THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

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

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

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

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WANG ON GROUP LIMITED

(

)[*]

(Incorporated in Bermuda with limited liability)

(Stock Code: 1222)

(1) MAJOR AND CONNECTED TRANSACTION – ACQUISITION OF HANWIN INVESTMENT LIMITED;

(2) DISCLOSEABLE TRANSACTION – ACQUISITION OF YUEN LONG PROPERTY; AND

(3) REFRESHMENT OF GENERAL MANDATES

Financial adviser

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Independent financial adviser

to the Independent Board Committee and the Independent Shareholders

A letter dated 13 April 2005 from the Independent Board Committee (as defined herein) containing its advice to the Independent Shareholders (as defined herein) in respect of the terms of the Hanwin Acquisition and the Issue Mandate (both as defined herein) is set out on pages 17 to 18 of this circular. A letter from Baron Capital Limited, the independent financial adviser to the Independent Board Committee and the Independent Shareholders, containing its advice in respect of the terms of the Hanwin Acquisition and the General Mandates is set out on pages 19 to 32 of this circular.

A notice convening a special general meeting of Wang On Group Limited to be held at 37th Floor, Two International Finance Centre, 8 Finance Street, Central, Hong Kong on 6 May 2005 at 9:30 a.m. is set out on pages 141 and 145 of this circular. A form of proxy for use in the special general meeting is enclosed. Whether or not you propose to attend the special general meeting, you are requested to complete and return the accompanying form of proxy in accordance with the instructions printed thereon as soon as possible and in any event not less than 48 hours before the time appointed for the holding of the special general meeting or any adjourned meeting thereof. Completion and return of the form of proxy will not preclude you from attending and voting in person at the special general meeting or any adjourned meeting thereof should you so wish.

For identification purpose only

13 April 2005

CONTENTS

			Page
Definitions . . . . . . . .	. . . . . . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . . . . . . . . . . . .	1
Letter from the Board
Introduction . . .	. . . . . . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . . . . . . . . . . . .	6
The Hanwin Acquisition . . . . . . . . . . . . . . .		. . . . . . . . . . . . . . . . . . . . . . . . . . .	7
The Yuen Long Property Acquisition . . . . .		. . . . . . . . . . . . . . . . . . . . . . . . . . .	11
Proposed refreshment of General Mandates		. . . . . . . . . . . . . . . . . . . . . . . . . . .	13
Implications under the Listing Rules and of		the SGM . . . . . . . . . . . . . . . . . . .	13
Voting on poll .	. . . . . . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . . . . . . . . . . . .	15
Financial and trading prospects . . . . . . . . .		. . . . . . . . . . . . . . . . . . . . . . . . . . .	15
Recommendation	. . . . . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . . . . . . . . . . . .	16
Additional information . . . . . . . . . . . . . . . .		. . . . . . . . . . . . . . . . . . . . . . . . . . .	16
Letter from the Independent Board Committee		. . . . . . . . . . . . . . . . . . . . . . . . . .	17
Letter from Baron .	. . . . . . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . . . . . . . . . . . .	19
Appendix I –	Accountants’ report on Hanwin. . . . . . . . . . . . . . . . . . . . . .		33
Appendix II –	Financial information on	the Group . . . . . . . . . . . . . . . . .	40
Appendix III –	Accountants’ report on Dragon Richly . . . . . . . . . . . . . . . .		92
Appendix IV –	Accountants’ report on Poly Talent . . . . . . . . . . . . . . . . . .		100
Appendix V –	Accountants’ report on Profit Million . . . . . . . . . . . . . . . .		107
Appendix VI –	Financial information on	the Enlarged Group . . . . . . . . .	115
Appendix VII –	Comfort letter . . . . . . . .	. . . . . . . . . . . . . . . . . . . . . . . . . . .	125
Appendix VIII –	Valuation report on the Sham Shui Po Property . . . . . . . .		127
Appendix IX –	Explanatory Statement .	. . . . . . . . . . . . . . . . . . . . . . . . . . .	130
Appendix X –	General information . . .	. . . . . . . . . . . . . . . . . . . . . . . . . . .	133
Notice of SGM . . . .	. . . . . . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . . . . . . . . . . . .	141

−i −

DEFINITIONS

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

“associates” has the meaning ascribed thereto in the Listing Rules “Baron” Baron Capital Limited, a licensed corporation under the SFO permitted to carry out types 1 and 6 regulated activities (as defined in the SFO) and the independent financial adviser to the Independent Board Committee
“Board” the board of Directors “Company” Wang On Group Limited, a company incorporated in Bermuda and the shares of which are listed on the Stock Exchange
“Completion” completion of the Hanwin Acquisition pursuant to the Hanwin Acquisition Agreement
“connected person” has the meaning ascribed to it under the Listing Rules “Convertible Notes” two convertible redeemable notes, bearing 1% interest payable semi-annually to the holders of the Convertible Notes in an aggregate principal amount up to HK$61,440,000 and HK$37,180,000 due on the expiry of a period of three years and two and a half years, respectively, from the date of issue of the Convertible Notes. Please refer to the Company’s announcements dated 7, 22 February 2005 and 22 November 2004 for details regarding the Convertible Notes
“Directors” the directors of the Company “Dragon Richly” Dragon Richly Investment Limited, a company wholly and beneficially owned by the Company
“DR Acquisition” the sale and purchase of the entire issued share capital and shareholder’s loan of Dragon Richly pursuant to the DR Acquisition Agreement
“DR Acquisition Agreement” the conditional agreement dated 27 September 2004 entered into between Suitbest, Mr. Tang and Dragon Richly in relation to the DR Acquisition

−1 −

DEFINITIONS

“Enlarged Group”	the Group and Hanwin
“Formal Agreement”	the formal agreement to be entered into by Hanwin with
	the Sham Shui Po Property Vendor in relation to the sale
	and purchase of the Sham Shui Po Property
“General Mandates”	the general and unconditional mandates proposed to be
	granted to the Board at the SGM to exercise the powers
	of the Company to respectively (i) repurchase Shares not
	exceeding 10% of the aggregate nominal amount of the
	issued share capital of the Company as at the date of the
	SGM; and (ii) allot, issue and deal with Shares not
	exceeding 20% of the aggregate nominal amount of the
	issued share capital of the Company as at the date of the
	SGM
“Group”	the Company and its subsidiaries
“Hanwin”	Hanwin Investment Limited, a company incorporated in
	Hong Kong and wholly and beneficially owned by
	Mr. Tang
“Hanwin Acquisition”	the sale and purchase of the entire issued share capital
	and shareholder’s loan of Hanwin pursuant to the Hanwin
	Acquisition Agreement
“Hanwin Acquisition Agreement”	the conditional agreement dated 18 March 2005 entered
	into between Suitbest, Mr. Tang and Hanwin in relation to
	the Hanwin Acquisition
“Hanwin Consideration”	the consideration for the Hanwin Acquisition to be paid
	in the manner of payment as set out in the section “Letter
	from the Board” under the heading “The Hanwin
	Acquisition Agreement” in this circular
“Hong Kong”	the Hong Kong Special Administrative Region of the
	People’s Republic of China
“Independent Board Committee”	an independent committee of the Board, comprising the
	independent non-executive Directors, namely Dr. Lee
	Peng Fei, Allen, Mr. Wong Chun, Justein, Dr. Siu Yim
	Kwan, Sidney and Mr. Siu Kam Chau

−2 −

DEFINITIONS

“Independent Third Party”	an independent third party not connected with the
	Company and its connected persons as defined in the
	Listing Rules
“Independent Shareholders”	the shareholders of the Company other than Mr. Tang and
	his associates
“Issue Mandate”	the issue mandate to be granted to the Board at the SGM
	to allot, issue and deal with Shares
“Latest Practicable Date”	11 April 2005, being the latest practicable date for
	ascertaining certain information for inclusion in this
	circular
“Listing Rules”	the Rules Governing the Listing of Securities on The
	Stock Exchange of Hong Kong Limited
“Mr. Tang”	Mr. Tang Ching Ho, being the chairman and the managing
	director of the Company
“Poly Talent”	Poly Talent Investment Limited, a company wholly and
	beneficially owned by the Company
“Profit Million”	Profit Million Investment Limited, a company wholly and
	beneficially owned by the Company
“Provisional Agreement”	the provisional agreement entered into by Hanwin with
	the Sham Shui Po Property Vendor on 17 March 2005 in
	relation to the sale and purchase of the Sham Shui Po
	Property
“PT/PM Acquisition”	the sale and purchase of the entire issued share capital
	and shareholders’ loans of each of Profit Million and Poly
	Talent pursuant to PT/PM Acquisition Agreement
“PT/PM Acquisition Agreement”	the conditional agreement dated 12 October 2004 entered
	into between Suitbest, Mr. Tang, Poly Talent and Profit
	Million in relation to the PT/PM Acquisition
“Repurchase Mandate”	the repurchase mandate to be granted to the Board at the
	SGM to repurchase Shares
“SFO”	the Securities and Futures Ordinance (Chapter 571 of The
	Laws of Hong Kong)

−3 −

DEFINITIONS

“SGM” the special general meeting of the Company to be convened to consider and, if thought fit, approve the Hanwin Acquisition Agreement, other transactions contemplated in or incidental to the Hanwin Acquisition Agreement and to grant the General Mandates “Sham Shui Po Property” a 18-storey building, amongst which 16 storeys are currently intended for sale or rental for residential purposes and 2 storeys are currently intended for sale or rental for commercial purposes, located at No. 58 Yen Chow Street, Sham Shui Po, Kowloon, Hong Kong “Sham Shui Po Property Vendor” Chueyine Company Limited, a company incorporated in Hong Kong “Share(s)” share(s) of HK$0.10 each in the capital of the Company “Shareholders” shareholders of the Company

“Stock Exchange” The Stock Exchange of Hong Kong Limited
“Suitbest” Suitbest Investments Limited, a company incorporated in British Virgin Islands and a wholly-owned subsidiary of the Company
“WYT” Wai Yuen Tong Medicine Holdings Limited, a company incorporated in Bermuda with limited liability and the shares of which are listed on the Stock Exchange (Stock Code: 897)
“Yuen Long Consideration” the consideration for the Yuen Long Property Acquisition to be paid in the manner of payment as set out in the section “Letter from the Board” under the heading “The Yuen Long Property Acquisition Agreement” in this circular
“Yuen Long Property” Ground Floor, No. 170 Castle Peak Road (Section A of Lot No. 3705 IN DD120), Yuen Long, New Territories
“Yuen Long Property the acquisition of the Yuen Long Property pursuant to the Acquisition” Yuen Long Property Acquisition Agreement

−4 −

DEFINITIONS

“Yuen Long Property the provisional agreement for sale and purchase entered Acquisition Agreement” into between the Yuen Long Property Purchaser and the Yuen Long Property Vendor on 16 March 2005 relating to the Yuen Long Property Acquisition
“Yuen Long Property Purchaser” Champford Investment Limited, an investment holding company incorporated in Hong Kong and an indirect wholly-owned subsidiary of the Company
“Yuen Long Property Vendor” the vendor to the Yuen Long Property Acquisition Agreement, an individual who is an Independent Third Party
“HK$” Hong Kong dollars, the lawful currency of Hong Kong “sq.ft.” square feet “sq.m.” square meters

−5 −

LETTER FROM THE BOARD

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WANG ON GROUP LIMITED

( )[*]

(Incorporated in Bermuda with limited liability)

(Stock Code: 1222)

Executive Directors:

Mr. Tang Ching Ho (Chairman and Managing Director) Ms. Yau Yuk Yin

(Deputy Chairman and Deputy Managing Director) Mr. Chan Chun Hong, Thomas

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

Independent non-executive Directors:

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

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

13 April 2005

To the Shareholders

Dear Sir or Madam,

(1) MAJOR AND CONNECTED TRANSACTION – ACQUISITION OF HANWIN INVESTMENT LIMITED;

(2) DISCLOSEABLE TRANSACTION – ACQUISITION OF YUEN LONG PROPERTY; AND

(3) REFRESHMENT OF GENERAL MANDATES

INTRODUCTION

On 22 March 2005, the Directors announced that on 18 March 2005, Suitbest, a wholly-owned subsidiary of the Company, Mr. Tang and Hanwin entered into the Hanwin Acquisition Agreement, pursuant to which Suitbest had agreed to acquire from Mr. Tang the entire issued share capital and shareholder’s loan of Hanwin at a consideration to be paid in the manner as set out under the heading “The Hanwin Acquisition Agreement” in this letter.

For identification purpose only

−6 −

LETTER FROM THE BOARD

The Directors also announced that on 16 March 2005, Champford Investment Limited, an indirect wholly-owned subsidiary of the Company, entered into the Yuen Long Property Acquisition Agreement with the Yuen Long Property Vendor, an Independent Third Party, to acquire the Yuen Long Property at a consideration of HK$35,000,000 to be paid in the manner as set out under the heading “The Yuen Long Property Acquisition Agreement” in this letter.

The purpose of this circular is to provide you with, among other matters, (i) further information on the Hanwin Acquisition and the Yuen Long Property Acquisition; (ii) information on the proposed grant of the General Mandates; (iii) the accountants’ report on Hanwin; (iv) a valuation report on the Sham Shui Po Property; (v) the advice from Baron; (vi) the recommendation from the Independent Board Committee; and (vii) the notice convening the SGM, at which the necessary resolutions will be proposed to the Independent Shareholders to consider and, if thought fit, approve the Hanwin Acquisition and granting of the Issue Mandate.

THE HANWIN ACQUISITION

The Hanwin Acquisition Agreement

Date: 18 March 2005 Purchase price: HK$110,000,000 Parties: (i) Mr. Tang, the chairman and managing director of the Company, as vendor;

(ii) Suitbest, a wholly-owned subsidiary of the Company, as purchaser; and
(iii) Hanwin, a limited liability company incorporated in Hong Kong and wholly and beneficially owned by Mr. Tang.
Assets to be acquired: (i) one share of HK$1 in the share capital of Hanwin, being the entire issued share capital of Hanwin; and
(ii) shareholder’s loan of Hanwin.

The Hanwin Consideration shall represent the face value of the entire issued share capital and shareholder’s loan of Hanwin as at Completion. As at the date of the Hanwin Acquisition Agreement, the shareholder’s loan of Hanwin amounted to HK$3,000,000 which had been fully paid by Hanwin to partially satisfy the initial deposit for the purchase of the Sham Shui Po Property. The Hanwin Consideration shall be payable in cash and funded by internal resources of the Group and/or debt borrowing from bank.

−7 −

LETTER FROM THE BOARD

The Hanwin Consideration shall be as follows and payable in the following manner:

(1) a sum of HK$3,000,001 paid to Mr. Tang as deposit on the signing of the Hanwin Acquisition Agreement (representing the value of the entire issued share capital of Hanwin and the amount of shareholder’s loan of Hanwin as at the date of the Hanwin Acquisition Agreement);
(2) whenever Hanwin shall be required to pay any amounts in accordance with the Provisional Agreement or Formal Agreement, Suitbest shall, upon request by Mr. Tang, pay to Hanwin (or such other person(s) as directed by Mr. Tang) such same amounts of money, which shall be deemed to be advanced by Mr. Tang to Hanwin as additional shareholder’s loan and be applied by Hanwin in accordance with the Provisional Agreement or the Formal Agreement (as applicable); and
(3) the balance of Hanwin Consideration (if any) shall be paid to Mr. Tang (or such other person(s) as directed by Mr. Tang) at Completion.

Completion is conditional upon the following conditions precedent:

(i) approval of the Hanwin Acquisition Agreement and other transactions contemplated in or incidental to the Hanwin Acquisition Agreement at the SGM of the independent Shareholders in accordance with the Listing Rules; and
(ii) all other necessary waivers, consents and approvals (if required) from the relevant governmental or regulatory authorities in Hong Kong and Bermuda as required under the Hanwin Acquisition Agreement and required under the transactions contemplated in the Hanwin Acquisition Agreement in relation to Suitbest and the Company having been obtained.

As at 22 March 2005, the sum of HK$3,000,001 referred to in (1) above was paid to Mr. Tang. On 31 March 2005, Suitbest paid to vendor’s solicitors an aggregate amount of HK$8,000,000 upon at the request of Mr. Tang in respect of the Hanwin Acquisition.

Completion

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

The parties to the Hanwin Acquisition Agreement have agreed to use their best endeavours to ensure that the conditions precedent to the Hanwin Acquisition Agreement are fulfilled by 5:00 p.m. (Hong Kong time) on 31 May 2005 (or such later date as the parties may agree), failing which the Hanwin Acquisition Agreement shall, subject to the liability of any party to the other in respect of any antecedent breach of any of the terms hereof, be null and void and of no effect and Mr. Tang shall refund the deposit paid by Suitbest as referred to in (1) above.

−8 −

LETTER FROM THE BOARD

Following Completion, the Company will own the entire issued share capital of Hanwin and Hanwin will become a wholly-owned subsidiary of the Company.

Information of Hanwin

Hanwin is a limited liability company incorporated in Hong Kong on 3 March 2005. Hanwin is wholly and beneficially owned by Mr. Tang, the chairman and managing director of the Company. Hanwin is an investment holding company and has not carried out any other business activities since its incorporation other than entering into the Provisional Agreement and the Hanwin Acquisition Agreement. Upon completion of the acquisition of the Sham Shui Po Property, the Sham Shui Po Property will be Hanwin’s principal asset.

Based on the management accounts of Hanwin, the unaudited net loss of Hanwin for the period from 3 March 2005 to 18 March 2005 was HK$5,371, representing business registration fee, formation expenses as well as search, filing and secretarial fees and the unaudited net tangible liabilities of Hanwin as at 18 March 2005 was HK$5,370. Other than the payment for purchase price pursuant to the Provisional Agreement, Hanwin did not have any long term liability as at the Latest Practicable Date.

Information of the Sham Shui Po Property

The Sham Shui Po Property is a 18-storey building, amongst which 16 storeys are currently intended for sale or rental for residential purposes and 2 storeys are currently intended for sale or rental for commercial purposes, with an aggregate site area of approximately 3,300 sq.ft. and a total floor area of approximately 30,000 sq.ft., located at No. 58 Yen Chow Street, Sham Shui Po, Kowloon, Hong Kong. None of the units in the Sham Shui Po Property has been engaged as at the Latest Practicable Date.

Reasons for the Hanwin Acquisition

In view of the time required for obtaining Shareholders’ approval in relation to the acquisition of the Sham Shui Po Property and in order to facilitate the purchase of the Sham Shui Po Property from the Sham Shui Po Property Vendor, Mr. Tang, at the request of the Company, stepped in through Hanwin, to acquire the Sham Shui Po Property. Prior to the entering into the Hanwin Acquisition Agreement, Hanwin entered into the Provisional Agreement on 17 March 2005 for the purchase of the Sham Shui Po Property. The Sham Shui Po Property represents the whole block of Wealthy Terrace located at No. 58 Yen Chow Street, Sham Shui Po, Kowloon. The Directors intend that following the completion of the acquisition of the Sham Shui Po Property by Hanwin and upon Completion, the Company would sell and/or lease the residential units and the shops in the Sham Shui Po Property. As the Group is principally engaged in, among other matters, property development and property investment, the Group has expertise and experience in building construction in Hong Kong. The Group has an expert team of staff specialized in property development, projects management, building construction, quantity surveying as well as the sales and marketing in property.

−9 −

LETTER FROM THE BOARD

As at 17 March 2005, an amount of HK$3,000,000 was paid by Hanwin to the Sham Shui Po Property Vendor to partially satisfy the deposit pursuant to the terms of the Provisional Agreement. The Formal Agreement will be entered into by Hanwin and the Sham Shui Po Property Vendor as soon as practicable. On 31 March 2005, a further amount of HK$8,000,000 was paid by Hanwin to vendor’s solicitors as stakeholder to be released when the Formal Agreement is entered into. The balance of the purchase price of HK$99,000,000 of the Sham Shui Po Property, of which HK$60,000,000 will be satisfied by a bank borrowing with a term of 10 years (subject to negotiation and final determination by bank), is expected to be payable by Hanwin as to HK$5,500,000 on or before 30 April 2005 and HK$93,500,000 on or before 29 July 2005.

The Sham Shui Po Property Vendor is a property investment company. The Directors confirm that, to the best of their knowledge, information and belief and having made all reasonable enquiry, the Sham Shui Po Property Vendor and its ultimate beneficial owners (if any) are Independent Third Parties who are not connected persons (as defined in the Listing Rules) of the Company.

