Wang On Group Limited — Proxy Solicitation & Information Statement 2004

May 13, 2004

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

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

If you have sold or transferred all your shares in Wang On Group Limited (the “Company”), you should at once hand this circular with the accompanying proxy form to the purchaser or the transferee or to the bank, stockbroker or other agent through whom the sale or transfer was effected for transmission to the purchaser or the 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 （宏安集團有限公司）＊

(incorporated in Bermuda with limited liability)

(Stock Code: 1222)

MAJOR TRANSACTIONS

(1) DISPOSAL OF BUSINESS INTERESTS OF WOD INVESTMENTS LIMITED; AND

(2) SUBSCRIPTION OF RIGHTS SHARES PROVISIONALLY ALLOTTED TO WANG ON GROUP LIMITED ON THE RECORD DATE TOGETHER WITH THE APPLICATION FOR 210,000,000 EXCESS RIGHTS SHARES UNDER THE PROPOSED RIGHTS ISSUE OF WAI YUEN TONG MEDICINE HOLDINGS LIMITED

Financial adviser

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KINGSWAY CAPITAL LIMITED

A letter from the board of directors of the Company dated 12 May, 2004 is set out on pages 6 to 19 of this circular.

A notice convening a special general meeting of the Company to be held at 37th Floor, Citibank Tower, Citibank Plaza, 3 Garden Road, Central, Hong Kong at 9:30 a.m. on 4 June, 2004 is set out on pages 69 to 70 of this circular. A form of proxy for use at the special general meeting is enclosed with this circular. Whether or not you are able to attend the meeting, you are requested to complete and return the enclosed form of proxy in accordance with the instructions printed thereon and deposit with the Company’s Hong Kong branch share registrar, Tengis Limited, at Ground Floor, Bank of East Asia Harbour View Centre, 56 Gloucester Road, Wanchai, Hong Kong as soon as possible but in any event not less than 48 hours before the time appointed for the holding of the special general meeting. Completion and return of the form of proxy will not preclude you from attending and voting in person at the special general meeting should you so desire.

• For identification purpose only

12 May, 2004

CONTENTS

	Page
Responsibility statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	ii
Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
Letter from the Board
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	6
Conditional Sale and Purchase Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	7
Information on WOD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	9
Reasons for the Disposal and use of proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	10
Rights Issue and Underwriting Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	11
Conditions of the Underwriting Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	14
Financial and trading prospects of the Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	15
Reasons for application for excess Rights Shares by Wang On . . . . . . . . . . . . . . .	16
WYT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	17
Listing Rules implications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	18
SGM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	18
Recommendation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	19
Additional information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	19
Appendix I – Financial information of the Group. . . . . . . . . . . . . . . . . . . . . . . . .	20
Appendix II – Financial information of the WYT Group . . . . . . . . . . . . . . . . . . .	22
Appendix III – Valuation report. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	58
Appendix IV – General information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	62
Notice of the SGM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	69

– i –

RESPONSIBILITY STATEMENT

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

– ii –

DEFINITIONS

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

“2002 Convertible Notes” the convertible notes having an aggregate principal amount of HK$36,500,000, convertible into WYT Shares at HK$1.00 each, issued by WYT to a subsidiary of the Company on 9 July, 2002 “2004 Convertible Notes” the convertible notes having an aggregate principal amount of HK$20,000,000, convertible into WYT Shares at HK$0.70 each, issued by WYT to a subsidiary of the Company on 30 March, 2004 “associates” has the meaning ascribed thereto in the Listing Rules “Board” the board of the Directors “Bonus Share(s)” not less than 552,773,845 and not more than 552,788,529 new WYT Shares to be allotted and issued to the first registered holders of the Rights Shares on the basis of one bonus share (credited as fully paid) for every three fully paid Rights Shares “Business Day” any day (other than Saturday) on which licensed banks in Hong Kong are generally open for business throughout their normal business hours “Capital Adjustment” the cancellation of the authorised but unissued WYT Shares and the restoration of the authorised share capital of WYT to its original amount by the creation of the requisite number of New WYT Shares “Capital Reduction” the proposed reduction of the nominal value of each of the issued WYT Shares from HK$0.10 each to HK$0.01 by the cancellation of HK$0.09 paid up on each issued WYT Share “Capital Reorganisation” the Capital Reduction and the Capital Adjustment “Companies Act” the Companies Act 1981 of Bermuda “Conditional Sale and the conditional sale and purchase agreement dated as of Purchase Agreement” 8 April, 2004 entered into between, amongst others, Wang On (BVI) and Source Millennium in respect of the sale and purchase of the entire issued share capital of WOD and a related shareholder’s loan

– 1 –

DEFINITIONS

“Convertible Loan Stock”	the convertible unsecured loan stock issued by WYT on
	12 January, 1999
“Convertible Securities”	the Share Options and the Convertible Loan Stock
	entitling the relevant holders to subscribe/convert an
	aggregate of 14,684 WYT Shares, excluding those Share
	Options which the two holders thereof have undertaken
	not to exercise
“Directors”	the directors of the Company, including the independent
	non-executive directors of the Company
“Disposal”	the sale and purchase of the entire issued share capital
	of WOD and a related shareholder’s loan pursuant to the
	Conditional Sale and Purchase Agreement
“Group”	the Company and its subsidiaries
“Hong Kong”	the Hong Kong Special Administrative Region of the
	PRC
“Independent Accountant”	an international firm of accountants as agreed between
	Wang On (BVI) and Source Millennium
“Irrevocable Undertaking”	the conditional irrevocable undertaking given by the
	Company to (a) subscribe or procure the subscription of
	its or its subsidiaries’ full entitlement pursuant to the
	Rights Issue; (b) make or procure an application for an
	aggregate of 210,000,000 excess Rights Shares; and (c)
	procure its subsidiary not to exercise the conversion rights
	attaching to the 2002 Convertible Notes and the 2004
	Convertible Notes prior to the latest time for acceptance
	of the Rights Shares
“Joint Announcement”	a joint announcement dated 20 April, 2004 issued by
	WYT and the Company regarding, amongst other things,
	the Disposal, the Rights Issue, Capital Reorganisation,
	amendments of Bye-Laws of WYT and a continuing
	connected transaction of WYT
“Kingston”	Kingston Securities Limited, a deemed licensed
	corporation to carry out business in types 1, 4, 6 and 9
	regulated activities under the Securities and Futures
	Ordinance (Chapter 571 of the Laws of Hong Kong)

– 2 –

DEFINITIONS

“Kingsway”	Kingsway Financial Services Group Limited, a deemed
	licensed corporation to carry out business in types 1, 4,
	6, 7 and 9 regulated activities under the Securities and
	Futures Ordinance (Chapter 571 of the Laws of Hong
	Kong)
“Last Trading Day”	7 April, 2004, being the last trading day before the
	suspension of the trading of WYT Shares and the Shares
	on the Stock Exchange pending the publication of the
	joint announcement dated 20 April, 2004 of WYT and
	the Company
“Latest Practicable Date”	7 May, 2004, being the latest practicable date prior to
	the printing of this circular for the purpose of ascertaining
	certain information for inclusion in this circular
“Lease”	the lease of part of WYT Building by the Company (or
	its subsidiary) upon completion of the Disposal pursuant
	to the Conditional Sale and Purchase Agreement
“Leased Property”	the part of WYT Building to be leased by the Company
	(or its subsidiary) pursuant to the Lease
“Listing Rules”	the Rules Governing the Listing of Securities on the
	Stock Exchange
“New WYT Shares”	shares of HK$0.01 each in the share capital of WYT
	upon the Capital Reorganisation becoming effective
“PRC”	the People’s Republic of China
“Prospectus Documents”	the Rights Issue prospectus, the Application Form and
	the form of application for excess Rights Shares
“Record Date”	4 June, 2004, being the date by reference to which
	entitlements to the Rights Issue will be determined
“Registrar”	Tengis Limited of Ground Floor, Bank of East Asia
	Harbour View Centre, 56 Gloucester Road, Wanchai,
	Hong Kong
“Rights Issue”	the proposed issue of the Rights Shares by way of rights
	issue, together with Bonus Shares, to the Qualifying
	Shareholders on the terms to be set out in the Prospectus
	Documents and summarised herein

– 3 –

DEFINITIONS

“Rights Share(s)”	not less than 1,658,321,535 and not more than
	1,658,365,587 New WYT Shares proposed to be offered
	to the Qualifying Shareholders for subscription on the
	basis of three rights shares for every WYT Share held
	on the Record Date pursuant to the Rights Issue
“SGM”	the special general meeting to be convened by the
	Company at 37th Floor, Citibank Tower, Citibank Plaza,
	3 Garden Road, Central, Hong Kong at 9:30 a.m. on 4
	June, 2004 to approve the matters referred to herein
“Share Options”	the options to subscribe for WYT Shares granted under
	the share option schemes adopted by WYT on 16 October,
	1997 and 18 September, 2003
“Shareholders”	holder(s) of the Shares
“Shares”	ordinary shares of HK$0.10 each in the share capital of
	the Company
“Source Millennium”	Source Millennium Limited, a wholly-owned subsidiary
	of WYT
“Stock Exchange”	The Stock Exchange of Hong Kong Limited
“Subscription Price”	the subscription price of HK$0.16 per Rights Share
“Underwriters”	Kingston and Kingsway
“Underwriting Agreement”	the underwriting agreement dated 8 April, 2004 entered
	into between WYT and the Underwriters in relation to
	the Rights Issue
“Valuation Report”	the valuation report on the WYT Building issued by the
	Valuer
“Valuer”	Vigers Appraisal and Consulting Limited, an independent
	professional valuer
“Wang On” or the “Company”	Wang On Group Limited, a company incorporated in
	Bermuda with limited liability and the shares of which
	are listed on the Stock Exchange
“Wang On (BVI)”	Wang On Enterprises (BVI) Limited, a wholly-owned
	subsidiary of Wang On

– 4 –

DEFINITIONS

“WOD”	WOD Investments Limited, a wholly-owned subsidiary
	of Wang On (BVI)
“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
“WYT Board”	the board of the WYT Directors
“WYT Building”	Wai Yuen Tong Medicine Building, a six-storey building
	situated at 9 Wang Kwong Road, Kowloon Bay,
	Kowloon, Hong Kong
“WYT Directors”	the directors of WYT, including the independent non-
	executive directors of WYT
“WYT Group”	WYT and its subsidiaries
“WYT Qualifying	WYT Shareholders, whose names appear on the register
Shareholders”	of members of WYT as at the close of business on the
	Record Date and whose addresses as shown in the register
	of members of WYT are in Hong Kong
“WYT SGM”	the special general meeting of WYT to be convened to
	be held to approve, among others, the Disposal and the
	Rights Issue
“WYT Shareholder(s)”	holder(s) of WYT Shares
“WYT Shares”	shares of HK$0.10 each in the share capital of WYT
	prior to the Capital Reorganisation
“HK$”	Hong Kong dollars, the lawful currency of Hong Kong
“sq.m.”	square meters

– 5 –

LETTER FROM THE BOARD

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WANG ON GROUP LIMITED （宏安集團有限公司）＊

(incorporated in Bermuda with limited liability)

(Stock Code: 1222)

Executive Directors:

Mr. Tang Ching Ho

(Chairman and Managing Director)

Ms. Yau Yuk Yin (Deputy Chairman and Deputy Managing Director) Mr. Chan Chun Hong, Thomas

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

Independent Non-executive Directors:

Dr. Lee Peng Fei, Allen, CBE, JP Mr. Wong Chun, Justein, MBE, JP Dr. Siu Yim Kwan, Sidney, S.B. St.J.

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

12 May, 2004

To the Shareholders and holders

of the share options

Dear Sir or Madam,

MAJOR TRANSACTIONS

(1) DISPOSAL OF BUSINESS INTERESTS OF WOD INVESTMENTS LIMITED; AND

(2) SUBSCRIPTION OF RIGHTS SHARES PROVISIONALLY ALLOTTED TO WANG ON GROUP LIMITED ON THE RECORD DATE TOGETHER WITH THE APPLICATION FOR 210,000,000 EXCESS RIGHTS SHARES UNDER THE PROPOSED RIGHTS ISSUE OF WAI YUEN TONG MEDICINE HOLDINGS LIMITED

INTRODUCTION

In the Joint Announcement, the Board announced that, amongst other things, Wang On (BVI), Source Millennium, the Company and WYT entered into the Conditional Sale and

• For identification purpose only

– 6 –

LETTER FROM THE BOARD

Purchase Agreement dated as of 8 April, 2004 whereby Wang On (BVI) has agreed to sell and Source Millennium has agreed to purchase the entire issued share capital of WOD and a related shareholder’s loan at an initial consideration of HK$64,485,762 (subject to adjustment).

It was also announced in the Joint Announcement that, subject to the satisfaction of the conditions of the Rights Issue as mentioned in the paragraph headed “Conditions of the Rights Issue” below, WYT proposed to raise approximately HK$265.3 million, before expenses, by issuing not less than 1,658,321,535 Rights Shares and not more than 1,658,365,587 Rights Shares at a price of HK$0.16 per Rights Share by way of the Rights Issue on the basis of three Rights Shares for every WYT Share held on the Record Date. WYT also proposes to issue Bonus Shares on the basis of one Bonus Share for every three fully paid Rights Shares. Pursuant to the Irrevocable Undertaking, the Company, being the substantial shareholder of WYT, has conditionally irrevocably undertaken to take up or procure to take up all its or its subsidiaries’ entitlement under the Rights Issue (being 325,393,989 Rights Shares) and, in addition, to make or procure an excess application for 210,000,000 Rights Shares under the Rights Issue. Such undertaking is subject to the approval of the Shareholders at the SGM. WYT Board also announced that they intend to put forward the Capital Reorganisation but it is not conditional upon the implementation of the Rights Issue.

Each of the subscription by the Company of its entitlement of the Rights Shares together with the application for 210,000,000 excess Rights Shares by the Company under the Rights Issue and the Disposal constitutes a major transaction for the Company under the Listing Rules and is subject to Shareholders’ approval at the SGM.

The purpose of this circular is to give you further information regarding, among other things, the subscription by the Company of its entitlement of the Rights Shares together with the application for 210,000,000 excess Rights Shares by the Company under the Rights Issue and the Conditional Sale and Purchase Agreement, and to give you the notice convening the SGM to consider and approve, among other things, (i) the subscription by the Company of its entitlement of the Rights Shares together with the application for 210,000,000 excess Rights Shares by the Company under the Rights Issue; and (ii) the Conditional Sale and Purchase Agreement in accordance with the Listing Rules.

