Weiye Holdings Limited - Proxy Solicitation & Information Statement 2005

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 a licensed securities dealer, a bank manager, solicitor, professional accountant or other professional adviser.

If you have sold or transferred all your shares in United Power Investment Limited, you should at once hand this circular together with 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. This circular is not and does not constitute an offer of, nor is it intended to invite offers for, the securities in United Power Investment Limited.

The Stock Exchange of Hong Kong Limited and Hong Kong Securities Clearing Company Limited take no responsibility for the contents of this circular, make no representation as to its accuracy or completeness and expressly disclaim 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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UNITED POWER INVESTMENT LIMITED

(Incorporated in Bermuda with limited liability)

(Stock Code: 674)

(1) VERY SUBSTANTIAL ACQUISITION AND CONNECTED TRANSACTION (2) INCREASE IN AUTHORISED SHARE CAPITAL (3) OPEN OFFER OF NEW SHARES ON THE BASIS OF ONE OFFER SHARE FOR EVERY SHARE HELD ON THE RECORD DATE (4) APPLICATION FOR THE GRANT OF WHITEWASH WAIVER AND

(5) ONGOING CONNECTED TRANSACTIONS

Financial adviser to the Company

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

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A letter from the Independent Board Committee is set out on page 31 of this circular. A letter from Baron Capital Limited, the independent financial adviser, containing its advice to the Independent Board Committee and the Independent Shareholders is set out on pages 32 to 60 of this circular.

A notice convening the SGM to be held at Golden Island Bird’s Nest Chiu Chau Restaurant, 2nd Floor, East Wing, Star House, 3 Salisbury Road, Tsimshatsui, Kowloon, Hong Kong on Monday, 3 October 2005 at 11:30 a.m. is set out on pages 189 to 190 of this circular. Whether or not you are able to attend the meeting in person, please complete and return the accompanying form of proxy in accordance with the instructions printed thereon and return the same to the Company’s principal office, at 2810-11 28th Floor, Shun Tak Centre, West Tower, 200 Connaught Road Central, Hong Kong as soon as practicable but in any event not less than 48 hours before the time appointed for the holding of the meeting. Completion and return of the accompanying from of proxy will not preclude you from attending and voting at the meeting should you so wish.

Shareholders should note that the Underwriters may terminate the Underwriting Agreement by notice in writing to the Company on or before 5:00 p.m. on the business day immediately prior to the date of despatch of Offer Share certificates if:

(a) there develops, occurs or comes into force
(i) any new law or government regulation or other occurrence of any nature whatsoever which in the reasonable opinion of the Underwriters adversely affects or may adversely affect the business of the Group or any part thereof to a material extent or is materially adverse in the context of the Open Offer; or
(ii) any change in local, national, international, financial, political or economic conditions which in the reasonable opinion of the Underwriters is materially adverse in the context of the Open Offer; or
(iii) any adverse change in market conditions which in the reasonable opinion of the Underwriters materially prejudicially affects the Open Offer and makes it inadvisable or inexpedient to proceed therewith, or
(b) there comes to the notice of any of the Underwriters any matter or event showing any of the representations and warranties referred to in the Underwriting Agreement to be untrue or inaccurate in any respect which the Underwriters consider to be material.

If the Underwriters terminate the Underwriting Agreement, the Open Offer will not proceed.

16 September 2005

Page Definitions .................................................................................................................................................... ii Summary of the proposed Open Offer .................................................................................................... vii Expected timetable for the Open Offer .................................................................................................. viii Letter from the Board ................................................................................................................................. 1 Letter from the Independent Board Committee ..................................................................................... 31 Letter from Baron ..................................................................................................................................... 32 Appendix I – Accountants’ report on the Waldorf Group ................................................................... 61 Appendix II – Financial information of the Group .............................................................................. 91 Appendix III – Pro forma financial information of the Enlarged Group ......................................... 121 Appendix IV – Property valuation of the Waldorf Group ................................................................. 130 Appendix V – Property valuation of the Group .................................................................................. 146 Appendix VI – General Information .................................................................................................... 177 Notice of SGM .......................................................................................................................................... 189

DEFINITIONS

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

‘‘Acquisition’’

the acquisition of the Sale Shares from the Vendors and the Sale Loan from Wealth Access by the Purchaser pursuant to the Sale and Purchase Agreement

‘‘Announcement’’ the announcement of the Company dated 29 August 2005 in relation to the Proposals