In view of the fact that Hanwin had entered into the Provisional Agreement in respect of the Sham Shui Po Property for an aggregate consideration of HK$110,000,000, which is determined based on the value of the Sham Shui Po Property, as estimated based on the Group’s property assessment expertise which considers the Hanwin Consideration to be the market price in the area adjacent to the Sham Shui Po Property, and that the Hanwin Consideration has been negotiated on an arm’s length basis and agreed on normal commercial terms between Hanwin and the Sham Shui Po Property Vendor, the Company, through Suitbest, entered into the Hanwin Acquisition Agreement to acquire from Mr. Tang the entire issued share capital of and the Shareholder’s loan of Hanwin, with no profit made or accrued to either parties, with the purpose of ultimately having interests in the Sham Shui Po Property. Independent valuation on the Sham Shui Po Property is set out in Appendix VIII in this circular. No adjustment will be made to the Hanwin Consideration in the event of any difference between the Hanwin Consideration of HK$110,000,000 and the independent valuation of the Sham Shui Po Property. To the best of their knowledge, information and belief of the Directors, having made all reasonable enquiry, the Sham Shui Po Property’s current uses as a residential and/or commercial building should remain unchanged at the time of Completion.

The Directors (including the independent non-executive Directors) confirm that the Hanwin Acquisition was negotiated on an arm’s length basis and agreed on normal commercial terms between the parties and that the terms of the Hanwin Acquisition Agreement are fair and reasonable so far as the Shareholders are concerned, and are of the view that Hanwin has acquired the Sham Shui Po Property at fair market price and therefore consider that the Hanwin Acquisition is in the interest of the Company and the Shareholders as a whole.

−10 −

LETTER FROM THE BOARD

THE YUEN LONG PROPERTY ACQUISITION

The Yuen Long Property Acquisition Agreement

Date of Execution: 16 March 2005 Parties: (i) Yuen Long Property Champford Investment Limited, an Purchaser: investment holding company incorporated in Hong Kong and an indirect wholly-owned subsidiary of the Company, as a purchaser; and (ii) Yuen Long Property an individual who is an Independent Vendor: Third Party, as a vendor Yuen Long Property Address: Ground Floor (for commercial No. 170 Castle Peak Road use): (Section A of Lot No. 3705 IN DD120) Yuen Long, New Territories Gross floor area: Approximately 2,260 square feet Yuen Long The Yuen Long Consideration of HK$35,000,000 was agreed after Consideration: arm’s length negotiations between the Yuen Long Property Vendor and the Yuen Long Property Purchaser by reference to the current market value of properties for commercial use in the market in the Yuen Long area and shall be payable in cash as follows:

(i) HK$1,700,000 on the signing of the Yuen Long Property Agreement;
(ii) HK$1,800,000 on the signing of the formal agreement for sale and purchase of the Yuen Long Property; and
(iii) the balance of HK$31,500,000 upon completion.

To the best of the Directors’ knowledge, information and belief having made all reasonable enquiry, the Yuen Long Property Vendor is an Independent Third Party.

−11 −

LETTER FROM THE BOARD

Terms:

As at 16 March 2005, an amount of HK$1,700,000 has been paid by the Yuen Long Property Purchaser to the Yuen Ling Property Vendor pursuant to the terms of the Yuen Long Property Acquisition Agreement. The formal agreement for the sale and purchase of the Yuen Long Property will be entered into by the Yuen Long Property Purchaser and the Yuen Long Property Vendor as soon as practicable. As at 29 March 2005, a further amount of HK$1,800,000 was paid by the Yuen Long Property Purchaser to the Yuen Long Property vendor’s solicitors as stakeholder to be released when the formal agreement is entered into. Completion of the sale and purchase of the Yuen Long Property shall take place on or before 31 May 2005.

The Yuen Long Property Vendor agrees to sell and the Yuen Long Property Purchaser agrees to purchase the Yuen Long Property subject to the Yuen Long Property Purchaser being satisfied that the terms of the new renewal tenancy the final terms of which are still being settled will be as follows:

(i) the new renewal tenancy began on 1 April 2005 and will expire on 31 March 2008;
(ii) the rent receivable per month under the new renewal tenancy to be HK$168,000 exclusive of rates, Government rent and management fees, and
(iii) the tenant having an option to renew for a further two years at the prevailing market rental price at the time.

The rent receivable per month under the tenancy expiring on 31 March 2005 was HK$140,000 exclusive of rates, Government rent and management fees.

If the final terms of the new renewal tenancy are different from the above, the Yuen Long Property Purchaser is entitled to cancel the Yuen Long Property Acquisition Agreement and the deposit will be refunded, without interest, to the Yuen Long Property Purchaser from the Yuen Long Property Vendor forthwith.

The Yuen Long Property is to be sold to the Yuen Long Property Purchaser by the Yuen Long Property Vendor free from encumbrances.

Reasons for the Yuen Long Property Acquisition

Having regard to the upturn of the Hong Kong economy and the property market, the Directors consider the terms of the Yuen Long Property Acquisition Agreement are fair and reasonable and the Yuen Long Property Acquisition is in the interest of the Shareholders as a whole.

The Yuen Long Property Acquisition will be funded by the Group’s internal resources and bank financing.

−12 −

LETTER FROM THE BOARD

PROPOSED REFRESHMENT OF GENERAL MANDATES

As the general mandate granted to the Board at the SGM of the Company held on 28 January 2005 to allot, issue and deal with additional Shares has been exercised and almost used up by the new Shares falling to be issued upon full conversion of the Convertible Notes as detailed in the announcements of the Company dated 7 and 22 February 2005, the Board would like to propose resolutions at the SGM to grant the General Mandates to the Board to exercise the powers of the Company to (i) repurchase Shares not exceeding 10% of the aggregate nominal amount of the issued share capital of the Company as at the date of the SGM; and (ii) allot, issue and deal with Shares and to make or grant offers, agreements and options, including warrants to subscribe for Shares, not exceeding 20% of the aggregate nominal amount of the issued share capital of the Company as at the date of the SGM (such mandate be extended to Shares repurchased by the Company pursuant to the proposed mandate as set out in (i) above).

The Directors believe that the granting of each of the General Mandates is in the best interests of the Company and the Shareholders as a whole by maintaining the financial flexibility necessary for the Group’s future business development. The Board considers equity financing to be an important avenue of resources for the Group since equity financing does not create any interest paying obligations on the Group. In appropriate circumstances, the Group will also consider other financing methods such as debt financing or internal cash resources to fund its future business development. As mentioned above, the general mandate granted to the Board to issue new Shares at the special general meeting of the Company held on 28 January 2005 has been utilised, therefore, the Board will propose to seek the approval of the Independent Shareholders at the SGM of the General Mandates such that should future funding needs arise or attractive terms for investment in the Shares become available from potential investors, the Board will be able to respond to the market promptly.

IMPLICATIONS UNDER THE LISTING RULES AND OF THE SGM

Mr. Tang is the chairman and managing director of the Company, and is therefore a connected person (as defined in the Listing Rules) of the Company. The Hanwin Acquisition constitutes a major and connected transaction under Rule 14.06(3) and Rule 14A.13(1)(a) of the Listing Rules and therefore Completion is subject to the Independent Shareholders’ approval, voting by way of poll, under the Listing Rules. Mr. Tang and his associates will abstain from voting on the relevant resolutions for the approval of the Hanwin Acquisition.

The Yuen Long Property Acquisition constitutes a discloseable transaction for the Company under the Listing Rules.

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

−13 −

LETTER FROM THE BOARD

Under the Listing Rules, (i) any vote of Shareholders taken at the SGM to approve a general mandate must be taken on a poll; (ii) any refreshment of a general mandate before the next annual general meeting of the Company requires any controlling shareholders and their associates or, where there are no controlling shareholders, directors (excluding independent non-executive directors) and the chief executive of the issuer and their respective associates to abstain from voting in favour of the relevant resolution. Mr. Tang and his associates will abstain from voting in favour of the relevant resolution regarding the granting of Issue Mandate.

Set out on pages 141 and 145 is a notice convening the SGM to be held at 37th Floor, Two International Finance Centre, 8 Finance Street, Central, Hong Kong at 9:30 a.m. (Hong Kong time) on 6 May 2005 at which ordinary resolutions will be proposed to the Independent Shareholders to consider and, if thought fit, approve the Hanwin Acquisition and the granting of the Issue Mandate.

The following table shows the Company’s history of refreshment of general mandate since the last annual general meeting of the Company held on 13 August 2004:

		Amount of
		proceeds raised	Use of proceeds
		from the utilization	and the intended
	Date of general	of the general	use of proceeds not
Description	mandate granted	mandate	yet utilised
Placing of	28 January 2005 (as	HK$61,440,000	not yet utilised,
Convertible	at the Latest		approximately (i)
Notes	Practicable Date,		HK$40 million are
	89.31% of such		intended to use for
	general mandate has		property
	been utilised)		development and (ii)
			the remaining
			HK$21 million are
			intended to use for
			general working
			capital purposes

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

−14 −

LETTER FROM THE BOARD

VOTING ON POLL

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

(i) by the chairman of the meeting; or
(ii) by at least 3 members present in person or by proxy (or in the case of a member being a corporation, by its representative duly authorised therefor) for the time being entitled to vote at the meeting; or
(iii) by any member or members present in person or by proxy (or being a corporation, is present by a representative duly authorised therefor) and representing not less than one-tenth of the total voting rights of all the members having the right to attend and vote at the meeting; or
(iv) by any member or members present in person or by proxy (or being a corporation, is present by a representative duly authorised therefor) and having the right to attend and vote at the meeting on which there have been paid up sums in the aggregate equal to not less than one-tenth of the total sum paid up on all the shares having that right.

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

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

FINANCIAL AND TRADING PROSPECTS

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

−15 −

LETTER FROM THE BOARD

Directors are optimistic about the property market in Hong Kong and perceive investment potentials arising from the acquisition of the Sham Shui Po Property in Hong Kong and perceive investment potentials arising from the acquisition of the Yuen Long Property for sale and/or lease.

Shareholders and the investing public should note that Completion is conditional and they should exercise caution when dealing in the Shares in the Company.

RECOMMENDATION

Your attention is drawn to the letter from the Independent Board Committee set out on pages 17 to 18 of this circular which contains its advice to the Independent Shareholders, and the letter from Baron on pages 19 to 32 of this circular which contains its advice to the Independent Board Committee and the Independent Shareholders as well as the principal factors and reasons taken into consideration in arriving at its advice.

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

ADDITIONAL INFORMATION

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

Yours faithfully,

For and on behalf of the Board

Wang On Group Limited

Tang Ching Ho

Chairman and Managing Director

−16 −

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

==> picture [82 x 61] intentionally omitted <==

WANG ON GROUP LIMITED

( )[*]

(Incorporated in Bermuda with limited liability)

(Stock Code: 1222)

13 April 2005

To the Independent Shareholders

Dear Sir or Madam,

(1) MAJOR AND CONNECTED TRANSACTION – ACQUISITION OF HANWIN INVESTMENT LIMITED; AND

(2) REFRESHMENT OF GENERAL MANDATES TO ISSUE SHARES

We have been appointed as members of the Independent Board Committee to advise you in connection with the captioned major and connected transactions and the Issue Mandate, details of which are set out in the “Letter from the Board” in the circular dated 13 April 2005 (the “Circular”) of which this letter forms part. Defined terms used in this letter shall have the same meanings as given to them in the Circular unless the context otherwise requires.

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

Baron has been appointed by the Company to advise us and the Independent Shareholders as to whether the terms of the Hanwin Acquisition and the grant of the Issue Mandate are fair and reasonable so far as the Independent Shareholders are concerned. Details of its advice, together with the principal factors which have been taken into consideration in arriving at such advice, are set out on pages 19 to 32 of the Circular.

Your attention is also drawn to the “Letter from the Board” set out on pages 6 to 16 of the Circular and the additional information set out in the appendices to the Circular.

For identification purpose only

−17 −

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

As referred to in the “Letter from the Board” in the Circular, Mr. Tang and his associates will abstain from voting on the ordinary resolutions to be proposed at the SGM to approve the Hanwin Acquisition and the granting of the Issue Mandate.

Having considered the terms of the Hanwin Acquisition Agreement and the General Mandates and taking into account the advice of Baron, we consider that both the terms of the Hanwin Acquisition and the grant of the Issue Mandate are fair and reasonable as far as the Independent Shareholders are concerned and that the Hanwin Acquisition and the grant of the Issue Mandate are in the interests of the Company and the Independent Shareholders as a whole. Accordingly, we recommend the Independent Shareholders to vote in favour of each of the ordinary resolutions as set out in the notice of the SGM attached to this Circular to approve the Hanwin Acquisition and the grant of the Issue Mandate.

Yours faithfully, Independent Board Committee of Wang On Group Limited

Dr. Lee Peng Fei, Allen Mr. Wong Chun, Justein Independent Non-executive Director Independent Non-executive Director

Dr. Siu Yim Kwan, Sidney Mr. Siu Kam Chau Independent Non-executive Director Independent Non-executive Director

−18 −

LETTER FROM BARON

The following is the text of a letter of advice to the Independent Board Committee and to the Independent Shareholders from Baron Capital Limited dated 13 April 2005 prepared for the purpose of incorporation in this circular:

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

13 April 2005

To the Independent Board Committee and

the Independent Shareholders of Wang On Group Limited

Dear Sirs,

(1) MAJOR AND CONNECTED TRANSACTION – ACQUISITION OF HANWIN INVESTMENT LIMITED

AND

(2) REFRESHMENT OF GENERAL MANDATES TO ISSUE SHARES

INTRODUCTION

We refer to the circular dated 13 April 2005 (the “Circular”) issued by the Company to its Shareholders and to our appointment as independent financial adviser to the Independent Board Committee in respect of the Hanwin Acquisition and the refreshment of the general mandate, details of which are set out in the “Letter from the Board” contained in this Circular. Terms defined in the Circular shall have the same meanings in this letter unless the context otherwise requires.

On 22 March 2005, the Company announced that Suitbest, a wholly-owned subsidiary of the Company, had entered into the Hanwin Acquisition Agreement with Mr. Tang on 18 March 2005, pursuant to which Suitbest has agreed to acquire from Mr. Tang the entire issued share capital and shareholder’s loan of Hanwin. In addition, prior to entering into the Hanwin Acquisition Agreement, Hanwin entered into the Provisional Agreement for the purchase of the Sham Shui Po Property. The Directors intend that following the completion of the acquisition of the Sham Shui Po Property by Hanwin and upon Completion, the Company would sell and/or lease the residential units and the shops in the Sham Shui Po Property.

−19 −

LETTER FROM BARON

The Hanwin Acquisition constitutes a major and connected transaction under Chapter 14 and Chapter 14A of the Listing Rules. Since Mr. Tang is the chairman and managing director of the Company, he is regarded as a connected person of the Company under the Listing Rules. The Hanwin Acquisition is therefore subject to Independent Shareholders’ approval at the SGM voting by way of poll, under the Listing Rules. Mr. Tang and his associates will abstain from voting on the relevant resolutions for the approval of the Hanwin Acquisition.

Pursuant to the Listing Rules, the granting of Issue Mandate is subject to the approval of the Independent Shareholders at the SGM, voting by way of poll. Accordingly, the Independent Board Committee has been appointed to advise the Independent Shareholders in relation to the Hanwin Acquisition and the refreshment of general mandate. Baron has been appointed to advise the Independent Board Committee and the Independent Shareholders in these respects.

BASIS OF OUR OPINION

In arriving at our opinion and recommendation, we have relied on the information supplied and the opinion expressed by the Directors and the management of the Company. We have assumed that the information contained and representations made to us or referred to in the Circular are true, accurate and complete at the time they were made and continue to be so at the date of the Circular. We have also relied on the information and representations provided by Chesterton Petty Limited, an independent valuer regarding the valuation of the Sham Shui Po Property (the “Valuation Report”) and assumed that the bases and assumptions made in determining the valuation by the independent valuer are fair and reasonable.

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

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

We have not, however, carried out any independent verification of the information provided by the Directors and the management of the Company, nor have we conducted an independent investigation into the business and affairs of the Company and on the Valuation Report, nor have we considered the taxation implication on the Group or the Shareholders as a result of the Hanwin Acquisition and the refreshment of general mandate.

−20 −

LETTER FROM BARON

PRINCIPAL FACTORS AND REASONS CONSIDERED

In formulating our opinion on the Hanwin Acquisition and the refreshment of general mandate, we have considered the following factors and reasons:

A. Background of the Group

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

B. The Hanwin Acquisition

1. Background of Hanwin

As stated in the “Letter from the Board”, Hanwin is a company incorporated in Hong Kong on 3 March 2005 with limited liability and is beneficially wholly-owned by Mr. Tang, the chairman and managing director of the Company. Hanwin is an investment holding company and has not carried out any other business activities since its incorporation other than entering into the Provisional Agreement and the Hanwin Acquisition Agreement. Upon completion of the acquisition of the Sham Shui Po Property, the Sham Shui Po Property will be Hanwin’s principal assets. Based on the management accounts of Hanwin, the unaudited net loss of Hanwin for the period from 3 March 2005 to 18 March 2005 was HK$5,371, representing business registration fee, formation expenses as well as search, filing and secretarial fees. The unaudited net tangible liabilities of Hanwin as at 18 March 2005 were HK$5,370. Other than the payment for purchase price pursuant to the Provisional Agreement, Hanwin did not have any long-term liability as at the Latest Practicable Date.

2. The Hanwin Acquisition Agreement

On 18 March 2005, Suitbest, a wholly-owned subsidiary of the Company, Mr. Tang and Hanwin entered into the Hanwin Acquisition Agreement. Pursuant to the Hanwin Acquisition Agreement, details of which are set out in the “Letter from the Board”, Suitbest had agreed to acquire from Mr. Tang the entire issued share capital and shareholder’s loan of Hanwin. The Hanwin Consideration shall represent the face value of the entire issued share capital and shareholder’s loan of Hanwin as at Completion. As at the date of the Hanwin Acquisition Agreement, the shareholder’s loan of Hanwin amounted to HK$3,000,000 which had been fully paid by Hanwin to partially satisfy the initial deposit for the purchase of the Sham Shui Po Property. The Hanwin Consideration shall be payable in cash and funded by internal resources of the Group and/or debt borrowing from bank. The Hanwin Acquisition Agreement is conditional upon the approval of the Hanwin Acquisition Agreement at the SGM by the Independent Shareholders.

−21 −

LETTER FROM BARON

Prior to entering into the Hanwin Acquisition Agreement, Hanwin entered into the Provisional Agreement for the purchase of Sham Shui Po Property. The Directors intend that following the completion of the acquisition of the Sham Shui Po Property by Hanwin and upon Completion, the Company would sell and/or lease the residential units and the shops in the Sham Shui Po Property.

3. Description of the Sham Shui Po Property

The Sham Shui Po Property represents the whole block of Wealthy Terrace located at No. 58, Yen Chow Street, Sham Shui Po, Kowloon, Hong Kong. It is a 18-storey building, amongst which 16 storeys are currently intended for sale or rental for residential purposes and 2 storeys are currently intended for sale or rental for commercial purposes with an aggregate site area of approximately 3,300 square feet and a total floor area of approximately 30,000 square feet.

4. Reasons for the Hanwin Acquisition

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

In view of the time required for obtaining Shareholders’ approval in relation to the acquisition of Sham Shui Po Property and in order to facilitate the purchase of the Sham Shui Po Property from the Sham Shui Po Property Vendor, Mr. Tang, at the request of the Company, stepped in through Hanwin, to acquire the Sham Shui Po Property, with no profit made or accrued by Mr. Tang, with the purpose of ultimately having interests in the Sham Shui Po Property. The Directors intended that following the completion of the acquisition of the Sham Shui Po Property by Hanwin and upon Completion, the Company would sell and/or lease the residential units and the shops in the Sham Shui Po Property.

The Directors expect the overall economic and business environment in Hong Kong will continue to improve and are of the view that the Enlarged Group is well-positioned to benefit from the improvement in the general business environment in Hong Kong. The Directors are optimistic about the property market in Hong Kong and perceive investment potentials arising from the acquisition of the Sham Shui Po Property in Hong Kong.

−22 −

LETTER FROM BARON

The following chart illustrates the rental indices for Hong Kong property market complied by the Rating and Valuation Department, HKSAR from 1st January 1997 to 31st January 2005:

==> picture [57 x 73] intentionally omitted <==

==> picture [329 x 190] intentionally omitted <==

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

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

==> picture [63 x 48] intentionally omitted <==

==> picture [325 x 191] intentionally omitted <==

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

−23 −

LETTER FROM BARON

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

We believe that the Hanwin Acquisition, which includes the acquisition of the Sham Shui Po Property, shall further enhance and strengthen the property portfolio of the Company and potentially provide a solid future income stream to the Company. On that basis, we consider that the Hanwin Acquisition to be complimentary to the Company’s business development and in the interests of the Group and the Shareholders as a whole.