CONDITIONAL SALE AND PURCHASE AGREEMENT

Date: As of 8 April, 2004 Parties: Wang On (BVI) (as vendor) Source Millennium (as purchaser) the Company WYT Subject: the entire issued share capital of WOD and a related shareholder’s loan

– 7 –

LETTER FROM THE BOARD

Consideration and payment terms

Pursuant to the Conditional Sale and Purchase Agreement, Source Millennium has conditionally agreed to acquire the entire issued share capital of WOD and a related shareholder’s loan from Wang On (BVI) for an aggregate cash consideration of HK$64,485,762 (subject to adjustment). The terms of the Conditional Sale and Purchase Agreement were arrived at after arm’s length negotiation and are on normal commercial terms. The price payable by Source Millennium is based on the book value of the shareholder’s loan to WOD and the unaudited net deficit of WOD as at 31 March, 2004 as adjusted by the valuation of WYT Building of HK$85 million as stated in the Valuation Report made by the Valuer. The Valuation Report is set out in Appendix II of this circular.

The consideration shall be payable by Source Millennium to Wang On (BVI) in full by cash, which will be financed by the proceeds of the Rights Issue.

Guarantee

Pursuant the Conditional Sale and Purchase Agreement, the Company has guaranteed the obligations of Wang On (BVI) and WYT has guaranteed the obligations of Source Millennium.

Undertaking by WYT and Source Millennium

WYT and Source Millennium have undertaken to procure the relevant bank to release the corporate guarantee given by the Company in favour of the relevant bank in respect of the bank loan to WOD and other entities within 3 months after completion of the Conditional Sale and Purchase Agreement. Such bank loan amounted to approximately HK$21.24 million as at 31 March, 2004.

Completion accounts and adjustment to consideration

Wang On (BVI) and Source Millennium are required to procure the Independent Accountant to prepare completion accounts within two weeks of completion of the Conditional Sale and Purchase Agreement. The completion accounts are to be prepared in accordance with Hong Kong generally accepted accounting practices and will show the value of the WYT Building as at the date of the Conditional Sale and Purchase Agreement as determined by the Valuer.

The adjustment amount (being the initial consideration of HK$64,485,762 less the total shareholder’s equity/deficiency plus the shareholder’s loans of WOD as set out in the completion accounts) must be paid by Source Millennium to Wang On (BVI) (if it is a negative amount) or by Wang On (BVI) to the Source Millennium (if it is a positive amount) within 3 Business Days after the issue of the completion accounts by the Independent Accountant, provided that if the adjustment amount is negative and exceeds 10% of the initial purchase price of

– 8 –

LETTER FROM THE BOARD

HK$64,485,762, the adjustment amount payable by Source Millennium shall be limited to HK$6,448,576.20, being 10% of such initial purchase price. There is no such limit on the adjustment amount payable by Wang On (BVI) if the adjustment amount is positive.

The Lease

Pursuant to the Conditional Sale and Purchase Agreement, upon completion of the Disposal, the Company (or its subsidiary) will lease the Leased Property from WOD for a monthly rental based on the fair market rent of the Leased Property as at 8 April, 2004 of HK$196,000 per month as stated in a valuation report issued by the Valuer.

Conditions of the Conditional Sale and Purchase Agreement and date of completion

The Conditional Sale and Purchase Agreement is conditional upon, among other things,

• (i) completion of the Rights Issue;

• (ii) approval by Shareholders at the SGM for (a) the subscription by the Company and its subsidiaries of their entitlement of the Rights Shares together with the application for 210,000,000 excess Rights Shares by the Company and its subsidiaries under the Rights Issue; and (b) the Conditional Sale and Purchase Agreement in accordance with the Listing Rules; and

• (iii) approval by the Independent WYT Shareholders at the WYT SGM for the Conditional Sale and Purchase Agreement in accordance with the Listing Rules.

If the above conditions have not been fulfilled by 31 August, 2004, or such later date as the parties may agree, the Conditional Sale and Purchase Agreement shall terminate and be of no further material effect. The consideration shall be paid by Source Millennium at completion which is to occur on the Business Day after the satisfaction of the last condition precedent of the Conditional Sale and Purchase Agreement or such other dates as otherwise agreed by Wang On (BVI) and Source Millennium.

INFORMATION ON WOD

WOD, an indirect wholly-owned subsidiary of the Company, is a property holding company and its principal asset is WYT Building, which is a six-storey building situated at 9 Wang Kwong Road, Kowloon Bay, Kowloon, Hong Kong and is used mainly for commercial and industrial uses. The gross floor area of WYT Building is approximately 10,500 sq.m.. Part of the 1st floor of WYT Building is currently used as parking area for the use of the Group and WYT Group.

– 9 –

LETTER FROM THE BOARD

WOD has entered into two tenancy agreements for the lease of an aggregate of approximately 7,084 sq.m. (representing approximately 67.47% of the total floor area) of WYT Building with (i) WYT Medicine Company Limited, a 99.79% indirect owned subsidiary of WYT at a monthly rental fee of HK$300,000 in July 2003 for a term of three years; and (ii) Luxembourg Medicine Company Limited, a 99.79% indirect owned subsidiary of WYT at a monthly rental fee of HK$75,000 in April, 2003 for a term of three years. The tenancy agreements entered into between WOD and WYT Medicine Company Limited were disclosed in the announcement of WYT dated 25 July, 2003. Other than the aforesaid two tenancy agreements, the remaining area of approximately 3,416 sq.m. of the WYT Building is currently fully used by the Group.

For the two financial years ended 31 March, 2003, WOD recorded audited net losses of approximately HK$1,713 and HK$4.02 million respectively. The losses were mainly attributable to administrative expenses incurred in the respective years and deficit on revaluation of investment property for the financial year 2003. There were no tax payments recorded by WOD during the two financial years of 2002 and 2003.

In accordance with the management account of WOD, the unaudited net tangible liabilities of WOD as at 31 March, 2004 (as adjusted by the valuation of WYT Building) was approximately HK$7.53 million. The bank loans and shareholder’s loan amounted to approximately HK$21.24 million and HK$72.02 million respectively.

REASONS FOR THE DISPOSAL AND USE OF PROCEEDS

As stated in the paragraph headed “Information on WOD” of this circular, WYT Building is a six-storey building and is owned by the Group via its indirect wholly owned subsidiary, WOD, and is currently used by the Group and WYT Group. Presently, an aggregate of approximately 7,084 sq.m. (representing approximately 67.47% of the total floor area) is occupied by WYT Group under two leases with a total monthly rental of HK$375,000.

The initial consideration of HK$64,485,762 was based on the book value of the shareholder’s loan to WOD of HK$72,016,054 and was deducted by the unaudited net deficit of WOD as at 31 March, 2004 of HK$7,530,292 (as adjusted by the valuation of WYT Building of HK$85 million as stated in the Valuation Report made by the Valuer). In accordance with the Conditional Sale and Purchase Agreement, the consideration is subject to adjustment and the calculation of such adjustment amount is stated in the paragraph headed “Completion accounts and adjustment to consideration” of the Joint Announcement. Accordingly, the Company is not expected to make any material gain or loss as a result of the Disposal. The Directors consider that the Disposal will assist to realise its investment and the proceeds of which will be applied as to approximately HK$32.2 million for its future property developments and investments and the remaining of approximately HK$32.2 million (subject to adjustment as stated in the paragraph headed “Completion accounts and adjustment to consideration” of the Joint Announcement) for general working capital of the Group.

– 10 –

LETTER FROM THE BOARD

RIGHTS ISSUE AND UNDERWRITING AGREEMENT

It was announced in the Joint Announcement that, subject to the satisfaction of the conditions of the Rights Issue as mentioned in the paragraph headed “Conditions of the Rights Issue” below, WYT proposed to raise approximately HK$265.3 million by way of the Rights Issue on the basis of three Rights Shares for every WYT Share held on the Record Date. WYT also proposes to issue Bonus Shares on the basis of one Bonus Share for every three fully paid Rights Shares.

As at the Latest Practicable Date, the Group was interested in 108,464,663 WYT Shares, representing approximately 19.62% of WYT’s existing issued share capital.

Issue statistics

Basis of the Rights Issue:

three Rights Shares for every one WYT Share held on the Record Date with one Bonus Share for every three Rights Shares taken up

Subscription price:

HK$0.16 per Rights Share. Taking into account the Bonus Shares being issued with the Rights Shares, the effective price for each Rights Share is approximately HK$0.12 which represents:

• (i) a discount of approximately 66.7% to the closing price of HK$0.36 per WYT Share as quoted on the Stock Exchange on the Last Trading Day;

• (ii) a discount of approximately 28.6% to the theoretical ex-entitlement price of approximately HK$0.168 per share based on the closing price per WYT Share on the Last Trading Day;

• (iii) a discount of approximately 70.4% to the average closing price of HK$0.405 per WYT Share as quoted on the Stock Exchange for the last 10 consecutive trading days up to and including the Last Trading Day;

– 11 –

LETTER FROM THE BOARD

• (iv) a discount of approximately 8.0% to the closing price of HK$0.174 per WYT Share on the Latest Practicable Date; and

• (v) a premium of approximately 5.3% to the average closing price of HK$0.152 per WYT Share for the last ten trading days up to and including the Latest Practicable Date.

The Subscription Price was determined after arm’s length negotiation between WYT and the Underwriters.

Number of WYT Shares in issue 552,773,845 WYT Shares as at the Latest Practicable Date: Number of Rights Shares to be issued: not less than 1,658,321,535 Rights Shares and not more than 1,658,365,587 Number of Bonus Shares to be issued: not less than 552,773,845 Bonus Shares and not more than 552,788,529 Bonus Shares Estimated proceeds of the Rights Issue: approximately HK$265.33 million, before expenses

Use of proceeds: will be applied as to approximately HK$15 million for repayment of bank loans; approximately HK$64 million for redemption of the 2002 Convertible Notes, the 2004 Convertible Notes and repayment of shareholders’ loan, approximately HK$64.5 million for acquisition of the entire issued share capital of WOD, approximately HK$25 million to open new retail shops and for the expansion and upgrading of production facilities, approximately HK$35 million for the possible investment in new business opportunities and the remaining balance of approximately HK$46.5 million for general working capital of WYT Group

– 12 –

LETTER FROM THE BOARD

Number of Rights Shares undertaken to be taken up by the Group:

pursuant to the Irrevocable Undertaking, the Company has conditionally irrevocably undertaken to take up or procure to take up all its or its subsidiaries’ entitlement under the Rights Issue (being 325,393,989 Rights Shares) and, in addition, to make or procure an excess application for 210,000,000 Rights Shares under the Rights Issue. Such undertaking is subject to the approval of the Shareholders at the SGM

Payments by the Company:

depending on the level of acceptances of the Rights Shares and excess applications of the Rights Shares by the WYT Qualifying Shareholders, and transferees of nil-paid Rights Shares, the amount to be payable by the Company would be between approximately HK$52.06 million (assuming all WYT Qualifying Shareholders take up their Rights Shares in full) to approximately HK$85.66 million (assuming the excess application for 210,000,000 Rights Shares pursuant to the Irrevocable Undertaking are fully allotted to the Company)

Underwriters:

Kingston and Kingsway

Number of Rights Shares underwritten by the Underwriters:

not more than 1,122,971,598 Rights Shares, of which not more than 561,485,799 Rights Shares are fully underwritten by each of Kingston and Kingsway

Number of New WYT Shares in issue upon completion of the Rights Issue:

not less than 2,763,869,225 New WYT Shares and not more than 2,763,942,645 New WYT Shares

As at the Latest Practicable Date, the Group was the holder of the 2002 Convertible Notes and 2004 Convertible Notes entitling the Group to subscribe for an aggregate of 65,071,428 WYT Shares (subject to adjustment). Pursuant to the Irrevocable Undertaking, the Company has conditionally irrevocably undertaken to procure its subsidiary not to exercise the conversion rights attaching to the 2002 Convertible Notes and the 2004 Convertible Notes prior to the latest time for acceptance of the Rights Shares.

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LETTER FROM THE BOARD

As at the Latest Practicable Date, there were outstanding Share Options and Convertible Loan Stock entitling the relevant holders to subscribe/convert an aggregate of 57,600 WYT Shares and 84 WYT Shares (subject to adjustment) respectively. Two of the holders of the Share Options have severally irrevocably undertaken that they will not exercise their respective Share Options entitling them to subscribe for an aggregate of 43,000 WYT Shares (subject to adjustment) prior to the latest time for acceptance of the Rights Shares.

Save for the aforesaid 2002 Convertible Notes, the 2004 Convertible Notes, the Share Options and the Convertible Loan Stock, WYT has no outstanding options, warrants or other instruments convertible into WYT Shares.

CONDITIONS OF THE UNDERWRITING AGREEMENT

The Underwriting Agreement is conditional upon, among other things:

• (i) the passing by the Independent WYT Shareholders at the WYT SGM of resolutions to approve the Rights Issue and the passing by the WYT Shareholders at the WYT SGM of resolutions to approve the Capital Reorganisation;

• (ii) the passing by WYT Shareholders at the WYT SGM of a resolution to amend the bye-laws of WYT to allow a distribution to WYT Shareholders on such non prorata basis as WYT Shareholders may approve;

• (iii) the passing by the Shareholders at the SGM of a resolution to approve the subscription of Rights Shares together with the application of 210,000,000 excess Rights Shares by the Group under the Rights Issue;

• (iv) the Listing Committee of the Stock Exchange granting or agreeing to grant (subject to allotment) and not having withdrawn or revoked listing of, and permission to deal in, the Rights Shares, in their nil-paid and fully-paid forms, and the Bonus Shares;

• (v) the delivery to the Stock Exchange for authorisation and the registration with the Registrar of Companies in Hong Kong respectively one copy of each of the Prospectus Documents in compliance with the Listing Rules and the Companies Ordinance (Cap. 32 of the laws of Hong Kong) and the filing of one copy of each of the Prospectus Documents with the Registrar of Companies in Bermuda.

None of the conditions above can be waived by the Underwriters. The Rights Issue is subject to the Underwriting Agreement becoming unconditional and not being terminated in accordance with its terms, which is expected to be on or before 5:00 p.m., Friday, 25 June, 2004, being the third Business Day after the date on which the latest time for acceptance of the Rights Shares falls, or such date as may be agreed between WYT and the Underwriters.

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LETTER FROM THE BOARD

FINANCIAL AND TRADING PROSPECTS OF 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.

As disclosed in the 2003 interim report of the Company, the turnover and net profit attributable to the Shareholders of the Group for the six months ended 30 September, 2003 amounted to approximately HK$156.3 million and HK$7.2 million, respectively, representing the increases of approximately 1.9% and 53.3%, respectively, from the six months ended 30 September, 2002.

