Wang On Group Limited

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

If you are in 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 TRANSACTION INVOLVING PROPOSED DISPOSAL OF PROPERTY AND PROPOSED RENEWAL OF THE SCHEME MANDATE

Financial adviser

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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 12 November 2004 at 9:30 a.m. is set out on pages 77 and 78 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 by no later than 48 hours before the time appointed for holding the special general meeting or any adjourned meeting thereof. Completion and return of the form of proxy shall 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

27 October 2004

	Page
DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
LETTER FROM THE BOARD
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	5
The Provisional Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	6
Information on the Property and financial effects of the Disposal . . . . . . . . . . .	7
Reason for the Disposal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	8
Use of proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	8
Acquisition of Dragon Richly, Poly Talent and Profit Million . . . . . . . . . . . . .	8
Information on the Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	10
Renewal of the Scheme Mandate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	10
The SGM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	12
Voting on poll . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	12
Recommendation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	13
Additional information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	13
APPENDIX I – FINANCIAL INFORMATION ON THE GROUP. . . . . . . .	14
APPENDIX II – PROPERTY VALUATION. . . . . . . . . . . . . . . . . . . . . . . . . .	67
APPENDIX III – GENERAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . .	70
NOTICE OF THE SGM. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	77

−i −

DEFINITIONS

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

“associate”	has	the meaning ascribed to it under the Listing Rules
“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
“Directors”	the	directors of the Company
“Disposal”	the	disposal of the Property pursuant to the terms of the
	Provisional Agreement
“Dragon Richly”	Dragon Richly Investment Limited, a company wholly
	and	beneficially owned by Mr. Tang
“Eligible Person”	means:
	(i)	(a) any director or proposed director (whether
		executive or non-executive, including any
		independent non-executive director),
		employee or proposed employee (whether full
		time or part time) of, or
		(b) any individual for the time being seconded to
		work for,
		any member of the Group (as defined in the Share
		Option Scheme) or any Substantial Shareholder or
		any company controlled by a Substantial
		Shareholder; or

(ii) any holder of any securities issued by any member of the Group (as defined in the Share Option Scheme) or any Substantial Shareholder or any company controlled by a Substantial Shareholder; or

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DEFINITIONS

(iii) (a) any business or joint venture partner, contractor, agent or representative of,
(b) any person or entity that provides research, development or other technological support or any advisory, consultancy, professional or other services to,
(c) any supplier, producer or licensor of goods or services to,
(d) any customer, licensee (including any sublicensee) or distributor of goods or services of, or
(e) any landlord or tenant (including any subtenant) of,
any member of the Group (as defined in the Share Option Scheme) or any Substantial Shareholder or any company controlled by a Substantial Shareholder;

and, for the purposes of the Share Option Scheme, shall include any company controlled by one or more persons belonging to any of the above classes of participants

“Group”

the Company and its subsidiaries

“Hong Kong” the Hong Kong Special Administrative Region of the People’s Republic of China
“Latest Practicable Date” 20 October 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, the chairman and the managing director of the Company

“Poly Talent” Poly Talent Investment Limited, a company wholly and beneficially owned by Mr. Tang

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DEFINITIONS

“Profit Million” Profit Million Investment Limited, a company wholly and beneficially owned by Mr. Tang

“Property” the entirety of one block of 4-storey pre-war commercial and residential building situated at No. 32 Argyle Street, Kowloon, Hong Kong
“Provisional Agreement” the provisional sale and purchase agreement entered into by WOB on 30 September 2004 in respect of the Disposal
“Purchaser” Modern Win (Hong Kong) Limited. To the best of the Directors’ knowledge, information and belief having made all reasonable enquiry, Modern Win (Hong Kong) Limited and its ultimate beneficial owner are not connected with the Company, the director, chief executive or substantial shareholder of the Company or any of its subsidiaries or an associate of any of them
“Scheme Mandate” the limit imposed under Rule 4(A) of the rules of the Share Option Scheme on the maximum number of Shares issuable upon the exercise of all options which may be granted under the Share Option Scheme and any other share option schemes of the Company, being 10% of the Shares in issue on the adoption date of the Share Option Scheme
“Scheme Period” the period commencing on the date on which the Share Option Scheme was adopted by Shareholders (i.e. 3 May 2002) and expiring at the close of business on the day immediately preceding the tenth anniversary thereof
“SFO” the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong)
“SGM” the special general meeting of the Company to be convened to consider and, if thought fit, approve the agreements in relation to the Disposal, the Disposal and the renewal of the Scheme Mandate
“Share(s)”
share(s) of HK$0.10 each in the capital of the Company

