issue 30 Warrant issue expenses Share issue expenses 30 Net profit for the year At 31 March and 1 April 2003 Placement of shares 30 Expiry of warrant 30 Share issue expenses 30 Net profit for the year Interim 2004 dividend 12, 30 Proposed final 2004 dividend 12 At 31 March 2004	Share premium account Contributed surplus (Note) HK$’000 HK$’000 331,114 15,035 19,500 – – 106,329 – – – – (2,392) – – –	Share premium account Contributed surplus (Note) HK$’000 HK$’000 331,114 15,035 19,500 – – 106,329 – – – – (2,392) – – –	Warrant reserve HK$’000 – – – 2,000 (265) – –	Retained profits HK$’000 3,100 – – – – – 108,216	Proposed final dividend HK$’000 – – – – – – –	Total HK$’000 349,249 19,500 106,329 2,000 (265) (2,392) 108,216 582,637 23,600 – (810) 6,166 (2,194) – 609,399
	348,222 23,600 – (810) – 1,350 –	121,364 – – – – – –	1,735 – (1,735) – – – –	111,316 – 1,735 – 6,166 (3,544) (10,032)	– – – – – – 10,032	582,637 23,600 – (810 6,166 (2,194 –
	372,362	121,364	–	105,641	10,032

Note: 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. The movements during the year ended 31 March 2003 represent the difference between the nominal value of the share capital before and after the Group’s Capital Reorganisation. Under the Companies Act 1981 of Bermuda (as amended), the contributed surplus is distributable to shareholders under certain circumstances.

−102 −

FINANCIAL INFORMATION ON THE GROUP

APPENDIX IV

33. NOTES TO THE CONSOLIDATED CASH FLOW STATEMENT

(a) Major non-cash transactions

During the year, the Group entered into a sale and purchase agreement to dispose of its entire interests in certain subsidiaries of the Group to WYTH at a consideration of HK$130 million. The consideration was satisfied by the issuance of approximately 5,972 million ordinary shares in WYTH at HK$0.01 per share and convertible notes issued by WYTH of approximately HK$70 million. Further details are set out in note (d) below.

During the year, the Group entered into a sale and purchase agreement to dispose of its entire interests in an associate to WYTH at a consideration of HK$20 million. The consideration was satisfied by the issuance of convertible notes by WYTH of approximately HK$20 million. A gain on disposal of approximately HK$13 million was resulted upon the completion of this disposal.

(b) Acquisition of a subsidiary

Net assets acquired: Fixed assets Inventories Trade receivables, prepayments, deposits and other receivables Cash and cash equivalents Trade payables, other payables and accruals Tax payable Goodwill on acquisition Satisfied by: Cash	2004 HK$’000 – – – – – –	2003 HK$’000 495 23 2,075 997 (2,201) (124) 1,265 4,805 6,070 6,070
	– –	1,265 4,805
	– –

An analysis of the net outflow of cash and cash equivalents in respect of the acquisition of a subsidiary is as follows:

Cash consideration Cash and cash equivalents acquired Net outflow of cash and cash equivalents in respect of acquisition of a subsidiary	2004 HK$’000 – – –	2003 HK$’000 (6,070) 997 (5,073)

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FINANCIAL INFORMATION ON THE GROUP

APPENDIX IV

33. NOTES TO THE CONSOLIDATED CASH FLOW STATEMENT (Cont’d)

(c) Acquisition of additional shares in associates which became subsidiaries as a result thereof

Notes Net assets acquired: Fixed assets 14 Inventories Trade receivables, prepayments, deposits and other receivables Tax recoverable Cash and cash equivalents Trade payables, other payables and accruals Interest-bearing bank borrowings Tax payable Goodwill on acquisition 15 Satisfied by: Cash Disposal of interests in an associate	2004 HK$’000 158 – 827 12 844 (677) – –	2003 HK$’000 374 2,496 2,865 – 2,185 (3,660) (1,600) (54) 2,606 71,001 73,607 1,885 71,722 73,607
	1,164 2,191	2,606 71,001
	3,355
	2,773 582	1,885 71,722
	3,355

An analysis of the net inflow/(outflow) of cash and cash equivalents in respect of the acquisition of additional shares in associates which became subsidiaries as a result thereof is as follows:

Cash consideration Expenses incurred Cash and cash equivalents acquired Net inflow/(outflow) of cash and cash equivalents in respect of acquisition of additional shares in subsidiaries	2004 HK$’000 (2,750) (23) 844 (1,929)	2003 HK$’000 (1,480) (405) 2,185 300

On 15 July 2003, the Group acquired a further 50% interest in Tse’s, a then 50%-owned associate of the Group at a cash consideration of HK$2,750,000.

Tse’s had no significant impact on the Group’s consolidated turnover and profit after tax for the year after it was accounted for as a subsidiary of the Group.

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APPENDIX IV

33. NOTES TO THE CONSOLIDATED CASH FLOW STATEMENT (Cont’d)

(d) Disposal of subsidiaries

Notes Net assets disposed of: Fixed assets 14 Intangible assets Interests in associates Inventories Trade receivable Deposits and other receivables Cash and cash equivalents Trade and other payables Interest-bearing bank and other borrowings Tax payable Deferred income Deferred tax liabilities 29 Minority interests Goodwill released on disposal 15 Gain/(loss) on disposal of subsidiaries Deferred gain/(loss) on disposal of subsidiaries Satisfied by: Interests in an associate Convertible notes of an associate Expenses incurred	2004 HK$’000 324 – – 3,377 9,194 647 3,691 (6,208) (4,722) (628) – – (12)	2003 HK$’000 12,516 228 5,593 11,779 14,619 5,424 3,553 (16,856) – (2,159) (722) (218) (8,660) 25,097 75,104 17,031 45,183 162,415 103,089 64,000 (4,674) 162,415
	5,663 126,094 (1,020) (1,012)	25,097 75,104 17,031 45,183
	129,725
	59,938 70,000 (213)	103,089 64,000 (4,674
	129,725

An analysis of the net outflow of cash and cash equivalents in respect of the disposal of subsidiaries as a result thereof is as follows:

Expenses incurred Cash and cash equivalents disposed of Net outflow of cash and cash equivalents in respect of the disposal of subsidiaries	2004 HK$’000 (213) (3,691) (3,904)	2003 HK$’000 (4,674) (3,553) (8,227)

On 20 August 2003, the Group disposed of its entire interests in Biomore Investments Limited and Bio Chapter Limited (collectively referred to as the “Disposed Subsidiaries”), two then wholly-owned subsidiaries of the Company, to WYTH for an aggregate consideration of HK$129,725,000. The consideration was satisfied by the issuance of approximately 5,972 million ordinary shares in WYTH at HK$0.01 per share and convertible notes issued by WYTH of HK$70 million. The convertible notes are interest-bearing at 2% per annum, payable semi-annually in arrears, with the maturity date falling on the last day of a period of three years from the issue date.

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FINANCIAL INFORMATION ON THE GROUP

APPENDIX IV

33. NOTES TO THE CONSOLIDATED CASH FLOW STATEMENT (Cont’d)

(d) Disposal of subsidiaries (Cont’d)

The Disposed Subsidiaries and their subsidiaries contributed HK$18,556,000 to the Group’s turnover and HK$5,404,000 to the consolidated profit after tax and before minority interests for the year ended 31 March 2004.

34. CONTINGENT LIABILITIES

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

(a) Guarantees in respect of performance bonds given to third parties Guarantees given in lieu of utility and property rental deposits Bills discounted with recourse Guarantees given to financial institutions in connection with facilities granted to subsidiaries	Group 2004 2003 HK$’000 HK$’000 – 15,222 – 17,567 – 1,628 – – – 34,417	Company 2004 2003 HK$’000 HK$’000 – – – – – – 243,650 194,555 243,650 194,555	Company 2004 2003 HK$’000 HK$’000 – – – – – – 243,650 194,555 243,650 194,555
			194,555

• (b) A corporate guarantee in the amount of approximately HK$Nil (2003: HK$464,000) was given by the Company to a landlord in respect of the full rental payments of the office premises during the tenancy period.

A corporate guarantee in the amount of HK$5,000,000 (2003: Nil) was given by the Company to a bank as a security of general banking facilities of HK$5,000,000 granted to a subsidiary of an associate of the Group. As at 31 March 2004, as aggregate amount of HK$1,486,000 was utilised.

The Group has a contingent liability in respect of possible future long service payments to employees under the Hong Kong Employment Ordinance, with a maximum possible amount of HK$1,558,000 as at 31 March 2004, as further explained under the heading “Employee benefits” in note 3 to the financial statements. The contingent liability has arisen because, at the balance sheet date, a number of current employees had achieved the required number of years of service to the Group in order to be eligible for long service payments under the Employment Ordinance if their employment is terminated under certain circumstances. A provision has not been recognised in respect of such possible payments, as it is not considered probable that the situation will result in a material future outflow of resources from the Group.

35. OPERATING LEASE ARRANGEMENTS

(a) As lessor

The Group leases its investment properties (note 14 to the financial statements) and sub-leases Chinese wet markets, shopping centres and car parks under operating lease arrangements, with leases negotiated for terms ranging from three months to six years. The terms of the leases generally also require the tenants to pay security deposits and provide for periodic rental adjustments according to the then prevailing market conditions.

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FINANCIAL INFORMATION ON THE GROUP

APPENDIX IV

35. OPERATING LEASE ARRANGEMENTS (Cont’d)

(a) As lessor (Cont’d)

At the balance sheet date, the Group had total future minimum lease receivables under non-cancellable operating leases with its tenants falling due as follows:

Within one year In the second to fifth years, inclusive	Group 2004 2003 HK$’000 HK$’000 70,810 108,730 30,319 57,853 101,129 166,583	Group 2004 2003 HK$’000 HK$’000 70,810 108,730 30,319 57,853 101,129 166,583
		166,583

(b) As lessee

The Group leases Chinese wet markets, shopping centres, car parks and certain of its office properties under operating lease arrangements. Leases are negotiated for terms ranging from three months to six years.

At the balance sheet date, the Group had total future minimum lease payments under non-cancellable operating leases falling due as follows:

Within one year In the second to fifth years, inclusive After five years	Group 2004 2003 HK$’000 HK$’000 109,754 130,353 114,171 288,040 378 7,321 224,303 425,714	Group 2004 2003 HK$’000 HK$’000 109,754 130,353 114,171 288,040 378 7,321 224,303 425,714
		425,714

36. COMMITMENTS

In addition to the operating lease commitments detailed in note 35(b) above, the Group had the following commitments at the balance sheet date:

							Group
							2004	2003
							HK$’000	HK$’000
Capital	commitments	contracted,	but	not	provided	for	146,561	7,460

At the balance sheet date, the Company had no significant commitments.