Management and sub-licensing of Chinese wet markets

With the grand opening of the Chinese wet market at Yu Chui Shopping Centre, Shatin in January 2003, the Group currently operates more than 12 Chinese wet markets and continues to be the largest single operator of Chinese wet markets in Hong Kong.

The Group had also entered into a lease agreement for the operation of a Chinese wet market in Guangzhou with a gross area of 2,524.5 sq.m. in early 2004. The Directors will continue to look for opportunities to expand this area of business, including expansion to the PRC.

Management and sub-licensing of shopping centres and car parks

The Group was granted a new car park management contract, with over 1,800 car parking bays mainly located in Kowloon East and Tung Chung, for the Housing Authority in April 2003. In view of the continuing privatisation policy of the government, the Directors are optimistic of the future prospects of this area of business.

Investment in pharmaceutical business through investment in WYT

Through the continuing expansion of its Chinese pharmaceutical business and the diversification into the western pharmaceutical business, the Directors are confident of the long term prospects of the pharmaceutical business of WYT and expect this investment will generate stable returns to the Group in the future.

Retail business

Taking advantage of the Group’s retail network in Chinese wet markets, the Group has diversified into the retail fresh meat selling business and is expected to generate satisfactory return to the Group.

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LETTER FROM THE BOARD

Property development

As disclosed in the Company’s announcement dated 30 March, 2004, the Company, through its wholly owned subsidiary, purchased a piece of leasehold land located in Shatin, Hong Kong. The Group currently plans to develop the property into a low density residential area intended for sale and/or lease. The Directors consider that this property development project represents a milestone for the Group to diversify into the property development business.

In view of the gradual recovery of the property market in Hong Kong and the expertise and experience of the Group in building construction and properties, the Directors are optimistic of the future prospects of the property development business. This area of business has become part of the Group’s ordinary and usual course and its related transactions are for accounting purposes treated as revenue nature. The Directors also expect to expand further into this area of business.

Property investment

With the gradual recovery of the Hong Kong economy and the property market, the Directors believe that the Group’s existing investment property portfolio will secure the Group’s long term stable return and a long term capital appreciation is also expected, in particular in the retail sector.

With the gradual recovery of the Hong Kong economic environment and the Group’s strong financial resources, the Group will continue to strengthen its existing business whilst continuing to seek new business opportunities to enhance the Shareholders’ returns.

REASONS FOR APPLICATION FOR EXCESS RIGHTS SHARES BY WANG ON

Pursuant to the Irrevocable Undertaking, the Company, being the substantial shareholder of WYT, has conditionally irrevocably undertaken to take up or procure to take up all its or its subsidiaries’ entitlement under the Rights Issue (being 325,393,989 Rights Shares, amounting to approximately HK$52.06 million) and in addition, to make or procure an excess application for 210,000,000 Rights Shares (amounting to approximately HK$33.6 million) under the Rights Issue. Such undertaking is subject to the approval of the Shareholders at the SGM.

As disclosed in the interim report of the Company for the six months ended 30 September, 2003, despite the loss recorded by WYT for the six months under review, the Directors are still confident of its long term prospects because of the improvement in the worldwide economy and the increasing contribution from its pharmaceutical business such as the continuing expansion of its Chinese pharmaceutical business and its diversification into the western pharmaceutical business under the brand name of “Madame Pearl’s” through the acquisition of Luxembourg Medicine Company Limited in July 2003. The Directors therefore intend to maintain the Company’s percentage shareholding in WYT by way of subscribing or procuring

– 16 –

LETTER FROM THE BOARD

the subscription of its or its subsidiaries’ entitlement to Rights Shares and further increase such percentage shareholding in WYT by way of making or procuring the application for excess Rights Shares. In addition, the Directors consider that the Group’s subscription of Rights Shares and application of excess for Rights Shares will facilitate the completion of the Rights Issue which will strengthen the financial position of WYT and the Group will be benefited accordingly by virtue of its shareholding in WYT. Accordingly, the Directors consider that the subscription for the Group’s entitlement to Rights Shares and application for excess Rights Shares are in the interest of the Shareholders as a whole.

WYT

The WYT Group is principally engaged in the production and sale of (i) traditional Chinese medicine which includes Chinese medicinal products sold under the name of “Wai Yuen Tong” and a range of products manufactured by selected medicinal materials with traditional prescription, mainly in the PRC and Hong Kong; and (ii) western pharmaceutical products under the brand name of “Madame Pearl’s”.

The following is the shareholding structure of WYT immediately before and after completion of the Rights Issue, assuming no Convertible Securities have been exercised/ converted prior to the completion of the Rights Issue:

The Group Kingston Kingsway Public Total	Immediately before completion of the Rights Issue Shares Percentage 108,464,663 19.62% – – – – 444,309,182 80.38% 552,773,845 100%	Immediately after completion of the Rights Issue (assuming all Qualifying Shareholders take up their respective entitlements under the Rights Issue ) Shares Percentage 542,323,315 19.62% – – – – 2,221,545,910 80.38% 2,763,869,225 100%	Immediately after completion of the Rights Issue (assuming no Qualifying Shareholder takes up his/her/its entitlement under the Rights Issue, except that Wang On takes up all its entitlement under the Rights Shares and the 210,000,000 Rights Shares under the excess application made by Wang On pursuant to the Irrevocable Undertaking ) Shares Percentage 822,323,315 29.75% 748,618,364 27.09% 748,618,364 27.09% 444,309,182 16.07% 2,763,869,225 100%	Immediately after completion of the Rights Issue (assuming no Qualifying Shareholder takes up his/her/its entitlement under the Rights Issue, except that Wang On takes up all its entitlement under the Rights Shares and the 210,000,000 Rights Shares under the excess application made by Wang On pursuant to the Irrevocable Undertaking ) Shares Percentage 822,323,315 29.75% 748,618,364 27.09% 748,618,364 27.09% 444,309,182 16.07% 2,763,869,225 100%
				100%

– 17 –

LETTER FROM THE BOARD

The estimated net proceeds from the Rights Issue will be approximately HK$250 million, which is intended to be applied as to approximately HK$15 million for repayment of bank loans; approximately HK$64 million for redemption of the 2002 Convertible Notes, the 2004 Convertible Notes and repayment of shareholders’ loan, approximately HK$64.5 million for acquisition of the entire issued share capital of WOD, approximately HK$25 million to open new retail shops and for the expansion and upgrading of production facilities, approximately HK$35 million for the possible investment in new business opportunities and the remaining balance of approximately HK$46.5 million for general working capital of WYT Group. The WYT Directors consider that the Rights Issue could strengthen the financial position of WYT Group and it will enable suitable investments to be made promptly as and when the opportunities arise.

The WYT Directors consider that the Rights Issue will enlarge the capital base of WYT and the Rights Issue provides an opportunity to WYT Shareholders to participate in the growth of WYT. The WYT Directors also consider that the Bonus Shares to be issued with the Rights Shares will make the Rights Issue attractive to the WYT Shareholders. The WYT Directors consider that the Rights Issue is in the interest of WYT and the WYT Shareholders as a whole.

LISTING RULES IMPLICATIONS

Each of the Disposal and subscription of the Rights Shares provisionally allotted to the Group on the Record Date together with the application for 210,000,000 excess Rights Shares by the Group under the Rights Issue constitutes a major transaction under the Listing Rules, which requires the Shareholders’ approval at the SGM.

SGM

A notice of the SGM to be held at 37th Floor, Citibank Tower, Citibank Plaza, 3 Garden Road, Central, Hong Kong at 9:30 a.m. on Friday, 4 June, 2004 is set out on pages 69 and 70 of this circular. At such meeting, an ordinary resolution will be proposed to approve, among other things, (i) the subscription by the Company of its entitlement of the Rights Shares together with the application for 210,000,000 excess Rights Shares by the Company under the Rights Issue; and (ii) the Conditional Sale and Purchase Agreement.

A form of proxy for use at the SGM is enclosed with this circular. Whether or not you are able to attend the SGM, you are requested to complete and return the enclosed form of proxy in accordance with the instruction printed thereon and deposit with the Company’s Hong Kong branch share registrar, 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 less than 48 hours before the time appointed for the holding of the SGM. Completion and return of the form of proxy will not preclude you from attending and voting in person at the SGM should you so desire.

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LETTER FROM THE BOARD

RECOMMENDATION

The Directors consider that each of the subscription by the Company of its entitlement of the Rights Shares together with the application for 210,000,000 excess Rights Shares by the Company under the Rights Issue and the terms of the Disposal are fair and reasonable so far as the Shareholders are concerned and are of the best interests of the Company and the Shareholders as a whole. The Directors recommend the Shareholders to vote in favour of the resolutions to be proposed at the SGM.

ADDITIONAL INFORMATION

Your attention is drawn to the additional information set out in the Appendices (on pages 20 to 68) of this circular.

Yours faithfully, On behalf of the Board of

Wang On Group Limited Tang Ching Ho

Chairman and Managing Director

– 19 –

FINANCIAL INFORMATION OF 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, 2003.

Results

Turnover Profit/(loss) before taxation Taxation Profit/(loss) after taxation Minority interest Profit/(loss) for the year Financial position Total assets Total liabilities Minority interest Surplus of shareholders’ funds	Year ended 31 March 2003 2002 2001 HK$’000 HK$’000 HK$’000 292,156 320,047 211,998 45,141 34,123 (47,938) (3,207) (3,634) 138 41,934 30,489 (47,800) (641) (2,789) 287 41,293 27,700 (47,513) At 31 March 2003 2002 2001 HK$’000 HK$’000 HK$’000 779,351 646,981 331,295 (158,531) (168,413) (163,550) (324) (10,569) (7,829) 620,496 467,999 159,916

2. INDEBTEDNESS

As at 31 March, 2004, the Group had secured outstanding bank borrowings of approximately HK$104.6 million. These facilities were secured by certain of the Group’s 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.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Save as aforesaid and apart from intra-group liabilities and normal accounts payable, the Group did not have any mortgages, charges, debentures, loan capital, bank loans and overdrafts, debt securities or other similar indebtedness, finance leases or hire purchase commitments, liabilities under acceptances or acceptances creditors, or any guarantees, or other material contingent liabilities outstanding at the close of business on 31 March, 2004.

The Directors are not aware of any material adverse changes in the Group’s indebtedness position and contingent liabilities since 31 March, 2004.

3. WORKING CAPITAL

The Board is of the opinion 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 will have sufficient working capital for its present requirements.

4. MATERIAL CHANGE

The Directors are not aware of any material adverse change in the financial or trading position of the Group since 31 March, 2003, being the date to which the latest published audited accounts of the Group were made up.

– 21 –

APPENDIX II FINANCIAL INFORMATION OF THE WYT GROUP

1. SUMMARY OF AUDITED FINANCIAL INFORMATION

The following is a summary of the results and financial position of the WYT Group for the three years ended 31 March, 2003.

Results

Turnover Loss before taxation Taxation Loss after taxation Minority interest Loss for the year Financial position Total assets Total liabilities Minority interest Surplus (deficiency) of shareholders’ funds	Year ended 31 March 2003 2002 2001 HK$’000 HK$’000 HK$’000 259,824 220,812 240,358 (26,615) (33,682) (31,260) (2,302) (105) (231) (28,917) (33,787) (31,491) (29) 235 – (28,946) (33,552) (31,491) At 31 March, 2003 2002 2001 HK$’000 HK$’000 HK$’000 319,685 83,460 111,182 (233,557) (130,282) (124,452) (94) – – 86,034 (46,822) (13,270)

– 22 –

APPENDIX II FINANCIAL INFORMATION OF THE WYT GROUP

2. EXTRACT OF THE FINANCIAL STATEMENTS

The following audited consolidated financial statements of the WYT Group are extracted from pages 21 to 71 of the annual report of WYT for the year ended 31 March, 2003.

Consolidated Income Statement

For the year ended 31st March, 2003

Notes Turnover 4 Cost of sales Gross profit Other operating income Distribution costs Administrative expenses Loss from operations 5 Finance costs 6 Share of results of associates Loss before taxation Taxation 9 Loss before minority interests Minority interests Loss for the year Loss per share 10 – Basic	2003 HK$’000 259,824 (147,314) 112,510 3,548 (54,654) (79,379) (17,975) (8,651) 11 (26,615) (2,302) (28,917) (29) (28,946) (0.28 cents)	2002 HK$’000 220,812 (148,199) 72,613 2,609 (27,185) (72,647) (24,610) (9,072) – (33,682) (105) (33,787) 235 (33,552) (25.4 cents)

– 23 –

FINANCIAL INFORMATION OF THE WYT GROUP

APPENDIX II

Consolidated Balance Sheet

At 31st March, 2003

Notes Non-current assets Investment properties 11 Property, plant and equipment 12 Goodwill 13 Interests in associates 15 Loan receivable 16 Trademarks 17 Current assets Inventories 18 Trade and other receivables 19 Amounts due from associates 15 Loan receivable 16 Taxation recoverable Bank balances and cash Current liabilities Trade and other payables 20 Loan from and interest payable to a director 21 Loans from and interest payable to a shareholder 21 Amount due to a related company 22 Obligations under finance leases 23 Bank and other borrowings 24 Deferred franchise income 25 Convertible loan stock 26 Taxation payable Net current assets (liabilities)	2003 HK$’000 3,600 30,001 179,630 1,968 808 503 216,510 47,979 31,668 1,855 129 36 21,508 103,175 55,999 9,780 17,318 – 614 13,947 240 6 1,832 99,736 3,439 219,949	2002 HK$’000 4,000 22,544 – – – 28 26,572 27,848 22,167 – – 36 6,837 56,888 48,178 8,774 900 223 479 5,545 – 290 131 64,520 (7,632) 18,940

– 24 –

FINANCIAL INFORMATION OF THE WYT GROUP

APPENDIX II

Notes Capital and reserves Share capital 27 Reserves Minority interests Non-current liabilities Convertible notes 30 Loans from a shareholder 31 Obligations under finance leases 23 Bank and other borrowings 24 Deferred franchise income 25 Deferred taxation 32	2003 HK$’000 157,899 (71,865) 86,034 94 64,000 64,850 887 3,332 535 217 133,821 219,949	2002 HK$’000 13,190 (60,012) (46,822) – – 64,850 912 – – – 65,762 18,940