‘‘associates’’

has the meaning ascribed to in the Listing Rules

‘‘Baron’’
Baron Capital Limited, a licensed corporation to carry out types 1 and 6 regulated activities (dealing in securities and advising on corporate finance) under the SFO, and the independent financial adviser to the Independent Board Committee and the Independent Shareholders in relation to the Acquisition, the Open Offer, the Whitewash Waiver and the Ongoing Connected Transactions
‘‘Board’’ the board of Directors, including independent non-executive Directors
‘‘BVI’’

the British Virgin Islands

‘‘Casino’’

a casino operated by Galaxy Casino, S.A. and located in the Hotel

‘‘Chung Nam’’ Chung Nam Securities Limited
‘‘Company’’ United Power Investment Limited, a company incorporated in Bermuda with limited liability, the shares of which are listed on the Stock Exchange
‘‘Concert Parties’’ has the meaning ascribed thereto under the Takeovers Code
‘‘Consideration’’
MOP282 million (approximately HK$273.8 million), being the aggregate consideration payable by the Purchaser to the Vendors for the Acquisition
‘‘Director(s)’’ the director(s), including the independent non-executive directors of the Company
‘‘Enlarged Group’’
the Group and the Waldorf Group assuming completion of the Sale and Purchase Agreement
‘‘Excluded Shareholder(s)’’ Shareholders who are excluded from the Open Offer as mentioned in the section headed ‘‘Rights of the Excluded Shareholders’’ in this circular

DEFINITIONS

‘‘Executive’’
‘‘Group’’
‘‘Hong Kong’’
‘‘Hotel’’
‘‘Independent Board Committee’’
‘‘Independent Shareholders’’
‘‘Independent Third Party(ies)’’
‘‘Latest Practicable Date’’
‘‘Listing Rules’’
‘‘Macau’’
‘‘Madam Ma’’
‘‘Memorandum’’
‘‘Mr. Yeung’’
‘‘Ms. Yeung’’
‘‘Open Offer’’

Executive Director of the Corporate Finance Division of the Securities and Futures Commission of Hong Kong or any of his delegates

the Company and its subsidiaries
the Hong Kong Special Administrative Region of the PRC
the hotel in Macau operated by Waldo Hotel
the independent board committee of the Company comprising two independent non-executive Directors, namely Messrs. Lee Wai Loun and Lee Yuk Sang, Angus
Shareholders other than World Possession, its Concert Parties and its associates
third party(ies) independent of the Company and its connected persons (as defined in the Listing Rules)
13 September 2005, being the latest practicable date prior to printing of this circular for ascertaining certain information for inclusion in this circular
the Rules Governing the Listing of Securities on the Stock Exchange
the Macau Special Administrative Region of the PRC
Madam Ma Shuk Kam, an executive Director
the memorandum dated 25 August 2005 (as amended on 29 August 2005) between Waldo Hotel and Waldo Entertainment pursuant to which Waldo Hotel agrees to provide certain services and/or facilities to Waldo Entertainment from the date of the Memorandum up to 31 March 2008
Mr. Yeung Chi Hang, the Chairman of the Company and an executive Director
Ms. Yeung Kit Yu, Kitty, an executive Director

the issue by the Company of 1,315,060,800 Offer Shares by way of an open offer, subject to the terms and conditions set out in this circular and the Prospectus Documents

iii

DEFINITIONS

‘‘Offer Shares’’
‘‘Ongoing Connected Transactions’’

‘‘Placing’’

‘‘PRC’’

‘‘Proposals’’
‘‘Prospectus’’
‘‘Prospectus Documents’’
‘‘Purchaser’’
‘‘Qualifying Shareholder(s)’’
‘‘Record Date’’
‘‘Related Services’’
‘‘Relevant Period’’
‘‘Sale and Purchase Agreement’’

the new Shares to be issued pursuant to the Open Offer

the transactions contemplated under the Memorandum

the top-up placing of 219,176,800 new Shares at a subscription price of HK$0.60 per Share raising net cash proceeds of approximately HK$128.1 million for the Company as mentioned in the announcement of the Company dated 12 May 2005