“Share Option Scheme” the share option scheme of the Company adopted pursuant to an ordinary resolution of the Company passed on 3 May 2002

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DEFINITIONS

“Shareholders” holders of the Shares “Stock Exchange” The Stock Exchange of Hong Kong Limited “Substantial Shareholder” any substantial shareholder of the Company; and “substantial shareholder” shall have the meaning ascribed to it under rule 1.01 of the Listing Rules “Suitbest” Suitbest Investments Limited, a wholly owned subsidiary of the Company “WOB” WOB 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 “HK$” 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

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

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

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

27 October 2004

To the Shareholders

Dear Sir or Madam

MAJOR TRANSACTION INVOLVING PROPOSED DISPOSAL OF PROPERTY AND PROPOSED RENEWAL OF THE SCHEME MANDATE

INTRODUCTION

On 5 October 2004, the Board announced that on 30 September 2004, WOB, a wholly owned subsidiary of the Company, entered into the Provisional Agreement pursuant to which WOB conditionally agreed to sell to the Purchaser the Property for a cash consideration of HK$73.8 million. The Disposal constitutes a major transaction of the Company under the Listing Rules.

The purpose of this circular is to, among other things, provide you with information of the Provisional Agreement and the Disposal and renewal of the Scheme Mandate and to convene the SGM to consider and, if thought fit, approve (i) the agreements in relation to the Disposal and the Disposal; and (ii) the renewal of the Scheme Mandate.

* For identification purpose only

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LETTER FROM THE BOARD

THE PROVISIONAL AGREEMENT

Date of execution

30 September 2004

Parties

Vendor : WOB, a wholly owned subsidiary of the Company Purchaser : Modern Win (Hong Kong) Limited. To the best of the Directors’ knowledge, information and belief having made all reasonable enquiry, the Purchaser and its ultimate beneficial owner are not connected with the Company, the director, chief executive or substantial shareholder of the Company or any of its subsidiaries or an associate of any of them.

According to the Directors’ understanding, the Purchaser is an investment holding company.

Asset subject to the Disposal

The whole block located at No. 32 Argyle Street, Kowloon, Hong Kong in which (i) the First Floor of the Property will be subject to and with the benefit of the existing tenancy (which is for a term of twenty two months from 1 February 2004 to 30 November 2005, both days inclusive, for the monthly rent of HK$15,000, exclusive of rates, government rent and management fee which are to be borne by the tenant) on completion of the Disposal; and (ii) vacant possession of the Ground Floor, the Second Floor and the Third Floor of the Property will be delivered to the Purchaser on completion of the Disposal.

Consideration

The consideration for the Disposal is HK$73.8 million, which was determined after arm’s length negotiations between the parties and was agreed on normal commercial terms between the parties. In arriving at the consideration, the Directors have taken into account the prevailing market conditions and prices of similar properties located in the nearby area.

Pursuant to the Provisional Agreement, the consideration for the Disposal shall be paid in the following manner:

(i) a sum of HK$1,000,000 shall be paid upon signing of the Provisional Agreement;
(ii) a sum of HK$2,690,000 shall be paid on or before 11 October 2004;
(iii) a sum of HK$3,690,000 shall be paid on or before 27 October 2004; and

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LETTER FROM THE BOARD

(iv) the balance of HK$66,420,000 shall be paid upon completion of the Disposal.

At the Latest Practicable Date, an aggregate sum of HK$3,690,000 as described in (i) and (ii) above has already been paid by the Purchaser.

Pursuant to the Provisional Agreement, the parties shall enter into a formal sale and purchase agreement in respect of the Disposal on 27 October 2004.

Condition precedent

Completion of the Disposal is conditional upon the approval of the agreements in relation to the Disposal and the Disposal by the Shareholders in the SGM, which shall be held on or before 30 November 2004.

Completion

Completion shall take place on or before 31 January 2005.

In the event that the agreements in relation to the Disposal and the Disposal are not approved by the Shareholders in the SGM, the terms of the Provisional Agreement shall be void and of no effect and WOB shall refund all amounts paid by the Purchaser without interest.

INFORMATION ON THE PROPERTY AND FINANCIAL EFFECTS OF THE DISPOSAL

The Property was acquired by the Group on 2 February 2004 at a consideration of HK$48 million and the total cost of acquisition of the Property amounted to approximately HK$50.1 million. Details of the Property are summarised below:

Address : the entire block of a 4-storey pre-war commercial and residential building located at No. 32 Argyle Street, Kowloon, Hong Kong Floor area : the Property occupies a site area of approximately 981.5 square feet. The Property has a total saleable floor area of approximately 2,964 square feet.