– 25 –

FINANCIAL INFORMATION OF THE WYT GROUP

APPENDIX II

Balance Sheet

At 31st March, 2003

Notes Non-current asset Interests in subsidiaries 14 Current assets Amounts due from subsidiaries 14 Other receivables Bank balances Current liabilities Other payables Amounts due to subsidiaries 14 Loan from and interest payable to a director 21 Loans from and interest payable to a shareholder 21 Amount due to a related company 22 Convertible loan stock 26 Net current liabilities Capital and reserves Share capital 27 Reserves 29 Non-current liabilities Convertible notes 30 Loans from a shareholder 31	2003 HK$’000 243,789 – 782 3,729 4,511 1,239 4,468 9,780 17,318 – 6 32,811 (28,300) 215,489 157,899 (71,260) 86,639 64,000 64,850 128,850 215,489	2002 HK$’000 26,719 2,564 423 1 2,988 1,880 – 8,774 900 223 290 12,067 (9,079) 17,640 13,190 (60,400) (47,210) – 64,850 64,850 17,640

– 26 –

FINANCIAL INFORMATION OF THE WYT GROUP

APPENDIX II

Consolidated Cash Flow Statement

For the year ended 31st March, 2003

Operating activities Loss before taxation Adjustments for: Interest income Interest expenses Interest on obligation under finance lease Depreciation and amortisation of property, plant and equipment Amortisation of goodwill Amortisation of trademarks Amortisation of issue cost of convertible loan stock Release of issue cost on redemption of convertible loan stock Share of results of associates Deficit arising on revaluation of investment properties Impairment losses recognised respect of property, plant and equipment Loss on disposal of property, plant and equipment Operating cash flows before movements in working capital (Increase) decrease in inventories Decrease in trade and other receivables Decrease in amounts due from associates Decrease in trade and other payables Decrease in amount due to a related company Increase in deferred franchise income Cash used in operation Hong Kong Profits Tax paid PRC Tax paid Interest paid Net cash used in operating activities	2003 HK$’000 (26,615) (47) 8,517 103 8,182 7,002 45 31 – (11) 400 3,000 540 1,147 (8,352) 8,491 1,783 (6,274) 731 53 (2,421) (2,760) – (4,478) (9,659)	2002 HK$’000 (33,682) (34) 5,596 86 11,891 – 14 443 2,947 – 600 4,747 172 (7,220) 9,360 8,401 – (19,403) 223 – (8,639) (13) (383) (5,596) (14,631)

– 27 –

FINANCIAL INFORMATION OF THE WYT GROUP

APPENDIX II

Notes Investing activities Acquisition of subsidiaries 33 Interest received Proceeds from disposal of property, plant and equipment Purchase of property, plant and equipment Purchase of trademark Repayment of loan receivables Net cash used in investing activities Financing Dividend paid to minority shareholders Interest on obligations under finance lease contracts Redemption of convertible loan stock Principal payments of obligations under finance leases Trust receipt loans raised (repaid) Bank borrowings raised (repaid) Repayment of other loans Loan from a director Loans from a shareholder Repayment of loans from a shareholder Contribution from a minority shareholder of a subsidiary Proceeds from issue of new shares Net cash from financing Increase in cash and cash equivalents Cash and cash equivalents brought forward Cash and cash equivalents carried forward, representing bank balances and cash Analysis of the balances of cash and cash equivalents Cash and cash equivalent as previously reported Effect of reclassification of trust receipt loans Cash and cash equivalent as restated	2003 HK$’000 987 47 252 (6,127) (293) 35 (5,099) (10) (103) (315) (679) 559 11,175 – – 13,900 (900) – 5,802 29,429 14,671 6,837 21,508	2002 HK$’000 – 34 24 (3,777) – – (3,719) – (86) (30,169) (368) (14,810) (653) (3,640) 8,774 65,750 – 235 – 25,033 6,683 154 6,837 1,292 5,545 6,837

– 28 –

FINANCIAL INFORMATION OF THE WYT GROUP

APPENDIX II

Consolidated Statement of Changes in Equity

For the year ended 31st March, 2003

THE GROUP At 1st April, 2001 Loss for the year At 31st March, 2002 and 1st April, 2002 Private placement of shares Reduction in share capital Issue of new shares for acquisition of subsidiaries Issue of new shares for conversion of convertible notes Loss for the year At 31st March, 2003	Share capital HK$’000 13,190 – 13,190 5,802 (17,093) 136,000 20,000 – 157,899	Share premium HK$’000 15,393 – 15,393 – – – – – 15,393	Special reserve HK$’000 (note) (27,150) – (27,150) – – – – – (27,150)	Other reserves Capital General reserve reserve HK$’000 HK$’000 (note 29) 609 54,589 – – 609 54,589 – – – – – – – – – – 609 54,589	Accumulated Total losses Total HK$’000 HK$’000 HK$’000 28,048 (69,901) (13,270) – (33,552) (33,552) 28,048 (103,453) (46,822) – – 5,802 – 17,093 – – – 136,000 – – 20,000 – (28,946) (28,946) 28,048 (115,306) 86,034

Note: The special reserve of the Group represents the difference between the nominal value of ordinary shares issued by the Company and the aggregate nominal value of the issued ordinary share capital of the subsidiaries acquired pursuant to a group reorganisation in 1995.

– 29 –

APPENDIX II FINANCIAL INFORMATION OF THE WYT GROUP

NOTES TO THE FINANCIAL STATEMENTS

For the year ended 31st March, 2003

1. GENERAL

The Company was incorporated in Bermuda on 12th August, 1994 under the Companies Act 1981 of Bermuda as an exempted company and its shares were listed on both the London Stock Exchange and The Stock Exchange of Hong Kong Limited (“Stock Exchange”). On 3rd April, 2002, the listing of the Company’s shares on the London Stock Exchange was cancelled.

The Company is an investment holding company. The activities of its principal subsidiaries are set out in note 41.

2. ADOPTION OF STATEMENTS OF STANDARD ACCOUNTING PRACTICE

In the current year, the Group has adopted, for the first time, a number of new and revised Statements of Standard Accounting Practice (“SSAP(s)”) issued by the Hong Kong Society of Accountants. The adoption of these SSAPs has resulted in a change in the format of presentation of the cash flow statement and inclusion of the statement of changes in equity, but has had no material effect on the results for the current or prior accounting periods. Accordingly, no prior period adjustment has been required. Further details of those new and revised SSAPs are as follows:

Foreign Currencies

The revisions to SSAP 11 “Foreign Currency Translation” have eliminated the choice of translating the income statements of subsidiaries denominated in currencies other than Hong Kong dollars at the closing rate for the period, the policy previously followed by the Group. They are now required to be translated at an average rate. This change in accounting policy has not had any material effect on the results for the current or prior accounting years.

Cash Flow Statements

Under SSAP 15 (Revised) “Cash Flow Statements”, cash flows are classified under three headings – operating, investing and financing, rather than the previous five headings. Interest income, interest expenses and dividend paid, which were previously presented under a separate heading, are classified as investing, operating and financing cash flows, as appropriate. Cash flows arising from taxes on income are classified as operating activities, unless they can be separately identified with investing or financing activities. In addition, the amounts presented for cash and cash equivalents have been amended to exclude short term loans that are financing in nature. The re-definition of cash and cash equivalents has resulted in a restatement of the comparative amounts shown in the consolidated cash flow statement.

Employee Benefits

SSAP 34 “Employee Benefits” introduces measurement rules for employee benefits, including retirement benefit plans. The principal effect of the implementation of SSAP 34 is in connection with the recognition of costs for the Group’s defined contribution retirement benefit plan. The adoption of this SSAP has not had any material effect on the results for the current period or prior account period.

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FINANCIAL INFORMATION OF THE WYT GROUP

APPENDIX II

3. SIGNIFICANT ACCOUNTING POLICIES

The financial statements have been prepared under the historical cost convention as modified for the revaluation of investment properties.

The financial statements have been prepared in accordance with accounting principles generally accepted in Hong Kong. The principal accounting policies adopted are as follows:

Basis of Consolidation

The consolidated financial statements incorporate the financial statements of the Company and its subsidiaries made up to 31st March each year.

The results of subsidiaries and associates acquired or disposed of during the year are included in the consolidated income statement from the effective date of acquisition or up to the effective date of disposal, as appropriate.

All significant intercompany transactions and balances within the Group are eliminated on consolidation.

Goodwill

Goodwill arising on consolidation represents the excess of the cost of acquisition over the Group’s interest in the fair value of the identifiable assets and liabilities of a subsidiary at the date of acquisition. Goodwill arising on the acquisition of subsidiaries is presented separately in the balance sheet as a separate intangible asset.

Goodwill is amortised on a straight line basis over its useful economic life.

Negative Goodwill

Negative goodwill represents the excess of the Group’s interest in the fair value of the identifiable assets and liabilities of a subsidiary at the date of acquisition over the cost of acquisition.

Negative goodwill arising on acquisitions prior to 1st April, 2001 continues to be held in reserves and will be credited to income at the time of disposal of the relevant subsidiary.

Investments in Subsidiaries

Investments in subsidiaries are included in the Company’s balance sheet at cost less any identified impairment loss.

Interests in Associates

The consolidated income statement includes the Group’s share of the post-acquisition results of its associates for the year. In the consolidated balance sheet, interests in associates are stated at the Group’s share of the net assets of the associates less any identified impairment loss.

Revenue Recognition

Sales of goods are recognised when goods are delivered and title has passed.

Service fee income is recognised when services are provided.

Rental income, including rental invoiced in advance, from properties let under operating leases, is recognised on a straight line basis over the period of the respective leases.

Interest income is accrued on a time basis, by reference to the principal outstanding and the interest rate applicable.

Franchise fee income is recognised on a straight line basis over the franchise period.

– 31 –

FINANCIAL INFORMATION OF THE WYT GROUP

APPENDIX II

Investment Properties

Investment properties are completed properties which are held for their investment potential, any rental income being negotiated at arm’s length.

Investment properties are stated at their open market value based on independent professional valuations at each balance sheet date. Any surplus or deficit arising on the revaluation of investment properties is credited or charged to the revaluation reserve unless the balance on this reserve is insufficient to cover a deficit, in which case the excess of the deficit over the balance on the revaluation reserve is charged to the income statement.

On disposal of an investment property, the balance on the investment property revaluation reserve attributable to that property disposed of is credited in the income statement.

No depreciation is provided on investment properties except where the unexpired term of the relevant lease is 20 years or less.

Property, Plant and Equipment

Property, plant and equipment are stated at cost less accumulated depreciation and amortisation, and accumulated impairment losses.

The gain or loss arising from disposal or retirement of an asset is determined as the difference between the sale proceeds and the carrying amount of the asset and is recognised in the income statement.

Depreciation and amortisation are provided to write off the cost of property, plant and equipment over their estimated useful lives, using the straight line method, at the following rates per annum:

Land held on medium-term leases	2% or the terms of the leases, if shorter
Buildings	2% or the terms of the leases, if shorter
Leasehold improvements	20-331⁄3%
Plant and machinery	20%
Furniture and equipment	20-331⁄3%
Motor vehicles	20%
Computer system	20-331⁄3%

Assets held under finance leases are depreciated over their expected useful lives on the same basis as assets owned by the Group.

Trademarks

Trademarks are stated at cost less accumulated amortisation and accumulated impairment losses. Amortisation is calculated to write off the cost of trademarks over a period of ten years, their estimated useful lives, using the straight line method.

Impairment

At each balance sheet date, the Group reviews the carrying amounts of its assets to determine whether there is any indication that those assets have suffered an impairment loss. If the recoverable amount of an asset is estimated to be less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount. An impairment loss is recognised as an expense immediately.

Where an impairment loss subsequently reverses, the carrying amount of the asset is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset in prior years. A reversal of an impairment loss is recognised as income immediately.

– 32 –

FINANCIAL INFORMATION OF THE WYT GROUP

APPENDIX II

Assets Held under Finance Leases

A lease is classified as a finance lease whenever the term of the lease transfers substantially all the risks and rewards of ownership of the asset concerned to the Group. Assets held under finance leases are capitalised at their fair values at the date of acquisition. The corresponding liability to the lessor, net of interest charges, is included in the balance sheet as a finance lease obligation. Finance costs, which represent the difference between the total leasing commitments and the fair value of the assets acquired, are charged to the income statement over the period of the relevant lease so as to produce a constant periodic rate of charge on the remaining balance of the obligations for each accounting period.

All other leases are classified as operating leases and the rental expenses and income are charged and credited respectively to the income statement on a straight line basis over the lease terms.

Inventories

Inventories are stated at the lower of cost and net realisable value. Cost is calculated using the first-in, first-out method.

Convertible Loan Stock

Convertible loan stock are separately disclosed and regarded as liabilities unless conversion actually occurs. The costs incurred in connection with the issue of convertible loan stock are deferred and amortised on a straight line basis over the lives of the convertible loan stock from the date of issue of the loan stock to their final redemption date. If any of the loan stock are purchased and cancelled, redeemed or converted prior to the final redemption date, an appropriate portion of any remaining unamortised costs will be charged immediately to the income statement.

Deferred Franchise Income

Deferred franchise income represents initial franchise fee received which is recognised as income over the franchise period.

Research and Development

Expenditure on research activities is recognised as an expense in the period in which it is incurred.

Taxation

The charge for taxation is based on the results for the year as adjusted for items which are non-assessable or disallowed. Timing differences arise from the recognition for tax purposes of certain items of income and expense in a different accounting period from that in which they are recognised in the financial statements. The tax effect of the resulting timing differences, computed under the liability method, is recognised as deferred taxation in the financial statements to the extent that it is probable that a liability or an asset will crystallise in the foreseeable future.

Foreign Currencies

Transactions in currencies other than Hong Kong dollars are initially recorded at the rates of exchange prevailing on the dates of the transactions. Monetary assets and liabilities denominated in such currencies are retranslated at the rates prevailing on the balance sheet date. Profits and losses arising on exchange are included in profit or loss for the year.

On consolidation, the assets and liabilities of the Group’s subsidiaries outside Hong Kong are translated at exchange rates prevailing on the balance sheet date. Income and expense items are translated at the average exchange rates for the period. Exchange differences arising, if any, are classified as equity and transferred to the Group’s translation reserve. Such translation differences are recognised as income or as expenses in the period in which the operation is disposed of.

– 33 –

FINANCIAL INFORMATION OF THE WYT GROUP

APPENDIX II

Retirement Benefit Scheme

Contributions payable by the Group to its defined contribution retirement benefit scheme are charged to the income statement.