5. Terms and conditions of Hanwin Acquisition

The Hanwin Consideration

According to the “Letter from the Board” contained in the Circular, it was stated that an aggregate Hanwin Consideration of HK$110,000,000, which is determined based on the value of the Sham Shui Po Property, as estimated based on the Group’s property assessment expertise which considers such Hanwin Consideration to be the market price in the area adjacent to the Sham Shui Po Property, and that such Hanwin Consideration has been negotiated on an arm’s length basis and agreed on normal commercial terms between Hanwin and the Sham Shui Po Property Vendor. The Hanwin Consideration shall be as follows and payable in the following manner:

(1) a sum of HK$3,000,001 paid to Mr. Tang as deposit on the signing of the Hanwin Acquisition Agreement (representing the value of the entire issued share capital of Hanwin and the amount of shareholder’s loan of Hanwin as at the date of the Hanwin Acquisition Agreement);
(2) whenever Hanwin shall be required to pay any amounts in accordance with the Provisional Agreement or Formal Agreement, Suitbest shall, upon request by Mr. Tang, pay to Hanwin (or such other person(s) as directed by Mr. Tang) such same amounts of money, which shall be deemed to be advanced by Mr. Tang to Hanwin as additional shareholders’ loan and be applied by Hanwin in accordance with the Provisional Agreement or the Formal Agreement (as applicable); and
(3) the balance of Hanwin Consideration (if any) shall be paid to Mr. Tang (or such other person(s) as directed by Mr. Tang) at Completion.

−24 −

LETTER FROM BARON

As at 17 March 2005, an amount of HK$3,000,000 was paid by Hanwin to the Sham Shui Po Property Vendor to partially satisfy the deposit pursuant to the terms of the Provisional Agreement. The Formal Agreement will be entered into by Hanwin and the Sham Shui Po Property Vendor as soon as practicable by Hanwin. On 31 March 2005, a further amount of HK$8,000,000 was paid by Hanwin to vendor’s solicitors as stakeholder to be released when the Formal Agreement is entered into. The balance of the purchase price of HK$99,000,000 of the Sham Shui Po Property, of which HK$60,000,000 will be satisfied by a bank borrowing with a term of 10 years (subject to negotiation and final determination by bank), is expected to be payable by Hanwin as to HK$5,500,000 on or before 30 April 2005 and HK$93,500,000 on or before 29 July 2005.

Completion

Completion is conditional upon the following conditions precedent:

(i) approval of the Hanwin Acquisition Agreement and other transactions contemplated in or incidental to the Hanwin Acquisition Agreement at the SGM of the Independent Shareholders in accordance with the Listing Rules; and
(ii) all other necessary waivers, consents and approvals (if required) from the relevant governmental or regulatory authorities in Hong Kong and Bermuda as required under the Hanwin Acquisition Agreement and required under the transactions contemplated in the Hanwin Acquisition Agreement in relation to Suitbest and the Company having been obtained.

The parties to the Hanwin Acquisition Agreement have agreed to use their best endeavours to ensure that the conditions precedent to the Hanwin Acquisition agreement are fulfilled by 5:00p.m. on 31 May 2005 (or such later date as the parties may agree), failing which the Hanwin Acquisition Agreement shall, subject to the liability of any party to the other in respect of any antecedent breach of any of the terms hereof, be null and void and of no effect and Mr. Tang shall refund the deposit paid by Suitbest as referred to in (1) above. Following the Completion, the Company will own the entire issued share capital of Hanwin and Hanwin will become a wholly-owned subsidiary of the Company.

−25 −

LETTER FROM BARON

Given that (a) the Hanwin Consideration represents the face value of the entire issued share capital and shareholder’s loan of Hanwin; (b) the valuation of the Sham Shui Po Property prepared by an independent valuer to be fair and reasonable; (c) Mr. Tang does not stand to make any profit under the Hanwin Acquisition; and (d) to the best of the Directors’ knowledge, the Sham Shui Po Property Vendor together with its respective ultimate beneficial owners are Independent Third Parties, and we consider the Hanwin Consideration to be fair and reasonable so far as the Independent Shareholders are concerned.

6. Basis of Hanwin Consideration

The consideration of HK$110,000,000 for the Hanwin Acquisition was determined in accordance with the valuation as at 30 March 2005 by Chesterton Petty Limited, an independent valuer, a copy of the Valuation Report on the Sham Shui Po Property under the Provisional Agreement is set out in Appendix VIII of this Circular.

As stated in the Valuation Report, the valuation of the Sham Shui Po Property represents the open market value which is defined as “the best price at which the sale of an interest in a property would have been completed unconditionally for cash consideration on the date of valuation”. Following inquiries to the valuer, we understand that the valuer has adopted the direct comparison approach to determine the valuation of Sham Shui Po Property, which they consider to be a common valuation approach in determining the appraised value of the Sham Shui Po Property as at 30 March 2005. Under the direct comparison approach, a valuation is based on the assumption that vacant possession of property would be readily available upon completion of a sale and by making reference to sales evidence as available on the market. For further details of the assumption and basis for the valuation, please refer to Appendix VIII of the Circular.

We have reviewed the basis of the underlying assumptions, among others, that (i) the owner sells the property in the open market without the benefit of a deferred term contract, leaseback, joint venture, management agreement or any similar arrangement which would serve to increase the value of the property; and (ii) no account has been taken of any option or right of pre-emption concerning or affecting the sale of the property and no forced sale situation in any manner. Given the assumptions and valuation methodologies applied by the valuer are normal and usual among professional property valuers in Hong Kong, we have no reason to doubt the assumptions they have made and the reasonableness of the valuation and consider the methodology adopted in their valuation to be appropriate. In this regard, we are of the view that the valuation of the Sham Shui Po Property has been performed by Chesterton Petty Limited after due care and consideration, and the consideration, which is based on the valuation of the Sham Shui Po Property as at 30 March 2005, is fair and reasonable so far as the Independent Shareholders are concerned.

−26 −

LETTER FROM BARON

7. Financial effects of the Hanwin Acquisition

Effect on Net Assets

With reference to the paragraph headed “Unaudited Pro Forma Statement of Assets and Liabilities of the Enlarged Group” in Appendix VI of this Circular, the unaudited consolidated net assets of the Group as at 30 September 2004 were HK$675,658,000, which is the same as the pro forma consolidated net assets of the Enlarged Group as if the Hanwin Acquisition was completed. Therefore, there will be no material impact on the pro forma net assets of the Group immediately following the Completion.

Effect on Gearing

According to the “Letter from the Board” in the Circular, the consideration for the Hanwin Acquisition shall be payable in cash and funded by internal resources of the Group and/or debt borrowing from bank. The balance of the purchase price of HK$99,000,000 of the Sham Shui Po Property, of which HK$60,000,000 will be satisfied by a bank borrowing with a term of 10 years (subject to negotiation and final determination by bank) is expected to be payable by Hanwin as to HK$5,500,000 on or before 30 April 2005 and HK$93,500,000 on or before 29 July 2005. Before the completion of the acquisition of the Dragon Richly, Poly Talent, Profit Million and Hanwin, the Group was in a net cash position. Net cash (debt) position, being defined as cash and cash equivalents net of total debt of the Group amounted to HK$27,269,000 as at 30 September 2004.

Only taking into account the Hanwin Acquisition, the Group would have a net debt of HK$82,731,000 upon Completion. The pro forma unaudited net asset value of the Group amounted to HK$675,658,000 upon Completion. The gearing ratio of the Group (being the net debt divided by the net asset value of the Group) was thus approximately 12.24% when compared to the net cash position as at 30 September 2004.

However, given the benefits of the Hanwin Acquisition as discussed above, we consider the increase in gearing ratio to be acceptable and are in the interest of the Company and the Independent Shareholders.

Effect on liquidity and working capital of the Group

As disclosed in the “Unaudited Pro Forma Statement of Assets and Liabilities of the Enlarged Group” as set out in Appendix VI of the Circular, as at 30 September 2004, the working capital (being current assets minus current liabilities of the Group) of the Group is HK$234,695,000. Only taking into account the Hanwin Acquisition, the working capital will be decreased to HK$178,695,000, representing

−27 −

LETTER FROM BARON

a decrease of HK$56,000,000 (including a HK$50,000,000 decrease in current assets and a HK$6,000,000 increase in current liabilities of the Group after the completion of the acquisition of the Sham Shui Po Property by Hanwin and upon Completion).

The current ratio (being the current assets minus current liabilities) of the Group as at 30 September 2004 was approximately 2.70 and by only taking into account the Hanwin Acquisition, the current ratio of the Group will be approximately 2.24. As a result, the liquidity position of the Group would be worsen upon completion of the acquisition of the Sham Shui Po Property by Hanwin and upon Completion.

Despite the decrease in the current ratio as referred above, the Group’s liquidity position is considered as generally healthy so long as the current ratio is greater than one. Accordingly, we consider that the Hanwin Acquisition are in the interest of the Company and the Shareholders as a whole.

Effect on Earnings

The Directors intend that following the completion of the acquisition of the Sham Shui Po Property by Hanwin and upon Completion, the Company would sell and/or lease the residential units and the shops in the Sham Shui Po Property.

The Directors confirmed that the Hanwin Acquisition would bring positive effect on earnings assuming that some of the residential units and shops of the Sham Shui Po Property could be leased out following the completion of the acquisition of the Sham Shui Po Property by Hanwin and upon Completion . In view of the above, we consider that acquisition of Sham Shui Po Property to be beneficial to the Group and the Shareholders as a whole.

8. Conclusion

Having taken into account the above, in particular:

(i) In view of the time required for obtaining Shareholder’s approval in relation to the acquisition of Sham Shui Po Property and in order to facilitate the purchase of the Sham Shui Po Property from the Sham Shui Po Property Vendor, Mr. Tang, at the request of the Company, stepped in through Hanwin, to acquire the Sham Shui Po Property, with no profit made or accrued by Mr. Tang, with the purpose of ultimately having interests in the Sham Shui Po Property;
(ii) Acquisition of the Sham Shui Po Property shall further enhance and strengthen the property portfolio of the Company and potentially provide a solid future income stream to the Company;

−28 −

LETTER FROM BARON

(iii) Hanwin Consideration is to be fair and reasonable given that (a) the Hanwin Consideration represents the face value of the entire issued share capital and shareholder’s loan of Hanwin; (b) the valuation of the Sham Shui Po Property prepared by an independent valuer is fair and reasonable; (c) Mr. Tang does not stand to make any profit under the Hanwin Acquisition; and (d) to the best of the Directors’ knowledge, the Sham Shui Po Property Vendor together with its respective ultimate beneficial owners are Independent Third Party(s);
(iv) The Hanwin Consideration is based on the valuation of the Sham Shui Po Property as determined by an independent valuer; and
(v) Hanwin Acquisition may bring positive effect on earnings assuming that some of the residential units and shops of the Sham Shui Po Property could be leased out at reasonable market prices upon Completion.

We consider that Hanwin Acquisition is in the interests of the Group and the Shareholders as a whole.

C. Refreshment of the general mandate

At the special general meeting held on 28 January 2005, the general mandate was granted to the Directors to allot, issue and deal with the Shares not exceeding 20% of the aggregate nominal amount if the share capital of the Company in issue as at the date passing of the relevant ordinary resolution.

During the period from the grant of the general mandate to the Latest Practicable Date, the general mandate had been utilized as to 25,600,000 Shares falling to be issued upon full conversion of the Convertible Notes as disclosed in the Company’s announcement dated 7 and 22 February 2005, being approximately 89.31% of the aggregate number of Shares which may allot, issue and deal with under the general mandate.

The Board will propose to pass an ordinary resolution to seek the approval of the Independent Shareholders at the SGM to approve the Issue Mandate in accordance with Rule 13.36(4)(a) of the Listing Rules to allow flexibility to issue any additional new Shares so that the Directors would be granted to allot, issue and deal with not exceeding 20% of the issued share capital of the Company as at the date of the SGM. The Issue Mandate will be in force when it is approved by the Independent Shareholders at the SGM.

History of fund raising exercise and use of proceeds

Over the past 12 months, the Company carried out two fund raising exercises. On 19 November 2004, the Company entered into a placing agreement to place the Convertible Notes (“Convertible Notes A”), convertible into 28,600,000 Shares upon full conversion and to be issued pursuant to a general mandate granted at the AGM dated 13 August 2004. The net proceeds of approximately HK$35 million were intended for general working capital purpose.

−29 −

LETTER FROM BARON

On 4 February 2005, the Company entered into a placing agreement to place the Convertible Notes (“Convertible Notes B”), convertible into 28,600,000 Shares upon full conversion and to be issued pursuant to the general mandate granted at the SGM dated 28 January 2005. Subsequently on 22 February 2005, the Company announced completion of placing of Convertible Notes B with a total of 25,600,000 Shares for an aggregate amount of HK$61,400,000. It is the intention of the Company to use HK$40 million proceeds for property development and the remaining balance for general working capital purposes.

Financial flexibility

The Directors believe that the granting of the Issue Mandate to allot, issue and deal with the new Shares at the SGM is in the best interests of the Company and the Shareholders as a whole by maintaining the financial flexibility necessary for the Group’s future business development. The Board considers equity financing to be an important avenue of resources to the Group since equity financing does not create any interest paying obligations on the Group. In appropriate circumstances, the Group will also consider other financing methods such as debt financing or internal cash resources to fund its future business development.

We consider that the granting of the Issue Mandate could enhance the financing flexibility of the Company to raise capital and to strengthen the capital base of the Group, if and when required, through placing of Shares for further development of the Group. We consider the granting of the Issue Mandate to be in the interest of the Company and the Shareholders as a whole.

Potential dilution to shareholding of the Independent Shareholders

Caister Limited (Note 1) Mr. Tang Ching Ho (Note 2) Ms. Yau Yuk Yin (Note 3) Trustcorp Limited (Note 4) Holder of Convertible Notes A Holder of Convertible Notes B Shares issued under New Issue Mandate Public Total	Existing Number of Shares held % of issued 2,247,227 1.57% 614,355 0.43% 614,354 0.43% 24,243,463 16.91% – – – – – – 115,600,967 80.66% 143,320,366 100.00%	Assume full conversion of the Convertible Notes A (and none of the Convertible Notes B are converted prior to the SGM) Number of Shares held % of issued 2,247,227 1.31% 614,355 0.36% 614,354 0.36% 24,243,463 14.10% 28,600,000 16.64% – – – – 115,600,967 67.23% 171,920,366 100.00%	Assume full conversion of the Convertible Notes A and Convertible Notes B are converted prior to the SGM Number of Shares held % of issued 2,247,227 1.14% 614,355 0.31% 614,354 0.31% 24,243,463 12.27% 28,600,000 14.48% 25,600,000 12.96% – – 115,600,967 58.53% 197,520,366 100.00%	Utilization of New Issue Mandate (assuming full conversion of Convertible Notes A and Convertible Notes B prior to the SGM) Number of Shares held % of issued 2,247,227 0.95% 614,355 0.26% 614,354 0.26% 24,243,463 10.23% 28,600,000 12.07% 25,600,000 10.80% 39,504,073 16.67% 115,600,967 48.76% 237,024,439 100.00%	Utilization of New Issue Mandate (assuming full conversion of Convertible Notes A and Convertible Notes B prior to the SGM) Number of Shares held % of issued 2,247,227 0.95% 614,355 0.26% 614,354 0.26% 24,243,463 10.23% 28,600,000 12.07% 25,600,000 10.80% 39,504,073 16.67% 115,600,967 48.76% 237,024,439 100.00%
					100.00%

−30 −

LETTER FROM BARON

Notes:

Caister Limited is wholly and beneficially owned by Mr. Tang Ching Ho.
Mr. Tang Ching Ho is the chairman and managing director of the Company.
Ms. Yau Yuk Yin is the wife of Mr. Tang Ching Ho and the deputy managing director and deputy chairman of the Company.
Accord Power Limited is wholly-owned by Trustcorp Limited in its capacity as the trustee of Tang’s Family Trust; accordingly, Trustcorp Limited was taken to be interested in those Shares held by Accord Power Limited.

Shareholders should note that the general mandate will be superceded upon approval at the SGM in connection with the grant of the Issue Mandate which will be and continue to be in force until the earliest of (i) the conclusion of the Company’s next AGM; and (ii) the revocation or variation or renewal of the authority given under the relevant resolution to be proposed by ordinary resolution of the Shareholders in general meeting. Such duration is in compliance with Rule 13.36(3) of the Listing Rules.

For illustrative purpose, assuming that (i) the Convertible Notes A and Convertible Notes B are fully converted into Shares prior to the SGM; (ii) the grant of Issue Mandate is approved by the Independent Shareholders at the SGM; and (iii) the Issue Mandate in relation to the allotment, issue and dealing of Shares is fully utilized, 39,504,073 Shares will be issued, representing 20% of the issued share capital of the Company as at the date of the SGM and approximately 16.67% of the issued share capital of the Company as enlarged by the Shares issued under the Issue Mandate respectively.

In such scenario, the aggregate shareholding of the Independent Shareholders (including those of the holders of the Convertible Notes A and Convertibles Note B) will decrease from approximately 85.97% to approximately 76.23% upon full utilization of the Issue Mandate, a potential maximum dilution of approximately 9.74%. We take into account (i) the Issue Mandate will provide an alternative to increase the amount of capital which may be raised under the Issue Mandate; (ii) the Issue Mandate provides more flexibility and options of financing to the Group and the Directors for further development of the business and operation as well as in other potential future investment and/or acquisition opportunities as and when such opportunities arise; and (iii) the shareholding of all Shareholders will be diluted proportionally to their respective shareholdings upon any utilization of the Issue Mandate. As such, we consider the potential maximum dilution to shareholdings of the Independent Shareholders to be justifiable.

−31 −

LETTER FROM BARON

RECOMMENDATION

Having considered the above principal factors and reasons, we are of the opinion that the Hanwin Acquisition and the refreshment of general mandate are in the interest of the Company and the terms of which are fair and reasonable so far as the Independent Shareholders are concerned. Accordingly, we advise the Independent Board Committee to recommend the Independent Shareholders to vote in favor of the relevant ordinary resolutions to be proposed at the SGM to approve the Hanwin Acquisition and the refreshment of general mandate.

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

−32 −

ACCOUNTANTS’ REPORT ON HANWIN

APPENDIX I

15th Floor Hutchison House 10 Harcourt Road Central Hong Kong

13 April 2005

The Directors Wang On Group Limited Kingston Corporate Finance Limited

Dear Sirs,

We set out below our report on the financial information regarding Hanwin Investment Limited (“Hanwin”) for the period from 3 March 2005 (date of incorporation) to 18 March 2005 (the “Relevant Period”), prepared on the basis set out in Section 1 below, for inclusion in the circular of Wang On Group Limited (the “Company”) dated 13 April 2005 (the “Circular”) in connection with the proposed acquisition of the entire issued share capital and a shareholder’s loan of Hanwin by Suitbest Investments Limited (“Suitbest”), a wholly-owned subsidiary of the Company, pursuant to a conditional agreement (the “Hanwin Acquisition Agreement”) dated 18 March 2005 entered into between Suitbest, Mr. Tang Ching Ho, the director and substantial shareholder of the Company and the sole shareholder of Hanwin, and Hanwin.

Hanwin was incorporated with limited liability in Hong Kong on 3 March 2005 and it is wholly and beneficially owned by Mr. Tang Ching Ho, the director of the Company. Hanwin is an investment holding company and has not carried out any other business activities since its incorporation other than entering into a provisional agreement for the purpose of acquiring certain properties (the “Provisional Agreement”) and the Hanwin Acquisition Agreement.

Hanwin entered into the Provisional Agreement on 17 March 2005 for the sale and purchase of 48 residential units and 11 commercial units in certain properties.

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

The financial information of the results, statement of changes in equity and cash flows of Hanwin for the Relevant Period and the balance sheet of Hanwin as at 18 March 2005, together with the notes thereon (the “Financial Information”), set out in this report has been prepared from the audited financial statements and no adjustments are considered necessary. We have

−33 −

ACCOUNTANTS’ REPORT ON HANWIN

APPENDIX I

examined the Financial Information in accordance with the Auditing Guideline “Prospectuses and the reporting accountant” issued by the Hong Kong Institute of Certified Public Accountants.

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

In our opinion, the Financial Information, for the purpose of this report, and on the basis of preparation set out below gives a true and fair view of the results and cash flows of Hanwin for the Relevant Period, and of the balance sheet of Hanwin as at 18 March 2005.

1. BASIS OF PREPARATION

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

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

2. PRINCIPAL ACCOUNTING POLICIES

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

Impairment of assets

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

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

−34 −

ACCOUNTANTS’ REPORT ON HANWIN

APPENDIX I

Income tax

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

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

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

Related parties

Parties are considered to be related if one party has the ability, directly or indirectly, to control the other party or exercise significant influence over the other party in making financial and operating decisions. Parties are also considered to be related if they are subject to common control or common significant influence. Related parties may be individuals or corporate entities.

3. RESULTS

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

Note TURNOVER Administrative expenses NET LOSS FOR THE PERIOD (a)	HK$ – (5,371) (5,371)

−35 −

ACCOUNTANTS’ REPORT ON HANWIN

APPENDIX I

Notes:

(a) Net loss for the period

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

HK$

Director’s remuneration – Auditors’ remuneration –

The auditors’ remuneration was borne by the Company.