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FINANCIAL INFORMATION ON THE GROUP

APPENDIX IV

37. POST BALANCE SHEET EVENTS

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

• (a) On 19 March 2004, the Group entered into a provisional sale and purchase agreement with an independent third party to acquire an investment property at a consideration of HK$56 million, of which, HK$10 million had been paid as a deposit by the Group prior to the balance sheet date. The outstanding balance of HK$46 million was included in the amount of capital commitments contracted, but not provided for, in note 36 to the financial statements. The acquisition was completed on 18 May 2004.

• (b) On 24 March 2004, the Group entered into a conditional sale and purchase agreement with independent third parties to acquire Swing International Limited (“Swing”) at a cash consideration of HK$10 million. The major asset of Swing was a deposit paid for the acquisition of an investment property of approximately HK$5.63 million, representing 10% of the total consideration of approximately HK$56.3 million. The remaining consideration was fully paid on the completion date of the acquisition on 30 April 2004.

• (c) On 7 April 2004, the Group entered into a sale and purchase agreement with an independent third party to dispose of an investment property situated in Hong Kong for a cash consideration of HK$33.8 million. The transaction was completed on 1 June 2004 and resulted in a gain of approximately HK$4.4 million.

• (d) On 26 March 2004, the Group entered into a provisional sale and purchase agreement with an independent third party to acquire a residential leasehold land situated in Shatin for residential development purpose at a consideration of HK$103.8 million, of which, HK$5 million had been paid as a deposit by the Group prior to the balance sheet date. The outstanding balance of HK$98.8 million was included in the amount of capital commitments contracted, but not provided for, in note 36 to the financial statements. The directors expect the acquisition will be completed on 20 July 2004.

• (e) On 8 April 2004, the Group entered into a conditional sale and purchase agreement with a subsidiary of WYTH (the “Purchaser”) to dispose of its entire interest in a wholly-owned subsidiary of the Group, WOD, which owns the Wai Yuen Tong Medicine Building, to the Purchaser at an initial consideration of approximately HK$64.5 million. The transaction was completed on 30 June 2004.

• (f) On 20 April 2004, WYTH announced that it proposed to issue approximately 1,658 million rights shares at a price of HK$0.16 per rights share on the basis of three rights shares for every WYTH share held on 2 June 2004 (“Rights Issue”). In addition, WYTH also proposed to issue approximately 553 million bonus shares on the basis of one bonus share for every three fully paid rights shares (“Bonus Issue”). The Group had given a conditional irrevocable undertaking to WYTH to subscribe or procure the subscribing of all its entitlement pursuant to the Rights Issue (i.e. a total of 433.8 million of shares, including both rights shares and bonus shares, to be issued to the Group) and to make or procure an excess application for 210 million rights shares under the Rights Issues. Accordingly, upon the completion of Rights Issue and Bonus Issue on 28 June 2004, 535.3 million rights shares and 178.5 million bonus shares in the capital of WYTH were allotted to the Group, which increased the Group’s interest in WYTH’s enlarged share capital to 29.75%.

• (g) On 5 July 2004, the Group entered into a sale and purchase agreement with an independent third party to acquire investment properties, together with two existing tenancies with an aggregated monthly rental charge of HK$77,000, both expiring on 31 May 2006, at a consideration of HK$19.8 million.

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FINANCIAL INFORMATION ON THE GROUP

APPENDIX IV

38. RELATED PARTY TRANSACTIONS

In addition to the transaction as detailed in note 34(b) to the financial statements, the Group had the following material transactions with related parties during the year:

		2004	2003
	Notes	HK$’000	HK$’000
Rental income received from Mr. Tang Ching Ho	(a)	583	686
Proceeds from disposal of companies to an associate	(b)	149,725	167,089
Income from associates:	(c)
– Management fee		960	960
– Rental		5,116	679
– Interest income		6,957	6,900
Cleaning expenses paid to an associate	(c)	1,716	6,084
Sales to a related party	(c)	–	247

Notes:

• (a) An investment property of the Group was leased to Mr. Tang Ching Ho for a period of one year from 20 December 2002 at an agreed monthly rental of HK$50,000. The lease was renewed and extended for a further one year at an agreed monthly rental of HK$45,000. The rentals were determined with reference to the prevailing market rates.

• (b) The entire interests of the Disposed Subsidiaries and China Field Enterprises Limited, a then 49%-owned associate of the Group, were disposed of to WYTH at considerations of HK$129.7 million and HK$20 million, respectively. The considerations were based on terms mutually agreed between the Group and WYTH. Further details of the disposal of the Disposed Subsidiaries are disclosed in note 33(d) to the financial statements.

The Company agreed to severally warrant, guarantee and undertake to WYTH that the audited consolidated net profit after tax of Luxembourg Medicine Company Limited (“LMC”), a company 99.79%-owned by the Disposed Subsidiaries, for the year ended 31 March 2004 shall not be less than HK$11.5 million. In the event that the profit is less than the guaranteed profit, the Company will pay to WYTH a prescribed cash sum. The audited consolidated net profit after tax of LMC for the year ended 31 March 2004 was HK$12 million.

• (c) The transactions were based on terms mutually agreed between the Group and the related parties.

Details of the Group’s balances with associates as at the balance sheet date are disclosed in note 17 to the financial statements.

39. COMPARATIVE AMOUNTS

As further explained in note 2 to the financial statements, due to the adoption of a revised SSAP during the current year, the accounting treatment and presentation of certain items and balances in the financial statements have been revised to comply with the new requirements. Accordingly, certain comparative amounts have been reclassified to conform with the current year’s presentation.

40. APPROVAL OF THE FINANCIAL STATEMENTS

The financial statements were approved and authorised for issue by the board of directors on 9 July 2004.

−109 −

APPENDIX V FINANCIAL INFORMATION ON THE ENLARGED GROUP

UNAUDITED PRO FORMA STATEMENT OF ASSETS AND LIABILITIES OF THE ENLARGED GROUP

AFTER COMPLETION OF THE DR ACQUISITION AGREEMENT REGARDING ON THE ACQUISITION OF THE 29 UNITS OF THE KENNEDY TOWN PROPERTIES ONLY

Introduction to unaudited pro forma statement of assets and liabilities of the Enlarged Group

The accompanying unaudited pro forma statement of assets and liabilities of the Enlarged Group, has been prepared from the audited consolidated balance sheet of the Group as at 31 March 2004 giving effect to the proposed acquisition of the entire issue capital and shareholder’s loan of Dragon Richly (the “Transaction”), as if the Transaction has been completed on 15 October 2004, after giving effect to the pro forma adjustments described in the accompany notes. A narrative description of the pro forma adjustments of the Transaction that are (i) directly attributable to the Transaction; (ii) expected to have a continuing impact on the Enlarged Group and (iii) factually supportable, are summarised in the accompany notes.

The accompanying unaudited pro forma statement of assets and liabilities of the Enlarged Group has not given effect to the completion of (i) the post balance sheet events as disclosed in the Company 2004 annual report; (ii) the acquisition of four residential units as announced on 8 September 2004; (iii) the proposed disposal of property as announced on 5 October 2004 and (iv) the proposed acquisition of the entire issued capital and shareholder’s loan of Poly Talent and Profit Million as announced on 13 October 2004.

The unaudited pro forma statement of assets and liabilities of the Enlarged Group is prepared for illustrative purpose only and is based on a number of assumptions, estimates, uncertainties and currently available information. As a result of these assumptions, estimates and uncertainties, the accompanying unaudited pro forma statement of assets and liabilities of the Enlarged Group does not purport to describe the actual financial position of the Enlarged Group that would have been attained had the Transaction been completed on 15 October 2004. Further, the accompanying unaudited pro forma statement of assets and liabilities of the Enlarged Group do not purport to predict the Enlarged Group’s future financial position and may not give a true picture of the Enlarged Group’s financial position or results.

The unaudited pro forma statement of assets and liabilities of the Enlarged Group should read in conjunction with the extract of the annual report of the Company as set out in Appendix IV, the accountants’ report on Dragon Richly as set out in Appendix I and other financial information included elsewhere in this circular.

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FINANCIAL INFORMATION ON THE ENLARGED GROUP

APPENDIX V

Unaudited pro forma statement of assets and liabilities of the Enlarged Group As at 15 October 2004

NON-CURRENT ASSETS Fixed assets Goodwill Interests in associates Long term investments Loans receivable Rental deposits paid Other deposits Deferred tax assets CURRENT ASSETS Short term investments Inventories Trade receivables Prepayments, deposits and other receivables Cash and cash equivalents CURRENT LIABILITIES Trade payables Other payables and accruals Shareholder’s loan Deposits received and receipts in advance Interest-bearing bank and other borrowings Provisions for onerous contracts Tax payable NET CURRENT ASSETS/ (LIABILITIES) TOTAL ASSETS LESS CURRENT LIABILITIES	The Group as at 31 March 2004 HK$’000 (audited) 292,779 5,459 136,602 34,843 1,741 7,556 30,630 1,418	Dragon Richly Adjustments HK$’000 HK$’000 Notes (audited) – 77,550 (2) & (3) – 5 (4) – – – – – – – – – – – –	Dragon Richly Adjustments HK$’000 HK$’000 Notes (audited) – 77,550 (2) & (3) – 5 (4) – – – – – – – – – – – –	Pro forma Financial Information HK$’000 370,329 5,464 136,602 34,843 1,741 7,556 30,630 1,418
	511,028 37,428 73 5,551 13,972 289,365 346,389 188 12,997 – 40,299 24,575 9,112 4,729	– – – – 7,815 – 7,815 – 5 7,815 – – – –	77,555 – – – (7,815) (1) (77,550) (2) & (3) (85,365) – – (7,815) (1) – – – –	588,583 37,428 73 5,551 13,972 211,815
				268,839 188 13,002 – 40,299 24,575 9,112 4,729
	91,900 254,489 765,517	7,820 (5) (5)	(7,815) (77,550) 5	91,905 176,934 765,517

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FINANCIAL INFORMATION ON THE ENLARGED GROUP

APPENDIX V

NON-CURRENT LIABILITIES Interest-bearing bank loans Provisions for onerous contracts MINORITY INTERESTS CAPITAL AND RESERVES/ (DEFICIENCY IN SHAREHOLDERS’ EQUITY) Issued capital Reserves	The Group as at 31 March 2004 HK$’000 80,073 4,461 84,534 401 680,582	Dragon Richly Adjustments HK$’000 HK$’000 Notes – – – – – – – – (5) 5	Dragon Richly Adjustments HK$’000 HK$’000 Notes – – – – – – – – (5) 5	Pro forma Financial Information HK$’000 80,073 4,461
				84,534 401
				680,582
	14,332 666,250	– (5)	– 5 (4)	14,332 666,250
	680,582	(5)	5	680,582

Notes to unaudited pro forma statement of assets and liabilities of the Enlarged Group

• (1) Following the completion of the acquisition of Dragon Richly and completion of the acquisition of the properties, the assets and liabilities of Dragon Richly will be accounted for in the consolidated financial statements of the Group at their fair value under purchase method of accounting. The pro forma adjustment reflects elimination of the acquisition of the shareholder’s loan of approximately HK$7,815,000 of Dragon Richly as at 15 October 2004.