4. TURNOVER

Turnover represents the aggregate of net amounts received and receivable from third parties, less returns and allowances, and is summarised as follows:

Assembly of watches and manufacture of cases Sales of pharmaceutical products Retail of complete watches and bags Property investments and property holding	2003 HK$’000 109,298 83,340 67,148 38 259,824	2002 HK$’000 152,422 – 68,256 134
		220,812

5. LOSS FROM OPERATIONS

Loss from operations has been arrived at after charging: Staff costs – Directors’ remuneration_(note 7)_ – Other staff costs – Other staff’s retirement benefit scheme contributions Amortisation of goodwill (included in administrative expenses) Amortisation of trademarks (included in administrative expenses) Auditors’ remuneration – current year – under-provision in a prior year Depreciation and amortisation – assets owned by the Group – assets held under finance leases Impairment losses recognised in respect of property, plant and equipment (included in administrative expenses) Loss on disposal of property, plant and equipment Deficit on revaluation of investment properties Management fee paid to a shareholder Research and development expenses and after crediting: Interest income Net foreign exchange profits Release of deferred franchise income Rental income, net of outgoings of HK$28,000 (2002: HK$19,000)	2003 HK$’000 1,750 43,873 1,731 47,354 7,002 45 579 89 8,060 122 3,000 540 400 960 1,000 47 – 175 17	2002 HK$’000 3,004 30,542 1,080
		34,626
		– 14 397 – 11,617 274 4,747 172 600 560 – 34 31 – 115

– 34 –

FINANCIAL INFORMATION OF THE WYT GROUP

APPENDIX II

6. FINANCE COSTS

Amortisation of issue cost of convertible loan stock Release of issue cost of convertible loan stock on redemption Interest expense on: Bank borrowings – wholly repayable within five years – not wholly repayable within five years Convertible notes Convertible loan stock Loans from a shareholder Loan from a director Obligations under finance leases DIRECTORS’ REMUNERATION Directors’ fees: Executive Non-executive Independent non-executive Other emoluments: Executive directors: Salaries and other benefits Retirement benefit scheme contributions Independent non-executive directors Total directors’ emoluments	2003 HK$’000 31 – 606 – 2,258 4 5,028 621 103 8,620 8,651 2003 HK$’000 – – 420 1,300 30 – 1,750	2002 HK$’000 443
		2,947
		1,119 24 – 2,895 1,173 385 86
		5,682
		9,072
		2002 HK$’000 – 54 310 2,563 77 –
		3,004

7. DIRECTORS’ REMUNERATION

For the year ended 31st March, 2003, directors’ emoluments included the use of rent free accommodation with an estimated rateable value of HK$203,000 (2002: HK$417,000) per annum provided by the Group to one (2002: one) of the directors.

The directors’ emoluments were within the following bands:

	2003	2002
	Number of	Number of
	directors	directors
Nil to HK$1,000,000	6	10
HK$1,000,001 to HK$1,500,000	–	1

During the year, no emoluments were paid by the Group to the five highest paid individuals, including directors, as an inducement to join or upon joining the Group or as compensation for loss of office. In addition, during the year, no directors waived any emoluments.

– 35 –

FINANCIAL INFORMATION OF THE WYT GROUP

APPENDIX II

8. EMPLOYEES’ EMOLUMENTS

The five highest paid individuals in the Group included nil (2002: one) director of the Company whose emoluments are set out in note 7 above. The aggregate emoluments of the remaining five (2002: four) individuals were as follows:

Salaries and allowances Retirement benefit scheme contributions	2003 HK$’000 6,456 198 6,654	2002 HK$’000 5,465 90
		5,555

The emoluments of the remaining five (2002: four) highest paid individuals were within the following bands:

	2003	2002
	Number of	Number of
	employees	employees
Nil to HK$1,000,000	1	–
HK$1,000,001 to HK$1,500,000	3	3
HK$1,500,001 to HK$2,000,000	1	–
HK$2,000,001 to HK$2,500,000	–	1

9. TAXATION

The charge comprises: Hong Kong Profits Tax PRC Income Tax	2003 HK$’000 2,184 118 2,302	2002 HK$’000 15 90
		105

Hong Kong Profits Tax and PRC Income Tax had been provided at the rate of 16% (2002: 16%) and 27% (2002: 27%) respectively, on the estimated assessable profit for the year.

Details of deferred taxation are set out in note 32.

10. BASIC LOSS PER SHARE

The calculation of the basic loss per share is based on the loss for the year of HK$28,946,000 (2002: HK$33,552,000) and on the weighted average number of 10,276,225,398 (2002: 131,899,864) shares in issue during the year.

No diluted loss per share has been presented as the exercise and conversion of the share options, convertible loan stock and convertible notes would reduce the loss per share for both years.

– 36 –

FINANCIAL INFORMATION OF THE WYT GROUP

APPENDIX II

11. INVESTMENT PROPERTIES

	THE GROUP
	HK$’000
VALUATION
At 1st April, 2002	4,000
Deficit arising on revaluation	(400)
At 31st March, 2003	3,600

The Group’s investment properties were held under medium-term leases in Hong Kong and were revalued at 31st March, 2003 by Vigers Hong Kong Limited, a firm of independent professional property valuers, on an open market and existing use basis. The deficit on revaluation has been charged to the income statement.

The Group’s investment properties are held for rental under operating leases.

12. PROPERTY, PLANT AND EQUIPMENT

THE GROUP COST At 1st April, 2002 Additions Acquired on acquisition of subsidiaries Disposals At 31st March, 2003 DEPRECIATION AND AMORTISATION AND IMPAIRMENT LOSSES At 1st April, 2002 Provided for the year Acquired on acquisition of subsidiaries Impairment losses recognised Disposals At 31st March, 2003 NET BOOK VALUE At 31st March, 2003 At 31st March, 2002	Leasehold land and buildings HK$’000 31,628 – 7,706 – 39,334 17,805 2,019 994 3,000 – 23,818 15,516 13,823	Leasehold improve- ments HK$’000 22,519 1,924 2,657 (597) 26,503 20,861 1,927 622 – (466) 22,944 3,559 1,658	Plant and machinery HK$’000 17,788 1,460 4,406 – 23,654 14,208 1,070 2,628 – – 17,906 5,748 3,580	Furniture and equipment HK$’000 15,241 1,952 11,796 (1,873) 27,116 13,232 2,012 11,189 – (1,381) 25,052 2,064 2,009	Motor vehicles HK$’000 3,163 1,136 – (844) 3,455 2,552 197 – – (675) 2,074 1,381 611	Computer system HK$’000 6,569 444 2,546 – 9,559 5,706 957 1,163 – – 7,826 1,733 863	Total HK$’000 96,908 6,916 29,111 (3,314) 129,621 74,364 8,182 16,596 3,000 (2,522) 99,620 30,001 22,544

During the year, the directors of the Company reviewed the carrying value of the Group’s leasehold land and buildings in view of the recurring operating loss of the assembly of watches and manufacture of cases business. The value in use of this business is determined with reference to the estimated future cash flows using a discount rate of 6%. Impairment losses of approximately HK$3,000,000 were identified and charged to the consolidated income statement.

– 37 –

FINANCIAL INFORMATION OF THE WYT GROUP

APPENDIX II

The net book value of leasehold land and buildings shown above comprises:

Medium-term leases: In Hong Kong In PRC	2003 HK$’000 13,875 1,641 15,516	2002 HK$’000 7,700 6,123
		13,823

At 31st March, 2003, the net book value of property, plant and equipment included assets held under finance leases of HK$1,904,000 (2002: HK$1,668,000).

13. GOODWILL

	THE GROUP
	HK$’000
COST
Arising on acquisition of subsidiaries and balance at 31st March, 2003_(note 33)_	186,632
AMORTISATION
Provided for the year and balance at 31st March, 2003	(7,002)
NET BOOK VALUE
At 31st March, 2003	179,630

The goodwill is amortised, on a straight-line basis, over a period of 20 years.

14. INTERESTS IN SUBSIDIARIES/AMOUNTS DUE FROM (TO) SUBSIDIARIES

Unlisted shares, at cost _Less:_Impairment loss recognised Amounts due from subsidiaries Amounts due from subsidiaries Amounts due to subsidiaries	THE COMPANY 2003 2002 HK$’000 HK$’000 151,227 151,227 (134,508) (124,508) 16,719 26,719 227,070 – 243,789 26,719 – 2,564 4,468 –	THE COMPANY 2003 2002 HK$’000 HK$’000 151,227 151,227 (134,508) (124,508) 16,719 26,719 227,070 – 243,789 26,719 – 2,564 4,468 –
		26,719 –
		26,719
		2,564
		–

The amounts due from subsidiaries of HK$227,070,000 are unsecured, interest-free and have no fixed terms of repayment. In the opinion of the directors, the amounts will not be repayable within twelve months from the balance sheet date and are therefore shown as non-current.

Other than as mentioned above, the amounts due from (to) subsidiaries are unsecured, interest-free and have no fixed terms of repayment.

– 38 –

APPENDIX II

FINANCIAL INFORMATION OF THE WYT GROUP

During the year, the directors considered that in the light of the recurring operating losses of certain subsidiaries and unfavourable market conditions, the amounts recoverable from certain subsidiaries should be reduced to their estimated net realisable value with reference to their identifiable net assets. Accordingly, an impairment loss of HK$10,000,000 in respect of the investments in subsidiaries has been recognised and charged to the income statement for the year.

Details of the Company’s principal subsidiaries at 31st March, 2003 are set out in note 41.

15. INTERESTS IN ASSOCIATES/AMOUNTS DUE FROM ASSOCIATES

Share of net assets Amounts due from associates	THE GROUP 2003 2002 HK$’000 HK$’000 1,968 – 1,855 –	THE GROUP 2003 2002 HK$’000 HK$’000 1,968 – 1,855 –
		–

The amounts due from associates are unsecured, interest-free and are repayable on demand.

Details of the Group’s associates at 31st March, 2003 are as follows:

			Attributable
			proportion of
			nominal value of
	Place of		issued share capital
	incorporation/	Issued and fully	indirectly held by
Name of associate	operation	paid share capital	the Company	Principal activity
Creation Sino	Hong Kong	HK$2,500,000	50%	Retailing of Chinese
Limited				pharmaceutical
				products
Winning Forever	Hong Kong	HK$2,500,000	50%	Retailing of Chinese
Limited				pharmaceutical
				products
Wise Hope	Hong Kong	HK$2	50%	Inactive
Limited

16. LOAN RECEIVABLE

Principal Interest accruals _Less:_Amount due with one year shown under current assets	THE GROUP 2003 2002 HK$’000 HK$’000 890 – 47 – 937 – (129) – 808 –	THE GROUP 2003 2002 HK$’000 HK$’000 890 – 47 – 937 – (129) – 808 –
		– –
		–

The loan is unsecured, interest-bearing at 5.25% per annum and is repayable before 27th November, 2006 by 59 monthly instalments.

– 39 –

FINANCIAL INFORMATION OF THE WYT GROUP

APPENDIX II

17. TRADEMARKS

	THE GROUP
	HK$’000
COST
At 1st April, 2002	139
Acquired on acquisition of subsidiaries	235
Addition	293
At 31st March, 2003	667
AMORTISATION
At 1st April, 2002	111
Acquired on acquisition of subsidiaries	8
Provided for the year	45
At 31st March, 2003	164
NET BOOK VALUE
At 31st March, 2003	503
At 31st March, 2002	28

18. INVENTORIES

Raw materials and consumables Work-in-progress Finished goods	THE GROUP 2003 2002 HK$’000 HK$’000 13,731 6,005 8,583 3,987 25,665 17,856 47,979 27,848	THE GROUP 2003 2002 HK$’000 HK$’000 13,731 6,005 8,583 3,987 25,665 17,856 47,979 27,848
		27,848

All the inventories, excluding those fully provided for, were carried at cost.

19. TRADE AND OTHER RECEIVABLES

The Group allows an average credit period of 60 days to its trade customers. The following is an aging analysis of trade receivables at the balance sheet date:

0–30 days 31–60 days 61-120 days Over 120 days Other receivables	THE GROUP 2003 2002 HK$’000 HK$’000 13,337 13,068 7,363 3,686 2,915 331 91 357 23,706 17,442 7,962 4,725 31,668 22,167	THE GROUP 2003 2002 HK$’000 HK$’000 13,337 13,068 7,363 3,686 2,915 331 91 357 23,706 17,442 7,962 4,725 31,668 22,167
		17,442 4,725
		22,167

– 40 –

FINANCIAL INFORMATION OF THE WYT GROUP

APPENDIX II

20. TRADE AND OTHER PAYABLES

The following is an aging analysis of trade payables at the balance sheet date:

0–30 days 31–60 days 61-120 days Over 120 days Other payables	THE GROUP 2003 2002 HK$’000 HK$’000 7,751 6,524 4,971 2,538 5,827 8,381 5,790 3,523 24,339 20,966 31,660 27,212 55,999 48,178	THE GROUP 2003 2002 HK$’000 HK$’000 7,751 6,524 4,971 2,538 5,827 8,381 5,790 3,523 24,339 20,966 31,660 27,212 55,999 48,178
		20,966 27,212
		48,178

21. LOANS FROM AND INTEREST PAYABLE TO A DIRECTOR/A SHAREHOLDER

The loans are unsecured, interest-bearing at prime rate plus 2% per annum and are repayable on demand.

22. AMOUNT DUE TO A RELATED COMPANY

The amount as at 31st March, 2002 represented the balance with Wang On Group Limited (“Wang On”), a substantial shareholder of the Company. The amount was unsecured, non-interest bearing and was fully repaid during the year.

23. OBLIGATIONS UNDER FINANCE LEASES

THE GROUP Amounts payable under finance leases: Within one year In the second to fifth year inclusive _Less:_future finance charges Present value of lease obligations _Less:_Amount due within one year shown under current liabilities Amount due after one year	Minimum lease payments 2003 2002 HK$’000 HK$’000 681 571 940 990 1,621 1,561 (120) (170) 1,501 1,391	Present value of minimum lease payments 2003 2002 HK$’000 HK$’000 614 479 887 912 1,501 1,391 – – 1,501 1,391 (614) (479) 887 912	Present value of minimum lease payments 2003 2002 HK$’000 HK$’000 614 479 887 912 1,501 1,391 – – 1,501 1,391 (614) (479) 887 912
			1,391 –
			1,391 (479)
			912

– 41 –

FINANCIAL INFORMATION OF THE WYT GROUP

APPENDIX II

It is the Group’s policy to lease certain of its plant and machinery under finance leases. The average lease period is 3 years. For the year ended 31st March, 2003, the average effective borrowing rate was 8%. Interest rates are fixed at the contract date. All leases are on a fixed repayment basis and no arrangements have been entered into for contingent rental payments.

The Group’s obligations under finance leases are secured by the lessor’s charge over the leased assets.