As at the Latest Practicable Date, the Ground Floor and the First Floor of the Property are occupied for commercial purposes, and the Second Floor and the Third Floor of the Property are vacant. Details of the Property is set out in Appendix II to this circular.

The audited net book value of the Property as at 31 March 2004 is HK$53 million. The excess of the consideration of the Property over its audited net book value as at 31 March 2004 amounted to HK$20.8 million. The revenue attributable to the Property from the date of acquisition of the Property to 31 March 2004 was approximately HK$0.4 million, which represented the rental income generated from leasing out the Property. The expenses attributable to the leasing of the Property during the aforesaid period were not significant.

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LETTER FROM THE BOARD

Based on the total cost of acquisition of the Property, the Directors estimate that the Group will record a gain of approximately HK$22.7 million arising from the Disposal after taking into account the relevant expenses in relation to the Disposal of approximately HK$1.0 million. Such gain, which is subject to further adjustment and review by the Company’s auditors, will be recognized in the profit and loss account of the Group for the year ending 31 March 2005, in which completion of the Disposal is expected to take place. Completion of the Disposal will give rise to the following effects on the financial position of the Group:

(i) the consolidated fixed assets of the Group will be reduced by the net book value of the Property as at the date of completion of the Disposal (which amount was HK$53 million as at 31 March 2004);
(ii) the consolidated balance of the bank loan secured by the Property (the “Bank Loan”) and the interest accrued thereon will be reduced to nil as they will be fully repaid; and
(iii) the consolidated cash balance of the Group will be increased by the net proceeds from the Disposal of approximately HK$72.8 million less the amount outstanding under the Bank Loan as at the date of completion of the Disposal.

The effects of the Disposal are expected to be reflected in the consolidated financial statements of the Group for the year ending 31 March 2005, in which completion of the Disposal is expected to take place.

REASON FOR THE DISPOSAL

The Property was acquired by the Group on 2 February 2004 at a consideration of HK$48 million for investment purpose. Having regard to the consideration for the Disposal of HK$73.8 million and the expected gain arising from the Disposal of approximately HK$22.7 million (which amount is subject to further adjustment and review by the Company’s auditors), the Directors consider that the terms of the Disposal are fair and reasonable and the Disposal is in the interest of the Company and the Shareholders as a whole.

USE OF PROCEEDS

As mentioned in Appendix II to this circular, the property was subject to a Legal Charge and a Rental Assignment in favour of The Hongkong and Shanghai Banking Corporation Limited. As at the Latest Practicable Date, the aggregate amount of such secured bank loan was HK$25.5 million and the interest accrued thereto was approximately HK$0.1 million. Part of the net proceeds from the Disposal will be applied for fully repaying the amount outstanding under the Bank Loan and the remaining balance will be used as the Group’s working capital. The Legal Charge and the Rental Assignment will be released upon completion of the Disposal.

ACQUISITION OF DRAGON RICHLY, POLY TALENT AND PROFIT MILLION

On 30 September 2004, the Board announced that on 27 September 2004, Suitbest, Mr. Tang and Dragon Richly entered into an agreement (the “First Acquisition Agreement”) pursuant to which Suitbest conditionally agreed to acquire from Mr. Tang the entire issued

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LETTER FROM THE BOARD

share capital and shareholder’s loan of Dragon Richly. Dragon Richly had on 17 September 2004 entered into provisional sale and purchase agreements (the “KT Provisional Agreements”) to acquire 29 residential and commercial units in Nos. 12, 14, 16, 18, 20 and 22, Davis Street, Kennedy Town, Hong Kong. As informed by Dragon Richly, apart from such 29 units, it is in negotiations for a possible acquisition of one residential unit and one commercial unit in Nos. 12 and 22, Davis Street, Kennedy Town, Hong Kong (the “Remaining Units”). The consideration payable by Suitbest under the First Acquisition Agreement shall be the aggregate of the face value of the entire issued share capital of Dragon Richly, that is, HK$1, and the shareholder’s loan owing by Dragon Richly to Mr. Tang as at completion of the First Acquisition Agreement. As at the Latest Practicable Date, the shareholder’s loan owing by Dragon Richly to Mr. Tang amounted to approximately HK$7.8 million, which had been paid or will be applied by Dragon Richly as the deposits for the purchase of the aforesaid premises in Kennedy Town. Without taking into account the possible acquisition of the Remaining Units, the maximum amount of consideration payable by Suitbest under the First Acquisition Agreement, before related expenses, is HK$77,550,001, being the aggregate of the purchase price for 29 residential and commercial units under the KT Provisional Agreements and the face value of the entire issued share capital of Dragon Richly. Completion of the First Acquisition Agreement is conditional upon certain conditions being fulfilled by 5:00 p.m. on 31 March 2005 or such later date as the parties may agree, and shall take place on the next business day after fulfillment of all the conditions precedent or at such other date as the parties may agree.