the People’s Republic of China, which, for the purpose of the this circular, excludes Hong Kong, Taiwan and Macau
the proposals relating to the Acquisition, the Open Offer, including the Underwriting Agreement and the absence of arrangements for the disposal of Offer Shares not validly applied for by way of application in excess of assured entitlement, increase in the authorised share capital of the Company, the Whitewash Waiver and the Ongoing Connected Transactions detailed in this circular
the prospectus to be issued by the Company in relation to the Open Offer
the Prospectus and the related application forms for use by the Qualifying Shareholders to apply for the Offer Shares
Widelead Group Limited (a wholly-owned subsidiary of the Company incorporated in BVI with limited liability)
Shareholders whose names appear on the register of members of the Company on the Record Date and not being Excluded Shareholders
Monday, 3 October 2005, being the date by reference to which entitlements to the Open Offer will be determined
the services and/or facilities to be provided by Waldo Hotel to the Casino and its customers pursuant to the Memorandum
the period commencing from 28 February 2005, being the date six months before the Announcement, up to the Latest Practicable Date
the conditional sale and purchase agreement dated 16 August 2005 between the Vendors, Waldorf and the Purchaser, pursuant to which the Purchaser agreed to acquire (i) from the Vendors the Sale Shares and (ii) from Wealth Access the rights and benefits of the Sale Loan

DEFINITIONS

‘‘Sale Loan’’ ‘‘Sale Shares’’

the rights and benefits of the interest free unsecured loans in the total amount of MOP90,557,600 (approximately HK$87,920,000) advanced by Wealth Access to Waldorf MOP95,000 (approximately HK$92,233) of the registered capital of Waldorf

‘‘SFO’’ Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong)

‘‘SGM’’ the special general meeting of the Company to be held on 3 October 2005 at 11:30 a.m. for approving the Proposals, notice of which is set out on pages 189 and 190 of this circular ‘‘Share(s)’’ share(s) of HK$0.05 each in the share capital of the Company ‘‘Shareholder(s)’’ holder(s) of Shares ‘‘Stock Exchange’’ The Stock Exchange of Hong Kong Limited ‘‘Sunling’’ Sunling Resources Limited

‘‘Takeovers Code’’ the Hong Kong Code on Takeovers and Mergers ‘‘Underwriters’’ World Possession and Chung Nam

‘‘Underwritten Shares’’

a total of 727,738,593 Offer Shares underwritten by the Underwriters under the Underwriting Agreement

‘‘Underwriting Agreement’’

the underwriting agreement dated 16 August 2005 (as amended on 29 August 2005) between the Company and the Underwriters relating to the Open Offer

‘‘Valuer’’

Vigers Appraisal & Consulting Limited, an independent valuer appointed by the Company
‘‘Vendors’’
Wealth Access and Sunling
‘‘Waldo Entertainment’’
Waldo Entertainment Limited, a company incorporated in Macau with limited liability and a wholly owned subsidiary of Wealth Access

‘‘Waldo Hotel’’

Waldo Hotel Limited, a company incorporated in Macau with limited liability and a wholly owned subsidiary of Waldorf

DEFINITIONS

‘‘Waldorf’’ Waldorf Holding Limited, a company incorporated in Macau with limited liability which is owned as to (i) 70% by Wealth Access; (ii) 25% by Sunling; and (iii) 5% by Sentosa Resources Limited

‘‘Waldorf Group’’ Waldorf and its subsidiaries
‘‘Wealth Access’’ Wealth Access Holdings Limited
‘‘Whitewash Waiver’’ a waiver of the obligation of World Possession and its Concert Parties to make a mandatory offer for all the issued Shares (other than those already owned by World Possession and its Concert Parties) under Rule 26 of the Takeovers Code as a result of the fulfillment of its underwriting commitment under the Underwriting Agreement pursuant to Note 1 on dispensations from Rule 26 of the Takeovers Code
‘‘World Possession’’ World Possession Assets Limited, a company incorporated in BVI with limited liability and the controlling Shareholder interested in approximately 44.66% of the issued share capital of the Company as at the Latest Practicable Date. Madam Ma, Mr. Yeung and Ms. Yeung, all being executive Directors, hold the entire issued share capital of World Possession in equal shares
‘‘HK$’’ Hong Kong dollars, the lawful currency of Hong Kong ‘‘MOP’’ Macau pataca, the lawful currency of Macau ‘‘sq.m.’’ square meter(s) ‘‘%’’ percentage

For the purpose of this circular, all amounts in MOP are translated into HK$ at an exchange rate of MOP1.03 : HK$1.00.