• (2) The pro forma adjustment reflects the cash consideration of HK$720,001 which was paid by the Group on the signing of the DR Acquisition Agreement and further deposits of HK$7,095,000 was paid by the Group upon request by Mr. Tang in accordance with Kennedy Town Provisional Agreements. The consideration and deposits was financed by internal funding.

• (3) The pro forma adjustment reflects the balance consideration of HK$69,735,000 which will be paid by the Group on the completion date of the acquisition of the 29 units of Kennedy Town Properties.

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FINANCIAL INFORMATION ON THE ENLARGED GROUP

APPENDIX V

• (4) The pro forma adjustment represents total goodwill of HK$5,371 arising on the acquisition of Dragon Richly, which represents the difference of the consideration of HK$1 for acquiring the entire issued share capital and the net liabilities of Dragon Richly of HK$5,370 prior to the Acquisition.

• (5) The unaudited pro forma statement of the Enlarged Group has not taken into account the effect of the disposal of the whole block of 4-storey pre-war commercial and residential building situated at No. 32 Argyle Street, Kowloon, Hong Kong by WOB Investments Limited, a wholly owned subsidiary of the Company, to an independent third party at a consideration of HK$73.8 million pursuant to a provisional agreement between the relevant parties on 30 September 2004. Such disposal is subject to the approval of the shareholders of the Company at the special general meeting to be convened on 12 November 2004. Details of such disposal were set out in the Company’s announcement on 5 October 2004 and the circular dated 27 October 2004.

−113 −

APPENDIX V FINANCIAL INFORMATION ON THE ENLARGED GROUP

AFTER COMPLETION OF THE PT/PM ACQUISITION AGREEMENT ONLY:

Introduction to unaudited pro forma statement of assets and liabilities of the Enlarged Group

The accompanying unaudited pro forma statement of assets and liabilities of the Enlarged Group, has been prepared from the audited consolidated balance sheet of the Group as at 31 March 2004 giving effect to the proposed acquisition of the entire issued capital and shareholder’s loan of each of Poly Talent and Profit Million (the “Transactions”), as if these Transactions have been completed on 15 October 2004, after giving effect to the pro forma adjustments described in the accompany notes. A narrative description of the pro forma adjustments of the Transactions that are (i) directly attributable to the Transactions; (ii) expected to have a continuing impact on the Enlarged Group and (iii) factually supportable, are summarised in the accompany notes.

The accompanying unaudited pro forma statement of assets and liabilities of the Enlarged Group has not given effect to the completion of (i) the post balance sheet events as disclosed in the Company 2004 annual report; (ii) the acquisition of four residential units as announced on 8 September 2004; (iii) the proposed disposal of property as announced on 5 October 2004 and (iv) the proposed acquisition of the entire issued capital and shareholder’s loan of Dragon Richly as announced on 30 September 2004.

The unaudited pro forma statement of assets and liabilities of the Enlarged Group is prepared for illustrative purpose only and is based on a number of assumptions, estimates, uncertainties and currently available information. As a result of these assumptions, estimates and uncertainties, the accompanying unaudited pro forma statement of assets and liabilities of the Enlarged Group does not purport to describe the actual financial position of the Enlarged Group that would have been attained had the Transactions been completed on 30 September 2004. Further, the accompanying unaudited pro forma statement of assets and liabilities of the Enlarged Group do not purport to predict the Enlarged Group’s future financial position and may not give a true picture of the Enlarged Group’s financial position or results.

The unaudited pro forma statement of assets and liabilities of the Enlarged Group should read in conjunction with the extract of the annual report of the Company as set out in Appendix IV, the accountants’ reports on Poly Talent and Profit Million as set out in Appendix II and Appendix III respectively and other financial information included elsewhere in this circular.

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FINANCIAL INFORMATION ON THE ENLARGED GROUP

APPENDIX V

Unaudited pro forma statement of assets and liabilities of of the Enlarged Group

As at 15 October 2004

NON-CURRENT ASSETS Fixed assets Goodwill Interests in associates Long term investments Loans receivable Rental deposits paid Other deposits Deferred tax assets CURRENT ASSETS Short term investments Inventories Trade receivables Prepayments, deposits and other receivables Cash and cash equivalents CURRENT LIABILITIES Trade payables Other payables and accruals Shareholder’s loan Deposits received and receipts in advance Interest-bearing bank and other borrowings Provisions for onerous contracts Tax payable NET CURRENT ASSETS/(LIABILITIES) TOTAL ASSETS LESS CURRENT LIABILITIES NON-CURRENT LIABILITIES Interest-bearing bank loans Provisions for onerous contracts MINORITY INTERESTS	The Group as at 31 March 2004 HK$’000 (audited) 292,779 5,459 136,602 34,843 1,741 7,556 30,630 1,418	Poly Talent HK$’000 (audited) – – – – – – – –	Profit Million HK$’000 (audited) – – – – – – – –	Adjustments HK$’000 Notes 68,330 (2) & (3) 10 (4) – – – – – –	Pro forma Financial Information HK$’000 361,109 5,469 136,602 34,843 1,741 7,556 30,630 1,418
	511,028 37,428 73 5,551 13,972 289,365 346,389 188 12,997 – 40,299 24,575 9,112 4,729 91,900 254,489 765,517 80,073 4,461 84,534 401	– – – – 1,800 – 1,800 – 5 1,800 – – – – 1,805 (5) (5) – – – –	– – – – 300 – 300 – 5 300 – – – – 305 (5) (5) – – – –	68,340 – – – (2,100) (1) (68,330) (2) & (3) (70,430) – – (2,100) (1) – – – – (2,100) (68,330) 10 – – – –	579,368 37,428 73 5,551 13,972 221,035
					278,059 188 13,007 – 40,299 24,575 9,112 4,729
					91,910 186,149 765,517 80,073 4,461
					84,534 401
	680,582	(5)	(5)	10	680,582

−115 −

FINANCIAL INFORMATION ON THE ENLARGED GROUP

APPENDIX V

CAPITAL AND RESERVES/(DEFICIENCY IN SHAREHOLDERS’ EQUITY) Issued capital Reserves	The Group as at 31 March 2004 HK$’000 (audited) 14,332 666,250 680,582	Poly Talent HK$’000 (audited) – (5) (5)	Profit Million HK$’000 (audited) – (5) (5)	Adjustments HK$’000 Notes – 10 (4) 10	Pro forma Financial Information HK$’000 14,332 666,250
					680,582

Notes to unaudited pro forma statement of assets and liabilities of the Enlarged Group

• (1) Following the completion of the acquisition of Poly Talent and Profit Million and completion of the acquisition of the properties, the assets and liabilities of Poly Talent and Profit Million will be accounted for in the consolidated financial statements of the Group at their fair value under purchase method of accounting. The pro forma adjustment reflects elimination of the acquisition of the shareholder’s loan of approximately HK$1,800,000 and HK$300,000 of Poly Talent and Profit Million, respectively, as at 15 October 2004.

• (2) The pro forma adjustment reflects the cash consideration of HK$1,800,001 and HK$300,001 which was paid by the Group on the signing of the PT/PM Acquisition Agreement. The consideration will be financed by internal funding.

• (3) The pro forma adjustment reflects the balance consideration of HK$60,000,000 and HK$6,230,000 which will be paid by the Group on the completion date of the acquisition of the Yuen Long Property A and the Yuen Long Property B, respectively.

• (4) The pro forma adjustment represents total goodwill of HK$10,734 arising on acquisition of Poly Talent and Profit Million, which represents the difference of the total consideration HK$2 for acquiring the entire issued share capital and the net liabilities of Poly Talent and Profit Million of HK$5,366 and HK$5,366, respectively, prior to the Acquisition.

• (5) The unaudited pro forma statement of the Enlarged Group has not taken into account the effect of the disposal of the whole block of 4-storey pre-war commercial and residential building situated at No. 32 Argyle Street, Kowloon, Hong Kong by WOB Investments Limited, a wholly owned subsidiary of the Company, to an independent third party at a consideration of HK$73.8 million pursuant to a provisional agreement between the relevant parties on 30 September 2004. Such disposal is subject to the approval of the shareholders of the Company at the special general meeting to be convened on 12 November 2004. Details of such disposal were set out in the Company’s announcement on 5 October 2004 and the circular dated 27 October 2004.

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APPENDIX V FINANCIAL INFORMATION ON THE ENLARGED GROUP

AFTER COMPLETION OF THE DR ACQUISITION AGREEMENT AND THE PT/PM ACQUISITION AGREEMENT:

Introduction to unaudited pro forma statement of assets and liabilities of the Enlarged Group

The accompanying unaudited pro forma statement of assets and liabilities of the Enlarged Group, has been prepared from the audited consolidated balance sheet of the Group as at 31 March, 2004 giving effect to the proposed acquisition of the entire issued capital and shareholder’s loan of each of Dragon Richly, Poly Talent and Profit Million (the “Transactions”), as if these Transactions have been completed on 15 October 2004, after giving effect to the pro forma adjustments described in the accompany notes. A narrative description of the pro forma adjustments of the Transactions that are (i) directly attributable to the Transcations; (ii) expected to have a continuing impact on the Enlarged Group and (iii) factually supportable, are summarized in the accompany notes.

The accompanying unaudited pro forma statement of assets and liabilities of the Enlarged Group has not given effect to the completion of (i) the post balance sheet events as disclosed in the Company 2004 annual report and (ii) the acquisition of four residential units as announced on 8 September 2004 and (iii) the proposed disposal of property as announced on 5 October 2004.

The unaudited pro forma statement of assets and liabilities of the Enlarged Group is prepared for illustrative purpose only and is based on a number of assumptions, estimates, uncertainties and currently available information. As a result of these assumptions, estimates and uncertainties, the accompanying unaudited pro forma statement of assets and liabilities of the Enlarged Group does not purport to describe the actual financial position of the Enlarged Group that would have been attained had the Transactions been completed on 30 September 2004. Further, the accompanying unaudited pro forma statement of assets and liabilities of the Enlarged Group do not purport to predict the Enlarged Group’s future financial position and may not give a true picture of the Enlarged Group’s financial position or results.

The unaudited pro forma statement of assets and liabilities of the Enlarged Group should read in conjunction with the extract of the annual report of the Company as set out in Appendix IV, the accountants’ reports Dragon Richly, Poly Talent and Profit Million as set out in Appendix I, Appendix II and Appendix III respectively and other financial information included elsewhere in this circular.