(b) Tax

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

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

4. BALANCE SHEET

The following is a summary of the balance sheet of Hanwin as at 18 March 2005 prepared on the basis set out in Section 1 above:

Notes CURRENT ASSETS Deposits on acquisition of properties Cash on hand CURRENT LIABILITIES Other payables and accruals Shareholder’s loan (a) DEFICIENCY IN SHAREHOLDER’S EQUITY Issued capital (b) Accumulated losses	HK$ 3,000,000 1 3,000,001 5,371 3,000,000 3,005,371 (5,370) 1 (5,371) (5,370)

−36 −

ACCOUNTANTS’ REPORT ON HANWIN

APPENDIX I

Notes:

(a) Shareholder’s loan

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

(b) Share capital

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

	1

The Company was incorporated on 3 March 2005 with an authorised share capital of HK$10,000 divided into 10,000 ordinary shares of HK$1 each. On 3 March 2005, 1 ordinary share of HK$1 was issued at par for cash.

(c) Capital commitment

Hanwin had contracted, but not provided for the purchase of properties in the amount of HK$107,000,000 at the balance sheet date.

5. STATEMENT OF CHANGES IN EQUITY

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

Issue of share Net loss for the period At 18 March 2005	Issued share capital Accumulated losses HK$ HK$ 1 – – (5,371) 1 (5,371)	Total HK$ 1 (5,371)
		(5,370)

−37 −

ACCOUNTANTS’ REPORT ON HANWIN

APPENDIX I

6. CASH FLOW STATEMENT

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

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

HK$
(5,371)
(5,371)
5,371
–
(3,000,000)
(3,000,000)
1
3,000,000
3,000,001
1
1
1

7. DIRECTOR’S EMOLUMENTS

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

−38 −

ACCOUNTANTS’ REPORT ON HANWIN

APPENDIX I

8. RELATED PARTY TRANSACTION

During the Relevant Period, Mr. Tang Ching Ho, the shareholder of Hanwin, advanced a loan of HK$3,000,000 to Hanwin.

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

9. SUBSEQUENT EVENTS

On 31 March 2005, Mr. Tang Ching Ho advanced a loan of HK$8,000,000 to Hanwin for further deposit on acquisition of properties pursuant to the terms of the Provisional Agreement.

Save as aforesaid, no other significant events have taken place subsequent to 18 March 2005.

10. SUBSEQUENT FINANCIAL STATEMENTS

No audited financial statements have been prepared by Hanwin in respect of any period subsequent to 18 March 2005.

Yours faithfully,

Ernst & Young Certified Public Accountants Hong Kong

−39 −

FINANCIAL INFORMATION ON THE GROUP

APPENDIX II

1. SUMMARY OF AUDITED FINANCIAL INFORMATION

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

Results

Year ended 31 March 2004 2003 2002 HK$’000 HK$’000 HK$’000 (Restated) (Restated) 296,565 292,156 320,047 51,671 80,004 35,274 (10,307) (11,409) 3,331 (7,656) (16,454) (4,482) – (7,000) – 33,708 45,141 34,123 (4,334) (3,361) (3,531) 29,374 41,780 30,592 (89) (641) (2,789) 29,285 41,139 27,803 31 March 2004 2003 2002 HK$’000 HK$’000 HK$’000 (Restated) (Restated) 857,417 781,578 649,144 (176,434) (157,766) (167,430) (401) (324) (10,569) 680,582 623,488 471,145	Year ended 31 March 2004 2003 2002 HK$’000 HK$’000 HK$’000 (Restated) (Restated) 296,565 292,156 320,047 51,671 80,004 35,274 (10,307) (11,409) 3,331 (7,656) (16,454) (4,482) – (7,000) – 33,708 45,141 34,123 (4,334) (3,361) (3,531) 29,374 41,780 30,592 (89) (641) (2,789) 29,285 41,139 27,803 31 March 2004 2003 2002 HK$’000 HK$’000 HK$’000 (Restated) (Restated) 857,417 781,578 649,144 (176,434) (157,766) (167,430) (401) (324) (10,569) 680,582 623,488 471,145	Year ended 31 March 2004 2003 2002 HK$’000 HK$’000 HK$’000 (Restated) (Restated) 296,565 292,156 320,047 51,671 80,004 35,274 (10,307) (11,409) 3,331 (7,656) (16,454) (4,482) – (7,000) – 33,708 45,141 34,123 (4,334) (3,361) (3,531) 29,374 41,780 30,592 (89) (641) (2,789) 29,285 41,139 27,803 31 March 2004 2003 2002 HK$’000 HK$’000 HK$’000 (Restated) (Restated) 857,417 781,578 649,144 (176,434) (157,766) (167,430) (401) (324) (10,569) 680,582 623,488 471,145
51,671 (10,307) (7,656) – 33,708 (4,334) 29,374 (89)	80,004 (11,409) (16,454) (7,000) 45,141 (3,361) 41,780 (641)	35,274 3,331 (4,482 –
		34,123 (3,531
		30,592 (2,789
29,285 2004 HK$’000 857,417 (176,434) (401) 680,582	41,139 31 March 2003 HK$’000 (Restated) 781,578 (157,766) (324) 623,488

−40 −

FINANCIAL INFORMATION ON THE GROUP

APPENDIX II

2. EXTRACT OF THE FINANCIAL STATEMENTS

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

Consolidated Profit and Loss Account

Year ended 31 March 2004

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

−41 −

FINANCIAL INFORMATION ON THE GROUP

APPENDIX II

Consolidated Balance Sheet

31 March 2004

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

−42 −

FINANCIAL INFORMATION ON THE GROUP

APPENDIX II

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

		11,815 611,673
		623,488

−43 −

FINANCIAL INFORMATION ON THE GROUP

APPENDIX II

Consolidated Statement of Changes in Equity

Year ended 31 March 2004

Issued share capital HK$’000 98,644 –	Share premium account Contributed surplus HK$’000 HK$’000 331,114 – – –	Share premium account Contributed surplus HK$’000 HK$’000 331,114 – – –	Warrant reserve HK$’000 – –	Capital reserve HK$’000 – –	Investment property revaluation reserve HK$’000 2,243 –	Retained profits HK$’000 35,998 3,146	Proposed final dividend HK$’000 – –	Total HK$’000 467,999 3,146
98,644 19,500 (106,329) – – – – – – –	331,114 19,500 – – – (2,392) – – – –	– – 106,329 – – – – – – –	– – – 2,000 (265) – – – – –	– – – – – – – – – 1,511	2,243 – – – – – (2,243) – – –	39,144 – – – – – – 75,104 41,139 (1,511)	– – – – – – – – – –	471,145
								39,000 – 2,000 (265 (2,392 (2,243 75,104 41,139 –
11,815	348,222	106,329	1,735	1,511	–	153,876	–	623,488

11,815 – 11,815 2,360 – – – – 157 – –	348,222 – 348,222 23,600 – (810) – – 1,350 – –	106,329 – 106,329 – – – – – – – –	1,735 – 1,735 – (1,735) – – – – – –	1,511 – 1,511 – – – – – – – (1,511)	– – – – – – 4,696 – – – –	150,884 2,992 153,876 – 1,735 – – 29,285 (3,544) (10,032) 1,511	– – – – – – – – – 10,032 –	620,496 2,992
								623,488
								25,960 – (810 4,696 29,285 (2,037 – –
14,332	372,362*	106,329*	–*	–*	4,696*	172,831*	10,032*	680,582

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

−44 −

APPENDIX II

FINANCIAL INFORMATION ON THE GROUP

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

							632,917 (9,429)
							623,488

−45 −

FINANCIAL INFORMATION ON THE GROUP

APPENDIX II

Consolidated Cash Flow Statement

Year ended 31 March 2004

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

−46 −

FINANCIAL INFORMATION ON THE GROUP

APPENDIX II

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

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FINANCIAL INFORMATION ON THE GROUP

APPENDIX II

Notes NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS Cash and cash equivalents at beginning of year CASH AND CASH EQUIVALENTS AT END OF YEAR ANALYSIS OF BALANCES OF CASH AND CASH EQUIVALENTS Cash and bank balances 22 Non-pledged time deposits with original maturity of less than three months when acquired 22	2004 HK$’000 75,174 214,191 289,365 25,931 263,434 289,365	2003 HK$’000 (99,615) 313,806 214,191 40,947 173,244 214,191

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FINANCIAL INFORMATION ON THE GROUP

APPENDIX II

Balance Sheet

31 March 2004

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

	14,332 609,399	11,815 582,637
	623,731	594,452

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FINANCIAL INFORMATION ON THE GROUP

APPENDIX II

Notes to the Financial Statements

31 March 2004

1. CORPORATE INFORMATION

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

During the year, the Group was involved in the following principal activities:

management and sub-licensing of Chinese wet markets, shopping centres and car parks
production and sale of cough syrup and health care products
property investment
retailing of pork stalls

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

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

SSAP 12 (Revised): “Income taxes”
Interpretation 20: “Income taxes – Recovery of revalued non-depreciable assets”

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

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

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

Measurement and recognition:

deferred tax assets and liabilities relating to the differences between capital allowances for tax purposes and depreciation for financial reporting purposes and other taxable and deductible temporary differences are generally fully provided for, whereas previously the deferred tax was recognised for timing differences only to the extent that it was probable that the deferred tax asset or liability would crystallise in the foreseeable future;
a deferred tax asset has been recognised for provisions for onerous contracts made in the current/prior periods; and
a deferred tax asset has been recognised for tax losses arising in the current/prior periods to the extent that it is probable that there will be sufficient future taxable profits against which such losses can be utilised.

Disclosures:

deferred tax assets and liabilities are presented separately on the balance sheet, whereas previously they were presented on a net basis; and
the related note disclosures are now more extensive than previously required. These disclosures are presented in notes 10 and 29 to the financial statements and include a reconciliation between the accounting profit and the tax expense for the year.

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FINANCIAL INFORMATION ON THE GROUP

APPENDIX II

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

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

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

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of preparation

These financial statements have been prepared in accordance with Hong Kong Statements of Standard Accounting Practice, accounting principles generally accepted in Hong Kong and the disclosure requirements of the Hong Kong Companies Ordinance. They have been prepared under the historical cost convention, except for the periodic remeasurement of investment properties and certain investments, as further explained below.

Basis of consolidation

The consolidated financial statements include the financial statements of the Company and its subsidiaries for the year ended 31 March 2004. The results of the subsidiaries acquired or disposed of during the year are consolidated from or to their effective dates of acquisition or disposal, respectively. All significant intercompany transactions and balances within the Group are eliminated on consolidation.

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

Subsidiaries

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

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

Associates

An associate is a company, not being a subsidiary or a jointly-controlled entity, in which the Group has a long term interest of generally not less than 20% of the equity voting rights and over which it is in a position to exercise significant influence.

The Group’s share of the post-acquisition results and reserves of associates is included in the consolidated profit and loss account and consolidated reserves, respectively. The Group’s interests in associates are stated in the consolidated balance sheet at the Group’s share of net assets under the equity method of accounting, less any impairment losses. Goodwill or negative goodwill arising from the acquisition of associates, which was not previously eliminated or recognised in the consolidated reserves, is included as part of the Group’s interests in associates.

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

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

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FINANCIAL INFORMATION ON THE GROUP

APPENDIX II

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

Goodwill

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

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

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

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

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

Negative goodwill

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

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

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

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

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

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

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FINANCIAL INFORMATION ON THE GROUP

APPENDIX II

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

Related parties

Impairment of assets

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

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

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

Fixed assets and depreciation

Fixed assets, other than investment properties and construction in progress, are stated at cost less accumulated depreciation and any impairment losses. The cost of an asset comprises its purchase price and any directly attributable costs of bringing the asset to its working condition and location for its intended use. Expenditure incurred after fixed assets have been put into operation, such as repairs and maintenance, is normally charged to the profit and loss account in the period in which it is incurred. In situations where it can be clearly demonstrated that the expenditure has resulted in an increase in the future economic benefits expected to be obtained from the use of the fixed asset, the expenditure is capitalised as an additional cost of that asset.

Depreciation is calculated on the straight-line basis to write off the cost of each asset over its estimated useful life. The principal annual rates used for this purpose are as follows:

Leasehold land	Over the lease terms
Buildings	2%
Leasehold improvements	10% – 20%
Machineries	15% – 20%
Furniture, fixtures and office equipment	15% – 20%
Motor vehicles	20% – 30%
Computer equipment	15% – 30%

The gain or loss on disposal or retirement of a fixed asset recognised in the profit and loss account is the difference between the net sales proceeds and the carrying amount of the relevant asset.

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

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FINANCIAL INFORMATION ON THE GROUP

APPENDIX II

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

Investment properties

Investment properties are interests in land and buildings in respect of which construction work and development have been completed and which are intended to be held on a long term basis for their investment potential, any rental income being negotiated at arm’s length. Such properties are not depreciated and are stated at their open market values on the basis of annual professional valuations performed at the end of each financial year. Changes in the values of investment properties are dealt with as movements in the investment property revaluation reserve. If the total of this reserve is insufficient to cover a deficit, on a portfolio basis, the excess of the deficit is charged to the profit and loss account. Any subsequent revaluation surplus is credited to the profit and loss account to the extent of the deficit previously charged.

On disposal of an investment property, the relevant portion of the investment property revaluation reserve realised in respect of previous valuations is released to the profit and loss account.

Leased assets

Leases that transfer substantially all the rewards and risks of ownership of assets to the Group, other than legal title, are accounted for as finance leases. At the inception of a finance lease, the cost of the leased asset is capitalised at the present value of the minimum lease payments and recorded together with the obligation, excluding the interest element, to reflect the purchase and financing. Assets held under capitalised finance leases are included in fixed assets and depreciated over the shorter of the lease terms and the estimated useful lives of the assets. The finance costs of such leases are charged to the profit and loss account so as to provide a constant periodic rate of charge over the lease terms.

Assets acquired through hire purchase contracts of a financing nature are accounted for as finance leases, but are depreciated over their estimated useful lives.

Leases where substantially all the rewards and risks of ownership of assets remain with the lessor are accounted for as operating leases. Where the Group is the lessor, assets leased by the Group under operating leases are included in non-current assets and rentals receivable under the operating leases are credited to the profit and loss account on the straight-line basis over the lease terms. Where the Group is the lessee, rentals payable under the operating leases are charged to the profit and loss account on the straight-line basis over the lease terms.

Investments

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

Held-to-maturity securities

Investments in dated debt securities which are intended to be held to maturity are stated at cost, adjusted for the amortisation of premiums or discounts arising on acquisitions, less any impairment losses, on an individual investment basis.

The carrying amounts of held-to-maturity securities are reviewed as at the balance sheet date in order to assess the credit risk and whether the carrying amounts are expected to be recovered. Provisions are made when carrying amounts are not expected to be recovered and are recognised as an expense in the profit and loss account in the period in which they arise.

Investment securities

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

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

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FINANCIAL INFORMATION ON THE GROUP

APPENDIX II

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

Investments (Cont’d)

Other investments

Investments in equity securities which are not intended to be held for an identified long term purpose are included in short term investments and are stated in the balance sheet at fair values. Fair values are determined on the basis of their quoted market prices at the balance sheet date, on an individual investment basis. The gains or losses arising from changes in the fair values of such investments are credited or charged to the profit and loss account in the period in which they arise.

The profit or loss on disposal of an investment is credited or charged to the profit and loss account in the period in which the disposal occurs, and is calculated as the difference between the net sales proceeds and the carrying amount of the investment.

Provisions against the carrying amounts of investments are written back when the circumstances and events that led to the write-down or write-off cease to exist and there is persuasive evidence that the new circumstances and events will persist for the foreseeable future.

Inventories

Inventories are stated at the lower of cost and net realisable value. Cost is determined on the first-in, first-out basis and in the case of finished goods, comprises direct materials, direct labour and an appropriate proportion of overheads. Net realisable value is based on estimated selling prices less any estimated costs to be incurred to completion and disposal.

Cash and cash equivalents

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

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

Provisions

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

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

Provisions for onerous contracts

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

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FINANCIAL INFORMATION ON THE GROUP

APPENDIX II

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

Income tax

Deferred tax liabilities are recognised for all taxable temporary differences:

except where the deferred tax liability arises from the initial recognition of an asset or liability and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and
in respect of taxable temporary differences associated with investments in subsidiaries and associates, except where the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future.

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

except where the deferred tax asset relating to the deductible temporary differences arises from the initial recognition of an asset or liability and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and
in respect of deductible temporary differences associated with investments in subsidiaries, and associates, deferred tax assets are only recognised to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilised.

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

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

Revenue recognition

Revenue is recognised when it is probable that the economic benefits will flow to the Group and when the revenue can be measured reliably, on the following bases:

(a) rental and sub-licensing fee income, on an accrual basis;
(b) from the provision of management services, when the services are rendered;
(c) from the sale of goods, when the significant risks and rewards of ownership have been transferred to the buyer, provided that the Group maintains neither managerial involvement to the degree usually associated with ownership, nor effective control over the goods sold;
(d) from the sale of properties, at the time when the sale agreement becomes unconditional;
(e) from the provision of project management and agency services, when the services are rendered;
(f) franchise fee income, on a time proportion basis over the franchise period;

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FINANCIAL INFORMATION ON THE GROUP

APPENDIX II

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

Revenue recognition (Cont’d)

(g) interest income, on a time proportion basis taking into account the principal outstanding and the effective interest rate applicable; and
(h) dividend income, where the shareholders’ right to receive payment has been established.

Employee benefits

Employment Ordinance long service payments

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

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

Retirement benefits scheme

The Group operates a defined contribution Mandatory Provident Fund retirement benefits scheme (the “Scheme”) under the Mandatory Provident Fund Schemes Ordinance, for those employees who are eligible to participate in the Scheme. Contributions are made based on a percentage of the employees’ basic salaries and are charged to the profit and loss account as they become payable in accordance with the rules of the Scheme. The assets of the Scheme are held separately from those of the Group in an independently administered fund. The Group’s employer contributions vest fully with the employees when contributed into the Scheme.

Share option schemes

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

Dividends

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

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

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FINANCIAL INFORMATION ON THE GROUP

APPENDIX II

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

Foreign currencies

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

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

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

4. SEGMENT INFORMATION

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

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

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

(a) the Chinese wet markets segment engages in the management and sub-licensing of Chinese wet markets;
(b) the shopping centres and car parks segment engages in the management and sub-licensing of shopping centres and car parks;
(c) the pharmaceutical segment engages in the production and sale of cough syrup and health care products;
(d) the property investment segment invests in industrial and commercial premises and residential units for rental income;
(e) the retail business segment engages in the retailing of pork; and
(f) the corporate and others segment comprises the Group’s management service business. This segment also includes corporate income and expense items.