SUMMARY OF THE PROPOSED OPEN OFFER

The following information is derived from, and should be read in conjunction with, the full text of this circular:

Basis of the Open Offer:

One Offer Share for every Share held on the Record Date

Number of existing Shares in issue as at the Latest Practicable Date:

1,315,060,800 Shares

Number of Open Offer Shares to be issued:

1,315,060,800 Offer Shares

Subscription price:

HK$0.15 per Offer Share payable in full on application

Undertaking of World Possession:

World Possession has undertaken to subscribe for (or procure the subscription of) its entitlement to 587,322,207 Offer Shares under the Open Offer in full

Number of Underwritten Shares:

727,738,593 Offer Shares (World Possession will first be obliged to subscribe for up to 592,738,593 Underwritten Shares (representing about 22.5% of the issued share capital of the Company as enlarged by completion of the Open Offer); and Chung Nam will take up the balance of up to 135,000,000 Underwritten Shares (representing about 5.1% of the issued share capital of the Company as enlarged by completion of the Open Offer))

Amount to be raised by the Open Offer: approximately HK$197.3 million before expenses

Underwriters:

Chung Nam and World Possession

vii

2005

EXPECTED TIMETABLE FOR THE OPEN OFFER

Last day of dealings in Shares on cum-entitlement basis .......................................... Thursday, 22 September First day of dealings in Shares on ex-entitlement basis ................................................. Friday, 23 September Latest time and date for lodging transfers of Shares in order to qualify for the Open Offer ................................................ 4:00 p.m. on Monday, 26 September Register of members of the Company closes (both dates inclusive) .......................................................... Tuesday, 27 September to Monday, 3 October Record Date ...................................................................................................................... Monday, 3 October SGM ................................................................................................................................. Monday, 3 October Despatch of the Prospectus Documents ............................................................................ Monday, 3 October Register of members re-opens .......................................................................................... Tuesday, 4 October Announcement of the results of the SGM ......................................................................... Tuesday, 4 October Latest time for acceptance of, and payment for, the Open Offer ....................................................................................... 4:00 p.m. on Monday, 17 October Latest time for the Open Offer to become unconditional ........................... 5:00 p.m. on Monday, 24 October Announcement of results of the Open Offer on newspapers ............................................................................................................. Tuesday, 25 October Certificates for the Offer Shares to be despatched on or before ................................................................................................................. Tuesday, 25 October Dealings in fully-paid Offer Shares commence on ........................................................ Thursday, 27 October

Dates stated in this circular for events in the timetable are indicative only and may be extended or varied. Any changes to the anticipated timetable for the Open Offer will be announced as and when appropriate.

viii

LETTER FROM THE BOARD

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UNITED POWER INVESTMENT LIMITED

(Incorporated in Bermuda with limited liability)

(Stock Code: 674)

Executive Directors: Yeung Chi Hang (Chairman) Ma Shuk Kam Liu Yu Mo Chung Siu Wah Yeung Kit Yu, Kitty Au Edmond Wah Chik To Pan

Independent Non-Executive Directors: Chan Lai Mei Lee Wai Loun Lee Yuk Sang, Angus

Registered Office: Clarendon House Church Street Hamilton HM 11 Bermuda

Head office and principal place of business in Hong Kong: 2810-11 28th Floor Shun Tak Centre West Tower 200 Connaught Road Central Hong Kong

16 September 2005

To the Shareholders,

Dear Sir or Madam,

(1) VERY SUBSTANTIAL ACQUISITION AND CONNECTED TRANSACTION (2) INCREASE IN AUTHORISED SHARE CAPITAL (3) OPEN OFFER OF NEW SHARES ON THE BASIS OF ONE OFFER SHARE FOR EVERY SHARE HELD ON THE RECORD DATE (4) APPLICATION FOR THE GRANT OF WHITEWASH WAIVER AND (5) ONGOING CONNECTED TRANSACTIONS

INTRODUCTION

On 16 August 2005, the Purchaser (a wholly-owned subsidiary of the Company) entered into the Sale and Purchase Agreement with the Vendors and Waldorf, pursuant to which the Purchaser agreed to acquire (i) from the Vendors the Sale Shares for a consideration of MOP191,442,400 (approximately HK$185,866,408) and (ii) from Wealth Access the rights and benefits of the Sale Loan for a consideration of MOP90,557,600 (approximately HK$87,920,000). The Acquisition constitutes a very substantial acquisition and connected transaction for the Company under the Listing Rules, as the Vendors are associates of Mr. Yeung.

To finance part of the consideration payable under the Sale and Purchase Agreement, the Company proposes to raise approximately HK$197.3 million before expenses by way of an open offer of 1,315,060,800 Offer Shares at a subscription price of HK$0.15 per Offer Share, payable in full on

LETTER FROM THE BOARD

application, on the basis of one Offer Share for every existing Share held on Record Date. To implement the Open Offer, it is also proposed to increase the authorised shares capital of the Company from HK$100 million to HK$190 million.