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FINANCIAL INFORMATION ON THE ENLARGED GROUP

APPENDIX V

Unaudited pro forma statement of assets and liabilities of of the Enlarged Group

As at 15 October 2004

NON-CURRENT ASSETS Fixed assets Goodwill Interests in associates Long term investments Loans receivable Rental deposits paid Other deposits Deferred tax assets CURRENT ASSETS Short term investments Inventories Trade receivables Prepayments, deposits and other receivables Cash and cash equivalents CURRENT LIABILITIES Trade payables Other payables and accruals Shareholder’s loan Deposits received and receipts in advance Interest-bearing bank and other borrowings Provisions for onerous contracts Tax payable NET CURRENT ASSETS/ (LIABILITIES) TOTAL ASSETS LESS CURRENT LIABILITIES NON-CURRENT LIABILITIES Interest-bearing bank loans Provisions for onerous contracts MINORITY INTERESTS	The Group as at 31 March 2004 HK$’000 (audited) 292,779 5,459 136,602 34,843 1,741 7,556 30,630 1,418	Dragon Richly HK$’000 (audited) – – – – – – – –	Poly Talent HK$’000 (audited) – – – – – – – –	Profit Million HK$’000 (audited) – – – – – – – –	Adjustments HK$’000 Notes 145,880 (2) & (3) 15 (4) – – – – – –	Pro forma Financial Information HK$’000 438,659 5,474 136,602 34,843 1,741 7,556 30,630 1,418
	511,028 37,428 73 5,551 13,972 289,365 346,389 188 12,997 – 40,299 24,575 9,112 4,729 91,900 254,489 765,517 80,073 4,461 84,534 401	– – – – 7,815 – 7,815 – 5 7,815 – – – – 7,820 (5) (5) – – – –	– – – – 1,800 – 1,800 – 5 1,800 – – – – 1,805 (5) (5) – – – –	– – – – 300 – 300 – 5 300 – – – – 305 (5) (5) – – – –	145,895 – – – (9,915) (1) (145,880) (2) & (3) (155,795) – – (9,915) (1) – – – – (9,915) (145,880) 15 – – – –	656,923 37,428 73 5,551 13,972 143,485
						200,509 188 13,012 – 40,299 24,575 9,112 4,729
						91,915 108,594 765,517 80,073 4,461
						84,534 401
	680,582	(5)	(5)	(5)	15	680,582

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FINANCIAL INFORMATION ON THE ENLARGED GROUP

APPENDIX V

CAPITAL AND RESERVES/ (DEFICIENCY IN SHAREHOLDERS’ EQUITY) Issued capital Reserves	The Group as at 31 March 2004 HK$’000 (audited) 14,332 666,250 680,582	Dragon Richly HK$’000 (audited) – (5) (5)	Poly Talent HK$’000 (audited) – (5) (5)	Profit Million HK$’000 (audited) – (5) (5)	Adjustments HK$’000 Notes – 15 (4) 15	Pro forma Financial Information HK$’000 14,332 666,250
						680,582

Notes to unaudited pro forma statement of assets and liabilities of the Enlarged Group

• (1) Following the completion of the acquisition of Dragon Richly, Poly Talent, Profit Million and completion of the acquisition of the properties, the assets and liabilities of Dragon Richly, Poly Talent and Profit Million will be accounted for in the consolidated financial statements of the Group at their fair value under purchase method of accounting. The pro forma adjustment reflects elimination of the acquisition of the shareholder’s loan of approximately HK$7,815,000, HK$1,800,000 and HK$300,000 of Dragon Richly, Poly Talent and Profit Million, respectively, as at 15 October 2004.

• (2) The pro forma adjustment reflects the cash consideration of HK$720,001, HK$1,800,001 and HK$300,001 which were paid by the Group on the signing of the DR Acquisition Agreement, PT/PM Acquisition Agreement and further deposits of HK$7,095,000 was paid by Wang On upon request by Mr. Tang in accordance with Kennedy Town Provisional Agreements of Dragon Richly. The consideration was financed by internal funding.

• (3) The pro forma adjustment reflects the balance consideration of HK$76,830,000, HK$60,000,000 and HK$6,230,000 which will be paid by the Group on the completion date of the acquisition of the 29 units of Kennedy Town Properties, the Yuen Long Property A and the Yuen Long Property B respectively.

• (4) The pro forma adjustment represents total goodwill of HK$16,105 arising on acquisition of Dragon Richly, Poly Talent and Profit Million, which represents the difference of the total consideration HK$3 for acquiring the entire issued share capital and the net liabilities of Dragon Richly, Poly Talent and Profit Million of HK$5,370, HK$5,366 and HK$5,366, respectively, prior to the Acquisition.

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FINANCIAL INFORMATION ON THE ENLARGED GROUP

APPENDIX V

• (5) The unaudited pro forma statement of the Enlarged Group has not taken into account the effect of the disposal of the whole block of 4-storey pre-war commercial and residential building situated at No. 32 Argyle Street, Kowloon, Hong Kong by WOB Investments Limited, a wholly owned subsidiary of the Company, to an independent third party at a consideration of HK$73.8 million pursuant to a provisional agreement between the relevant parties on 30 September 2004. Such disposal is subject to the approval of the shareholders of the Company at the special general meeting to be convened on 12 November 2004. Details of such disposal were set out in the Company’s announcement on 5 October 2004 and the circular dated 27 October 2004.

−120 −

APPENDIX V FINANCIAL INFORMATION ON THE ENLARGED GROUP

UNAUDITED PRO FORMA STATEMENT OF CONSOLIDATED NET TANGIBLE ASSETS OF THE ENLARGED GROUP

AFTER COMPLETION OF THE DR ACQUISITION AGREEMENT REGARDING THE ACQUISITION OF THE 29 UNITS OF THE KENNEDY TOWN PROPERTIES ONLY

For illustrative purpose only, the following is an unaudited pro forma statement of the consolidated net tangible assets of the Enlarged Group prepared in accordance with Rule 4.29 of the Listing Rules as if the DR Acquisition had taken place on 31 March 2004. The statement is prepared based on the audited consolidated financial statements of the Group as at 31 March 2004, adjusted to reflect the effect of the DR Acquisition at completion.

Audited

			Audited
			consolidated net
			tangible assets of	Less: Goodwill
			the Group as at	arising from the
			31 March 2004	DR Acquisition	Enlarged Group
			HK$’000	HK$’000	HK$’000
Net	tangible	assets	663,466	(5)	663,461

Note:

The audited consolidated net tangible asset value per share of the Group of approximately HK$4.63 and the unaudited pro forma adjusted consolidated net tangible asset value per share of the Enlarged Group upon completion of the DR Acquisition of approximately HK$4.63 are calculated on the basis of 143,320,366 Shares in issue as at the Latest Practicable Date as set out in this circular.

AFTER COMPLETION OF THE PT/PM ACQUISITION AGREEMENT ONLY

For illustrative purpose only, the following is an unaudited pro forma statement of the consolidated net tangible assets of the Enlarged Group prepared in accordance with Rule 4.29 of the Listing Rules as if the PT/PM Acquisition had taken place on 31 March 2004. The statement is prepared based on the audited consolidated financial statements of the Group as at 31 March 2004, adjusted to reflect the effect of the PT/PM Acquisition at completion.

			Audited
			consolidated net	Less: Goodwill
			tangible assets of	arising from the
			the Group as at	PT/PM
			31 March 2004	Acquisition	Enlarged Group
			HK$’000	HK$’000	HK$’000
Net	tangible	assets	663,466	(10)	663,456

Note:

The audited consolidated net tangible asset value per share of the Group of approximately HK$4.63 and the unaudited pro forma adjusted consolidated net tangible asset value per share of the Enlarged Group upon the completion of the PT/PM Acquisition of approximately HK$4.63 are calculated on the basis of 143,320,366 Shares in issue as at the Latest Practicable Date as set out in this circular.

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FINANCIAL INFORMATION ON THE ENLARGED GROUP

APPENDIX V

AFTER COMPLETION OF THE DR ACQUISITION AGREEMENT REGARDING THE ACQUISITION OF THE 29 UNITS OF THE KENNEDY TOWN PROPERTIES AND THE PT/PM ACQUISITION AGREEMENT ONLY

For illustrative purpose only, the following is an unaudited pro forma statement of the consolidated net tangible assets of the Enlarged Group prepared in accordance with Rule 4.29 of the Listing Rules as if the DR Acquisition and the PT/PM Acquisition had taken place on 31 March 2004. The statement is prepared based on the audited consolidated financial statements of the Group as at 31 March 2004, adjusted to reflect the effect of the the DR Acquisition and the PT/PM Acquisition at completion.

			Audited	Less: Goodwill
			consolidated net	arising from the
			tangible assets of	DR Acquisition
			the Group as at	and the PT/PM
			31 March 2004	Acquisition	Enlarged Group
			HK$’000	HK$’000	HK$’000
Net	tangible	assets	663,466	(15)	663,451

Note:

The audited consolidated net tangible asset value per share of the Group of approximately HK$4.63 and the unaudited pro forma adjusted consolidated net tangible asset value per share of the Enlarged Group upon completion of the DR Acquisition and the PT/PM Acquisition of approximately HK$4.63 are calculated on the basis of 143,320,366 Shares in issue as at the Latest Practicable Date as set out in this circular.

STATEMENT OF INDEBTEDNESS

As at 30 September 2004, the Enlarged Group had secured outstanding bank borrowings of approximately HK$270.8 million. These facilities were secured by certain of the Enlarged Group’s investment properties, rental income from certain of the Enlarged Group’s sublicensing operations of Chinese wet markets and shopping centres and corporate guarantees given by the Company.

Save as aforesaid and apart from intra-group liabilities, the Enlarged Group did not have any outstanding mortgages, charges, debentures, loan capital, debt securities, loans, bank overdraft or other similar indebtedness, finance leases or hire purchase commitments, liabilities under acceptances or acceptance credits or guarantees or other contingent liabilities as at the close of business on 30 September 2004.

For the purpose of the above indebtedness statement, foreign currency amounts have been translated into Hong Kong dollars at the approximately exchange rates prevailing at the close of business on 30 September 2004.

Save as disclosed above, the Directors have confirmed that there has been no material change in the indebtedness and contingent liabilities of the Enlarged Group since 30 September 2004.

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APPENDIX V FINANCIAL INFORMATION ON THE ENLARGED GROUP

WORKING CAPITAL

The Directors are satisfied after due and careful enquiry that the Enlarged Group has available sufficient working capital for the Enlarged Group’s present requirements, that is for at least the next 12 months from the date of publication of this circular.

MATERIAL ADVERSE CHANGE

The Directors are not aware of any material adverse change in the financial or trading position of the Group since the date to which the latest published audited financial statements of the Group were made up; and there has been no material adverse change in the financial or trading position of Dragon Richly, Poly Talent and Profit Million since the date to which the latest accountants’ reports of Dragon Richly, Poly Talent and Profit Million as set out in this circular were made up.