On 13 October 2004, the Board announced that on 12 October 2004, Suitbest, Mr. Tang, Poly Talent and Profit Million entered into an agreement (the “Second Acquisition Agreement”) pursuant to which Suitbest conditionally 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. Poly Talent and Profit Million had on 11 October 2004 separately entered into provisional sale and purchase agreements (the “FPB Provisional Agreements”) to acquire certain plots of vacant land situated at Fairview Park Boulevard, Yuen Long, New Territories, Hong Kong (the “Land”). The consideration payable by Suitbest under the Second Acquisition Agreement shall be the aggregate of the face value of the entire issued share capital of Poly Talent and Profit Million, that is, HK$2, and the shareholder’s loans owing to Mr. Tang by Poly Talent and Profit Million respectively as at completion of the Second Acquisition Agreement. As at the Latest Practicable Date, the shareholder’s loan owing by Poly Talent to Mr. Tang amounted to HK$1,800,000 and that owing by Profit Million to Mr. Tang amounted to HK$300,000, which had been paid by Poly Talent and Profit Million respectively as the initial deposits for the purchase of the Land. The maximum amount of consideration payable by Suitbest under the Second Acquisition Agreement, before related expenses, is HK$68,330,002, being the aggregate of the purchase price for the Land under the FPB Provisional Agreements and the face value of the entire issued share capital of Poly Talent and Profit Million. Completion of the Second Acquisition Agreement is conditional upon certain conditions being fulfilled by 5:00 p.m. on 31 March 2005 or such later date as the parties may agree, and shall take place on the next business day after fulfillment of all the conditions precedent or at such other date as the parties may agree.

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LETTER FROM THE BOARD

Details of the above acquisitions are set out in the announcements of the Company dated 30 September 2004 and 13 October 2004 respectively. A special general meeting of the Company will be convened for the purpose of considering and, if thought fit, approving the First Acquisition Agreement, the Second Acquisition Agreement and the transactions contemplated therein or incidental thereto. A circular containing, among others, information on the above acquisitions and the notice of such special general meeting will be despatched by the Company to the Shareholders as soon as practicable.

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.

RENEWAL OF THE SCHEME MANDATE

The Company adopted the Share Option Scheme on 3 May 2002. The purpose of the Share Option Scheme is to enable the Board to grant options to Eligible Persons as incentives or rewards for their contribution or potential contribution to the Group.

Under the rules of the Share Option Scheme:

(1) Subject to sub-paragraphs (2) and (3) below, the maximum number of Shares issuable upon exercise of all options to be granted under the Share Option Scheme and any other share option schemes of the Company as from the commencement of the Scheme Period (excluding, for this purpose, options which have lapsed in accordance with the terms of the Share Option Scheme or any other share option schemes of the Company) must not in aggregate exceed the Scheme Mandate. The Shares underlying any options granted under the Share Option Scheme or any other share option schemes of the Company which have been cancelled (but not options which have lapsed) are counted for the purpose of the Scheme Mandate.
(2) The Scheme Mandate may be refreshed at any time by obtaining approval of the Shareholders in general meeting provided that the new limit under the refreshed Scheme Mandate must not exceed 10% of the Shares in issue at the date of the Shareholders’ approval of such refreshed Scheme Mandate. Options previously granted under the Share Option Scheme or any other share option schemes of the Company (including those exercised, outstanding, cancelled or lapsed in accordance with the terms of the Share Option Scheme or any other share option schemes of the Company) will not be counted for the purpose of calculating the total number of Shares subject to the refreshed Scheme Mandate.
(3) The aggregate number of Shares which may be issued upon exercise of all outstanding options granted and yet to be exercised under the Share Option Scheme and any other share option schemes of the Company must not exceed 30% of the Shares in issue from time to time.

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LETTER FROM THE BOARD

Based on the total number of Shares in issue as at 3 May 2002, being the adoption date of the Share Option Scheme, the maximum number of Shares which may be issued upon exercise of all options granted and to be granted under the Share Option Scheme and any other share option schemes of the Company is 9,864,365 Shares. As at the Latest Practicable Date, the Company did not have any other share option scheme other than the Share Option Scheme.