24. BANK AND OTHER BORROWINGS

Bank borrowings – unsecured Trust receipt loans – secured The maturity of the above borrowings is as follows: On demand or within one year More than one year, but not exceeding two years More than two years, but not exceeding five years _Less:_Amount due within one year shown under current liabilities Amount due after one year	THE GROUP 2003 2002 HK$’000 HK$’000 11,175 – 6,104 5,545 17,279 5,545 13,947 5,545 1,668 – 1,664 – 17,279 5,545 (13,947) (5,545) 3,332 –	THE GROUP 2003 2002 HK$’000 HK$’000 11,175 – 6,104 5,545 17,279 5,545 13,947 5,545 1,668 – 1,664 – 17,279 5,545 (13,947) (5,545) 3,332 –
		5,545
		5,545 – –
		5,545 (5,545)
		–

25. DEFERRED FRANCHISE INCOME

Acquired on acquisition of subsidiaries Additions _Less:_Recognised in the current year Unamortised deferred franchise income carried forward _Less:_Amount due within one year shown under current liabilities	2003 HK$’000 722 228 (175) 775 (240) 535	2002 HK$’000 – – –
		– –
		–

– 42 –

FINANCIAL INFORMATION OF THE WYT GROUP

APPENDIX II

26. CONVERTIBLE LOAN STOCK

£590 (2002: £29,006) 9.5% convertible unsecured loan stock 2008 (“CL Stock”) _Less:_Issue cost Accumulated release on redemption Accumulated release on conversion Accumulated amortisation of issue cost	THE GROUP AND THE COMPANY 2003 2002 HK$’000 HK$’000 6 321 6,032 6,032 (4,348) (4,348) (13) (13) (1,671) (1,640) – 31 6 290

On 12th January, 1999, the Company issued CL Stock with a nominal value of £3,807,552 divided into 3,807,552 stock units. The CL Stock bear interest at the rate of 9.5% per annum, payable every half year on 31st March and 30th September of each year, and are redeemable at par on 30th September, 2008 or, if later, the date falling 30 days after the final conversion date in respect of the year 2008.

Holders of the CL Stock are entitled to convert their units biannually at any time within 30 calendar days after the despatch of the interim report or final report of the Company up to and including 29th September, 2008 on the following bases, subject to adjustment:

• (a) in respect of any conversion in any of the years 1999 to 2001 (both years inclusive), 25 ordinary shares for every stock unit (i.e. a theoretical conversion price of HK$0.50 for each ordinary share (taking an exchange rate of £1 = HK$12.5)); or

• (b) in respect of any conversion in any of the years 2003 to 2008 (both years inclusive), 14.286 ordinary shares for every stock unit (i.e. a theoretical conversion price of HK$0.87 for each ordinary share (taking an exchange rate of £1 = HK$12.5)).

During the year ended 31st March, 2002, the Company repaid £2,727,810 CL Stock and the balance of CL Stock outstanding at 31st March, 2002 amounted to HK$321,000 (£29,006) which had been classified as a current liability.

During the year ended 31st March, 2003, the Company repaid £28,416 CL Stock and the balance of CL Stock outstanding at 31st March, 2003 amounted to HK$6,000 (£590) which has been classified as a current liability.

– 43 –

FINANCIAL INFORMATION OF THE WYT GROUP

APPENDIX II

27. SHARE CAPITAL

Authorised: Ordinary shares of HK$0.10 each at 1st April, 2001 and 31st March, 2002 Reduction in share capital_(note ii (a)) Cancellation during the year(note ii (b)) Increase during the year(note ii (c)) Increase during the year(note iii) Ordinary shares of HK$0.01 each at 31st March, 2003 Issued and fully paid: Ordinary shares of HK$0.10 each at 1st April, 2001 and 31st March, 2002 Issue of shares by private placements(note i) Reduction in share capital(note ii (a)) Issue of 13,600,000,000 shares to acquire subsidiaries(note iv) Issue upon conversion of convertible notes(note v) At 31st March, 2003 _Notes:	Number of shares 800,000,000 – (610,080,136) 7,810,080,136 8,000,000,000 52,000,000,000 60,000,000,000 131,899,864 58,020,000 – 13,600,000,000 2,000,000,000 15,789,919,864	Amount HK$’000 80,000 (72,000) (6,101) 78,101 80,000 520,000 600,000 13,190 5,802 (17,093) 136,000 20,000 157,899

• (i) During the year, the Company issued and allotted 26,370,000 and 31,650,000 ordinary shares of HK$0.10 each at HK$0.10 per share as a result of private placements of shares to institutional investors.

• (ii) Pursuant to resolutions passed at a special general meeting held on 17th May, 2002, a reduction of the Company’s share capital was approved as follows:

• (a) the nominal value of each issued ordinary share of the Company was reduced from HK$0.10 per share to HK$0.01 per share by the cancellation of HK$0.09 of the capital paid up thereon;

• (b) all of the authorised but unissued share capital of the Company was cancelled;

• (c) thereafter the authorised share capital of the Company was increased to the original authorised share capital of HK$80,000,000 by the creation of 7,810,080,136 new ordinary shares of HK$0.01 each; and

• (d) the amount of the paid up capital of the issued shares so cancelled was credited to accumulated losses account.

• (iii) Pursuant to resolution passed at a special general meeting held on 3rd July, 2002, the authorised share capital of the Company was increased from HK$80,000,000 to HK$600,000,000 by the creation of an additional 52,000,000,000 new ordinary shares of HK$0.01 each.

• (iv) Details of the acquisition are set out in note 33.

• (v) The Company further issued and allotted a total of 2,000,000,000 ordinary shares of HK$0.01 each upon the exercise of the conversion rights by the holders of the convertible notes.

– 44 –

FINANCIAL INFORMATION OF THE WYT GROUP

APPENDIX II

28. SHARE OPTIONS

Pursuant to the share option scheme approved and adopted by the Company on 16th October, 1997 (the “1997 Scheme”) for the purpose of providing incentives to directors and eligible employees, which will expire on 16th October, 2007, the Board of Directors of the Company may, at their discretion, grant options to directors or employees of the Company or any of its subsidiaries to subscribe for shares in the Company in accordance with the terms of the 1997 Scheme.

Options may be granted at a nominal consideration and will entitle the holder thereof to subscribe for shares during a period of ten years from the date the option is granted and accepted or from a later date as determined by the Board at a price (subject to adjustments as provided therein) equal to the higher of the nominal value of the shares and 80% of the average of the closing prices of the shares on the Stock Exchange on the five trading days immediately preceding the date of the grant of the options.

The maximum number of shares in respect of which options may be granted under the 1997 Scheme shall not exceed 10% of the share capital of the Company in issue from time to time (except shares issued pursuant to the 1997 Scheme) and the maximum number of shares in respect of which options may be granted to any one employee shall not exceed 25% of the maximum number of shares in respect of which options may be granted under the 1997 Scheme.

The following table details movements in the Company’s share options during the year:

Exercise Date price of grant Exercisable period per share HK$ Category 1: Former directors Tsang Pui Sing, Aloysius 9.12.1999 9.12.1999 – 8.12.2009 0.285 (note 1) 3.3.2000 3.3.2000 – 2.3.2010 0.820 Leong Weng Kin_(note 1)_ 9.12.1999 9.12.1999 – 8.12.2009 0.285 3.3.2000 3.3.2000 – 2.3.2010 0.820 Category 2: Employees 9.12.1999 9.12.1999 – 8.12.2009 0.285 3.3.2000 3.3.2000 – 2.3.2010 0.820 Total all categories	Number of shares subject to options Outstanding at 31.3.2002 Outstanding Reclassifi- and at 1.4.2001 cation 31.3.2003 (note 2) 1,200,000 (1,200,000) – 1,000,000 (1,000,000) – 1,100,000 (1,100,000) – 1,000,000 (1,000,000) – 4,300,000 (4,300,000) – 1,680,000 2,300,000 3,980,000 – 2,000,000 2,000,000 1,680,000 4,300,000 5,980,000 5,980,000 – 5,980,000	Number of shares subject to options Outstanding at 31.3.2002 Outstanding Reclassifi- and at 1.4.2001 cation 31.3.2003 (note 2) 1,200,000 (1,200,000) – 1,000,000 (1,000,000) – 1,100,000 (1,100,000) – 1,000,000 (1,000,000) – 4,300,000 (4,300,000) – 1,680,000 2,300,000 3,980,000 – 2,000,000 2,000,000 1,680,000 4,300,000 5,980,000 5,980,000 – 5,980,000
		–
		3,980,000 2,000,000
		5,980,000
		5,980,000

No share options were granted or exercised during the year.

Notes:

1. Mr. Tsang Pui Sing, Aloysius, and Mr. Leong Weng Kin resigned as directors of the Company on 28th August, 2001.

2. During the year ended 31st March, 2002, the share options granted to the Company’s former directors after their resignation were reclassified as share options granted to the employees.

– 45 –

FINANCIAL INFORMATION OF THE WYT GROUP

APPENDIX II

29. RESERVES

THE COMPANY At 1st April, 2001 Loss for the year At 1st April, 2002 Credit arising from reduction in share capital Loss for the year At 31st March, 2003	Share premium HK$’000 15,393 – 15,393 – – 15,393	Contributed surplus HK$’000 18,494 – 18,494 – – 18,494	General Accumulated reserve losses HK$’000 HK$’000 54,589 (116,037) – (32,839) 54,589 (148,876) – 17,093 – (27,953) 54,589 (159,736)	Total HK$’000 (27,561) (32,839) (60,400) 17,093 (27,953) (71,260)

The general reserve represented the amount arising from reduction of par value of the Company’s ordinary shares during the year ended 31st March, 1999.

The Company did not have any distributable reserve at the balance sheet dates.

30. CONVERTIBLE NOTES

	THE GROUP
	AND
	THE COMPANY
	HK$’000
Issued during the year	84,000
Converted during the year	(20,000)
Balance at 31st March, 2003	64,000

On 9th July, 2002, the Company issued convertible notes of HK$84 million to satisfy partial consideration for the acquisition of approximately 99.79% interest in WYT. The convertible notes carry interest at 3.8% per annum and are redeemable on 8th July, 2005 unless it was previously converted or redeemed. The holders of the convertible notes have the option to convert the convertible notes into ordinary shares of the Company of HK$0.01 each at any time during the period from 9th July, 2002 to 8th July, 2005.

During the year, the Company issued and allotted 2,000,000,000 ordinary shares of HK$0.01 each upon the exercise of the conversion rights by the holders of the convertible notes.

At 31st March. 2003, all the convertible notes were held by Rich Time Strategy Limited, a substantial shareholder of the Company.

31. LOANS FROM A SHAREHOLDER

The amounts are unsecured, interest-bearing at prime rate plus 2% per annum and are repayable in one lump sum in July 2005.

– 46 –

FINANCIAL INFORMATION OF THE WYT GROUP

APPENDIX II

32. DEFERRED TAXATION

The Group

At 31st March, 2003, the Group had recognised a deferred tax liability of approximately HK$217,000 representing the tax effect of the timing difference between tax allowance and accounting depreciation as a result of the acquisition of subsidiaries.

At 31st March, 2003, the Group had an unrecognised deferred tax asset mainly representing the tax effect of timing differences arising as a result of estimated tax losses of approximately HK$43 million (2002: HK$53 million) available to set off against future assessable profits. The deferred tax asset has not been recognised in the financial statements as it is not certain that the benefit will be realised in the foreseeable future.

The Company

The Company had no material unprovided deferred taxation arising during the year or at the balance sheet date.

33. ACQUISITION OF SUBSIDIARIES

On 9th July, 2002, the Group acquired approximately 99.79% interest in WYT at an aggregate consideration of HK$220 million which was satisfied by the issue of 13,600,000,000 ordinary shares of the Company at HK$0.01 per share and the issue of convertible notes of HK$84 million.

Net assets acquired: Property, plant and equipment Interests in associates Amounts due from associates Loan receivable Trademarks Inventories Trade and other receivables Amount due from a related company Bank and cash balances Trade and other payables Taxation payable Deferred franchise income Deferred taxation Minority interests Net assets Goodwill	2003 HK$’000 12,515 2,333 3,262 972 227 11,779 17,992 954 3,303 (14,480) (2,159) (722) (217) (75) 35,684 186,632 222,316	2002 HK$’000 – – – – – – – – – – – – – –
		– –
		–

– 47 –

FINANCIAL INFORMATION OF THE WYT GROUP

APPENDIX II

Satisfied by: Issue of ordinary shares_(note)_ Issue of convertible notes Expenses paid in cash Analysis of net inflow of cash and cash equivalents in connection with the purchase of subsidiaries: Total cash consideration paid for legal and professional charges Bank balances and cash acquired	2003 HK$’000 136,000 84,000 2,316 222,316 (2,316) 3,303 987	2002 HK$’000 – – –
		–
		– –
		–

The subsidiaries acquired during the year contributed HK$83,340,000 to the group’s turnover and a profit of HK$15,469,000 to the Group’s operating results.

• Note: The shares were issued at HK$0.01 per share which represents a discount of approximately 76% to the closing price of HK$0.042 per share as quoted on the Stock Exchange on 9th July, 2002, being the trading date immediately before the completion of the acquisition of the WYT. In the opinion of the directors, the market price of HK$0.042 per share does not reflect the fair value of WYT because of the fluctuation of the Company’s share price due to market volatility. The directors have therefore arrived at the fair value of WYT with reference to a valuation performed by Vigers Hong Kong Limited, an independent firm of professional valuers, on a fair market value basis. Based on this valuation, the fair value of WYT at the time of acquisition by the Company was HK$220 million and the fair value of the Company’s shares issued for the acquisition was HK$0.01 per share.

Had the market price of HK$0.042 been used, the value of the consideration for the acquisition of the WYT would have been increased by HK$435.2 million.

34. MAJOR NON-CASH TRANSACTIONS

During the year ended 31st March, 2003, the major non-cash transactions are as follows:

• (a) The Group acquired approximately 99.79% interest in WYT at an aggregate consideration of HK$220 million which was satisfied by the issue of ordinary shares and convertible notes of HK$136 million and HK$84 million respectively.

• (b) The Company issued and allotted 2,000,000,000 ordinary shares of HK$0.01 each upon the exercise of the conversion rights by the holders of the convertible notes.

• (c) The Group entered into finance lease arrangements in respect of assets with a total capital value at the inception of lease contracts of HK$789,000.

During the year ended 31st March, 2002, the Group entered into finance lease arrangements in respect of assets with a total capital value at the inception of lease contracts of HK$1,432,000.