−123 −

COMFORT LETTER

APPENDIX VI

REPORT ON UNAUDITED PRO FORMA FINANCIAL INFORMATION

15th Floor Hutchison House 10 Harcourt Road Central Hong Kong

5 November 2004

The Directors Wang On Group Limited 5/F, Wai Yuen Tong Medicine Building 9 Wang Kwong Road Kowloon Bay Kowloon Hong Kong

Dear Sirs,

We report on the unaudited pro forma statements of the assets and liabilities and pro forma statements of net tangible assets of the Enlarged Groups, being Wang On Group Limited (the “Company”) and its subsidiaries (collectively referred to as the “Group”) together with (i) Dragon Richly Investment Limited (“Dragon Richly”) only; or (ii) Poly Talent Investment Limited (“Poly Talent”) and Profit Million Investment Limited (“Profit Million”) only; and (iii) Dragon Richly, Poly Talent and Profit Million), as set out on pages 110 to 123 in Appendix V (“the Pro Forma Financial Information”) to the circular of the Company dated 5 November 2004 in connection with the proposed acquisitions of the entire issued capital and shareholder’s loan of each of Dragon Richly, Poly Talent and Profit Million from Mr. Tang Ching Ho, the director of the Company, which have been prepared by the directors of the Company (the “Directors”), for illustration purposes only, to provide information about how the acquisitions of Dragon Richly, Poly Talent and Profit Million might have affected the historical financial information of the Group.

The historical financial information is derived from the audited historical financial information of the Group, Dragon Richly, Poly Talent and Profit Million appearing elsewhere herein. The basis of preparation of the Pro Forma Financial Information is set out in the accompanying introduction and notes to the Pro Forma Financial Information of the Enlarged Groups.

Responsibilities

It is the responsibility solely of the Directors to prepare the Pro Forma Financial Information in accordance with Paragraph 29 of Chapter 4 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the “Listing Rules”).

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COMFORT LETTER

APPENDIX VI

It is our responsibility to form an opinion, as required by the Listing Rules, on the Pro Forma Financial Information and to report our opinion to you. We do not accept any responsibility for any reports previously given by us on any financial information used in the compilation of the Pro Forma Financial Information beyond that owed to those to whom those reports were addressed by us at the dates of their issue.

Basis of opinion

We conducted our work in accordance with the Statements of Investment Circular Reporting Standards and Bulletin 1998/8 “Reporting on pro forma financial information pursuant to the Listing Rules” issued by the Auditing Practices Board of the United Kingdom, where applicable. Our work, which involved no independent examination of any of the underlying financial information, consisted primarily of comparing the unadjusted financial information with the source documents, considering the evidence supporting the adjustments and discussing the Pro Forma Financial Information with the Directors.

Our work did not constitute an audit or review made in accordance with Statements of Auditing Standards issued by the Hong Kong Institute of Certified Public Accountants, and accordingly, we do not express any such audit or review assurance on the Pro Forma Financial Information with the Directors.

The Pro Forma Financial Information is for illustrative purposes only, based on the judgements and assumptions of the Directors as set out in Appendix V, and because of its nature, it does not provide any assurance or indication that any event will take place in the future and may not be indicative of the financial position or results of:

• (a) the Enlarged Groups had the acquisition of (i) Dragon Richly only; (ii) Poly Talent and Profit Million only; and (iii) Dragon Richly, Poly Talent and Profit Million, actually occurred as at the dates indicated therein; or

• (b) the Enlarged Groups at any future date or for any future periods.

Opinion

In our opinion:

• (a) the Pro Forma Financial Information has been properly compiled on the basis stated;

• (b) such basis is consistent with the accounting policies of the Group; and

• (c) the adjustments are appropriate for the purpose of the Pro Forma Financial Information as disclosed pursuant to Paragraph 29 of Chapter 4 of the Listing Rules.

Yours faithfully, Ernst & Young Certified Public Accountants Hong Kong

−125 −

APPENDIX VII VALUATION REPORT ON 29 UNITS IN THE KENNEDY TOWN PROPERTIES

The following is the text of a letter with a summary of value and a valuation certificate, prepared for the purpose of incorporating in this major and connected transaction, received from Chesterton Petty Limited, an independent property valuer, in connection with their valuation as at 11 October 2004 of the property.

==> picture [26 x 6] intentionally omitted <==

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

PETTY
----- End of picture text -----

15 October 2004

Wang On Group Limited 5th Floor Wai Yuen Tong Medicine Building 9 Wang Kwong Road Kowloon Bay Kowloon

Dear Sirs,

Unit A on Ground Floor and Cockloft, Unit B on Ground Floor, 1st to 3rd Floors of No. 12 Davis Street; Ground Floor, Cockloft and 1st to 4th Floors of No. 14 Davis Street; Ground Floor, Cockloft and 1st to 4th Floors of No. 16 Davis Street; Ground Floor and 1st to 4th Floors of No. 18 Davis Street; Ground Floor, Cockloft and 1st to 4th Floors of No. 20 Davis Street; and 1st to 4th Floors of No. 22 Davis Street, Kennedy Town, Hong Kong.

In accordance with your instructions for us to value the captioned property, we confirm that we have carried out inspection, made relevant enquiries and carried out searches and obtained such further information as we consider necessary for the purposes of providing you with our opinion of the current open market value of the above property for your reference purposes.

Our valuation is our opinion of the open market value which we would define as intended to mean “the best price at which the sale of an interest in a property would have been completed unconditionally for cash consideration on the date of valuation assuming:

(a) a willing seller;

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APPENDIX VII VALUATION REPORT ON 29 UNITS IN THE KENNEDY TOWN PROPERTIES

• (b) that, prior to the date of valuation, there had been a reasonable period (having regard to the nature of the property and the state of the market) for the proper marketing of the interest, for the agreement of the price and terms and for the completion of the sale;

• (c) that the state of the market, level of values and other circumstances were, on any earlier assumed date of exchange of contracts, the same as on the date of valuation;

• (d) that no account is taken of any additional bid by a prospective purchaser with a special interest; and

• (e) that both parties to the transaction had acted knowledgeably, prudently and without compulsion”.

Our valuation has been made on the assumption that the owners sell the property on the open market without the benefit of any deferred term contract, leaseback, joint venture, management agreement or any similar arrangement which would serve to increase the value of the property. In addition, no account has been taken of any option or right of pre-emption concerning or affecting the sale of the property and no forced sale situation in any manner is assumed in our valuation.

In accordance with the specific terms of the instructions, we have prepared our valuation on the assumption the subject property is freely assignable in the market with the benefit of physical vacant possession and its title being otherwise free of all material encumbrances and defects.

In preparing our current open market valuation for Nos. 14 to 20 Davis Street, we have taken into consideration of both existing use value and redevelopment value and are of the opinion that the open market value of the subject property then rests on its optimum value.

In arriving at our opinion on the existing use value, we have applied Comparative Method by making reference to recent comparable sales transactions of both retail and domestic units in the vicinity. Appropriate adjustments have been made in our valuation for the differences between the subject property and comparable properties in terms of building age, location, date of transaction, external condition, size, view, floor level, shop frontage and etc..

In arriving at our opinion on the redevelopment value, we have applied both Comparative Method and Residual Method. In the adoption of Comparative Method, we have made reference to the comparable sales transactions of sites held under single ownership and have made appropriate adjustment for factors on location, site condition, site area, date of transaction, Government lease conditions and etc. to reflect the differences between the subject property and the comparable sites.

−127 −

APPENDIX VII VALUATION REPORT ON 29 UNITS IN THE KENNEDY TOWN PROPERTIES

Residual Method is a means of valuing land with reference to its developments potential by deducting the development costs (including demolition costs, construction costs, professional fees), interest and developer’s profit from its estimated gross development value. It relies upon a series of assumptions which produce an estimation of the expected current open market of a property being developed or held for development or redevelopment. The gross development value is arrived by taking into account the sales transaction of similar properties in the locality.

In respect of Units A and B on Ground Floor, Cockloft and 1st to 3rd Floors of No. 12 Davis Street and 1st to 4th Floors of No. 22 Davis Street, our valuation of these units is prepared on existing use basis because the ownership of their respective lots are yet to be unified for redevelopment. Nevertheless, we have assigned a hope value in this instance to reflect the possibility of joint redevelopment and merger with the neighbouring lots.

We have not been provided with any title document relating to the property but we have caused searches to be made at the Land Registry. We have not, however, scrutinized the original documents to verify ownership or to ascertain the existence of any amendment which does not appear on the copies obtained by us.

We have inspected the exterior of the property valued. In the course of our inspection, we did not note any serious defect. However, no structural survey has been made and we are therefore unable to report that the property is free from rot, infestation or any other structural defect. No tests were carried out on any of the services.

We have relied to a very considerable extent on information given by you and have accepted advice given to us on such matters as the properties to be valued, planning approvals or statutory notices, easements, tenure, ownerships, lettings, site and floor areas and all other relevant matters. Dimensions, measurements and areas included in the valuation certificate are based on information contained in the documents provided to us and are therefore only approximations. We have not at this stage verified the correctness of such areas so provided.

We have not been able to carry out investigation on site to determine the suitability of the ground conditions and the services etc. for the future development. Our valuation is prepared on the assumptions that these aspects are satisfactory and that no extraordinary expenses or delays will be incurred during the construction period. We have further assumed that all approvals, permits and consents from all relevant Government authorities in respect of the proposed development have been obtained without onerous conditions which may affect value.

We have not been able to delineate the exact boundaries of the property nor have we been able to carry out detailed site measurements to verify the correctness of the registered site areas of the lots. However, we have assumed the lot areas and all relevant information as stated in the Land Registry are correct.

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APPENDIX VII VALUATION REPORT ON 29 UNITS IN THE KENNEDY TOWN PROPERTIES

No allowance has been made in our valuation for any charge, mortgage or amount owning on the property nor for any expense or taxation which may be incurred in effecting a sale. Unless otherwise stated, it is assumed that the property is free from encumbrances, restrictions and outgoings of an onerous nature which could affect its value.

We enclose herewith our valuation certificate.

Yours faithfully,

For and on behalf of

Chesterton Petty Limited Charles C K Chan

MSc FRICS FHKIS MClArb RPS(GP) Executive Director

−129 −

APPENDIX VII VALUATION REPORT ON 29 UNITS IN THE KENNEDY TOWN PROPERTIES

SUMMARY OF VALUE

Property

Unit A on Ground Floor and Cockloft, Unit B on Ground Floor and 1st to 3rd Floors of No. 12 Davis Street; Ground Floor, Cockloft and 1st to 4th Floors of No. 14 Davis Street; Ground Floor, Cockloft and 1st to 4th Floors of No. 16 Davis Street; Ground Floor and 1st to 4th Floors of No. 18 Davis Street; Ground Floor, Cockloft and 1st to 4th Floors of No. 20 Davis Street; and 1st to 4th Floors of No. 22 Davis Street Kennedy Town, Hong Kong.