As at the Latest Practicable Date, options carrying the rights to subscribe for up to a total 9,800,000 Shares, representing 9.93% of the Shares in issue as at 3 May 2002, have been fully granted under the Share Option Scheme, and none of these options has been exercised.

None of the options under the Share Option Scheme has been granted to any connected person (as defined in the Listing Rules) of the Company.

Unless the Scheme Mandate is refreshed, only a limited number of options may be granted under the Scheme Mandate. The Directors believe that their ability to grant new options to Eligible Persons as incentives or rewards for their contribution or potential contribution to the Group is therefore restricted.

It is therefore proposed that, subject to the approval of the Shareholders at the SGM and fulfilment of other applicable requirements under the Listing Rules, the limit on the number of new options which may be granted by the Directors under the Share Option Scheme be refreshed to 10% of the Shares in issue at the date of the approval by the Shareholders at the SGM. Options previously granted under the Share Option Scheme or any other share option schemes of the Company (including those exercised, outstanding, cancelled or lapsed in accordance with the terms of the Share Option Scheme or any other share option schemes of the Company) will not be counted for the purpose of the calculation of the limit as refreshed.

If the Scheme Mandate is refreshed, on the basis of 143,320,366 Shares in issue as at the Latest Practicable Date and assuming that no further Shares will be issued prior to the date of Shareholders’ approval of the refreshed Scheme Mandate, the maximum number of options that can be granted by the Company under the refreshed Scheme Mandate will be options under which 14,332,036 Shares will be issuable.

The renewal of the Scheme Mandate is conditional upon:

(a) the Shareholders passing an ordinary resolution to approve the refreshed Scheme Mandate at the SGM; and
(b) the Stock Exchange granting the approval of the listing of, and permission to deal in, the Shares to be issued pursuant to the exercise of any options granted under the refreshed Scheme Mandate.

Application will be made to the Stock Exchange for the listing of and permission to deal in any Shares, representing 10% of the Shares in issue at the SGM, which may fall to be issued upon the exercise of any options that may be granted under the refreshed Scheme Mandate.

−11 −

LETTER FROM THE BOARD

THE SGM

The Disposal constitutes a major transaction of the Company pursuant to Rule 14.06(3) of the Listing Rules and is therefore subject to approval by the Shareholders in the SGM. So far as is known to the Directors, no Shareholder has a material interest in the Disposal and accordingly no Shareholder is required to abstain from voting at the SGM to approve the agreements in relation to the Disposal and the Disposal.

Set out on pages 77 and 78 of this circular is a notice convening the SGM to be held at 35th Floor, Two International Finance Centre, 8 Finance Street, Central, Hong Kong on 12 November 2004 at 9:30 a.m. at which ordinary resolutions will be proposed to the Shareholders to consider and, if thought fit, approve the agreements in relation to the Disposal, the Disposal and the renewal of the Scheme Mandate.

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 the branch share registrar of the Company in Hong Kong, Tengis Limited, 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 holding the SGM or any adjournment thereof. Completion and return of the form of proxy will not preclude you from attending and voting in person at the SGM or any adjournment thereof if 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) 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.

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LETTER FROM THE BOARD

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.

RECOMMENDATION

Having regard to the consideration for the Disposal of HK$73.8 million, the expected gain arising from the Disposal of approximately HK$22.7 million (which amount is subject to further adjustment and review by the Company’s auditors), the prevailing market conditions and prices of similar properties located in the nearby area, the Directors consider that the terms of the Disposal are fair and reasonable and that the Disposal is in the interests of the Company and the Shareholders as a whole. With a view that the proposed renewal of the Scheme Mandate will enhance the Company’s ability to grant new options to Eligible Persons as incentives or rewards for their contribution or potential contribution to the Group, the Directors consider that the proposed renewal of the Scheme Mandate are in the interests of the Company and the Shareholders as a whole. Accordingly, the Directors recommend the Shareholders to vote in favour of all the resolutions as set out in the notice of 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

−13 −

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

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

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

−14 −

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

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

−15 −

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

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

−16 −

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

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

−17 −

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

Consolidated Statement of Changes in Equity

Year ended 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.

−18 −

APPENDIX I

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

−19 −

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

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

−20 −

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

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

−21 −

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

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

−22 −

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

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

−23 −

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

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.

−24 −

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

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.

−25 −

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

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.

−26 −

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

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.

−27 −

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

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.

−28 −

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

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.