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FINANCIAL INFORMATION OF THE WYT GROUP

APPENDIX II

35. RETIREMENT BENEFIT SCHEMES

The Group participates in both a defined contribution scheme which is registered under the Occupational Retirement Scheme Ordinance (the “ORSO Scheme”) and a Mandatory Provident Fund Scheme (the “MPF Scheme”) established under the Mandatory Provident Fund Ordinance in December 2000. The assets of the schemes are held separately from those of the Group, in funds under the control of trustees. Employees who were members of the ORSO Scheme prior to the establishment of the MPF Scheme were offered a choice of staying within the ORSO Scheme or switching to the MPF Scheme, whereas all new employees joining the Group on or after December 2000 are required to join the MPF Scheme.

The employees of the Group’s subsidiaries in the PRC are members of state-managed retirement benefits schemes operated by the government. The subsidiaries are required to contribute a specified percentage of their payroll costs to the retirement benefits schemes. The only obligation of the Group with respect to the retirement benefits schemes is to make the specified contributions.

The total cost charged to the income statement of approximately HK$1,731,000 (2002: HK$1,080,000) represents contributions payable to the schemes by the Group at rates specified in the rules of the schemes.

At the balance sheet date, there was no significant forfeited contributions, which arose upon employees leaving the retirement benefit scheme, available to reduce the contribution payable in the future years.

36. PLEDGE OF ASSETS

At 31st March, 2003, the Group had pledged its leasehold land and buildings and investment properties with an aggregate net book value of approximately HK$10,882,000 (2002: HK$11,700,000) to a bank to secure general banking facilities granted to the Group.

37. CAPITAL COMMITMENTS

At 31st March, 2003, the Group had capital commitment of HK$377,000 in respect of acquisition of property, plant and equipment contracted for but not provided in the financial statements.

At 31st March, 2003, the Company had no significant capital commitments.

38. CONTINGENT LIABILITIES

Bills discounted with recourse Guarantees given to bankers in respect of banking facilities granted to – subsidiaries – a third party	THE 2003 HK$’000 1,370 – 1,489 1,489	GROUP 2002 HK$’000 905 – – –	THE COMPANY 2003 2002 HK$’000 HK$’000 – – 7,500 8,000 – – 7,500 8,000 (note) (note)	THE COMPANY 2003 2002 HK$’000 HK$’000 – – 7,500 8,000 – – 7,500 8,000 (note) (note)
				8,000 –
				8,000
				(note)

Note: The Company has given a corporate guarantee to a bank in respect of banking facilities granted to its subsidiaries. The extent of banking facilities utilised by the subsidiaries as at 31st March, 2003 amounted to approximately HK$5.0 million (2002: HK$5.5 million).

– 49 –

FINANCIAL INFORMATION OF THE WYT GROUP

APPENDIX II

39. OPERATING LEASE ARRANGEMENTS

The Group as lessee:

	2003	2002
	HK$’000	HK$’000
Operating lease payment in respect of land and buildings	3,963	566

At the balance sheet date, the Group had outstanding commitments under non-cancellable operating leases, which fall due as follows:

Within one year In the second to fifth year inclusive	2003 HK$’000 8,935 9,970 18,905	2002 HK$’000 502 142
		644

Operating lease payments represent rentals payable by the Group for certain of its office properties and retail shops. Leases are negotiated for a term ranging from 1 to 3 years. Certain lease rentals are based on turnover of the relevant retail shops.

The Group as lessor:

Property rental income earned during the year was HK$45,000 (2002: HK$134,000). The properties held have committed tenants for the next three years.

At the balance sheet date, the Group had contracted with tenants for the following future minimum lease payments:

Within one year In the second to fifth year inclusive	2003 HK$’000 72 144 216	2002 HK$’000 202 151
		353

At the balance sheet date, the Company did not have any operating lease arrangement.

– 50 –

FINANCIAL INFORMATION OF THE WYT GROUP

APPENDIX II

40. RELATED PARTY TRANSACTION AND BALANCES

During the year, the Group had the following connected transactions:

Name of related party	Transactions	2003	2002
		HK$’000	HK$’000
Wang On Group Limited and	Interest on term loans paid by
its subsidiaries	the Group_(note iii)_	5,028	1,173
(the “Wang On Group”)
	Interest on convertible notes paid
	by the Group_(note iv)_	1,865	–
	Management fee paid by
	the Group_(note v)_	960	560
Town Health International	Interest on convertible notes paid
Holdings Company Limited	by the Group_(note iv)_	393	–
and its subsidiaries
(the “Town Health Group”)	Sales of pharmaceutical products
(note i)	by the Group_(note vi)_	1,750	–
	Management fee received by
	the Group_(note vi)_	85	–
	Advertising and promotion fee
	received by the Group_(note vi)_	57	–
Leung Wai Ho_(note ii)_	Interest on terms loans paid by
	the Group_(note iii)_	621	385

Notes:

(i) Town Health International Holdings Company Limited is a substantial shareholder of the Company.

• (ii) Leung Wai Ho is a director of the Company.

(iii) Interest is calculated at 2% above prime rate per annum.

• (iv) Interest is calculated at 3.8% per annum.

(v) Management fee is mutually agreed and determined by the relevant parties.

(vi) These transactions were entered with the Town Health Group in accordance with the relevant franchise agreement.

In addition, the Group acquired approximately 99.79% interest in WYT from the Wang On Group and the Town Health Group, respectively, at an aggregate consideration of HK$220 million. WYT is a company incorporated in Hong Kong with limited liability and is principally engaged in the business of manufacturing, processing and retailing of traditional Chinese medicine. Further details of the transaction are set out in a circular of the Company dated 17th June, 2002. The acquisition was approved by shareholders in a special general meeting held on 3rd July, 2002 and was completed in July 2002.

Details of the balances with related parties as at the balance sheet date are set out in the balance sheets and notes 15, 21, 22, 30 and 31 respectively.

– 51 –

FINANCIAL INFORMATION OF THE WYT GROUP

APPENDIX II

41. PRINCIPAL SUBSIDIARIES

Particulars of the principal subsidiaries at 31st March, 2003 are as follows:

			Proportion of	Proportion of	Proportion of
	Place of		issued share
	incorporation/	Nominal value of issued	capital held
Name of subsidiary	operation	and paid up share capital	by the Company			Principal activity
			Directly	Indirectly
Always Prosperous Limited	Hong Kong	HK$500,000	–		100%	Property investment
Billion Good Investment	Hong Kong	HK$2	–		100%	Property holding
Limited
Dailywin Watch Products	Hong Kong	HK$1,000 ordinary	–		–	Manufacture of watch
Mfg. Limited		HK$2,500,000 non-voting	–		100%	cases, assembly of
(“Dailywin Watch”)		deferred_(note i)_				watches and trading
						in watches
Dongguan Dailywin Watch	PRC	HK$55,800,000 registered	–		95%	Manufacture of watch
Company Limited		capital_(note ii)_				cases, assembly of
(“Dongguan Dailywin”)						watches and trading
						in watches
Great Prime International	British Virgin	US$25,001	100%		–	Investment holding
Holdings Limited	Islands
Tensfine Investments Limited	Hong Kong	HK$10,000	–		100%	Property holding
Wai Yuen Tong Medicine	Hong Kong	HK$217,374 ordinary	–	99.79%		Manufacture and trading
Company Limited		HK$17,373,750 nonvoting				of Chinese
		deferred_(note iii)_				pharmaceutical
						products
東莞市時尚風采貿易	PRC	RMB5,500,000 registered	–		note iv	Trading in watches
有限公司		capital
(“Trendi Image”)

Notes:

• (i) The deferred shares in Dailywin Watch, which are not held by the Group, practically carry no rights to dividends or to receive notice of or to attend or vote at any general meeting of the company or to participate in any distribution on winding up. The Group has been granted an option by the holders of the deferred shares to acquire these shares at a nominal amount.

• (ii) Dongguan Dailywin is a joint venture limited liability company established in the PRC for a term of 15 years starting 15th January, 1992, subject to extension. The registered capital of Dongguan Dailywin is owned as to 95% by the Group and 5% by an independent PRC third party.

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

– 52 –

APPENDIX II

FINANCIAL INFORMATION OF THE WYT GROUP

• (iv) Trendi Image is a private limited liability company established in the PRC. The registered capital of Trendi Image is owned as to 48% by Mr. Chen Wei Lik 陳偉力 and 47% Mr. Chen Fu Yiu 陳富堯 and 5% by an independent third party. Pursuant to various deeds entered into between Mr. Chen Wei Lik 陳偉力 , Mr. Chen Fu Yiu 陳富堯 and D & S Concepts (HK) Limited (“D&S”), a wholly owned subsidiary of the Company, Mr. Chen Wei Lik 陳偉力 and Mr. Chen Fu Yiu 陳富堯 has each agreed, inter alia, (a) to assign to D&S all past, present and future benefits received by them as owners of the registered capital of Trendi Image; (b) to vote at board meetings, general meetings or otherwise of Trendi Image in accordance with instructions of D&S; and (c) not to dispose of his interest in Trendi Image unless authorised by D&S. In return, D&S has agreed to (a) provide all funding and financing for Trendi Image as and when requested by Mr. Chen Wei Lik 陳偉 力 and Mr. Chen Fu Yiu 陳富堯 ; and (b) indemnify Mr. Chen Wei Lik 陳偉力 and Mr. Chen Fu Yiu 陳富堯 for any costs, expenses or losses incurred by them by reason of their carrying on Trendi Image’s business. By virtue of these deeds, Mr. Chen Wei Lik 陳偉力 and Mr. Chen Fu Yiu 陳富堯 have effectively transferred their entire economic interests in Trendi Image to D&S.

On the basis of the various deeds mentioned above, the directors are of the opinion that the Group has effective control over Trendi Image and accordingly has accounted for Trendi Image as a subsidiary.

– 53 –

FINANCIAL INFORMATION OF THE WYT GROUP

APPENDIX II

42. BUSINESS AND GEOGRAPHICAL SEGMENTS

Business segments

For management purposes, the Group is currently organised into four operating divisions. These divisions are the basis on which the Group reports its primary segment information.

An analysis of the Group’s turnover and operating results and segment assets and liabilities by business segments is as follows:

For the year ended 31st March, 2003

Assembly of watches and manufacture of cases HK$’000 By principal activity TURNOVER External sale 109,298 Inter segment sales* 26,862 136,160 SEGMENT RESULTS (4,797) Amortisation of goodwill relating to pharmaceutical business Central administrative expenses Finance costs Share of results of associates Loss before taxation Taxation Loss before minority interests Minority interests Loss for the year	Retail of complete watches and bags HK$’000 67,148 14,764 81,912 (7,345)	Property investments and property holding HK$’000 38 216 254 (734)	Sales of phar- maceutical products HK$’000 83,340 – 83,340 15,469	Elimination HK$’000 – (41,842) (41,842) –	Total HK$’000 259,824 – 259,824 2,593 (7,002) (13,566) (8,651) 11 (26,615) (2,302) (28,917) (29) (28,946)

• Inter-segment sales are charged at terms determined and agreed between group companies.

– 54 –

FINANCIAL INFORMATION OF THE WYT GROUP

APPENDIX II

Assembly Property of watches Retail of investments Sales of and complete and phar- manufacture watches property maceutical of cases and bags holding products Elimination HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 ASSETS AND LIABILITIES AT 31ST MARCH, 2003 ASSETS Segmental assets 29,131 30,782 6,208 67,208 – Interests in associates 1,968 – Goodwill 179,630 – Unallocated corporate assets LIABILITIES Segmental liabilities 32,001 19,643 114 24,540 – Unallocated corporate liabilities OTHER INFORMATION FOR THE YEAR ENDED 31ST MARCH, 2003 Amortisation of trademarks 14 – – 31 – Capital expenditure 1,534 3,264 – 2,411 – Depreciation and amortisation of property, plant and equipment 3,732 2,546 204 1,700 – Deficit on revaluation of investment properties – – 400 – – Goodwill arising on acquisition of subsidiaries – – – 186,632 – Impairment losses recognised 3,000 – – – –	Total HK$’000 133,329 1,968 179,630 4,758
	319,685
	76,298 157,353
	233,651
	45 7,209 8,182 400 186,632 3,000

– 55 –

FINANCIAL INFORMATION OF THE WYT GROUP

APPENDIX II

For the year ended 31st March, 2002

Property Assembly of Retail of investments watches and complete and manufacture watches and property of cases bags holding Elimination HK$’000 HK$’000 HK$’000 HK$’000 By principal activity TURNOVER External sales 152,422 68,256 134 – Inter segment sales 28,501 25,147 216 (53,864) 180,923 93,403 350 (53,864) SEGMENT RESULTS (1,323) (13,698) (2,724) – Central administrative expenses Finance costs Loss before taxation Taxation Loss before minority interests Minority interests Loss for the year Inter-segment sales are charged at terms determined and agreed between group companies. ASSETS AND LIABILITIES AT 31ST MARCH, 2002 ASSETS Segmental assets 42,978 33,255 6,803 – Unallocated corporate assets LIABILITIES Segmental liabilities 34,562 18,690 113 – Unallocated corporate liabilities OTHER INFORMATION FOR THE YEAR ENDED 31ST MARCH, 2002 Amortisation of trademarks 14 – – – Capital expenditure 3,267 1,907 35 – Depreciation and amortisation of property, plant and equipment 4,773 6,930 202 – Deficit on revaluation of investment properties – – 600 – Impairment losses recognised 2,645 – 2,102 –

Total HK$’000 220,812 – 220,812 (17,745) (6,865) (9,072) (33,682) (105) (33,787) 235 (33,552) 83,036 424 83,460 53,365 76,917 130,282 14 5,209 11,905 600 4,747

– 56 –

FINANCIAL INFORMATION OF THE WYT GROUP

APPENDIX II

Geographical segments

The Group’s operations are mainly located in United States of America and the PRC, other than Hong Kong.