Total:

Open market value in existing state as at 11 October 2004

HK$80,000,000 HK$80,000,000

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APPENDIX VII VALUATION REPORT ON 29 UNITS IN THE KENNEDY TOWN PROPERTIES

VALUATION CERTIFICATE

Property

Unit A on Ground Floor and Cockloft, Unit B on Ground Floor and 1st to 3rd Floors of No. 12 Davis Street; Ground Floor, Cockloft and 1st to 4th Floors of No. 14 Davis Street; Ground Floor, Cockloft and 1st to 4th Floors of No. 16 Davis Street; Ground Floor and 1st to 4th Floors of No. 18 Davis Street; Ground Floor, Cockloft and 1st to 4th Floors of No. 20 Davis Street; and 1st to 4th Floors of No. 22 Davis Street Kennedy Town, Hong Kong.

4/5th shares of and in The Remaining Portion of Subsection 7 of Section A of Inland Lot No. 905, the whole of Section D, Section C, Section B and Section A of Sub-section 7 of Section A of Inland Lot No. 905 and 4/5th shares of and in Subsection 12 of Section A of Inland Lot No. 905.

Description and tenure

Nos. 12-22 Davis Street is a rectangular shaped level site with a total registered site area of about 461.378 square metres (4,966.281 square feet).

Currently standing on the site are six 5-storey (excluding cockloft) tenement blocks completed in 1955. Ground floor and cockloft of the buildings are devoted to commercial use whilst the upper floors of the buildings are designated for domestic purposes.

The subject property comprises a total of 29 of the 31 units in the buildings including 6 shop units (4 of which each with a cockloft) on Ground Floor and 23 domestic units on the upper floors with a total floor area of approximately 2,136.75 square metres (23,000 square feet).

Inland Lot No. 905 is held under a Government Lease for a term of 999 commencing from 24 September 1883. Use and development of the lot is virtually unrestricted except for the usual prohibition against offensive trades.

Open market value in existing Particulars of state as at 11 occupancy October 2004

The subject property HK$80,000,000 is valued on a vacant possession basis.

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APPENDIX VII VALUATION REPORT ON 29 UNITS IN THE KENNEDY TOWN PROPERTIES

Note: The registered owners and encumbrances of the subject property are as follows:

• Property Address Registered Owner Registered Encumbrances No. 12 Davis Street Unit A on Ground Floor Tam Shing Sye (1) Deed of Covenant and Cockloft 246117 dated 6 April (2) Sub-Deed of

• Unit B on Ground Floor Law Chun Pang and Memorial No. Cheung Hon Chun (for Units A & B on (3) Order No

• 1st Floor Chan Po Lung 24(1) of the memorial no 9262557

• 2nd Floor Leung Sui Fun 2003 (for Unit B on (4) Order No

• 3rd Floor Lui Kwok Fai 24(1) of the

• (1) Deed of Covenant vide Memorial No. 246117 dated 6 April 1956;

• (2) Sub-Deed of Mutual Covenant vide Memorial No. 3349977 dated 1 May 1984 (for Units A & B on G/F);

• (3) Order No UBZ/U04/0060/03 under Section 24(1) of the Buildings Ordinance vide memorial no 9262557 dated 15 December 2003 (for Unit B on G/F);

• (4) Order No UBZ/U04/0061/03 under Section 24(1) of the Buildings Ordinance vide memorial no 9262556 dated 15 December 2003 (for 1/F).

No. 14 Davis Street

• Ground Floor including Tsang Kam Wing Cockloft

• 1st Floor Wong Sau Ching 2nd Floor Kwok Cheung Kam (Administrator)

• 3rd Floor Cheng Wing Fai 4th Floor Ko’s Clan’s Association

• (1) Deed of Covenant vide Memorial No. 242510 dated 20 December 1955;

• (2) Order No UBZ/U04/0065/03 under Section 24(1) of the Buildings Ordinance vide memorial no 9262555 dated 15 December 2003 (for G/F including Cockloft);

• (3) Order No UBZ/U04/0066/03 under Section 24(1) of the Buildings Ordinance vide memorial no 9262554 dated 15 December 2003 (for 1/F);

• (4) Order No UBZ/U04/0067/03 under Section 24(1) of the Buildings Ordinance vide memorial no 9262553 dated 15 December 2003 (for 2/F);

• (5) Order No UBZ/U04/0068/03 under Section 24(1) of the Buildings Ordinance vide memorial no 9262552 dated 15 December 2003 (for 3/F);

• (6) Order No UBZ/U04/0069/03 under Section 24(1) of the Buildings Ordinance vide memorial no 9262551 dated 15 December 2003 (for 4/F).

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APPENDIX VII VALUATION REPORT ON 29 UNITS IN THE KENNEDY TOWN PROPERTIES

Property Address

Registered Owner

Registered Encumbrances

• No. 16 Davis Street Ground Floor including Chan Kwok Wa and (1) Deed of Covenant vide Memorial No. Cockloft Chan Kwok Wan 242693 dated 28 December 1955; (Administrators) (2) Order No UBZ/U04/0027/03 under Section 24(1) of the Buildings Ordinance vide

• 1st Floor Lui Chun Yuet memorial no 9270794 dated 15 December 2003 (for G/F);

• 2nd Floor Choi Hon Chit & Choi (3) Order No UBZ/U04/0028/03 under Section Hon Choy (Joint Tenants) 24(1) of the Buildings Ordinance vide memorial no 9270793 dated 15 December

• 3rd Floor Ko Kwok Ping 2003 (for 1/F); (4) Order No UBZ/U04/0029/03 under Section

• 4th Floor Cheung Kwong Man 24(1) of the Buildings Ordinance vide (1/3), Cheung Wai Fong memorial no 9270792 dated 15 December Margaret (1/3) and 2003 (for 2/F). Cheung Kwong Cheong (1/3) (Tenants in Common)

• No. 18 Davis Street Ground Floor Cheung Mang Tim, Lam (1) Deed of Covenant vide Memorial No. Yuet Wai and Cheung Wa 242138 dated 8 December 1955; Sun (Joint Tenants) (2) Order No C/DU/0455/99/HK under Section 28 of the Buildings Ordinance vide

• 1st Floor Cheung Ching Sum (1/2) memorial no 7958541 dated 20 October & Cheung Man Yiu (1/2) 1999; (Tenants in Common) (3) Order No UBZ/U04/0031/03 under Section 24(1) of the Buildings Ordinance vide

• 2nd Floor Lam Yu Tim and Cheung memorial no 9270790 dated 15 December Siu Ping (Joint Tenants) 2003 (for G/F); (4) Order No UBZ/U04/0032/03 under Section

• 3rd Floor Mak Hing Sun 24(1) of the Buildings Ordinance vide memorial no 9270789 dated 15 December

• 4th Floor Sham Oi Tei 2003 (for 1/F); (5) Order No UBZ/U04/0033/03 under Section 24(1) of the Buildings Ordinance vide memorial no 9270788 dated 15 December 2003 (for 2/F);

• (6) Order No UBZ/U04/0034/03 under Section 24(1) of the Buildings Ordinance vide memorial no 9270787 dated 15 December 2003 (for 3/F);

• (7) Order No UBZ/U04/0035/03 under Section 24(1) of the Buildings Ordinance vide memorial no 9270786 dated 15 December 2003 (for 4/F).

−133 −

APPENDIX VII VALUATION REPORT ON 29 UNITS IN THE KENNEDY TOWN PROPERTIES

Property Address

Registered Owner

Registered Encumbrances

No. 20 Davis Street

• Ground Floor including Yip Yiu Kuen & Leung the Cockloft Kang Yu (Joint Tenants)

• (1) Deed of Covenant vide Memorial No. 255791 dated 11 January 1957.

• 1st Floor Cheung Wai Yue

• 2nd Floor Chau Hans 3rd Floor Chau Hans 4th Floor Leung Yuk Wah

No. 22 Davis Street

• 1st Floor Wong Chou Nui (1) Deed of Covenant vide Memorial No. 245440 dated 12 March 1956;

• 2nd Floor Don Show Wei (2) Supplemental Deed of Mutual Covenants vide Memorial No. 249774 dated 21 July

• 3rd Floor Cheung Kam Wan 1956 (for 2/F, 3/F & 4/F); (3) Order No UBZ/U04/0042/03 under Section

• 4th Floor Szeto Thing Kaing 24(1) of the Buildings Ordinance vide memorial no 9262558 dated 15 December 2003 (for 1/F).

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APPENDIX VIII VALUATION REPORT ON THE YUEN LONG PROPERTIES

The following is the text of the letter and valuation certificate, prepared for the purpose of incorporation in this circular received from Vigers Appraisal & Consulting Limited, an independent valuer, in connection with their valuation of the Yuen Long Properties as at 12 October 2004.

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12 October, 2004

The Directors Wang On Group Limited 5th Floor, Wai Yuen Tong Medicine Building No. 9 Wang Kwong Road Kowloon Bay Hong Kong

Dear Sirs,

Re: Valuation of property – Lot No. 4781 in D.D. 104 and the Remaining Portion of Lot No. 3254 in D.D. 104, Yuen Long, New Territories

In accordance with your instruction for us to value the captioned property as at 12 October 2004 for the purposes of reference, we confirm that we have carried out an inspection of the property, made relevant enquiries and obtained such information as we consider necessary for the purpose of providing you with our opinion of the value of the property.

Our valuation represents our opinion of the open market value. We define open market value as – “an opinion of the best price at which the sale of an interest in the property would have been completed unconditionally for cash consideration on the date of valuation, assuming:

• (a) a willing seller;

• (b) that, prior to the date of valuation, there had been a reasonable period (having regard to the nature of the property and the state of the market) for the proper marketing of the interest, for the agreement of price and terms and for the completion of the sale;

• (c) that the state of the market, level of values and other circumstances were, on any earlier assumed date of exchange of contracts, the same as on the date of valuation;

• (d) that no account is taken of any additional bid by a prospective purchaser with a special interest; and

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APPENDIX VIII VALUATION REPORT ON THE YUEN LONG PROPERTIES

• (e) that both parties to the transaction had acted knowledgeably, prudently and without compulsion.”

Our valuation have been made on the assumption that the owners sells the property on the open market without the benefit of a deferred terms contract, leaseback, joint venture, management agreement or any similar arrangement which would serve to increase the value of the property.

We have valued the property by direct comparison approach with reference to market comparables.

We have relied to a considerable extent on information provided to us by you and have accepted advice given to us by you on such matters as planning approvals or statutory notices, easements, occupation, letting, tenure, site areas and all other relevant matters. We have caused searches to be made at the appropriate Land Registry in Hong Kong. We have not, however, searched the original documents to verify ownership or to verify any lease amendments which do not appear on the copies handed to us. All documents have been used for reference only. Dimensions, measurements and areas are only approximations.