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

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FINANCIAL INFORMATION ON THE GROUP

APPENDIX II

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

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FINANCIAL INFORMATION ON THE GROUP

APPENDIX II

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

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FINANCIAL INFORMATION ON THE GROUP

APPENDIX II

5. TURNOVER, REVENUE AND GAINS

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

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

Turnover Sub-licensing fee income Management income Sale of goods Rendering of services Gross rental income Sale of property held for re-sale Other revenue Interest income Interest income from investments Dividend income from listed securities Franchise income Others Gains Gain on disposal of convertible notes due from an associate Gain on disposal of investments, net Exchange gains, net Recognition of deferred gain on disposal of subsidiaries Other revenue and gains	Group 2004 2003 HK$’000 HK$’000 213,335 216,965 13,454 4,160 55,679 59,053 5,959 7,463 8,138 2,835 – 1,680 296,565 292,156	Group 2004 2003 HK$’000 HK$’000 213,335 216,965 13,454 4,160 55,679 59,053 5,959 7,463 8,138 2,835 – 1,680 296,565 292,156
		292,156

	8,428 2,386 128 – 4,653 15,595 17,883 109 1,564 688 20,244	9,007 1,865 93 35 8,201
		19,201
		– 200 4,070 944
		5,214
	35,839	24,415

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FINANCIAL INFORMATION ON THE GROUP

APPENDIX II

6. PROFIT FROM OPERATING ACTIVITIES

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

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

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

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

7. FINANCE COSTS

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

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FINANCIAL INFORMATION ON THE GROUP

APPENDIX II

8. DIRECTORS’ REMUNERATION

Directors’ remuneration for the year, disclosed pursuant to the Listing Rules and Section 161 of the Hong Kong Companies Ordinance, is as follows:

Fees: Executive directors Independent non-executive directors Other emoluments for executive directors: Salaries and allowances Pension scheme contributions	Group 2004 2003 HK$’000 HK$’000 – – 631 631 9,975 10,115 36 36 10,642 10,782	Group 2004 2003 HK$’000 HK$’000 – – 631 631 9,975 10,115 36 36 10,642 10,782
		10,782

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

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

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

9. FIVE HIGHEST PAID EMPLOYEES

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

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

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FINANCIAL INFORMATION ON THE GROUP

APPENDIX II

9. FIVE HIGHEST PAID EMPLOYEES (Cont’d)

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

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

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

10. TAX

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

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

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FINANCIAL INFORMATION ON THE GROUP

APPENDIX II

10. TAX (Cont’d)

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

Group

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

11. NET PROFIT FROM ORDINARY ACTIVITIES ATTRIBUTABLE TO SHAREHOLDERS

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

12. DIVIDENDS

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

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

13. EARNINGS PER SHARE

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

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

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

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FINANCIAL INFORMATION ON THE GROUP

APPENDIX II

14. FIXED ASSETS

Group

Investment properties Leasehold improvements Machineries HK$’000 HK$’000 HK$’000 128,790 40,905 4,522 95,807 801 3,370 – – 96 (1,940) (762) (2,361) – – (111) 25,981 12,340 – 11,762 – – 260,400 53,284 5,516	Investment properties Leasehold improvements Machineries HK$’000 HK$’000 HK$’000 128,790 40,905 4,522 95,807 801 3,370 – – 96 (1,940) (762) (2,361) – – (111) 25,981 12,340 – 11,762 – – 260,400 53,284 5,516	Investment properties Leasehold improvements Machineries HK$’000 HK$’000 HK$’000 128,790 40,905 4,522 95,807 801 3,370 – – 96 (1,940) (762) (2,361) – – (111) 25,981 12,340 – 11,762 – – 260,400 53,284 5,516	Furniture, fixtures and office equipment Motor vehicles HK$’000 HK$’000 55,512 699 629 22 2 59 (6,740) (22) (623) – 479 – – – 49,259 758	Furniture, fixtures and office equipment Motor vehicles HK$’000 HK$’000 55,512 699 629 22 2 59 (6,740) (22) (623) – 479 – – – 49,259 758	Computer equipment Construction in progress Total HK$’000 HK$’000 HK$’000 1,167 32,559 264,154 599 6,257 107,485 1 – 158 (16) – (11,841 – – (734 16 (38,816) – – – 11,762 1,767 – 370,984	Computer equipment Construction in progress Total HK$’000 HK$’000 HK$’000 1,167 32,559 264,154 599 6,257 107,485 1 – 158 (16) – (11,841 – – (734 16 (38,816) – – – 11,762 1,767 – 370,984	Computer equipment Construction in progress Total HK$’000 HK$’000 HK$’000 1,167 32,559 264,154 599 6,257 107,485 1 – 158 (16) – (11,841 – – (734 16 (38,816) – – – 11,762 1,767 – 370,984
			49,259	758		–	370,984

– – – –	24,148 6,393 (726) –	3,209 1,029 (2,145) (21)	46,830 463 4,814 113 (6,621) (2) (389) –		869 246 (5) –	– – – –	75,519 12,595 (9,499 (410
– 260,400 128,790	29,815 23,469 16,757	2,072 3,444 1,313	44,634	574	1,110 657 298	–	78,205

			4,625	184		–	292,779

			8,682	236		32,559	188,635

– 260,400	53,284 –	5,516 –	49,259 –	758 –	1,767 –	– –	110,584 260,400
260,400	53,284	5,516	49,259	758	1,767	–	370,984

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FINANCIAL INFORMATION ON THE GROUP

APPENDIX II

14. FIXED ASSETS (Cont’d)

Company

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

		5

		8

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

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

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

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

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

−67 −

FINANCIAL INFORMATION ON THE GROUP

APPENDIX II

15. GOODWILL

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

Group

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

At 31 March 2003	135,608	22,287

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

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

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

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FINANCIAL INFORMATION ON THE GROUP

APPENDIX II

16. INTERESTS IN SUBSIDIARIES

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

Notes:

(i) The amounts are unsecured and have no fixed terms of repayment. Except for a balance of HK$7,000,000 advanced to a subsidiary which bears interest at 2% per annum, the remaining balances are interest-free.
(ii) The amounts are unsecured and have no fixed terms of repayment. Except for a loan to a subsidiary of HK$17,217,000 which bears interest at 3% per annum, the remaining balances are interest-free.

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

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

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FINANCIAL INFORMATION ON THE GROUP

APPENDIX II

16. INTERESTS IN SUBSIDIARIES (Cont’d)

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

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FINANCIAL INFORMATION ON THE GROUP

APPENDIX II

16. INTERESTS IN SUBSIDIARIES (Cont’d)

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

Notes:

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

−71 −

FINANCIAL INFORMATION ON THE GROUP

APPENDIX II

16. INTERESTS IN SUBSIDIARIES (Cont’d)

(2) The non-voting preference shares carry no voting rights but the holders have the right to receive an annual cash dividend equivalent to 30% of the audited net profit after tax. On the winding-up of the company, the holders rank in priority to the ordinary shareholders provided that the assets of the company available for distribution to its members shall be applied first towards arrears or accruals of the dividend.
(3) The non-voting deferred shares carry no voting rights or rights to dividends. On the winding-up of the companies, the holders of non-voting deferred shares have a right to repayment in proportion to the amounts of all paid-up ordinary and deferred shares after the first HK$1,000,000,000,000 thereof has been distributed among the holders of the ordinary shares.

17. INTERESTS IN ASSOCIATES

Group 2004 2003 HK$’000 HK$’000 69,713 32,259 (8,785) (16,058) 11,657 22,287	Group 2004 2003 HK$’000 HK$’000 69,713 32,259 (8,785) (16,058) 11,657 22,287	Company 2004 2003 HK$’000 HK$’000 – – – – – –	Company 2004 2003 HK$’000 HK$’000 – – – – – –
72,585 539 (19) 7,000 56,500 136,605 (3)	38,488 7,874 – 80,495 64,000 190,857 (3,403)	– 219 – – – 219 –	– 219 – – –
			219 –
136,602	187,454	219	219

Notes:

(i) The amounts with associates are unsecured and interest-free. Except for an amount due from an associate of HK$319,000 which was repaid on 29 June 2004, the remaining balance has no fixed terms of repayment.
(ii) A loan to an associate of HK$7,000,000 as at 31 March 2004 is unsecured, bears interest at 2% per annum and was repaid on 29 June 2004.
(iii) The convertible notes of HK$36,500,000 carry interest at 3.8% per annum with a right to convert into ordinary shares of Wai Yuen Tong Medicine Holdings Limited (“WYTH”) at an initial conversion price of HK$0.01 per share during the period from 9 July 2002 to 8 July 2005. The initial conversion price of HK$0.01 per share was increased to HK$1 per share as a result of the capital reorganisation of WYTH effective on 20 October 2003.

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

All the convertible notes were repaid on 29 June 2004.

−72 −

FINANCIAL INFORMATION ON THE GROUP

APPENDIX II

17. INTERESTS IN ASSOCIATES (Cont’d)

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

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

Notes:

(1) The above table lists the associate of the Group which, in the opinion of the directors, principally affected the results for the year or formed a substantial portion of the net assets of the Group. To give details of other associates would, in the opinion of the directors, result in particulars of excessive length.
(2) During the year, the interest in WYTH was diluted as a result of placements of shares and the exercise of convertible notes and share options in the investee company.
(3) The financial statements of the company are not audited by Ernst & Young Hong Kong or other Ernst & Young International member firms.
Listed on The Stock Exchange of Hong Kong Limited.

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

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

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FINANCIAL INFORMATION ON THE GROUP

APPENDIX II

18. INVESTMENTS

(a) Long term investments

Group 2004 2003 HK$’000 HK$’000 15,534 –	Group 2004 2003 HK$’000 HK$’000 15,534 –	Company 2004 2003 HK$’000 HK$’000 15,534 –	Company 2004 2003 HK$’000 HK$’000 15,534 –

– 4,010 30,098 34,108 (14,799) 19,309	11,700 3,000 13,158 27,858 (13,158) 14,700	– – – – – –	11,700 – –
			11,700 –
			11,700
34,843 14,700 Group 2004 2003 HK$’000 HK$’000 19,403 – 11,650 – 5,920 3,344 455 – 37,428 3,344		15,534 11,700 Company 2004 2003 HK$’000 HK$’000 – – 11,650 – – – 455 – 12,105 –	11,700

			–

(b) Short term investments

−74 −

FINANCIAL INFORMATION ON THE GROUP

APPENDIX II

19. INVENTORIES

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

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

20. TRADE RECEIVABLES

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

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

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

21. PREPAYMENTS, DEPOSITS AND OTHER RECEIVABLES

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

−75 −

FINANCIAL INFORMATION ON THE GROUP

APPENDIX II

22. CASH AND CASH EQUIVALENTS

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

23. TRADE PAYABLES

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

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

24. OTHER PAYABLES AND ACCRUALS

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

25. INTEREST-BEARING BANK AND OTHER BORROWINGS

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

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FINANCIAL INFORMATION ON THE GROUP

APPENDIX II

26. PROVISIONS FOR ONEROUS CONTRACTS

At beginning of year Write back of provision Amount utilised during the year At 31 March Portion classified as current liabilities Long term portion	Group 2004 2003 HK$’000 HK$’000 20,139 27,017 (420) (313) (6,146) (6,565) 13,573 20,139 (9,112) (7,709) 4,461 12,430

27. INTEREST-BEARING BANK LOANS

Bank loans: Secured (Note) Unsecured Bank loans repayable: Within one year In the second year In the third to fifth years, inclusive Beyond five years Portion classified as current liabilities (Note 25) Long term portion	Group 2004 2003 HK$’000 HK$’000 104,648 60,193 – 15,767 104,648 75,960 24,575 25,124 9,734 11,355 24,890 29,061 45,449 10,420 104,648 75,960 (24,575) (25,124) 80,073 50,836	Group 2004 2003 HK$’000 HK$’000 104,648 60,193 – 15,767 104,648 75,960 24,575 25,124 9,734 11,355 24,890 29,061 45,449 10,420 104,648 75,960 (24,575) (25,124) 80,073 50,836
	24,575 9,734 24,890 45,449 104,648 (24,575)	25,124 11,355 29,061 10,420
		75,960
		(25,124
	80,073

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

−77 −

FINANCIAL INFORMATION ON THE GROUP

APPENDIX II

28. FINANCE LEASE PAYABLE

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

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

Group

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

−78 −

FINANCIAL INFORMATION ON THE GROUP

APPENDIX II

29. DEFERRED TAX

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

Deferred tax assets

Group

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

−79 −

FINANCIAL INFORMATION ON THE GROUP

APPENDIX II

29. DEFERRED TAX (Cont’d)

Group

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

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

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

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

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

−80 −

FINANCIAL INFORMATION ON THE GROUP

APPENDIX II

30. SHARE CAPITAL

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

		11,815

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

(a) On 19 December 2003, the Group declared an interim dividend of HK$0.03 per share, with a scrip alternative, to its shareholders whose names appear on the register of members on 9 January 2004. Accordingly, 1,576,711 ordinary shares of HK$0.10 each were issued at an issue price of HK$0.9558 each to the shareholders who elected to receive dividend, wholly or partly, by way of allotment of shares on 3 February 2004, resulting in the transfer of HK$157,000 and HK$1,350,000 from retained profits to issued capital and share premium account, respectively.
(b) On 9 February 2004, a top-up placement of 23,600,000 ordinary shares of HK$0.10 each was made at an issue price of HK$1.10 each. The net proceeds were used for the purchase of investment properties.

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

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

Share options

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

−81 −

FINANCIAL INFORMATION ON THE GROUP

APPENDIX II

30. SHARE CAPITAL (Cont’d)

Warrants

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

31. SHARE OPTION SCHEMES

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

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

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

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

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

−82 −

FINANCIAL INFORMATION ON THE GROUP

APPENDIX II

31. SHARE OPTION SCHEMES (Cont’d)

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

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

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

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

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

Name or category of
participant
Directors
Tang Ching Ho
Yau Yuk Yin
Other employees
In aggregate (under the old
scheme)
In aggregate (under the new
scheme)

Number of share options
At
1 April
2003
Granted
during
the year
At
31 March
2004
Date of grant
of share options
Exercise period of
share options
Exercise price
of share options
HK$
654,000
–
654,000
6-3-2001
6-3-2001 to 5-2-2005
2.17
654,000
–
654,000
6-3-2001
6-3-2001 to 5-2-2005
2.17
1,320,000
–
1,320,000
6-3-2001
6-3-2001 to 5-2-2005
2.17
–
9,800,000
9,800,000

*
2,628,000
9,800,000
12,428,000

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

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

−83 −

FINANCIAL INFORMATION ON THE GROUP

APPENDIX II

32. RESERVES

(a) Group

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

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

(b) Company

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

Note: The contributed surplus of the Company originally derived from the difference between the nominal value of the share capital and share premium of the subsidiaries acquired pursuant to the Group reorganisation on 6 February 1995 and the par value of the Company’s shares issued in exchange therefor. The movements during the year ended 31 March 2003 represent the difference between the nominal value of the share capital before and after the Group’s Capital Reorganisation. Under the Companies Act 1981 of Bermuda (as amended), the contributed surplus is distributable to shareholders under certain circumstances.

−84 −

FINANCIAL INFORMATION ON THE GROUP

APPENDIX II

33. NOTES TO THE CONSOLIDATED CASH FLOW STATEMENT

(a) Major non-cash transactions

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

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

(b) Acquisition of a subsidiary

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

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

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

−85 −

FINANCIAL INFORMATION ON THE GROUP

APPENDIX II

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

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

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

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

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

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

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

−86 −

FINANCIAL INFORMATION ON THE GROUP

APPENDIX II

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

(d) Disposal of subsidiaries

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

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

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

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

−87 −

FINANCIAL INFORMATION ON THE GROUP

APPENDIX II

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

(d) Disposal of subsidiaries (Cont’d)

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

34. CONTINGENT LIABILITIES

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

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

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

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

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

35. OPERATING LEASE ARRANGEMENTS

(a) As lessor

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

−88 −

FINANCIAL INFORMATION ON THE GROUP

APPENDIX II

35. OPERATING LEASE ARRANGEMENTS (Cont’d)

(a) As lessor (Cont’d)

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

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

(b) As lessee

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

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

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

36. COMMITMENTS

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

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

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

−89 −

FINANCIAL INFORMATION ON THE GROUP

APPENDIX II

37. POST BALANCE SHEET EVENTS

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

(a) On 19 March 2004, the Group entered into a provisional sale and purchase agreement with an independent third party to acquire an investment property at a consideration of HK$56 million, of which, HK$10 million had been paid as a deposit by the Group prior to the balance sheet date. The outstanding balance of HK$46 million was included in the amount of capital commitments contracted, but not provided for, in note 36 to the financial statements. The acquisition was completed on 18 May 2004.
(b) On 24 March 2004, the Group entered into a conditional sale and purchase agreement with independent third parties to acquire Swing International Limited (“Swing”) at a cash consideration of HK$10 million. The major asset of Swing was a deposit paid for the acquisition of an investment property of approximately HK$5.63 million, representing 10% of the total consideration of approximately HK$56.3 million. The remaining consideration was fully paid on the completion date of the acquisition on 30 April 2004.
(c) On 7 April 2004, the Group entered into a sale and purchase agreement with an independent third party to dispose of an investment property situated in Hong Kong for a cash consideration of HK$33.8 million. The transaction was completed on 1 June 2004 and resulted in a gain of approximately HK$4.4 million.
(d) On 26 March 2004, the Group entered into a provisional sale and purchase agreement with an independent third party to acquire a residential leasehold land situated in Shatin for residential development purpose at a consideration of HK$103.8 million, of which, HK$5 million had been paid as a deposit by the Group prior to the balance sheet date. The outstanding balance of HK$98.8 million was included in the amount of capital commitments contracted, but not provided for, in note 36 to the financial statements. The directors expect the acquisition will be completed on 20 July 2004.
(e) On 8 April 2004, the Group entered into a conditional sale and purchase agreement with a subsidiary of WYTH (the “Purchaser”) to dispose of its entire interest in a wholly-owned subsidiary of the Group, WOD, which owns the Wai Yuen Tong Medicine Building, to the Purchaser at an initial consideration of approximately HK$64.5 million. The transaction was completed on 30 June 2004.
(f) On 20 April 2004, WYTH announced that it proposed to issue approximately 1,658 million rights shares at a price of HK$0.16 per rights share on the basis of three rights shares for every WYTH share held on 2 June 2004 (“Rights Issue”). In addition, WYTH also proposed to issue approximately 553 million bonus shares on the basis of one bonus share for every three fully paid rights shares (“Bonus Issue”). The Group had given a conditional irrevocable undertaking to WYTH to subscribe or procure the subscribing of all its entitlement pursuant to the Rights Issue (i.e. a total of 433.8 million of shares, including both rights shares and bonus shares, to be issued to the Group) and to make or procure an excess application for 210 million rights shares under the Rights Issues. Accordingly, upon the completion of Rights Issue and Bonus Issue on 28 June 2004, 535.3 million rights shares and 178.5 million bonus shares in the capital of WYTH were allotted to the Group, which increased the Group’s interest in WYTH’s enlarged share capital to 29.75%.
(g) On 5 July 2004, the Group entered into a sale and purchase agreement with an independent third party to acquire investment properties, together with two existing tenancies with an aggregated monthly rental charge of HK$77,000, both expiring on 31 May 2006, at a consideration of HK$19.8 million.

−90 −

FINANCIAL INFORMATION ON THE GROUP

APPENDIX II

38. RELATED PARTY TRANSACTIONS

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

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

Notes:

(a) An investment property of the Group was leased to Mr. Tang Ching Ho for a period of one year from 20 December 2002 at an agreed monthly rental of HK$50,000. The lease was renewed and extended for a further one year at an agreed monthly rental of HK$45,000. The rentals were determined with reference to the prevailing market rates.
(b) The entire interests of the Disposed Subsidiaries and China Field Enterprises Limited, a then 49%-owned associate of the Group, were disposed of to WYTH at considerations of HK$129.7 million and HK$20 million, respectively. The considerations were based on terms mutually agreed between the Group and WYTH. Further details of the disposal of the Disposed Subsidiaries are disclosed in note 33(d) to the financial statements.

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

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

39. COMPARATIVE AMOUNTS

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

40. APPROVAL OF THE FINANCIAL STATEMENTS

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

−91 −

APPENDIX III ACCOUNTANTS’ REPORT ON DRAGON RICHLY

Set out below is the accountants’ report on Dragon Richly extracted from the Company’s circular dated 5 November 2004, which is included in this circular for reference by the Shareholders of the Company only.

15th Floor Hutchison House 10 Harcourt Road Central Hong Kong

5 November 2004

The Directors

Wang On Group Limited Kingston Corporate Finance Limited

Dear Sirs,

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

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

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

−92 −

ACCOUNTANTS’ REPORT ON DRAGON RICHLY

APPENDIX III

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

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

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

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

1. BASIS OF PREPARATION

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

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

−93 −

APPENDIX III ACCOUNTANTS’ REPORT ON DRAGON RICHLY

2. PRINCIPAL ACCOUNTING POLICIES

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

Impairment of assets

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

Income tax

−94 −

ACCOUNTANTS’ REPORT ON DRAGON RICHLY

APPENDIX III

Related parties

3. RESULTS

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

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

(b) Tax

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

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

−95 −

ACCOUNTANTS’ REPORT ON DRAGON RICHLY

APPENDIX III

4. BALANCE SHEET

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

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

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

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

(c) Capital commitment

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

−96 −

APPENDIX III ACCOUNTANTS’ REPORT ON DRAGON RICHLY

5. STATEMENT OF CHANGES IN EQUITY

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

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

−97 −

APPENDIX III ACCOUNTANTS’ REPORT ON DRAGON RICHLY

6. CASH FLOW STATEMENT

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

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

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

7. DIRECTOR’S EMOLUMENTS

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

−98 −

APPENDIX III ACCOUNTANTS’ REPORT ON DRAGON RICHLY

8. RELATED PARTY TRANSACTION

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

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

9. SUBSEQUENT EVENTS

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

10. SUBSEQUENT FINANCIAL STATEMENTS

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

Yours faithfully,

Ernst & Young Certified Public Accountants Hong Kong

−99 −

ACCOUNTANTS’ REPORT ON POLY TALENT

APPENDIX IV

Set out below is the accountants’ report on Poly Talent extracted from the Company’s circular dated 5 November 2004, which is included in this circular for reference by the Shareholders of the Company only.

15th Floor Hutchison House 10 Harcourt Road Central Hong Kong

5 November 2004

The Directors Wang On Group Limited Kingston Corporate Finance Limited

Dear Sirs,

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

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

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

The financial information of the results, statement of changes in equity and cash flows of Poly Talent for the Relevant Period and the balance sheet of Poly Talent as at 15 October 2004,

−100 −

ACCOUNTANTS’ REPORT ON POLY TALENT

APPENDIX IV

together with the notes thereon (the “Financial Information”), set out in this report has been prepared from the audited financial statements and no adjustments are considered necessary. We have examined the Financial Information in accordance with the Auditing Guideline “Prospectuses and the reporting accountant” issued by the Hong Kong Institute of Certified Public Accountants.