The following provides an analysis of the Group’s turnover by geographical market, irrespective of the origin of the goods/services:

United States of America The PRC, other than Hong Kong Hong Kong Others	2003 HK$’000 69,253 75,168 82,443 32,960 259,824	2002 HK$’000 115,470 70,756 9,151 25,435
		220,812

The following is an analysis of the carrying amount of segment assets, and additions to property, plant and equipment, by the geographical area in which the assets are located:

United States of America The PRC, other than Hong Kong Hong Kong Others	Carrying amount of segment assets 2003 2002 HK$’000 HK$’000 1,897 5,643 44,919 56,148 272,356 18,119 477 3,514 319,649 83,424	Additions to property, plant and equipment, goodwill and trademarks 2003 2002 HK$’000 HK$’000 – – 3,884 4,196 190,184 1,013 – – 194,068 5,209	Additions to property, plant and equipment, goodwill and trademarks 2003 2002 HK$’000 HK$’000 – – 3,884 4,196 190,184 1,013 – – 194,068 5,209
			5,209

– 57 –

VALUATION REPORT

APPENDIX III

The following is the text of a letter, summary of values and valuation certificate received from Vigers Appraisal and Consulting Limited, an independent valuer, in connection with their valuation as at 8 April, 2004 of WYT Building for the purpose of inclusion in this circular:

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

16th April 2004

The board of directors

Wai Yuen Tong Medicine Holdings Limited 5th Floor, Wai Yuen Tong Medicine Building No. 9 Wang Kwong Road Kowloon Bay Kowloon

Dear Sirs

In accordance with your instruction for us to value the captioned property as at 8th April 2004 for your reference purposes, we confirm that we have carried out external 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

– 58 –

VALUATION REPORT

APPENDIX III

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

Our valuation have been made on the assumption that the owners sold 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 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 are covered, unexposed or inaccessible and we are therefore unable to report that any such parts or of the property is 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 property nor for any expenses or taxation which might be incurred in effecting a sale. Unless otherwise stated, it is assumed that the properties are free from encumbrances, restrictions and outgoings of an onerous nature which could affect its value.

The valuation certificate is confidential to the client for the specific purpose of which they refers. It may be disclosed to other professional advisors assisting the client in respect of that purpose, but the client shall not disclose the valuation certificates to any other person.

In accordance with our standard practice, this valuation certificates are 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.

– 59 –

VALUATION REPORT

APPENDIX III

We enclose herewith our valuation certificate.

Yours faithfully

For and on behalf of

VIGERS APPRAISAL & CONSULTING LIMITED

Gilbert K M Yuen MHKIS MRICS

Director

– 60 –

VALUATION REPORT

APPENDIX III

VALUATION CERTIFICATE

Property

Description and tenure

Particulars of occupancy

Capital value in existing state as at 8th April 2004

The property comprises a 6- storey industrial building completed in about 1985. Parking and loading/unloading spaces are provided on the Ground Floor and First Floor.

1. Ground Floor, Upper Ground Floor, 1st, 2nd, 3rd, 4th and 5th Floors, and Roof of No. 9 Wang Kwong Road, Kowloon Bay, Kowloon

Kowloon The property has a total gross floor area of approximately 10,500/29,724th 113,022 sq.ft. (10,500 sq.m.). parts or shares of and in New In addition, 14 van/car parking Kowloon Inland Lot spaces, 7 lorry parking spaces No. 5864 and 1 container/lorry parking spaces are provided within the property.

As at 8th April 2004, the property was owneroccupied.

HK$85,000,000

The property is held under Conditions of Sale No. 11517 for a term of 99 years commencing from 1st July 1898 and had been extended to 30th June 2047 without premium. The current annual Government Rent payable for the property is 3% of the rateable value for the time being of the property.

Notes:

1. The registered owner of the property was WOD Investments Limited.

2. The property was subject to a Mortgage in favour of The Hongkong and Shanghai Banking Corporation Limited.

3. Memorandum of Change of name of Building vide Memorial No. 8895108 dated 18th March 2003.

– 61 –

GENERAL INFORMATION

APPENDIX IV

1. RESPONSIBILITY STATEMENT

This circular includes particulars given in compliance with the Listing Rules for the purpose of giving information with regard to the Company. The Directors collectively and individually accept full responsibility for the accuracy of the information contained in this circular and confirm, 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 DIRECTORS’ INTERESTS

As at the Latest Practicable Date, the interests and short positions of each Director or chief executive of the Company in the shares, underlying shares and debentures of the Company or any of its associated corporation(s) (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 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, pursuant to the Model Code for Securities Transactions by Directors of Listed Companies to be notified to the Company and the Stock Exchange, were as follows:

Interests in shares

	Capacity in	Number of	Approximate %
	which such	shares of	of the issued
Name of Director	interests are held	the Company	share capital
		(Note 1)
Mr. Tang Ching Ho	Corporate_(Note 2)_	2,247,227(L)	1.54%
(“Mr. Tang”)	Personal	1,268,355(L)	0.87%
	Family_(Note 3)_	1,268,354(L)	0.87%
	Other_(Note 4)_	25,563,463(L)	17.52%
Ms. Yau Yuk Yin	Personal	1,268,354(L)	0.87%
(“Ms. Yau”)	Family_(Note 5)_	29,079,045(L)	19.92%

Notes:

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

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

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

– 62 –

GENERAL INFORMATION

APPENDIX IV

1. 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.

2. 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 or chief executive of the Company had any interest or short position in the shares, underlying shares or debentures of the Company or any of its associated corporations (within the meaning 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 any interests and short positions which he was 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, pursuant to the Model Code for Securities Transactions by Directors of Listing Companies in the Listing Rules, to be notified to the Company and the Stock Exchange.

3. PERSONS WHO HAVE AN INTEREST OR SHORT POSITION WHICH IS 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 interests or short positions in the shares or underlying shares of the Company which would fall to be disclosed to the Company and the Stock Exchange 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 %
	Number of shares	of the issued
Name of shareholder	of the Company	share capital
	(Note 1)
Caister Limited	30,347,399 (L)	20.79%
	(Note 2)
Ms. Tang Mui Fong	30,347,399 (L)	20.79%
	(Note 2)
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)

– 63 –

GENERAL INFORMATION

APPENDIX IV

Notes:

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

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

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

Save as disclosed above, as at the Latest Practicable Date, none of the Directors knows of any person (not being a Director or chief executive of the Company) who had an interest or short position in shares or underlying shares 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 other member of the Group or held any option in respect of such capital.

4. MATERIAL CONTRACTS

The following contracts (not being contracts in the ordinary course of business of the Company) have been entered into by members of the Group within two years immediately the date of this circular which are or maybe material:

• (a) an agreement dated 22 May, 2002 entered into between Dailywin Group Limited (“Dailywin”), Town Health International Holdings Company Limited (“Town Health”) and the Company in respect of, among other things, the disposal by the Company and Town Health of the entire issued share capital of Reliance City Investments Limited and Plenty Time Investments Limited respectively to Dailywin;

• (b) a conditional placing agreement dated 13 June, 2002 entered into between the Company and Kingston Securities Limited in respect of the placement of 4,500,000,000 shares of Dailywin Group Limited by Kingston Securities Limited at the placing price of HK$0.01 per share to certain independent third parties;

• (c) a conditional placing agreement dated 24 June, 2002 entered into between the Company and Kingsway SW Securities Limited in relation to a private placing of 2,000,000,000 unlisted warrants at HK$0.001 per unit of warrant on a fully underwritten basis to certain independent third parties;

• (d) an option placing agreement dated 9 July, 2002 made between the Company and the Kingston Securities Limited in relation to a private placing of the 64 options, each with a denomination of principal amount of HK$1,000,000 to certain independent third parties;

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GENERAL INFORMATION

APPENDIX IV

• (e) 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) in respect of the acquisition of HK$12 million of 2002 Convertible Notes by Rich Time from TH Medicine Services;

• (f) an acquisition agreement dated 17 February, 2003 entered into between the Company and Town Health in respect of the acquisition by the Company 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;

• (g) 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 the Company of 517,556 shares of LMC from each of the Two Individual Shareholders;

• (h) 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;

• (i) a placing agreement dated 29 August, 2003 entered into between the Company and the Kingsway SW Securities Limited in relation to a private placing of the convertible notes of WYT to certain independent third parties; and

• (j) 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 and the transfer of loan from Advance Century Limited to Bright Leading Limited.

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APPENDIX IV

5. LITIGATION

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

6. SERVICE CONTRACTS

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

7. CONSENT

The following is the qualification of the expert who has given its opinion or advice which is contained in this circular:

Name	Qualification
Vigers Appraisal and Consulting	Professional surveyors and valuer
Limited (“Vigers”)

Vigers has given and has not withdrawn its written consent to the issue of this circular with the inclusion of its letter and references to its name in the form and context in which it appears.

Vigers confirms that it does not have any shareholding in the Company or any of its subsidiaries or any right (whether legally enforceable or not) to subscribe for or to nominate persons to subscribe for securities in any member of the Group.

Vigers also confirms that it does not have any interest, direct or indirect, in any assets which have been, since 31 March, 2003 (being the date to which the latest published audited 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.

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GENERAL INFORMATION

APPENDIX IV

8. GENERAL

1. The registered office of the Company is at Clarendon House, 2 Church Street, 41 Cedar Avenue, Hamilton HM 11, Bermuda.

2. The head office and principal place of business of the Company in Hong Kong is at 5th Floor, Wai Yuen Tong Medicine Building, 9 Wang Kwong Road, Kowloon Bay, Kowloon, Hong Kong.

3. The company secretary of the Company is Ms. Li Yu Lian, Kelly. She is an associate member of The Institute of Chartered Secretaries and Administrators.

4. The branch share registrar of the Company in Hong Kong is Tengis Limited, at Ground Floor, Bank of East Asia Harbour View Centre, 56 Gloucester Road, Wanchai, Hong Kong.

5. The English text of this circular shall prevail over the Chinese text in the case of inconsistency.

9. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents are available for inspection 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) up to and including the date of the SGM:

• (i) the memorandum of association and bye-laws of the Company;

• (ii) the Irrevocable Undertaking;

• (iii) the Conditional Sale and Purchase Agreement;

• (iv) the material contracts referred to in the paragraph headed “Material contracts” in this Appendix;

• (v) the written consent from Vigers referred to in the paragraph headed “Consent” in this Appendix;

• (vi) the annual report of the Company for the year ended 31 March, 2003;

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GENERAL INFORMATION

APPENDIX IV

• (vii) the unaudited interim report of the Company for the six months ended 30 September, 2003;

• (viii) the circular dated 3 March, 2003 issued by the Company in relation to the proposed acquisition of approximately 52.26% in and a related shareholder’s loan of Luxembourg Medicine Company Limited;

• (ix) the circular dated 31 July, 2003 issued by Company in relation to the proposed sale of approximately 99.79% in Luxembourg Medicine Company Limited;

• (x) the circular dated 22 September, 2003 issued by the Company in relation to the placement of 3.8% convertible notes issued by WYT;

• (xi) the circular dated 20 April, 2004 issued by the Company in relation to the acquisition of property;

• (xii) the annual report of WYT for the year ended 31 March, 2003;

• (xiii) the letter, summary of values and valuation certificate prepared by Vigers, the texts of which are set out in Appendix III of this circular; and

• (xiv) this circular.

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NOTICE OF THE SGM

==> picture [70 x 52] intentionally omitted <==

WANG ON GROUP LIMITED （宏安集團有限公司）＊

(incorporated in Bermuda with limited liability)

(Stock Code: 1222)

NOTICE is hereby given that a special general meeting of the shareholders of Wang On Group Limited (the “ Company ”) will be held at 9:30 a.m. on 4 June 2004 at 37th Floor, Citibank Tower, Citibank Plaza, 3 Garden Road, Central, Hong Kong for the purpose of considering and, if thought fit, passing the following resolutions, which will be proposed as Ordinary Resolutions of the Company:

ORDINARY RESOLUTIONS

1. THAT the conditional Sale and Purchase Agreement dated as of 8 April 2004 (the “ Sale and Purchase Agreement ”) between Wang On Enterprises (BVI) Limited (“ Wang On (BVI) ”), a wholly-owned subsidiary of the Company, Source Millennium Limited (“ Source Millennium ”), a wholly-owned subsidiary of Wai Yuen Tong Medicine Holdings Limited (“ WYT ”), the Company and WYT, a copy of which has been initialled by the chairman of this meeting and for the purpose of identification marked “A”, pursuant to which, inter alia, Wang On (BVI) agrees to sell and Source Millennium agrees to purchase:

2. (a) the entire issued share capital of WOD Investments Limited; and

3. (b) a related unsecured and interest free shareholder’s loan with no fixed payment date which stands at the aggregate amount of HK$72,015,692 as at the date of the Sale and Purchase Agreement,

at an initial consideration of HK$64,485,762, to be fully satisfied by payment in cash on completion, subject to adjustment after completion in accordance with the terms of the Sale and Purchase Agreement, be approved, and the board of directors of each of the Company and Wang On (BVI) be authorised to do all things and approve the execution of all documents in connection with or incidental to the Sale and Purchase Agreement, with such amendments or modifications (if any) as the relevant board may consider necessary, desirable or appropriate.

1. THAT the Irrevocable Undertaking dated 8 April 2004 given by the Company (the “ Undertaking ”), a copy of which has been initialled by the chairman of this meeting and for the purpose of identification marked “B”, pursuant to which,

2. For identification purpose only

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NOTICE OF THE SGM

inter alia, the Company has conditionally irrevocably undertaken to take up or procure the take up of all its or its subsidiaries’ entitlements under the proposed issue of rights shares (the “ Rights Shares ”) by WYT (being 325,393,989 rights shares) and any additional Rights Shares to be provisionally allotted to the Company or its subsidiaries in respect of any shares acquired by them on or after the date of the Undertaking and which are held by them as at the close of business on the Record Date (as defined in the Undertaking), and in addition, to make or procure an excess application for 210,000,000 Rights Shares (the “ Excess Application ”) by the Company be approved, and the board of directors of each of the Company and its subsidiaries be authorised to do all things and approve the execution of all documents in connection with or incidental to the Undertaking, including without limitation, the subscription of the Rights Shares and making the Excess Application, with such amendments or modifications (if any) as the relevant board may consider necessary, desirable or appropriate.

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

Hong Kong, 12 May 2004

Head office and principal place of business:

5th Floor

Wai Yuen Tong Medicine Building 9 Wang Kwong Road Kowloon Bay Kowloon Hong Kong

Notes:

1. A member of the Company entitled to attend and vote at the above meeting is entitled to appoint one or more than one proxy to attend and to vote in his stead. A proxy need not be a member of the Company.

2. A form of proxy for use at the meeting is enclosed herewith. The instrument appointing a proxy shall be in writing under the hand of the appointer or his/her attorney duly authorised in writing. If the appointer is a corporation, the form of a proxy must be under its common seal or under the hand of an officer, attorney or other person authorised to sign the proxy.

3. To be valid, the form of proxy together with the power of attorney or other authority (if any) under which it is signed, or a notarially certified copy of that power or authority, must be deposited at the Company’s registrar, Tengis Limited, at Ground Floor, Bank of East Asia Harbour View Centre, 56 Gloucester Road, Wanchai, Hong Kong, as soon as possible and in any event not less than 48 hours before the time appointed for holding the meeting or any adjournment thereof.

4. Completion and return of the form of proxy shall not preclude members from attending and voting in person at the meeting or at any adjourned meeting (as the case may be) should they wish, and in such event, the form of proxy shall be deemed to be revoked.

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