We have inspected the exterior of the property. However, we have not carried out a structural survey nor have we inspected woodwork or other parts of the structures which were covered, unexposed or inaccessible and we are therefore unable to report that any such parts of the property are free from defect.

We have not carried out a land survey to determine the demarcation of the lots. No allowance has been given to the contamination (if any) due to the past usage of the lots.

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

In accordance with our standard practice, this valuation certificate is for the use of the party to whom it is addressed and no responsibility is accepted to any third party for the whole or any part of the contents of the valuation certificate.

We enclose herewith our valuation certificate.

Yours faithfully, For and on behalf of

VIGERS APPRAISAL & CONSULTING LIMITED Gilbert K M Yuen MHKIS MRICS Director

Note: Mr. Gilbert K. M. Yuen is a chartered surveyor with over 15 years’ property valuation experiences in Hong Kong.

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APPENDIX VIII VALUATION REPORT ON THE YUEN LONG PROPERTIES

VALUATION CERTIFICATE

Property

Description and Tenure

Particulars of Occupancy

Capital value in Existing state as 12 October 2004

Lot No. 4781 and the The property comprises two Remaining Portion of contiguous lots, namely Lot No Lot No. 3254 4781 and The Remaining Portion in D.D. 104, of Lot No. 3254 in Demarcation Yuen Long District 104. New Territories

The registered site areas of the lots are approximately as follows:

Lot No. 4781 in D.D. 104 is now used as public car port, whilst The Remaining Portion of Lot No. 3254 in D.D. 104 is vacant.

HK$68,400,000

Lot No. 4781 3254RP Total	(sq.ft.) 92,796 11,601
	104,397

There are two-storey public carport buildings erected on Lot No. 4781 in D.D. 104. The buildings were completed on 11 June 2004.

Lot No. 4781 in D.D. is held under a New Grant No. 4418 for a term of 50 years commencing from 2 February 1999, whilst The Remaining Portion of Lot No. 3254 in D.D. 104 is held under a Block Government Lease for a term originally ended on 30 June 1997 and has been extended to 30 June 2047 by Ordinance. The Government rent is equivalent to 3% of the rateable value for the time being of the property.

Notes:

1. The registered owners of Lot No. 4781 in D.D. 104 of The Remaining Portion of Lot No. 3254 in D.D.104 are Jet Complete Limited and Hui Kam Hing respectively.

2. Lot No. 4781 in D.D. 104 is subject to a Deed of Grant of Right of Way registered by Memorial No. 1081285 in Yuen Long District Land Registry.

3. The property falls within a zone designated for “Commercial/Residential” under the Mai Po and Fairview Park Outline Zoning No. S/YL-MP/5 dated 26 March 2004. Accordingly, no new development, or addition, alternation and/or modification to or redevelopment of an existing building shall result in a total development and or/ redevelopment in excess of a maximum plot ratio of 0.4, a maximum site coverage of 20% and a maximum building height of 3 storeys (9 m.) or the plot ratio, site coverage and height of the building which was in existence on the date of the first publication in the Gazette of the notice of the interim development permission area plans, whichever is the greater.

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APPENDIX VIII VALUATION REPORT ON THE YUEN LONG PROPERTIES

1. According to the New Grant No. 4418, Lot No. 4781 in D.D. 104 is restricted to non-industrial (excluding godown, service apartments, hotel and petrol filling station) purposes, and the total gross floor area of any building or buildings erected on the lot shall not less than 22,260 sq.ft. (2,068 sq.m.) and shall not exceed 37,114 sq.ft. (3,448 sq.m.). The total site coverage of shall not exceed 20% and the building or buildings erected on the lot shall not exceed 3 storeys including car port and any floor or space below the level of the ground.

2. According to the Block Government Lease, The Remaining Portion of Lot No. 3254 in D.D. 104 is described as “Padi” i.e. agricultural purposes. Premium payment is required if the lot is to be modified for commercial/residential uses.

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GENERAL INFORMATION

APPENDIX IX

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 and the Enlarged Group. The Directors collectively and individually accept full responsibility for the accuracy of the information contained in this circular and confirm, having made all reasonable enquiries, that to the best of their knowledge and belief there are no other facts the omission of which would make any statement herein misleading.

2. DISCLOSURE OF INTERESTS

(a) Interests of Directors

As at the Latest Practicable Date, the interests and short positions in the shares, underlying shares and debentures of the Company and its associated corporations (within the meaning of Part XV of the SFO) of the Directors and the chief executive of the Company which were required to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short positions which they were taken or deemed to have under such provisions of the SFO), or which were required, pursuant to section 352 of the SFO, to be entered in the register referred to therein, or which were required to be notified to the Company and the Stock Exchange pursuant to the Model Code for Securities Transactions by Directors of Listed Companies, were as follows:

Interests in Shares

	Capacity in
	which such	Number of	Approximate
Name of Director	interests are held	Shares	percentage
		(Note 1)
Mr. Tang	Interest held by a	2,247,227 (L)	1.54%
	controlled
	corporation
	(Note 2)
	Beneficial owner	1,268,355 (L)	0.87%
	Interest held by	1,268,354 (L)	0.87%
	spouse (Note 3)
	Other (Note 4)	25,563,463 (L)	17.52%
Ms. Yau Yuk Yin	Beneficial owner	1,268,354 (L)	0.87%
(“Ms. Yau”)	Interest held by	29,079,045 (L)	19.92%
	spouse (Note 5)

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GENERAL INFORMATION

APPENDIX IX

Notes:

1. The letter “L” denotes a long position in shares.

2. Mr. Tang was interested in these shares through Caister Limited, a company which is wholly and beneficially owned by him.

3. Mr. Tang was taken to be interested under the SFO in those shares in which his spouse, Ms. Yau, was interested.

4. Agreements (the “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 317(1)(a) and 318 of the SFO, Mr. Tang was taken to be interested in the shares owned by them.

5. Ms. Yau was taken to be interested under the SFO in those shares in which her spouse, Mr. Tang, was interested.

Save as disclosed above, as at the Latest Practicable Date, none of the Directors and chief executive of the Company had any interests or short positions in the shares, underlying shares and debentures of the Company or its associated corporations (within the meaning of Part XV of the SFO) which were required to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests or short positions which they were taken or deemed to have under such provisions of the SFO), or which were required, pursuant to section 352 of the SFO, to be recorded in the register referred to therein, or which were required to be notified to the Company and the Stock Exchange pursuant to the Model Code for Securities Transactions by Directors of Listed Companies.

• (b) Interests of persons who had an interest or short position which were discloseable under Divisions 2 and 3 of Part XV of the SFO and substantial shareholders

As at the Latest Practicable Date, so far as is known to any Director or chief executive of the Company, the following persons (not being a Director or chief executive of the Company) had, or were deemed or taken to have an interest or short position in the shares or underlying shares of the Company which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO or, who were, 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 other member of the Group or had any option in respect of such capital:

		Approximate
Name of shareholder	Number of Shares	percentage
	(Note 1)
Caister Limited	30,347,399 (L)	20.79%
	(Note 2)
Ms. Tang Mui Fong	30,347,399 (L)	20.79%
	(Note 2)

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GENERAL INFORMATION

APPENDIX IX

		Approximate
Name of shareholder	Number of Shares	percentage
	(Note 1)
Mr. Yau Yuk Tong	30,347,399 (L)	20.79%
	(Note 2)
Ms. Tang Mui Fun	30,347,399 (L)	20.79%
	(Note 2)
Ms. Chan Yuk Kuen (“Ms. Chan”)	30,347,399 (L)	20.79%
	(Note 3)

Notes:

1. The letter “L” denotes a long position in shares.

2. Pursuant to the Agreements, Caister Limited, Ms. Tang Mui Fong, Mr. Yau Yuk Tong and Ms. Tang Mui Fun were taken to be interested in the 30,347,399 shares for the purpose of sections 317(1)(a) and 318 of the SFO.

3. Ms. Chan was taken to be interested under the SFO in those shares in which her spouse, Mr. Yau Yuk Tong was interested.

Save as disclosed herein, according to the register of interests kept by the Company under section 336 of the SFO and so far as is known to the Directors, as at the Latest Practicable Date, there was no other person (other than a Director or chief executive of the Company) who had any interest or short position in the shares or underlying shares of the Company which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO or who was, directly or indirectly, 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 in any options in respect of such capital.

(c) Particulars of executive Directors’ service contracts

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

(d) Miscellaneous

Save as disclosed in this circular and as at the Latest Practicable Date,

• (i) none of the Directors, Baron, Ernst & Young, Chesterton Petty Limited and Vigers Appraisal & Consulting Limited had any direct or indirect interest in any assets which, since 31 March 2004, the date to which the latest published audited consolidated accounts of the Group were made up, have been acquired or disposed of by or leased to any member of the Enlarged Group, or are proposed to be acquired or disposed of by or leased to any member of the Enlarged Group;

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GENERAL INFORMATION

APPENDIX IX

• (ii) none of the Directors was materially interested in any contract or arrangement subsisting at the Latest Practicable Date and which was significant in relation to the business of the Enlarged Group; and

• (iii) each of Baron, Ernst & Young, Chesterton Petty Limited and Vigers Appraisal & Consulting Limited did not have any shareholding in any member of the Group and did not have any right, whether legally enforceable or not, to subscribe for or to nominate persons to subscribe for securities in any member of the Group.

3. LITIGATION

As at the Latest Practicable Date, no member of the Enlarged Group was engaged in any litigation or arbitration or claims of material importance and no litigation or claims of material importance was known to the Directors to be pending or threatened by or against any member of the Enlarged Group.

4. DIRECTORS’ INTERESTS IN COMPETING BUSINESS

None of the Directors and their respective associates is interested in any business, apart from the Group’s business, which competes or is likely to compete, either directly or indirectly, with the Group’s business.

5. EXPERTS’ QUALIFICATION AND CONSENTS

Each of Baron, Ernst & Young, Chesterton Petty Limited and Vigers Appraisal & Consulting Limited has given and has not withdrawn its written consent to the issue of this circular with the inclusion of its letter and report and the reference to its name in the form and context in which it appears.