In addition to its entitlement under the Open Offer, World Possession has agreed to underwrite up to 592,738,593 Shares under the Underwriting Agreement. Assuming (i) World Possession is required to take up in full its share of the Underwritten Shares and (ii) there is no change in the shareholding structure of the Company from the Latest Practicable Date until immediately prior to the issue of the Offer Shares, the interests of World Possession and its Concert Parties in the Company will increase from approximately 44.66% to 67.20% immediately after completion of the Open Offer, thus will incur an obligation to make a general offer for all the issued Shares under the Takeovers Codes. World Possession has applied for the Whitewash Waiver.

Waldo Entertainment (an associate of Mr. Yeung) and Waldo Hotel have entered into the Memorandum whereby Waldo Hotel agrees to provide certain services and facilities to the Casino and its customers. Upon completion of the Acquisition, the aforesaid transactions will constitute ongoing connected transactions of the Company.

The Acquisition, the Open Offer, including the Underwriting Agreement and the absence of arrangements for the disposal of Offer Shares not validly applied for by way of application in excess of assured entitlement, the Whitewash Waiver and the Ongoing Connected Transactions require the approval of the Independent Shareholders at the SGM by poll pursuant to the Listing Rules and/or the Takeovers Code. Resolution will be proposed at the SGM to increase the authorised share capital of the Company in order to enable it to proceed with the Open Offer.

Madam Ma, Mr. Yeung and Ms. Yeung (all executive Directors), being shareholders of World Possession and associates of the Vendors, are interested in the Proposals. Messrs. Chung Siu Wah and Au Edmond Wah (both executive Directors) are interested in the Proposals as they are directors of the Vendors.

Messrs. Liu Yu Mo and Chik To Pan (both executive Directors) are salaried employees of the Group. Ms. Chan Lai Mei, Mr. Lee Wai Loun and Mr. Lee Yuk Sang, Angus (all being independent non-executive Directors) have no interest in the Proposals. Ms. Chan Lai Mei had been a director of the auditor of certain associates of Madam Ma and Mr. Yeung until 11 June 2004 and her husband also had been a director and a shareholder of the company secretary of such associates of Madam Ma and Mr. Yeung until 11 June 2004. An independent board committee comprising Messrs. Lee Wai Loun and Lee Yuk Sang, Angus, independent non-executive Directors, has been appointed to advise the Independent Shareholders in respect of the Proposals pursuant to Rule 13.39(6)(a) of the Listing Rules and the Takeovers Code. The Company has appointed Baron as the independent financial adviser to advise the Independent Board Committee and the Independent Shareholders.

The purpose of this circular is to give you further details of the Proposals and to convene a special general meeting to consider and, if thought fit, pass the necessary resolution to approve the Proposals.

(1) THE SALE AND PURCHASE AGREEMENT DATED 16 AUGUST 2005

Parties

Vendors: (i) Wealth Access Holdings Limited, a company incorporated in BVI with limited liability and owned as to 50% by Mr. Yeung and as to 50% by Mr. Cheng Kwee. It is an investment holding company and a service provider of the Casino; and

LETTER FROM THE BOARD

(ii) Sunling Resources Limited, a company incorporated in BVI with limited liability and a wholly-owned subsidiary of Wealth Access. It is an investment holding company

Purchaser: Widelead Group Limited (a company incorporated in BVI with limited liability and a wholly-owned subsidiary of the Company)

Waldorf: Waldorf Holding Limited, a company incorporated in Macau with limited liability, which is owned as to (i) 70% by Wealth Access; (ii) 25% by Sunling; and (iii) 5% by Sentosa Resources Limited

The Directors confirm that, to their best knowledge, information and belief having made reasonable enquiries, each of Mr. Cheng Kwee and Sentosa Resources Limited (and its ultimate beneficial owners) is an Independent Third Party.