−29 −

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

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;

−30 −

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

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.

−31 −

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

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.

−32 −

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

Group	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

−33 −

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

	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
Business segments (Cont’d)					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

−34 −

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

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

−35 −

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

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	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) – (8,060)	(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

−36 −

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

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

−37 −

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

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$’000 2,796 213 809 3,818 516 4,334	2003 HK$’000 (Restated) 2,246 37 154
		2,437 924
		3,361

−38 −

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

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.

−39 −

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

14. FIXED ASSETS

Group

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

−40 −

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

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.

−41 −

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

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.

−42 −

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

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	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
	776,081 (419,449)	826,279 (419,449
	356,632

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

−43 −

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

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

−44 −

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

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.

−45 −

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

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

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.

−46 −

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

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

−47 −

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

18. INVESTMENTS

(a) Long term investments

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 –
			–

−48 −

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

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:

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

−49 −

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

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

−50 −

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

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 27. 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

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

−51 −

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

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

−52 −

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

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

−53 −

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

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.

−54 −

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

30. SHARE CAPITAL

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.

−55 −

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

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.

−56 −

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

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)	At 1 April 2003 654,000 654,000 1,320,000 – 2,628,000	Number of share options 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 6-3-2001 6-3-2001 to 5-2-2005 2.17 – 654,000 6-3-2001 6-3-2001 to 5-2-2005 2.17 – 1,320,000 6-3-2001 6-3-2001 to 5-2-2005 2.17 9,800,000 9,800,000 * 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).

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FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

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
	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	609,399

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.

−58 −

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

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 I

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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FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

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 I

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 I

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.

−63 −

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

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.

−64 −

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

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.

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.

−65 −

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

3. STATEMENT OF INDEBTEDNESS

As at 31 August 2004, the Group had secured outstanding bank borrowings of approximately HK$276.3 million. These facilities were secured by certain of the Group’s leasehold land, investment properties, rental income from certain of the Group’s sub-licensing 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 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 31 August 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 31 August 2004.

Save as disclosed above, the Directors have confirmed that there has been no material change in the indebtedness and contingent liabilities of the Group since 31 August 2004.

4. WORKING CAPITAL

The Directors are satisfied after due and careful enquiry that following the completion of the Disposal, taking into account the financial resources available to the Group, including internal resources and present available banking facilities, and in the absence of unforeseen circumstances, the Group has available sufficient working capital for the Group’s present requirements, that is for at least the next 12 months from the date of publication of this circular.

5. FINANCIAL AND TRADING PROSPECTS

The overall economy in Hong Kong for 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 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 Group is in a good position to benefit from the improvement in the general business environment in Hong Kong.

−66 −

PROPERTY VALUATION

APPENDIX II

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 Property as at 7th October 2004.

==> picture [146 x 63] intentionally omitted <==

==> picture [78 x 76] intentionally omitted <==

7th 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 Sir

Re : Valuation of property – 32 Arygle Street, Kowloon

In accordance with your instruction for us to value the captioned property as at 7th 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
(e) that both parties to the transaction had acted knowledgeably, prudently and without compulsion.”

−67 −

APPENDIX II

PROPERTY VALUATION

Our valuation has been made on the assumption that the owner 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 and where appropriate on the basis of capitalisation of the net rental income obtained from the property with allowance for reversionary income potential.

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, floor 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 arranged for any investigation to be carried out to determine whether or not high alumina cement concrete or calcium chloride additive or pulverized fly ash, or any other deleterious material have been used in the construction of the property. We are therefore unable to report that the property is free from risk in this respect. For the purpose of this valuation, we have assumed that deleterious materials have not been used in the property.

No allowance has been made in our valuation for any charges, mortgages or amounts owing on the properties 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.

−68 −

PROPERTY VALUATION

APPENDIX II

VALUATION CERTIFICATE

Property

Description and Tenure

Particulars of Occupancy

Capital value in Existing state as 7th October 2004

No. 32 The property comprises a Argyle Street, 4-storey pre-war Kowloon commercial/residential tenement building sharing a common The whole of the staircase with No. 34 Argyle Remaining Portion of Street. The site area of the Kowloon Inland Lot No. subject property is approximately 2855 981.5 sq.ft. (91.18 sq.m.).

The G/F and 1/F are leased whilst the 2/F and 3/F are vacant.