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

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

1. BASIS OF PREPARATION

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

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

2. PRINCIPAL ACCOUNTING POLICIES

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

Impairment of assets

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

−101 −

ACCOUNTANTS’ REPORT ON POLY TALENT

APPENDIX IV

Income tax

Related parties

3. RESULTS

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

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

−102 −

ACCOUNTANTS’ REPORT ON POLY TALENT

APPENDIX IV

Notes:

(a) Net loss for the period

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

		HK$
Director’s	remuneration	–
Auditors’	remuneration	–

The auditors’ remuneration was borne by the Company.

(b) Tax

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

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

4. BALANCE SHEET

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

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

−103 −

ACCOUNTANTS’ REPORT ON POLY TALENT

APPENDIX IV

Notes:

(a) Shareholder’s loan

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

(b) Share capital

HK$

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

	1

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

(c) Capital commitment

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

5. STATEMENT OF CHANGES IN EQUITY

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

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

−104 −

ACCOUNTANTS’ REPORT ON POLY TALENT

APPENDIX IV

6. CASH FLOW STATEMENT

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

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

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

7. DIRECTOR’S EMOLUMENTS

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

−105 −

ACCOUNTANTS’ REPORT ON POLY TALENT

APPENDIX IV

8. RELATED PARTY TRANSACTION

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

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

9. SUBSEQUENT EVENTS

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

10. SUBSEQUENT FINANCIAL STATEMENTS

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

Yours faithfully,

Ernst & Young Certified Public Accountants Hong Kong

−106 −

APPENDIX V ACCOUNTANTS’ REPORT ON PROFIT MILLION

Set out below is the accountants’ report on Profit Million extracted from the Company’s circular dated 5 November 2004, which is included in this circular for reference by the Shareholders of the Company only.

15th Floor Hutchison House 10 Harcourt Road Central Hong Kong

5 November 2004

The Directors

Wang On Group Limited Kingston Corporate Finance Limited

Dear Sirs,

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

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

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

The financial information of the results, statement of changes in equity and cash flows of Profit Million for the Relevant Period and the balance sheet of Profit Million as at 15 October

−107 −

ACCOUNTANTS’ REPORT ON PROFIT MILLION

APPENDIX V

2004, together with the notes thereon (the “Financial Information”), set out in this report has been prepared from the audited financial statements and no adjustments are considered necessary. We have examined the Financial Information in accordance with the Auditing Guideline “Prospectuses and the reporting accountant” issued by the Hong Kong Institute of Certified Public Accountants.

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

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

1. BASIS OF PREPARATION

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

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

2. PRINCIPAL ACCOUNTING POLICIES

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

Impairment of assets

−108 −

ACCOUNTANTS’ REPORT ON PROFIT MILLION

APPENDIX V

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

Income tax

Related parties

−109 −

ACCOUNTANTS’ REPORT ON PROFIT MILLION

APPENDIX V

3. RESULTS

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

Note TURNOVER Administrative expenses NET LOSS FOR THE PERIOD (a) Notes: (a) Net loss for the period Profit Million’s net loss for the period is arrived at after charging: Director’s remuneration Auditors’ remuneration The auditors’ remuneration was borne by the Company.	HK$ – (5,367) (5,367) HK$ – –

(b) Tax

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

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

−110 −

ACCOUNTANTS’ REPORT ON PROFIT MILLION

APPENDIX V

4. BALANCE SHEET

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

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

−111 −

ACCOUNTANTS’ REPORT ON PROFIT MILLION

APPENDIX V

Notes:

(a) Shareholder’s loan

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

(b) Share capital

HK$

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

	1

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

(c) Capital commitment

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

5. STATEMENT OF CHANGES IN EQUITY

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

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

−112 −

ACCOUNTANTS’ REPORT ON PROFIT MILLION

APPENDIX V

6. CASH FLOW STATEMENT

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

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

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

7. DIRECTOR’S EMOLUMENTS

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

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ACCOUNTANTS’ REPORT ON PROFIT MILLION

APPENDIX V

8. RELATED PARTY TRANSACTION

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

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

9. SUBSEQUENT EVENTS

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

10. SUBSEQUENT FINANCIAL STATEMENTS

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

Yours faithfully,

Ernst & Young Certified Public Accountants Hong Kong

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APPENDIX VI FINANCIAL INFORMATION ON THE ENLARGED GROUP

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

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

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

The accompanying unaudited pro forma statement of assets and liabilities of the Enlarged Group, has been prepared from the unaudited consolidated balance sheet of the Group as at 30 September, 2004 giving effect to the acquisition of the entire issued capital and shareholder’s loan of each of Dragon Richly, Poly Talent, Profit Million and Hanwin (the “Transactions”), as if these Transactions have been completed on 30 September 2004, after giving effect to the pro forma adjustments described in the accompany notes. A narrative description of the pro forma adjustments of the Transactions that are (i) directly attributable to the Transcations; (ii) expected to have a continuing impact on the Enlarged Group and (iii) factually supportable, are summarized in the accompany notes.

The accompanying unaudited pro forma statement of assets and liabilities of the Enlarged Group has not given effect to the completion of (i) the post balance sheet events as disclosed in the Company 2004 interim report; (ii) the acquisition of properties as announced on 27 January 2005 and 23 March 2005; (iii) the disposal of the business interests of Geswin Limited as announced on 2 February 2005; and (iv) the placing of convertible notes as announced on 7 February 2005 and 23 February 2005.

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

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

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APPENDIX VI FINANCIAL INFORMATION ON THE ENLARGED GROUP

Unaudited Pro Forma Statement of Assets and Liabilities of the Enlarged Group As at 30 September 2004

The Group as at 30 September 2004 HK$’000 (unaudited) 320,831 118,335 4,671 155,459 36,448 1,392 7,810 2,479 514	Dragon Richly HK$’000 (audited) – – – – – – – – –	Poly Talent HK$’000 (audited) – – – – – – – – –	Profit Million HK$’000 (audited) – – – – – – – – –	Hanwin Adjustments HK$’000 HK$’000 Notes (audited) – 110,000 (4) & (5) – 145,880 (2) & (3) – 20 (6) – – – – – – – – – – – –	Hanwin Adjustments HK$’000 HK$’000 Notes (audited) – 110,000 (4) & (5) – 145,880 (2) & (3) – 20 (6) – – – – – – – – – – – –	Pro forma Financial Information HK$’000 430,831 264,215 4,691 155,459 36,448 1,392 7,810 2,479 514
647,939 45,442 68 8,543 20,543 298,056 372,652 157 16,569 – 42,594 64,481 7,915 6,241	– – – – 7,815 – 7,815 – 5 7,815 – – – –	– – – – 1,800 – 1,800 – 5 1,800 – – – –	– – – – 300 – 300 – 5 300 – – – –	– – – – 3,000 – 3,000 – 5 3,000 – – – –	255,900 – – – (12,915) (1) (164,880) (2), (3), (4) & (5) (177,795) – – (12,915) (1) – 6,000 (5) – –	903,839 45,442 68 8,543 20,543 133,176
						207,772 157 16,589 – 42,594 70,481 7,915 6,241
137,957	7,820	1,805	305	3,005	(6,915)	143,977

−116 −

APPENDIX VI

FINANCIAL INFORMATION ON THE ENLARGED GROUP

The Group as at 30 September 2004 HK$’000 (unaudited) 234,695 882,634 206,306 270	Dragon Richly HK$’000 (audited) (5) (5) – –	Poly Talent HK$’000 (audited) (5) (5) – –	Profit Million HK$’000 (audited) (5) (5) – –	Hanwin Adjustments HK$’000 HK$’000 Notes (audited) (5) (170,880) (5) 85,020 – 85,000 (3) & (5) – –	Hanwin Adjustments HK$’000 HK$’000 Notes (audited) (5) (170,880) (5) 85,020 – 85,000 (3) & (5) – –	Pro forma Financial Information HK$’000 63,795 967,634 291,306 270
206,576 400	– –	– –	– –	– –	85,000 –	291,576 400
675,658	(5)	(5)	(5)	(5)	20	675,658

14,332 657,026 4,300	– (5) –	– (5) –	– (5) –	– (5) –	– 20 (6) –	14,332 657,026 4,300
675,658	(5)	(5)	(5)	(5)	20	675,658

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

(1) Following the completion of the acquisition of Dragon Richly, Poly Talent, Profit Million, Hanwin and completion of the acquisition of the properties, the assets and liabilities of Dragon Richly, Poly Talent, Profit Million and Hanwin will be accounted for in the consolidated financial statements of the Group at their fair value under purchase method of accounting. The pro forma adjustment reflects the elimination of the acquisition of the shareholder’s loan of approximately HK$7,815,000, HK$1,800,000, HK$300,000 and HK$3,000,000 of Dragon Richly, Poly Talent, Profit Million and Hanwin, respectively.
(2) The pro forma adjustment reflects the cash consideration of HK$720,001, HK$1,800,001, HK$300,001 which were paid by the Group on the signing of the DR Acquisition Agreement, PT/PM Acquisition Agreement and further deposit of HK$7,095,000 was paid by Wang On upon request by Mr. Tang in accordance with Kennedy Town Provisional Agreements of Dragon Richly. The consideration was financed by internal funding.
(3) The pro forma adjustment reflects the balance consideration of (i) HK$60,000,000 and HK$6,230,000 which were paid by the Group on the completion date of the acquisition of the Yuen Long Property A and the Yuen Long Property B, respectively, of which HK$31,000,000 was satisfied by a long term bank borrowing; and (ii) HK$69,735,000 which will be paid by the Group on the completion date of the acquisition of the 29 units of Kennedy Town Properties.
(4) The pro forma adjustment reflects the cash consideration of HK$3,000,001 which was paid by the Group on the signing of the Hanwin Acquisition Agreement and further deposit of HK$8,000,000 was paid by Wang On upon request by Mr. Tang in accordance with Provisional Agreement of Hanwin. The consideration was financed by internal funding.

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FINANCIAL INFORMATION ON THE ENLARGED GROUP

APPENDIX VI

(5) The pro forma adjustment reflects the balance consideration of HK$99,000,000 which will be paid by the Group on the completion date of the acquisition of the Sham Shui Po Property, of which HK$60,000,000 will be satisfied by a bank borrowing with a term of 10 years (subject to negotiation and final determination by bank).
(6) The pro forma adjustment represents total goodwill of HK$21,472 arising on acquisition of Dragon Richly, Poly Talent, Profit Million and Hanwin, which represents the difference of the total consideration of HK$4 for acquiring the entire issued share capital and the net liabilities of Dragon Richly, Poly Talent, Profit Million and Hanwin of HK$5,370, HK$5,366, HK$5,366 and HK$5,370, respectively.

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

For illustrative purpose only, the following is an unaudited pro forma statement of the consolidated net tangible assets of the Enlarged Group prepared in accordance with Rule 4.29 of the Listing Rules as if the DR Acquisition, the PT/PM Acquisition and the Hanwin Acquisition had taken place on 30 September 2004. The statement is prepared based on the unaudited consolidated financial statements of the Group as at 30 September 2004, adjusted to reflect the effect of the the DR Acquisition, the PT/PM Acquisition and the Hanwin Acquisition at completion.

				Less: Goodwill
			Unaudited	arising from the
			consolidated net	DR Acquisition,
			tangible assets of	the PT/PM
			the Group as at	Acquisition and
			30 September	the Hanwin
			2004	Acquisition	Enlarged Group
			HK$’000	HK$’000	HK$’000
Net	tangible	assets	675,658	(20)	675,638

Note:

The unaudited consolidated net tangible asset value per share of the Group of approximately HK$4.71 and the unaudited pro forma adjusted consolidated net tangible asset value per share of the Enlarged Group upon completion of the DR Acquisition, the PT/PM Acquisition and the Hanwin Acquisition of approximately HK$4.71 are calculated on the basis of 143,320,366 Shares in issue as at the Latest Practicable Date as set out in this circular.

STATEMENT OF INDEBTEDNESS

As at 28 February 2005, the Enlarged Group has utilised secured bank borrowings of approximately HK$266.2 million. The bank borrowings were secured by certain of the Group’s leasehold land, investment properties, properties under development, 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. In addition, as at the same date, the Enlarged Group had outstanding convertible notes with a principal sum of approximately HK$98.6 million.

Save as aforesaid and apart from intra-group liabilities, the Enlarged Group did not have any outstanding mortgages, charges, debentures, loan capital, debt securities, loans, bank

−118 −

APPENDIX VI FINANCIAL INFORMATION ON THE ENLARGED GROUP

overdraft or other similar indebtedness, finance leases or hire purchase commitments, liabilities under acceptance or acceptance credits or guarantees or other contingent liabilities as at 28 February 2005.

Save as disclosed above, the Directors confirm that there has been no material change in the indebtedness and contingent liabilities of the Enlarged Group since 28 February 2005.

WORKING CAPITAL

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

MATERIAL ADVERSE CHANGE

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

BUSINESS REVIEW

For the year ended 31 March 2004, with the rebound of the Hong Kong economy, the Group recorded a net profit of HK$29.3 million.

The Group’s shareholders’ equity increased from HK$623.5 million as at 31 March 2003 to HK$680.6 million as at 31 March 2004. The Group’s solid financial position was also represented by an amount of cash and cash equivalents of over HK$289 million as at 31 March 2004.

Management and Sub-licensing of Chinese Wet Markets

The Group continues to be the leader in the management and sub-licensing of Chinese wet markets. Profit contribution of this area of business to the Group increased during the year 2004 as a result of more stringent cost control.

The Chinese wet market at Tseung Kwan O Plaza operated by the Group commenced business in June 2004.

The Directors are also pleased to announce that the Group’s first Chinese wet market, namely Bao Hua new market, located at Li Wan Qi, Guangzhou, the People’s Republic of China, also commenced business in July 2004. This represents a milestone for the Group’s expansion in this area of business into the PRC and the Directors will continue to explore future opportunities in the People’s Republic of China.

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FINANCIAL INFORMATION ON THE ENLARGED GROUP

APPENDIX VI

Management and Sub-licensing of Shopping Centres and Car Parks

These areas of business continued to grow steadily with satisfactory profit contributions to the Group.

Property Development

With the rebound of the Hong Kong property market, the Group continues to expand in this area of business. During the period under review and up to the date of this circular, the Group has made the following acquisitions or has entered into sale and purchase agreements for the acquisition of the following properties.

Property Name Location Shatin Heights Lot No. 1476 in DD 189 Fairview Park Boulevard Lot No. 4781 in D.D. No. 104 and Lot No. 3254 RP in D.D. 104 Kennedy Town 29 residential and commercial units of Nos. 12, 14, 16, 18, 20 and 22, Davis Street, Kennedy Town, Hong Kong Ho Chung Various lots in D.D. 210 and D.D. 244 Sai Kung, New Territories	Consideration (HK$) 103.8 million 68.3 million 77.6 million 13.8 million 263.5 million	Approximate Site Area (sq.ft.) 49,100 104,600 5,000 68,000 226,700	Estimated Approximate Gross Floor Area Development Plan Anticipated Completion (sq.ft.) 27,900 Low density residential area with 11 luxury houses First quarter of 2006 37,100 Low density residential and commercial area with 19 luxury houses and 2 shops Last quarter of 2006 37,000 26 storey residential and commercial building Second quarter of 2007 20,500 Low density residential development First quarter of 2008 122,500

There was no payment to or any benefits in kind received by any Director under any of the above acquisitions or sale and purchase agreements.

−120 −

APPENDIX VI FINANCIAL INFORMATION ON THE ENLARGED GROUP

Property Investment

During the period under review and up to the date of this circular, the Group has acquired/disposed of certain retail shops and residential units in its portfolio as follows:

Disposals

		Anticipated/
		Actual
Location	Consideration	Completion
	(HK$)
Shop 6 (including Cockloft) on the Ground Floor,	33.8 million	June 2004
Cheuk Ming Building,
Nos. 10-22 Tsuen Wan Market Street,
Tsuen Wan, New Territories
Whole block located at No. 32 Argyle Street,	73.8 million	January 2005
Kowloon
Flat D on the Ground Floor and Flat D on	29.1 million	March 2005
Mezzanine Floor, Nam Yeung Mansion,
Nos. 31-34 Mut Wah Street,
Kwun Tong, Kowloon
Acquisitions
		Anticipated/
		Actual
Location	Consideration	Completion
	(HK$)
Ground Floor and Cockloft,	19.8 million	July 2004
No. 203 Tung Choi Street,
Mongkok, Kowloon
Four residential units of Parc Palais,	30.9 million	March 2005
18 Wylie Road, King’s Park, Kowloon
G/F, Grandeur Garden,	16.3 million	February 2005
Nos. 14-18 Chik Fai Street,
Nos. 55-65 Tai Wai Road,
Shatin, New Territies, Hong Kong

As at 30 September 2004, the Group held a retail property portfolio with a net book value of approximately HK$244.4 million, generating a projected annual rental income of approximately HK$10.0 million.

−121 −

APPENDIX VI FINANCIAL INFORMATION ON THE ENLARGED GROUP

LIQUIDITY AND FINANCIAL RESOURCES

As at 31 March 2004, the Group had cash resources and short term investments of over HK$340 million, of which approximately HK$56 million is invested in certain certificates of deposits, bank commercial papers and listed securities. Also, HK$20 million is invested in various long-term guaranteed return funds and bank notes.

As at 31 March 2004, the Group had a net cash position of HK$184.8 million (calculated with reference to the Group’s cash and cash equivalent and total borrowings of HK$289.4 million and HK$104.6 million, respectively, as at 31 March 2004).

As at 31 March 2004, the Group’s investment properties had a book value of approximately HK$260.4 million and certain rental income generated therefrom were pledged to secure the Group’s banking facilities, approximately HK$140.7 million of which was utilized as at 31 March 2004.

The Group’s contingent liabilities and capital commitment as at 31 March 2004 amounted to approximately HK$149.6 million.

As at 30 September 2004, the Group had cash resources of around HK$280 million. In order to enhance its returns on the Group’s financial resources in the current low interest rate environment, the Group has also invested, in aggregate, approximately HK$52.1 million in certain long-term guaranteed return certificates of deposit and bank commercial papers.

The Group’s gearing ratio as at 30 September 2004 was approximately 0.4 (calculated by reference to the Group’s total borrowings and capital and reserves of HK$270.8 million and HK$675.7 million, respectively, as at 30 September 2004).

As at 30 September 2004, the Group’s investment properties had a book value of approximately HK$289.6 million and certain rental income generated therefrom were pledged to secure the Group’s banking facilities, approximately HK$218.8 million of which was utilised at 30 September 2004.

The Group’s contingent liabilities and capital commitment as at 30 September 2004 amounted to approximately HK$123.2 million.

On 19 November 2004, the Company entered into a conditional placing and underwriting agreement (the “Placing and Underwriting Agreement”) with an independent placing agent. Pursuant to the Placing and Underwriting Agreement, the relevant independent placing agent agreed to place convertible notes in an aggregate principal amount of approximately HK$37.18 million. The transaction was completed on 16 December 2004 and the net proceeds of approximately HK$35.70 million was received.

−122 −

APPENDIX VI FINANCIAL INFORMATION ON THE ENLARGED GROUP

On 4 February 2005, the Company entered into a conditional placing agreement (the “Placing Agreement”) with an independent placing agent. Pursuant to the Placing Agreement, the relevant independent placing agent agreed to place convertible notes in aggregate principal amount of HK$61,440,000.

Property Development

As disclosed in the Company’s announcement dated 30 March 2004 and a circular dated 20 April 2004, the Group purchased a piece of leasehold land located in Shatin, with a site area of approximately 4,560 square metres. The Group currently plans to develop the property into a low density residential complex intended for sale and/or lease. This property development project represents a milestone of the Group in its diversification into the property development business. Preparatory work for the development has commenced and it is expected the project will be ready for pre-sale or pre-leasing in mid 2005.

Property Investment

The Group holds a retail property portfolio for long term investment with a view to secure for the Group stable and recurring rental income and long term capital appreciation potential.

Segment Information

Business segments

The Company is an investment holding company and the Group principally operates in seven business segments as described below.

−123 −

FINANCIAL INFORMATION ON THE ENLARGED GROUP

APPENDIX VI

The following table presents revenue and profit/(loss) information for the Group’s business segments for the six months ended 30 September 2004.