The qualification of the experts who have provided their advice, opinion or report contained in this circular is set out as follows:

Name Qualification Baron A deemed licensed corporation under the SFO permitted to carry out types 1 and 6 of the regulated activity (as defined in the SFO) Ernst & Young Certified Public Accountants Chesterton Petty Limited Professional surveyors and valuer Vigers Appraisal & Consulting Professional surveyors and valuer Limited

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GENERAL INFORMATION

APPENDIX IX

6. MATERIAL CONTRACTS

The following contracts (not being contracts entered into in the ordinary course of business) were entered into by members of the Enlarged Group within the two years immediately preceding the date of this circular and are, or may be, material:

• (a) an acquisition agreement dated 13 January 2003 entered into between Rich Time Strategy Limited (“Rich Time”) (a company incorporated in the British Virgin Islands and a wholly-owned indirect subsidiary of the Company) and Town Health Traditional Chinese Medicine Services Limited (“TH Medicine Services”) (a company incorporated in Hong Kong and an indirect wholly-owned subsidiary of Town Health International Holdings Company Limited (“Town Health”)) in respect of the acquisition by Rich Time from TH Medicine Services of the convertible notes in the principal amount of HK$12 million issued by WYT on 9 July 2002 at a consideration of HK$12 million;

• (b) an acquisition agreement dated 17 February 2003 entered into between the Company and Town Health in respect of the acquisition by the Company from Town Health of 27,799 shares of US$1.00 each in the capital of Bio Chapter Limited (a company incorporated in the British Virgin Islands with limited liability and a then indirect wholly-owned subsidiary of Town Health) and the acquisition of the loan due by Luxembourg Medicine Company Limited (“LMC”) (a company incorporated in Hong Kong with limited liability) and its subsidiaries to Town Health group in the amount of HK$2,655,305.48 as at 31 December 2002 at a total consideration of approximately HK$70 million;

• (c) an acquisition agreement dated 17 February 2003 entered into between Biomore Investments Limited (a company incorporated in the British Virgin Islands and an indirect wholly-owned subsidiary of the Company) and two individual shareholders (“Two Individual Shareholders”) in respect of the acquisition by Biomore Investments Limited of 517,556 shares of HK$0.01 each in the capital of LMC from each of the Two Individual Shareholders at a total consideration of approximately HK$3 million;

• (d) an acquisition agreement dated 8 July 2003 entered into between the Company and WYT in respect of the acquisition by WYT of entire issued share capital of each of Bio Chapter Limited and Biomore Investments Limited from the Company at a total consideration of approximately HK$130 million;

• (e) a placing agreement dated 29 August 2003 entered into between the Company and Kingsway SW Securities Limited in relation to a private placing of the convertible notes in the aggregate principal amount of up to HK$33 million issued by WYT to certain independent third parties at a total placing price of up to HK$39.6 million;

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GENERAL INFORMATION

APPENDIX IX

• (f) a conditional sale and purchase agreement dated 19 February 2004 entered into between the Company and Bright Leading Limited (a company incorporated in Hong Kong with limited liability and a wholly-owned subsidiary of WYT) and Advance Century Limited (a company incorporated in Hong Kong with limited liability and a wholly-owned subsidiary of the Company) in respect of the acquisition by Bright Leading Limited of a 49% interest in the issued share capital of China Field Enterprises Limited (a company incorporated in Hong Kong with limited liability) from Advance Century Limited at a consideration of HK$20 million and the transfer of loan due from Advance Century Limited to Bright Leading Limited at a consideration of HK$7 million;

• (g) a conditional sale and purchase agreement dated 8 April 2004 entered into between, among others, Wang On Enterprises (B.V.I.) Limited and Source Millennium Limited in respect of the disposal by Wang On Enterprises (B.V.I.) Limited of the entire issued share capital of WOD Investments Limited and a related shareholder’s loan at a total consideration of approximately HK$64 million (subject to adjustment);

• (h) the DR Acquisition Agreement;

• (i) the provisional sale and purchase agreement dated 24 September 2004 and entered into between WOB Investments Limited, a wholly-owned subsidiary of the Company, and Modern Win (Hong Kong) Limited in relation to the sale of the property known as the whole block of No. 32 Argyle Street, Kowloon, Hong Kong by WOB Investments Limited to Modern Win (Hong Kong) Limited at a consideration of HK$73.8 million; and

• (j) the PT/PM Acquisition Agreement.

7. GENERAL

• (a) The secretary of the Company is Ms. Li Yu Lian, Kelly, who is an associate member of The Institute of Chartered Secretaries and Administrators.

• (b) The qualified accountant of the Company appointed pursuant to Rule 3.24 of the Listing Rules is Mr. Tang Kam Shing, CPA.

• (c) The branch share registrar of the Company in Hong Kong is Tengis Limited, Ground Floor, Bank of East Asia Harbour View Centre, 56 Gloucester Road, Wanchai, Hong Kong.

• (d) The English text of this circular shall prevail over the Chinese text.

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GENERAL INFORMATION

APPENDIX IX

8. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents will be available for inspection during normal business hours at the head office and principal place of business of the Company at 5th Floor, Wai Yuen Tong Medicine Building, 9 Wang Kwong Road, Kowloon Bay, 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:

• (a) the memorandum of association and bye-laws of the Company;

• (b) the annual reports of the Company for each of the two years ended 31 March 2004;

• (c) the letter from the Independent Board Committee dated 5 November 2004, the text of which is set out on pages 19 to 20 of this circular;

• (d) the letter of advice from Baron dated 5 November 2004, the text of which is set out on pages 21 to 35 of this circular;

• (e) the accountants’ reports regarding Dragon Richly, Poly Talent and Profit Million issued by Ernst & Young, the text of which is set out in Appendices I, II and III to this circular;

• (f) the letter and valuation certificate prepared by Chesterton Petty Limited as set out in Appendix VII to this circular;

• (g) the letter and valuation certificate prepared by Vigers Appraisal & Consulting Limited as set out in Appendix VIII to this circular;

• (h) the written consents referred to in the paragraph headed “5. Expert’s qualification and consents” in this appendix;

• (i) the material contracts referred to in the paragraph headed “6. Material contracts” in this appendix;

• (j) the circular dated 20 April 2004 issued by the Company in relation to the acquisition of property;

• (k) the circular dated 6 May 2004 issued by the Company in relation to the disposal of property;

• (l) the circular dated 12 May 2004 issued by the Company in relation to, among other matters, disposal of business interests of WOD Investments Limited;

• (m) the circular dated 27 July 2004 issued by the Company in relation to the acquisition of property;

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GENERAL INFORMATION

APPENDIX IX

• (n) the circular dated 28 September 2004 issued by the Company in relation to the purchase of properties;

• (o) the circular dated 27 October 2004 issued by the Company in relation to, among other matters, the disposal of property;

• (p) the Kennedy Town Provisional Agreements;

• (q) the Kennedy Town Formal Agreements in respect of eleven units;

• (r) the Yuen Long Provisional Agreements;

• (s) the Yuen Long Formal Agreements; and

• (t) this circular.

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NOTICE OF SGM

==> picture [81 x 60] intentionally omitted <==

WANG ON GROUP LIMITED

( )[*]

(Incorporated in Bermuda with limited liability)

(Stock Code: 1222)

NOTICE is hereby given that a special general meeting of Wang On Group Limited (the “Company”) will be held at 35th Floor, Two International Finance Centre, 8 Finance Street, Central, Hong Kong on 22 November 2004 at 9:30 a.m. for the purpose of considering and, if thought fit, passing the following resolutions, which will be proposed as ordinary resolutions of the Company:

ORDINARY RESOLUTIONS

1. “THAT the conditional sale and purchase agreement (the “Sale and Purchase Agreement A”) dated 27 September 2004 between Mr. Tang Ching Ho (“Mr. Tang”), Suitbest Investments Limited (“Suitbest”), a wholly-owned subsidiary of Wang On Group Limited (the “Company”), Dragon Richly Investment Limited (“Dragon Richly”), a company wholly and beneficially owned by Mr. Tang (a copy of which has been initialed by the chairman of this meeting and for the purpose of identification marked “A”) pursuant to which, inter alia, Mr. Tang has agreed to sell and Suitbest has agreed to purchase:

2. (a) the entire issued share capital of Dragon Richly; and

3. (b) shareholder’s loan of Dragon Richly,

be approved, confirmed and ratified and that all the transactions contemplated thereunder be and the same are hereby approved, and any one director of each of the Company and Suitbest be and he is authorised to do or execute all such acts and such other documents in connection with or incidental to the Sale and Purchase Agreement A by hand or in the case of execution of documents under seal, to do so jointly with either the secretary or a second director of each of the Company and Suitbest, with such amendments or modifications (if any) as the relevant director may consider necessary, desirable or appropriate.”

1. “THAT the conditional sale and purchase agreement (the “Sale and Purchase Agreement B”) dated 12 October 2004 between Mr. Tang Ching Ho (“Mr. Tang”), Suitbest Investments Limited (“Suitbest”), a wholly-owned subsidiary of Wang On Group Limited (the “Company”), Poly Talent Investment Limited (“Poly Talent”), a company wholly and beneficially owned by Mr. Tang and Profit Million Investment

2. For identification purpose only

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NOTICE OF SGM

Limited (“Profit Million”), a company wholly and beneficially owned by Mr. Tang (a copy of which has been initialed by the chairman of this meeting and for the purpose of identification marked “B”) pursuant to which, inter alia, Mr. Tang has agreed to sell and Suitbest has agreed to purchase:

• (a) the entire issued share capital of Poly Talent;

• (b) the entire issued share capital of Profit Million; and

• (c) shareholder’s loans of Poly Talent and Profit Million,

be approved, confirmed and ratified and that all the transactions contemplated thereunder be and the same are hereby approved, and any one director of each of the Company and Suitbest be and he is authorised to do or execute all such acts and such other documents in connection with or incidental to the Sale and Purchase Agreement B by hand or in the case of execution of documents under seal, to do so jointly with either the secretary or a second director of each of the Company and Suitbest, with such amendments or modifications (if any) as the relevant director may consider necessary, desirable or appropriate.”

By order of the Board Wang On Group Limited Kelly Li Company Secretary

Hong Kong, 5 November 2004

Head office and principal place of business:

5th Floor

Wai Yuen Tong Medicine Building 9 Wang Kwong Road Kowloon Bay Kowloon Hong Kong

Notes:

1. A member of the Company entitled to attend and vote at the above meeting is entitled to appoint one or more than one proxy to attend and to vote in his stead. A proxy need not be a member of the Company.

2. A form of proxy for use at the meeting is enclosed herewith. The instrument appointing a proxy shall be in writing under the hand of the appointer or his/her attorney duly authorised in writing. If the appointer is a corporation, the form of a proxy must be under its common seal or under the hand of an officer, attorney or other person authorised to sign the proxy.

3. To be valid, the form of proxy together with the power of attorney or other authority (if any) under which it is signed, or a notarially certified copy of that power of authority, must be deposited at the Company’s registrar, Tengis Limited, at Ground Floor, Bank of East Asia Harbour View Centre, 56 Gloucester Road, Wanchai, Hong Kong, as soon as possible and in any event not less than 48 hours before the time appointed for holding the meeting or any adjournment thereof.

4. Completion and return of the form of proxy shall not preclude members from attending and voting in person at the meeting or at any adjourned meeting (as the case may be) should they wish, and in such event, the form of proxy shall be deemed to be revoked.

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