HK$64,000,000

The property has a total saleable floor area of approximately 2,964 sq.ft. (275.36 sq.m.) and the breakdown is as follows:

Floor G/F 1/F 2/F 3/F Total: Plus Yard on G/F Roof	Saleable area (sq.ft.) 654 770 770 770
	2,964

	185 670

The property is held under a Government Lease for a term of 75 years commencing from 24th March 1923 and has been extended for a further term of 75 years. The annual Government rent is HK$70,398.

Notes:

The registered owner of the property is WOB Investments Limited.
The property is subject to a Legal Charge and a Rental Assignment in favour of The Hongkong and Shanghai Banking Corporation Limited.
The leases of the Ground Floor would be ended on 31st October 2004. The First Floor is leased to a tenant for a term expiring on 30th November 2005 at a monthly rent of HK$15,000, exclusive of rates, Government rent and management fees. The landlord is responsible for the exterior repairs whilst the tenant is responsible for the interior repairs.

Our valuation is made on the basis that the property is subject to an existing lease on the first floor whilst the other floors with vacant possession.

The property falls in a zone designated for “Residential (Group A)” under the Mong Kok Outline Zoning Plan No. 5/K3/21 dated 7th May 2004.
There are no options or rights of pre-emption.

−69 −

GENERAL INFORMATION

APPENDIX III

1. RESPONSIBILITY STATEMENT

This circular includes particulars given in compliance with the Listing Rules for the purpose of giving information with regard to the 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	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)

−70 −

GENERAL INFORMATION

APPENDIX III

Notes:

The letter “L” denotes a long position in shares.
Mr. Tang was interested in these shares through Caister Limited, a company which is wholly and beneficially owned by him.
Mr. Tang was taken to be interested under the SFO in those shares in which his spouse, Ms. Yau, was interested.
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.
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 III

		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:

The letter “L” denotes a long position in shares.
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.
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 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 and Vigers Appraisal & Consulting Limited had any direct or indirect interest in any assets which have been, since 31 March 2004, the date to which the latest published audited consolidated accounts of the Group were made up, acquired or disposed of by or leased to any member of the Group, or are proposed to be acquired or disposed of by or leased to any member of the Group;
(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 Group; and

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GENERAL INFORMATION

APPENDIX III

(iii) 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 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 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. EXPERT’S QUALIFICATION AND CONSENT

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

The qualification of the expert who has provided its opinion or report contained in this circular is set out as follows:

Name Qualification

Vigers Appraisal & Consulting Limited Professional surveyors and valuer

6. MATERIAL CONTRACTS

The following contracts (not being contracts entered into in the ordinary course of business) were entered into by members of the 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 HK$12 million of the convertible notes issued by WYT on 9 July 2002 at a consideration of HK$12 million;

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GENERAL INFORMATION

APPENDIX III

(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 an 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) 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$67 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”) of LMC in respect of the acquisition by Biomore Investments Limited of 517,556 shares 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 of WYT to certain independent third parties at a total placing price of HK$33 million;
(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 from Advance Century Limited to Bright Leading Limited at a consideration of HK$7 million;

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GENERAL INFORMATION

APPENDIX III

(g) a conditional sale and purchase agreement dated 8 April 2004 entered into between, among others, Wang On Enterprises (BVI) Limited and Source Millennium Limited in respect of the sale and purchase 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) a conditional sale and purchase agreement dated 27 September 2004 entered into between Mr. Tang, Suitbest and Dragon Richly in relation to the purchase of the entire issued share capital and shareholder’s loan of Dragon Richly by Suitbest from Mr. Tang;
(i) the Provisional Agreement; and
(j) a conditional sale and purchase agreement dated 12 October 2004 entered into between Mr. Tang, Suitbest, Poly Talent and Profit Million in relation to the purchase of the entire issued share capital and the shareholder’s loans of each of Poly Talent and Profit Million by Suitbest from Mr. Tang.

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.

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 and valuation certificate prepared by Vigers Appraisal & Consulting Limited as set out in Appendix II to this circular;

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GENERAL INFORMATION

APPENDIX III

(d) the written consent referred to in the paragraph headed “5. Expert’s qualification and consent” in this appendix;
(e) the material contracts referred to in the paragraph headed “6. Material contracts” in this appendix;
(f) the circular dated 20 April 2004 issued by the Company in relation to the acquisition of property;
(g) the circular dated 6 May 2004 issued by the Company in relation to the disposal of property;
(h) the circular dated 12 May 2004 issued by the Company in relation to, among other matters, disposal of business interests of WOD Investments Limited;
(i) the circular dated 27 July 2004 issued by the Company in relation to the acquisition of property;
(j) the circular dated 28 September 2004 issued by the Company in relation to the purchase of properties; and
(k) this circular.