Chinese wet markets Shopping centres and car parks Phar- maceutical business Property development Property investment Retail business Corporate and other Eliminations Consolidated (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) Group HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 (Note) Segment revenue Sales to external customers 72,129 44,377 – – 5,794 18,921 2,794 – 144,015 Intersegment sales 1,821 462 – – – – 5,181 (7,464) – Other revenue 323 934 – – 4,727 27 3,206 – 9,217 Total 74,273 45,773 – – 10,521 18,948 11,181 (7,464) 153,232 Segment results 6,942 2,880 – (1,556) 9,102 491 290 – 18,149 Unallocated expenses (2,829) Interest income 2,431 Profit from operating activities 17,751 Finance costs (1,870) Share of profits and losses of associates (including amortisation of goodwill) (3,421) Profit before tax 12,460 Tax (2,939) Profit before minority interests 9,521 Minority interests 1 Net profit from ordinary activities attributable to shareholders 9,522	Chinese wet markets Shopping centres and car parks Phar- maceutical business Property development Property investment Retail business Corporate and other Eliminations Consolidated (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) Group HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 (Note) Segment revenue Sales to external customers 72,129 44,377 – – 5,794 18,921 2,794 – 144,015 Intersegment sales 1,821 462 – – – – 5,181 (7,464) – Other revenue 323 934 – – 4,727 27 3,206 – 9,217 Total 74,273 45,773 – – 10,521 18,948 11,181 (7,464) 153,232 Segment results 6,942 2,880 – (1,556) 9,102 491 290 – 18,149 Unallocated expenses (2,829) Interest income 2,431 Profit from operating activities 17,751 Finance costs (1,870) Share of profits and losses of associates (including amortisation of goodwill) (3,421) Profit before tax 12,460 Tax (2,939) Profit before minority interests 9,521 Minority interests 1 Net profit from ordinary activities attributable to shareholders 9,522	Chinese wet markets Shopping centres and car parks Phar- maceutical business Property development Property investment Retail business Corporate and other Eliminations Consolidated (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) Group HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 (Note) Segment revenue Sales to external customers 72,129 44,377 – – 5,794 18,921 2,794 – 144,015 Intersegment sales 1,821 462 – – – – 5,181 (7,464) – Other revenue 323 934 – – 4,727 27 3,206 – 9,217 Total 74,273 45,773 – – 10,521 18,948 11,181 (7,464) 153,232 Segment results 6,942 2,880 – (1,556) 9,102 491 290 – 18,149 Unallocated expenses (2,829) Interest income 2,431 Profit from operating activities 17,751 Finance costs (1,870) Share of profits and losses of associates (including amortisation of goodwill) (3,421) Profit before tax 12,460 Tax (2,939) Profit before minority interests 9,521 Minority interests 1 Net profit from ordinary activities attributable to shareholders 9,522	Chinese wet markets Shopping centres and car parks Phar- maceutical business Property development Property investment Retail business Corporate and other Eliminations Consolidated (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) Group HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 (Note) Segment revenue Sales to external customers 72,129 44,377 – – 5,794 18,921 2,794 – 144,015 Intersegment sales 1,821 462 – – – – 5,181 (7,464) – Other revenue 323 934 – – 4,727 27 3,206 – 9,217 Total 74,273 45,773 – – 10,521 18,948 11,181 (7,464) 153,232 Segment results 6,942 2,880 – (1,556) 9,102 491 290 – 18,149 Unallocated expenses (2,829) Interest income 2,431 Profit from operating activities 17,751 Finance costs (1,870) Share of profits and losses of associates (including amortisation of goodwill) (3,421) Profit before tax 12,460 Tax (2,939) Profit before minority interests 9,521 Minority interests 1 Net profit from ordinary activities attributable to shareholders 9,522	Chinese wet markets Shopping centres and car parks Phar- maceutical business Property development Property investment Retail business Corporate and other Eliminations Consolidated (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) Group HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 (Note) Segment revenue Sales to external customers 72,129 44,377 – – 5,794 18,921 2,794 – 144,015 Intersegment sales 1,821 462 – – – – 5,181 (7,464) – Other revenue 323 934 – – 4,727 27 3,206 – 9,217 Total 74,273 45,773 – – 10,521 18,948 11,181 (7,464) 153,232 Segment results 6,942 2,880 – (1,556) 9,102 491 290 – 18,149 Unallocated expenses (2,829) Interest income 2,431 Profit from operating activities 17,751 Finance costs (1,870) Share of profits and losses of associates (including amortisation of goodwill) (3,421) Profit before tax 12,460 Tax (2,939) Profit before minority interests 9,521 Minority interests 1 Net profit from ordinary activities attributable to shareholders 9,522	Chinese wet markets Shopping centres and car parks Phar- maceutical business Property development Property investment Retail business Corporate and other Eliminations Consolidated (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) Group HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 (Note) Segment revenue Sales to external customers 72,129 44,377 – – 5,794 18,921 2,794 – 144,015 Intersegment sales 1,821 462 – – – – 5,181 (7,464) – Other revenue 323 934 – – 4,727 27 3,206 – 9,217 Total 74,273 45,773 – – 10,521 18,948 11,181 (7,464) 153,232 Segment results 6,942 2,880 – (1,556) 9,102 491 290 – 18,149 Unallocated expenses (2,829) Interest income 2,431 Profit from operating activities 17,751 Finance costs (1,870) Share of profits and losses of associates (including amortisation of goodwill) (3,421) Profit before tax 12,460 Tax (2,939) Profit before minority interests 9,521 Minority interests 1 Net profit from ordinary activities attributable to shareholders 9,522	Chinese wet markets Shopping centres and car parks Phar- maceutical business Property development Property investment Retail business Corporate and other Eliminations Consolidated (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) Group HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 (Note) Segment revenue Sales to external customers 72,129 44,377 – – 5,794 18,921 2,794 – 144,015 Intersegment sales 1,821 462 – – – – 5,181 (7,464) – Other revenue 323 934 – – 4,727 27 3,206 – 9,217 Total 74,273 45,773 – – 10,521 18,948 11,181 (7,464) 153,232 Segment results 6,942 2,880 – (1,556) 9,102 491 290 – 18,149 Unallocated expenses (2,829) Interest income 2,431 Profit from operating activities 17,751 Finance costs (1,870) Share of profits and losses of associates (including amortisation of goodwill) (3,421) Profit before tax 12,460 Tax (2,939) Profit before minority interests 9,521 Minority interests 1 Net profit from ordinary activities attributable to shareholders 9,522	Chinese wet markets Shopping centres and car parks Phar- maceutical business Property development Property investment Retail business Corporate and other Eliminations Consolidated (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) Group HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 (Note) Segment revenue Sales to external customers 72,129 44,377 – – 5,794 18,921 2,794 – 144,015 Intersegment sales 1,821 462 – – – – 5,181 (7,464) – Other revenue 323 934 – – 4,727 27 3,206 – 9,217 Total 74,273 45,773 – – 10,521 18,948 11,181 (7,464) 153,232 Segment results 6,942 2,880 – (1,556) 9,102 491 290 – 18,149 Unallocated expenses (2,829) Interest income 2,431 Profit from operating activities 17,751 Finance costs (1,870) Share of profits and losses of associates (including amortisation of goodwill) (3,421) Profit before tax 12,460 Tax (2,939) Profit before minority interests 9,521 Minority interests 1 Net profit from ordinary activities attributable to shareholders 9,522	Chinese wet markets Shopping centres and car parks Phar- maceutical business Property development Property investment Retail business Corporate and other Eliminations Consolidated (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) Group HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 (Note) Segment revenue Sales to external customers 72,129 44,377 – – 5,794 18,921 2,794 – 144,015 Intersegment sales 1,821 462 – – – – 5,181 (7,464) – Other revenue 323 934 – – 4,727 27 3,206 – 9,217 Total 74,273 45,773 – – 10,521 18,948 11,181 (7,464) 153,232 Segment results 6,942 2,880 – (1,556) 9,102 491 290 – 18,149 Unallocated expenses (2,829) Interest income 2,431 Profit from operating activities 17,751 Finance costs (1,870) Share of profits and losses of associates (including amortisation of goodwill) (3,421) Profit before tax 12,460 Tax (2,939) Profit before minority interests 9,521 Minority interests 1 Net profit from ordinary activities attributable to shareholders 9,522
74,273 6,942	45,773 2,880	– –	– (1,556)	10,521 9,102	18,948 491	11,181 290	(7,464) –	153,232
								18,149
								(2,829) 2,431
								17,751 (1,870) (3,421)
								12,460 (2,939)
								9,521 1
								9,522

PROSPECTS

The recovering Hong Kong economy is encouraging for the future performance of the Group. With deflation subsiding and the rate of employment improving, the Directors expect the economy and the property market in Hong Kong should perform well in the near future. The Company’s management will continue to strengthen the Group’s existing businesses whilst making every effort to explore new business opportunities to maximize returns for all shareholders.

−124 −

COMFORT LETTER

APPENDIX VII

REPORT ON UNAUDITED PRO FORMA FINANCIAL INFORMATION

15th Floor Hutchison House 10 Harcourt Road Central Hong Kong 13 April 2005

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

Dear Sirs,

We report on the unaudited pro forma statement of the assets and liabilities and pro forma statement of net tangible assets of the Enlarged Group, being Wang On Group Limited (the “Company”) and its subsidiaries (collectively referred to as the “Group”) together with Dragon Richly Investment Limited (“Dragon Richly”), Poly Talent Investment Limited (“Poly Talent”), Profit Million Investment Limited (“Profit Million”) and Hanwin Investment Limited (“Hanwin”), as set out on pages 115 to 118 in Appendix VI (“the Pro Forma Financial Information”) to the circular of the Company dated 13 April 2005 in connection with the proposed acquisition of the entire issued capital and shareholder’s loan of Hanwin from Mr. Tang Ching Ho, the director of the Company, which have been prepared by the directors of the Company (the “Directors”), for illustration purposes only, to provide information about how the acquisitions of Dragon Richly, Poly Talent, Profit Million and Hanwin might have affected the historical financial information of the Group.

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

Responsibilities

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

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COMFORT LETTER

APPENDIX VII

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

Basis of opinion

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

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

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

(a) the Enlarged Group had the acquisitions of Dragon Richly, Poly Talent, Profit Million and Hanwin, actually occurred as at the dates indicated therein; or
(b) the Enlarged Group at any future date or for any future periods.

Opinion

In our opinion:

(a) the Pro Forma Financial Information has been properly compiled on the basis stated;
(b) such basis is consistent with the accounting policies of the Group; and
(c) the adjustments are appropriate for the purpose of the Pro Forma Financial Information as disclosed pursuant to Paragraph 29 of Chapter 4 of the Listing Rules.

Yours faithfully, Ernst & Young Certified Public Accountants Hong Kong

−126 −

APPENDIX VIII VALUATION REPORT ON THE SHAM SHUI PO PROPERTY

The following is the text of a letter with a summary of value and a valuation certificate, prepared for the purpose of incorporating in this major and connected transaction, received from Chesterton Petty Limited, an independent property valuer, in connection with their valuation as at 30 March 2005 of the property.

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30 March 2005

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

Dear Sirs

THE WHOLE BLOCK OF WEALTHY TERRACE, 58 YEN CHOW STREET, SHAM SHUI PO, KOWLOON, HONG KONG

In accordance with your instructions for us to value the captioned property, we confirm that we have carried out inspection, made relevant enquiries and searches and obtained such further information as we consider necessary for the purpose of providing you with our opinion of the open market value of the property as at 30 March 2005.

Our valuation is our opinion of the open market value which we would define as intended to mean “the best price at which the sale of an interest in 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 the price and terms and for the completion of the sale;
(c) that the state of the market, level of values and other circumstances were, on any earlier assumed date of exchange of contracts, the same as on the date of valuation;

−127 −

VALUATION REPORT ON THE SHAM SHUI PO PROPERTY

APPENDIX VIII

(d) that no account is taken of any additional bid by a prospective purchaser with a special interest; and
(e) that both parties to the transaction had acted knowledgeably, prudently and without compulsion”.

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

We have valued the property with reference to sales evidence as available on the market assuming that vacant possession of the property would be readily available upon completion of a sale.

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

We have relied to a very considerable extent on information given by you and have accepted advice given to us on such matters as planning approvals or statutory notices, easements, tenure, occupancy particulars, site and floor areas and all other relevant matters. Dimensions, measurements and areas included in the valuation certificate are based on information contained in the documents provided to us and are therefore only approximations.

We have inspected the exterior of the property and where possible, we have also inspected the interior of the premises. However, no structural survey has been made, but in the course of our inspection, we did not note any serious defect. We are not, however, able to report that the property is free from rot, infestation or any other structural defect. No tests were carried out to any of the services.

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

We enclose herewith our valuation certificate.

Yours faithfully For and on behalf of Chesterton Petty Limited Charles C K Chan MSc FRICS FHKIS MCIArb RPS(GP) Executive Director

−128 −

VALUATION REPORT ON THE SHAM SHUI PO PROPERTY

APPENDIX VIII

VALUATION CERTIFICATE

Property

Description and tenure

Open market value Particulars of in existing state as at occupancy 30 March 2005

The Whole Block of Wealthy Terrace comprises a Wealthy Terrace, 16-storey residential tower built 58 Yen Chow Street, over 2 levels of commercial Sham Shui Po, podium erected on a rectangular Kowloon, site with a development site area Hong Kong of approximately 311.05 sq.m. (3,348 sq.ft.). The building was Sections A, B, C and The completed in 2003.

Sections A, B, C and The completed in 2003. Remaining Portion of New Kowloon Inland Lot The property comprises whole of No. 1062. the building with eight shop units planned on the Ground Floor and three shop units planned on the 1st Floor with a total saleable area of approximately 325.99 sq.m. (3,509 sq.ft.).

The property is currently vacant.

HK$110,000,000

The property also comprises forty-eight residential units on the 2nd to 19th Floors (4th and 14th Floors being omitted from floor numbering) with a total saleable area of approximately 1,422.71 sq.m. (15,314 sq.ft.) together with flat roofs on the 2nd Floor of approximately 161.46 sq.m. (1,738 sq.ft.).

New Kowloon Inland Lot No. 1062 is held under a Government Lease for a term expiring on 30 June 2047 at an annual Government rent at 3% of the rateable value for the time being of the lot.

Notes:

(1) The registered owner of the property is Chueyine Company Limited.
(2) The property is subject to a Deed of Dedication in favour of The Government of the Hong Kong Special Administrative Region.
(3) The property is subject to a Modification Letter.
(4) The property is subject to an Undertaking Letter from Chueyine Company Limited to the Building Authority of the Buildings Department.
(5) The property is subject to an Occupation Permit (Permit No. KN 24/2003 (OP)).

−129 −

EXPLANATORY STATEMENT

APPENDIX IX

This appendix serves as an explanatory statement as required by the Listing Rules to provide the requisite information to you for your consideration of the Repurchase Mandate.

RESPONSIBILITY STATEMENT

This circular includes particulars given in compliance with the Listing Rules for the purpose of giving information with regard to the Group. The Directors collectively and individually accept full responsibility for the accuracy of the information contained in this circular and confirm, having made all reasonable enquiries that to the best of their knowledge and belief, there are no other facts the omission of which would make any statement herein misleading.

1. SHARE CAPITAL

As at the Latest Practicable Date, the issued share capital of the Company was HK$14,332,036.6 comprising 143,320,366 Shares. In addition, as at the Latest Practicable Date, the Company has an outstanding Share Option and two series of Convertible Notes. The outstanding Share Options carrying the rights to subscribe up to an aggregate of 2,628,000 Shares and the two series of Convertible Notes carrying the rights to convert up to an aggregate of 28,600,000 Shares with and 25,600,000 Shares respectively. The initial conversion price for both Convertible Notes are HK$1.30 and HK$2.4 per Shares respectively. If such Share Options and Conversion Notes are exercised in full on or prior to the date of the SGM in respect of the Repurchase Mandate, a further 56,828,000 Shares will be in issue.

Subject to the passing of the relevant ordinary resolution as set out in the SGM Notice and assuming that no further Shares are issued or purchased by the Company, the Directors will be authorised to purchase up to 14,332,036 Shares pursuant to the Repurchase Mandate. Assuming that all outstanding Share Options and Conversion Notes are exercised in full and an aggregate of 56,828,000 Shares are issued on or before the date of the passing of the resolution in respect of the Repurchase Mandate and assuming no further Shares are issued or purchased by the Company, the total number of Shares in issue will be 200,148,366 and the Directors will be authorised to purchase up to 20,014,836 Shares.

2. REASONS FOR REPURCHASES

The Directors believe that it is in the best interests of the Company and the Shareholders to have a general authority from the Shareholders to enable the Directors to purchase Shares in the market. Such purchases may, depending on market conditions and funding arrangements at the time, lead to an enhancement of the net value of the Company and its assets or its earnings per Share or both and will only be made when the Directors believe that such purchases will benefit the Company and the Shareholders as a whole.

3. FUNDING OF REPURCHASES

In repurchasing Shares, the Company must fund the repurchase entirely from the Company’s available cash flow or working capital facilities legally available for such purpose in accordance with its memorandum of association and bye-laws and the laws of Bermuda.

−130 −

EXPLANATORY STATEMENT

APPENDIX IX

There might be an adverse impact on the working capital or gearing position of the Company as compared with the positions disclosed in the Company’s interim report for the six month ended 30 September 2004 in the event that the Repurchase Mandate was to be carried out in full at any time during the proposed repurchase period.

The Directors do not propose to exercise the Repurchase Mandate to such extent as could, in the circumstances, have a material adverse effect on the working capital or the gearing level of the Company which in the opinion of the Directors is from time to time appropriate for the Company.

4. DIRECTORS, THEIR ASSOCIATES AND CONNECTED PERSONS

None of the Directors nor, to the best of their knowledge having made all reasonable enquiries, any of their associates, have any present intention, in the event that the Repurchase Mandate is approved by the Shareholders at the SGM, to sell Shares to the Company under the Repurchase Mandate.

No connected person, as defined in the Listing Rules, has notified the Company that he has a present intention to sell any Shares to the Company, or that he has undertaken not to sell any Shares held by him to the Company, in the event that the Repurchase Mandate is granted by the Shareholders at the SGM.

The Company has not repurchased any of its Shares (whether on the Stock Exchange or otherwise) in the six months preceding the date of this circular.

5. DIRECTORS’ UNDERTAKING

The Directors have undertaken to the Stock Exchange that they will exercise the Repurchase Mandate in accordance with the Listing Rules and the applicable laws of Bermuda so far as the same may be applicable.

6. EFFECT OF THE CODE

If, on the exercise of the power to repurchase Shares pursuant to the Repurchase Mandate, a Shareholder’s proportionate interest in the voting rights of the Company increases, such increase will be treated as an acquisition for the purpose of Rule 32 of the Code. As a result, a Shareholder or a group of Shareholders acting in concert (as defined in the Code), depending on the level of such increase, could obtain or consolidate control of the Company and may become obliged to make a mandatory offer in accordance with Rule 26 of the Code.

As at the Latest Practicable Date, Mr. Tang Ching Ho, the Chairman and Managing Director of the Company, and parties acting in concert with him were interested or deemed to be interested in approximately 19.34% of the existing issued share capital of the Company. In the event that the Directors should exercise the power to repurchase Shares under the Repurchase Mandate in full, the shareholding of Mr. Tang Ching Ho and parties acting in concert with him will be increased to approximately 21.49% of the issued share capital of the Company.

−131 −

EXPLANATORY STATEMENT

APPENDIX IX

The Directors are not aware of any consequence which may arise under the Code as a result of any purchases made under the Repurchase Mandate.

The Directors have no present intention to exercise the power to repurchase Shares to the extent that the aggregate amount of the share capital of the Company in public hands would be reduced to less than 25%.

7. SHARE PRICES

The highest and lowest prices at which the Shares have traded on the Stock Exchange in each of the last twelve months are as follows:

	Shares
	Highest	Lowest
	HK$	HK$
2004
April	1.34	0.98
May	1.00	0.64
June	0.97	0.75
July	1.42	0.84
August	1.24	0.97
September	1.14	1.02
October	1.32	1.05
November	1.50	1.16
December	2.175	1.36
2005
January	2.35	1.81
February	2.20	1.91
March	2.17	1.92

8. EXPERTS’ QUALIFICATION AND CONSENTS

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

Baron is a corporation licensed to carry out Type 1 and Type 6 regulated activities under the SFO.

−132 −

GENERAL INFORMATION

APPENDIX X

1. RESPONSIBILITY STATEMENT

This circular includes particulars given in compliance with the Listing Rules for the purpose of giving information with regard to the Company and the Enlarged Group. The Directors collectively and individually accept full responsibility for the accuracy of the information contained in this circular and confirm, having made all reasonable enquiries, that to the best of their knowledge and belief there are no other facts the omission of which would make any statement herein misleading.