−76 −

NOTICE OF THE SGM

==> picture [82 x 60] intentionally omitted <==

( )[*]

(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 12 November 2004 at 9:30 a.m. for the purpose of considering and, if thought fit, passing the following resolutions as ordinary resolutions of the Company:

ORDINARY RESOLUTIONS

“ THAT :
(a) the provisional sale and purchase agreement executed on 30 September 2004 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 and the formal sale and purchase agreement subsequent to the said provisional sale and purchase agreement entered into by the said parties (together the “Agreements”) (a copy of such provisional sale and purchase agreement and a copy of such formal sale and purchase agreement have been produced to this meeting and marked “A” and “B” respectively and initialed by the chairman of the Meeting for the purpose of identification) and the transactions contemplated thereunder be and are hereby approved; and
(b) the directors of the Company be and are hereby authorized to do all such acts and things and sign and execute all such documents as they may consider necessary, expedient, appropriate or desirable in connection with or incidental to or to give effect to or for the implementation of the Agreements.”

* For identification purpose only

−77 −

NOTICE OF THE SGM

“ THAT , subject to and conditional upon the Listing Committee of The Stock Exchange of Hong Kong Limited granting the listing of and permission to deal in the shares issuable upon exercise of the options to be granted pursuant to the authority hereby given, the board of directors of the Company be and is hereby authorized to grant options under the share option scheme of the Company adopted on 3 May 2002 pursuant to which shares of the Company representing up to 10 per cent. of the number of shares of the Company in issue as at the date of the passing of this resolution may be issued upon the exercise of such options (the “Refreshed Scheme Mandate”) and to do all such acts and to enter into all such transactions, arrangements and agreements as may be necessary, expedient, appropriate or desirable in order to give full effect to the Refreshed Scheme Mandate.”

By order of the Board Wang On Group Limited Kelly Li Company Secretary

Hong Kong, 27 October 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:

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.
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.
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 branch share registrar in Hong Kong, 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.
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 so wish, and in such event, the form of proxy shall be deemed to be revoked.

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

−78 −

AI assistant

Wang On Group Limited — Proxy Solicitation & Information Statement 2004

49778_rns_2004-10-27_7f73cfb1-5df5-4cdf-8baa-1f23af735d29.pdf

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

MAJOR TRANSACTION INVOLVING PROPOSED DISPOSAL OF PROPERTY AND PROPOSED RENEWAL OF THE SCHEME MANDATE

Financial adviser

CONTENTS

DEFINITIONS

DEFINITIONS

MAJOR TRANSACTION INVOLVING PROPOSED DISPOSAL OF PROPERTY AND PROPOSED RENEWAL OF THE SCHEME MANDATE

INTRODUCTION

THE PROVISIONAL AGREEMENT

Date of execution

Parties

Asset subject to the Disposal

Consideration

Condition precedent

Completion

INFORMATION ON THE PROPERTY AND FINANCIAL EFFECTS OF THE DISPOSAL

LETTER FROM THE BOARD

REASON FOR THE DISPOSAL

USE OF PROCEEDS

ACQUISITION OF DRAGON RICHLY, POLY TALENT AND PROFIT MILLION

LETTER FROM THE BOARD

LETTER FROM THE BOARD

INFORMATION ON THE GROUP

RENEWAL OF THE SCHEME MANDATE

LETTER FROM THE BOARD

THE SGM

VOTING ON POLL

LETTER FROM THE BOARD

RECOMMENDATION

ADDITIONAL INFORMATION

1. SUMMARY OF AUDITED FINANCIAL INFORMATION

Results

2. EXTRACT OF THE FINANCIAL STATEMENTS

Consolidated Profit and Loss Account

Consolidated Balance Sheet

Consolidated Statement of Changes in Equity

FINANCIAL INFORMATION ON THE GROUP

Consolidated Cash Flow Statement

Balance Sheet

Notes to the Financial Statements

1. CORPORATE INFORMATION

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

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

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of preparation

Basis of consolidation

Subsidiaries

Associates

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

Goodwill

Negative goodwill

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

Related parties

Impairment of assets

Fixed assets and depreciation

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

Investment properties

Leased assets

Investments

Held-to-maturity securities

Investment securities

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

Inventories

Cash and cash equivalents

Provisions

Provisions for onerous contracts

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

Income tax

Revenue recognition

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

Employee benefits

Employment Ordinance long service payments

Retirement benefits scheme

Share option schemes

Dividends

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

Foreign currencies

Wang On Group Limited Proxy Solicitation & Information Statement 2004