2. DISCLOSURE OF INTERESTS

(a) Interests of Directors

As at the Latest Practicable Date, the interests and short positions 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

Name of Director
Mr. Tang Ching Ho
Ms. Yau Yuk Yin

Number of shares held, capacity and nature of interest
Percentage
of the
Company’s
issued
share
capital
Personal
interest
Family
interest
Corporate
interest
Other
interest
Total
614,355
614,354
2,247,227
24,243,463
27,719,399
19.34
(Note (a))
(Note (b))
(Note (c))
614,354
2,861,582
–
24,243,463
27,719,399
19.34
(Note (d))
(Note (e))
1,228,709
27,719,399
2,247,227
24,243,463

−133 −

GENERAL INFORMATION

APPENDIX X

Notes:

(a) Mr. Tang Ching Ho was taken to be interested in those Shares in which his spouse, Ms. Yau Yuk Yin, was interested.
(b) Mr. Tang Ching Ho was taken to be interested in those Shares in which Caister Limited, a company which is wholly and beneficially owned by him, was interested.
(c) Mr. Tang Ching Ho was taken to be interested in those Shares by virtue of being the founder of a discretionary trust, namely Tang’s Family Trust.
(d) Ms. Yau Yuk Yin was taken to be interested in those Shares in which her spouse, Mr. Tang Ching Ho, was interested.
(e) Ms. Yau Yuk Yin was taken to be interested in those Shares by virtue of being a beneficiary of Tang’s Family Trust.

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 corporation(s) (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 Listed Companies, to be notified to the Company and the Stock Exchange.

(b) 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 the Directors, 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 5% 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:

		Percentage of
		the
		Company’s
	Number of	issued
Name	Shares held	share capital
Accord Power Limited	24,243,463	16.91%
Trustcorp Limited (Note)	24,243,463	16.91%

−134 −

GENERAL INFORMATION

APPENDIX X

Note:

Accord Power Limited is wholly-owned by Trustcorp Limited in its capacity as the trustee of Tang’s Family Trust; accordingly, Trustcorp Limited was taken to be interested in those Shares held by Accord Power Limited.

Save as disclosed above, according to the register of interests kept by the Company under section 336 of the SFO and so far as is known to the Directors, as at the Latest Practicable Date, no other person (not being a Director or chief executive of the Company) had any interest or short position in Shares or underlying shares of the Company which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO, or who was, directly or indirectly, interested in 5% 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.

(c) Particulars of executive Directors’ service contracts

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

(d) Miscellaneous

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

(i) none of the Directors, Baron, Ernst & Young and Chesterton Petty Limited had any direct or indirect interest in any assets which, since 31 March 2004, the date to which the latest published audited consolidated accounts of the Group were made up, have been acquired or disposed of by or leased to any member of the Enlarged Group, or are proposed to be acquired or disposed of by or leased to any member of the Enlarged Group;
(ii) none of the Directors was materially interested in any contract or arrangement subsisting at the Latest Practicable Date and which was significant in relation to the business of the Enlarged Group; and
(iii) none of Baron, Ernst & Young and Chesterton Petty Limited had any shareholding in any member of the Group and did not have any right, whether legally enforceable or not, to subscribe for or to nominate persons to subscribe for securities in any member of the Group.

3. LITIGATION

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

−135 −

GENERAL INFORMATION

APPENDIX X

4. DIRECTORS’ INTERESTS IN COMPETING BUSINESS

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

5. EXPERTS’ QUALIFICATION AND CONSENTS

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

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

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

6. MATERIAL CONTRACTS

The following contracts (not being contracts entered into in the ordinary course of business) were entered into by members of the Enlarged Group within the two years immediately preceding the date of this circular and are, or may be, material:

(a) an acquisition agreement dated 8 July 2003 entered into between the Company and WYT in respect of the acquisition by WYT of entire issued share capital of each of Bio Chapter Limited and Biomore Investments Limited from the Company at a total consideration of approximately HK$130 million;
(b) a placing agreement dated 29 August 2003 entered into between the Company and Kingsway SW Securities Limited in relation to a private placing of the convertible notes in the aggregate principal amount of up to HK$33 million issued by WYT to certain independent third parties at a total placing price of up to HK$39.6 million;
(c) 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

−136 −

GENERAL INFORMATION

APPENDIX X

a wholly-owned subsidiary of the Company) in respect of the acquisition by Bright Leading Limited of a 49% interest in the issued share capital of China Field Enterprises Limited (a company incorporated in Hong Kong with limited liability) from Advance Century Limited at a consideration of HK$20 million and the transfer of loan due from Advance Century Limited to Bright Leading Limited at a consideration of HK$7 million;

(d) a conditional sale and purchase agreement dated 8 April 2004 entered into between, among others, Wang On Enterprises (B.V.I.) Limited and Source Millennium Limited in respect of the disposal by Wang On Enterprises (B.V.I.) Limited of the entire issued share capital of WOD Investments Limited and a related shareholder’s loan at a total consideration of approximately HK$64 million (subject to adjustment);
(e) a conditional agreement dated 27 September 2004 entered into between Suitbest Investments Limited (a wholly owned subsidiary of the Company, Mr. Tang and Dragon Richly Investment Limited, in respect of the acquisition of the entire issued share capital and shareholder’s loan of Dragon Richly at a consideration of HK$720,001;
(f) the provisional sale and purchase agreement dated 24 September 2004 and entered into between WOB Investments Limited, a wholly-owned subsidiary of the Company, and Modern Win (Hong Kong) Limited in relation to the sale of the property known as the whole block of No. 32 Argyle Street, Kowloon, Hong Kong by WOB Investments Limited to Modern Win (Hong Kong) Limited at a consideration of HK$73.8 million;
(g) a conditional agreement dated 12 October 2004 entered into between Suitbest Investments Limited (a wholly owned subsidiary of the Company), Mr. Tang, Poly Talent and Profit Million in respect of the acquisition of the entire issued share capital and shareholders’ loan of each of Poly Talent and Profit Million at a consideration of HK$1,800,001 and HK$300,001 respectively;
(h) an agreement dated 10 November 2004 entered into between Ventix Investment Limited (a wholly owned subsidiary of the Company) and Citigold Development Limited in respect of an acquisition of a property site in Sai Kung from Citigold Development Limited by Ventix Investment Limited at a consideration of HK$6,600,000;
(i) an agreement dated 10 November 2004 entered into between Ventix Investment Limited (a wholly owned subsidiary of the Company) and Score Million Investment Limited in respect of an acquisition of a property site in Sai Kung from Score Million Investment Limited by Ventix Investment Limited at a consideration of HK$7,200,000;

−137 −

GENERAL INFORMATION

APPENDIX X

(j) a placing and underwriting agreement dated 19 November 2004 entered into between the Company and Kingston Securities Limited in relation to a private placing of convertible notes in the aggregate principal amount of HK$37,180,000 to independent professional, corporate or individual investors;
(k) an agreement dated 30 December 2004 entered into between Century Fortune Limited (a wholly owned subsidiary of the Company) and Time Pioneer Investments Limited in respect of the disposal of a property by Century Fortune Limited to Time Pioneer Investments Limited at a consideration of HK$29,080,000;
(l) a provisional agreement dated 25 January 2005 entered into between Longable Limited (a wholly owned subsidiary of the Company), and Yield Land Limited in relation to the acquisition of a property at a consideration of HK$16,300,000;
(m) a conditional sale and purchase agreement dated 28 January 2005 entered into between WYT, Suitbest Investments Limited (a wholly owned subsidiary of the Company), Source Millennium Limited and the Company in respect of the disposal by Suitbest Investments Limited of the entire issued share capital of Geswin Limited at a total consideration of HK$63,232,857;
(n) a placing agreement dated 4 February 2005 entered into between the Company and Kingsway Financial Services Group Limited in relation to a private placing of the convertible notes in the aggregate principal amount of HK$68,640,000 to independent professional, corporate or individual investors;
(o) Yuen Long Property Acquisition Agreement;
(p) Hanwin Acquisition Agreement; and
(q) a provisional sale and purchase agreement dated 31 March 2005 entered between Shiny World Investment Limited (a wholly owned subsidiary of the Company) and Fou Hop Man Kee Investment Company Limited in relation to an acquisition of a property from Fou Hop Man Kee Investment Company Limited by Shiny World Investment Limited at a consideration of HK$13,000,000.

7. GENERAL

(a) The secretary of the Company is Mr. Chan Chun Hong, Thomas. He is a fellow member of The Association of Chartered Certified Accountants and an associate member of the Hong Kong Institute of Certified Public Accountants.
(b) The qualified accountant of the Company appointed pursuant to Rule 3.24 of the Listing Rules is Mr. Tang Kam Shing, CPA.
(c) The branch share registrar of the Company in Hong Kong is Tengis Limited, at Ground Floor, Bank of East Asia Harbour View Centre, 56 Gloucester Road, Wanchai, Hong Kong.
(d) The English text of this circular shall prevail over the Chinese text.

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GENERAL INFORMATION

APPENDIX X

8. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents will be 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) from the date of this circular up to and including the date of the SGM:

(a) the memorandum of association and bye-laws of the Company;
(b) the annual reports of the Company containing financial information of the Company in respect of the years ended 31 March 2003 and 31 March 2004;
(c) the letter from the Independent Board Committee dated 13 April 2005, the text of which is set out on pages 17 to 18 of this circular;
(d) the letter of advice from Baron dated 13 April 2005, the text of which is set out on pages 19 to 32 of this circular;
(e) the accountants’ reports regarding Hanwin issued by Ernst & Young, the text of which is set out in Appendix I to this circular;
(f) the accountants’ reports regarding Dragon Richly, Poly Talent and Profit Million issued by Ernst & Young, the text of which is set out in Appendices III, IV and V to this circular;
(g) the letter and valuation certificate prepared by Chesterton Petty Limited as set out in Appendix VIII to this circular;
(h) the written consents referred to in the paragraph headed “5. Expert’s qualification and consents” in this appendix;
(i) the material contracts referred to in the paragraph headed “6. Material contracts” in this appendix;
(j) the circular dated 20 April 2004 issued by the Company in relation to the acquisition of property;
(k) the circular dated 6 May 2004 issued by the Company in relation to the disposal of property;
(l) the circular dated 12 May 2004 issued by the Company in relation to, among other matters, disposal of business interests of WOD Investments Limited;
(m) the circular dated 27 July 2004 issued by the Company in relation to the acquisition of property;

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GENERAL INFORMATION

APPENDIX X

(n) the circular dated 28 September 2004 issued by the Company in relation to the purchase of properties;
(o) the circular dated 27 October 2004 issued by the Company in relation to, among other matters, the disposal of property;
(p) the circular dated 5 November 2004 issued by the Company in relation to the acquisition of entire issued share capital and shareholder’s loans of Dragon Richly, Poly Talent and Profit;
(q) the circular dated 17 November 2004 issued by the Company relating to acquisitions of property sites in Sai Kung;
(r) the circular dated 14 December 2004 issued by the Company in relation to the establishment of a property joint venture company in the PRC;
(s) the circular dated 15 December 2004 issued by the Company in relation to the disposal of a property;
(t) the circular dated 17 February 2005 issued by the Company in relation to the acquisition of a property;
(u) the circular dated 23 February 2005 issued by the Company in relation to the disposal of the business interests of Geswin Limited;
(v) the Hanwin Acquisition Agreement; and
(w) this circular.

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NOTICE OF SGM

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WANG ON GROUP LIMITED

( )[*]

(Incorporated in Bermuda with limited liability)

(Stock Code: 1222)

NOTICE is hereby given that a special general meeting of Wang On Group Limited (the “Company”) will be held at 37th Floor, Two International Finance Centre, 8 Finance Street, Central, Hong Kong on 6 May 2005 at 9:30 a.m. (Hong Kong time) for the purposes of considering and, if thought fit, passing the following resolutions, which will be proposed as ordinary resolutions of the Company:

ORDINARY RESOLUTIONS

“ THAT the conditional sale and purchase agreement (the “Sale and Purchase Agreement”) dated 18 March 2005 between Mr. Tang Ching Ho (“Mr. Tang”), Suitbest Investments Limited (“Suitbest”), a wholly-owned subsidiary of the Company, and Hanwin Investment Limited (“Hanwin”), a company wholly and beneficially owned by Mr. Tang, (a copy of which has been initialed by the chairman of this meeting and for the purpose of identification marked “A”) pursuant to which, inter alia, Mr. Tang has agreed to sell and Suitbest has agreed to purchase:
(a) one share of HK$1 in the share capital of Hanwin, being the entire issued share capital of Hanwin; and
(b) shareholder’s loan of Hanwin,

be approved, confirmed and ratified and that all the transactions contemplated thereunder be and the same are hereby approved, and any one director of each of the Company and Suitbest be and is authorised to do all such acts and/or execute such other documents in connection with or incidental to the Sale and Purchase Agreement by hand or under seal, with such amendments or modifications (if any) as the relevant director may consider necessary, desirable or appropriate.”

For identification purpose only

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NOTICE OF SGM

“ THAT :
(a) the general mandate granted to the directors of the Company (the “Directors”) to exercise the powers of the Company to repurchase shares in the capital of the Company (the “Shares”) as approved by the shareholders of the Company at the special general meeting held on 28 January 2005, to the extent not already exercised be and is hereby revoked (but without prejudice to any valid exercise of such general mandate prior to the passing of this resolution);
(b) subject to paragraph (c) below, the exercise by the Directors during the Relevant Period (as defined below) of all the powers of the Company to repurchase Shares be and is hereby generally and unconditionally approved;
(c) the aggregate nominal amount of the Shares which may be repurchased by the Company pursuant to the approval in paragraph (b) above shall not exceed 10% of the aggregate nominal amount of the share capital of the Company in issue at the date of the passing of this resolution, and the said approval shall be limited accordingly; and
(d) for the purpose of this resolution:

“Relevant Period” means the period from the passing of this resolution until whichever is the earliest of:

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

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

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

“ THAT :
(a) the general mandate granted to the directors of the Company (the “Directors”) to exercise the powers of the Company to allot, issue and deal with shares in the capital of the Company (the “Shares”) and to make or grant offers, agreements and options, including warrants to subscribe for Shares, as approved by the shareholders of the Company at the special general meeting held on 28 January 2005, to the extent not already exercised be and is hereby revoked (but without prejudice to any valid exercise of such general mandate prior to the passing of this resolution);

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NOTICE OF SGM

(b) subject to paragraph (d) below, pursuant to the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited, the exercise by Directors during the Relevant Period (as defined below) of all the powers of the Company to allot, issue and deal with additional Shares and to make or grant offers, agreements and options, including warrants to subscribe for Shares, which would or might require the exercise of such powers, subject to and in accordance with all applicable laws, be and is hereby generally and unconditionally approved;
(c) the approval in paragraph (b) above shall be in addition to any other authorisations given to the Directors and shall authorise the Directors during the Relevant Period to allot, issue and deal with additional Shares and to make or grant offers, agreements and options, including warrants to subscribe for Shares, which might require the exercise of such powers after the end of the Relevant Period;
(d) the aggregate nominal amount of share capital allotted or agreed conditionally or unconditionally to be allotted (whether pursuant to an option or otherwise), issued or dealt with by the Directors pursuant to the approval in paragraph (b) above, otherwise than pursuant to:

(aa) a Rights Issue (as defined below);

(bb) the exercise of rights of subscription or conversion under terms of any warrants issued by the Company or any securities which are convertible into Shares;
(cc) the exercise of any option under the share option scheme or similar arrangement for the time being adopted for the grant or issue to officers and/or employees of the Company and/or any of its subsidiaries of Shares or rights to acquire Shares; or
(dd) any scrip dividend or similar arrangement providing for the allotment of shares in lieu of the whole or part of a dividend on the Shares in accordance with the bye-laws of the Company in force from time to time,
(i) shall not exceed 20% of the aggregate nominal amount of share capital of the Company in issue at the date of the passing of this resolution; and
(ii) if the Directors are so authorised by a separate ordinary resolution of the shareholders of the Company, the nominal amount of share capital of the Company repurchased by the Company subsequent to the passing of this resolution up to a maximum equivalent to 10% of the aggregate nominal amount of the share capital of the Company in issue at the date of the passing of this resolution and the said approval shall be limited accordingly; and

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NOTICE OF SGM

(e) for the purpose of this resolution:

“Relevant Period” means the period from the passing of this resolution until whichever is the earliest of:

(i) the conclusion of the next annual general meeting of the Company;
(ii) the expiration of the period within which the next annual general meeting of the Company is required by Bermuda law or the Company’s bye-laws to be held; and
(iii) the revocation or variation of the authority given under this resolution by an ordinary resolution of the shareholders of the Company in general meeting; and

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

“ THAT conditional upon the passing of the resolutions numbered 2 and 3 above, the general mandate granted to the Directors to exercise the powers of the Company to allot, issue and deal with additional shares in the capital of the Company (the “Shares”) and to make or grant offers, agreements and options, including warrants to subscribe for Shares, pursuant to the resolution numbered 3 above be and is hereby extended by the addition to the aggregate nominal amount of the share capital of the Company which may be allotted, issued or dealt with by the Directors pursuant to such general mandate an amount equal to the aggregate nominal amount of the share capital of the Company repurchased by the Company under the authority granted pursuant to the resolution numbered 2 above, provided that such amount shall not exceed 10% of the aggregate nominal amount of the share capital of the Company in issue at the date of the passing of this resolution.”

By order of the Board Wang On Group Limited Chan Chun Hong, Thomas Director

Hong Kong, 13 April 2005

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NOTICE OF SGM

Head office and principal place of business:

5th Floor Wai Yuen Tong Medicine Building 9 Wang Kwong Road Kowloon Bay Kowloon Hong Kong

Notes:

A member of the Company entitled to attend and vote at the above meeting is entitled to appoint one or more than one proxy to attend and to vote in his stead. A proxy need not be a member of the Company.
A form of proxy for use at the meeting is enclosed herewith. The instrument appointing a proxy shall be in writing under the hand of the appointer or his/her attorney duly authorised in writing. If the appointer is a corporation, the form of a proxy must be under its common seal or under the hand of an officer, attorney or other person authorised to sign the proxy.
To be valid, the form of proxy together with the power of attorney or other authority (if any) under which it is signed, or a notarially certified copy of that power of authority, must be deposited at the Company’s 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.
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.

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

−145 −

AI assistant

Wang On Group Limited — Proxy Solicitation & Information Statement 2005

49778_rns_2005-04-21_33598a95-12b3-4d50-85d2-d555bec4059c.pdf

WANG ON GROUP LIMITED

Financial adviser

Independent financial adviser

DEFINITIONS

DEFINITIONS

DEFINITIONS

DEFINITIONS

DEFINITIONS

WANG ON GROUP LIMITED

INTRODUCTION

LETTER FROM THE BOARD

THE HANWIN ACQUISITION

The Hanwin Acquisition Agreement

Completion

Information of Hanwin

Information of the Sham Shui Po Property

Reasons for the Hanwin Acquisition

LETTER FROM THE BOARD

THE YUEN LONG PROPERTY ACQUISITION

The Yuen Long Property Acquisition Agreement

LETTER FROM THE BOARD

Terms:

Reasons for the Yuen Long Property Acquisition

PROPOSED REFRESHMENT OF GENERAL MANDATES

IMPLICATIONS UNDER THE LISTING RULES AND OF THE SGM

LETTER FROM THE BOARD

VOTING ON POLL

FINANCIAL AND TRADING PROSPECTS

RECOMMENDATION

ADDITIONAL INFORMATION

Wang On Group Limited

Tang Ching Ho

WANG ON GROUP LIMITED

(1) MAJOR AND CONNECTED TRANSACTION – ACQUISITION OF HANWIN INVESTMENT LIMITED; AND

(2) REFRESHMENT OF GENERAL MANDATES TO ISSUE SHARES

Yours faithfully, Independent Board Committee of Wang On Group Limited

(1) MAJOR AND CONNECTED TRANSACTION – ACQUISITION OF HANWIN INVESTMENT LIMITED

AND

(2) REFRESHMENT OF GENERAL MANDATES TO ISSUE SHARES

INTRODUCTION

LETTER FROM BARON

BASIS OF OUR OPINION

PRINCIPAL FACTORS AND REASONS CONSIDERED

A. Background of the Group

B. The Hanwin Acquisition

1. Background of Hanwin

2. The Hanwin Acquisition Agreement

LETTER FROM BARON

3. Description of the Sham Shui Po Property

4. Reasons for the Hanwin Acquisition

LETTER FROM BARON

5. Terms and conditions of Hanwin Acquisition

The Hanwin Consideration

LETTER FROM BARON

LETTER FROM BARON

Effect on Net Assets

Effect on Gearing

Effect on liquidity and working capital of the Group

Effect on Earnings

LETTER FROM BARON

C. Refreshment of the general mandate

History of fund raising exercise and use of proceeds

LETTER FROM BARON

Financial flexibility

Potential dilution to shareholding of the Independent Shareholders

LETTER FROM BARON

LETTER FROM BARON

RECOMMENDATION

Dear Sirs,

1. BASIS OF PREPARATION

2. PRINCIPAL ACCOUNTING POLICIES

Impairment of assets

Income tax

Related parties

3. RESULTS

(a) Net loss for the period

(b) Tax

Wang On Group Limited Proxy Solicitation & Information Statement 2005