Assets to be acquired

Sale Shares: MOP95,000 (approximately HK$92,233) registered capital of Waldorf (as to MOP70,000 (approximately HK$67,961) beneficially owned by Wealth Access and MOP25,000 (approximately HK$24,272) by Sunling, together representing 95% of the registered capital of Waldorf)

Sale Loan: the interest free unsecured loans in the total amount of MOP90,557,600 (approximately HK$87,920,000) advanced by Wealth Access to Waldorf

Consideration

The total consideration for the Acquisition is MOP282,000,000 (approximately HK$273,786,408) which comprises the consideration for the Sale Shares of MOP191,442,400 (approximately HK$185,866,408) and the consideration for the Sale Loan of MOP90,557,600 (approximately HK$87,920,000). The Consideration was arrived at after arm’s length negotiations between the Purchaser and the Vendors with reference to the unaudited consolidated net tangible asset of Waldorf as at 31 July 2005 after adjustment for the revaluation surplus (and taking into account deferred taxation effect) arising from the valuation of the property interests of the Waldorf Group. The Consideration represents a discount of approximately 5.3% to the sum of:

(i) MOP207,157,086 (approximately HK$201,123,385), being the attributable interest of 95% of the unaudited consolidated net tangible asset of Waldorf as at 31 July 2005 of approximately MOP9.2 million (approximately HK$8.9 million) after adjustment for the revaluation surplus of approximately MOP237.3 million (approximately HK$230.4 million) (and taking into account deferred taxation effect of approximately MOP28.5 million (approximately HK$27.7 million)) arising from the valuation of the property interests of the Waldorf Group; and
(ii) MOP90,557,600 (approximately HK$87,920,000), being the amount of the Sale Loan.

The Consideration of MOP282,000,000 (approximately HK$273,786,408) is payable in cash on completion of the Sale and Purchase Agreement. The Consideration will be satisfied as to approximately HK$193 million by the net proceeds of the Open Offer and as to the balance of approximately HK$81 million by the net proceeds of the Placing which was completed in May 2005.

LETTER FROM THE BOARD

Conditions

Completion of the Sale and Purchase Agreement shall be conditional upon:

(a) the passing at a special general meeting of the Company by the Independent Shareholders of resolutions (including transactions which will become connected transactions of the Company requiring approval of the Independent Shareholders after completion of the Sale and Purchase Agreement pursuant to the Listing Rules) to approve the Sale and Purchase Agreement at which voting will be taken on a poll and in accordance with the Listing Rules;
(b) the Purchaser completing a review of the financial, trading and legal position of the Waldorf Group and such review not revealing any breach of the representations, warranties or undertakings of the Vendors in respect of the Waldorf Group;
(c) the Purchaser being reasonably satisfied that the Waldorf Group has good marketable title to the properties owned by the Waldorf Group;
(d) completion of the Open Offer; and
(e) Waldorf passing its shareholders’ resolution to approve the waiver of its pre-emptive right in the acquisition of the Sale Shares and the consent to the transfer of the Sale Shares to the Purchaser and/or its nominee(s).

As at the Latest Practicable Date, none of the conditions above had been fulfilled.

None of aforesaid conditions can be waived. Completion of the Sale and Purchase Agreement will take place on the second business day immediately after all the aforesaid conditions have been fulfilled. If the aforesaid conditions have not all been fulfilled by 31 December 2005, the Sale and Purchase Agreement shall lapse.

Upon completion of the Sale and Purchase Agreement, Waldorf will become a 95% owned subsidiary of the Company and the accounts of which will be consolidated into those of the Company.

Warranties on net tangible asset value and others by the Vendors

Under the Sale and Purchase Agreement, the Vendors warrant to and undertake with the Purchaser that the consolidated net tangible asset value of the Waldorf Group as at the date of completion of the Sale and Purchase Agreement will not be less than MOP218,000,000 (approximately HK$211,650,000) (based on and after adjustment of the valuation by the Valuer as at 31 July 2005 of the properties owned by the Waldorf Group in Macau and Hong Kong at MOP500 million (approximately HK$485 million) and HK$3 million respectively). In compliance with Rule 14A.59(10)(a) of the Listing Rules, the independent non-executive Directors will provide an opinion in the Company’s next published annual report as to whether the waranty on net tangible asset value is fulfilled; and the Company will publish an announcement in the newspapers if the net tangible asset value of the Waldorf Group as at the date of completion of the Sale and Purchase Agreement is less than the amount warranted (and the proposed course of action). The consolidated net tangible asset value of the Waldorf Group as at the date of completion of the Sale and Purchase Agreement will be computed based on the unaudited management accounts of the Waldorf Group as at the date of completion of the Sale and Purchase Agreement.

Under the Sale and Purchase Agreement, the Vendors warrant to and undertake with the Purchaser that the amounts due from and to directors and related companies of the Waldorf Group other than the Sale Loan shall be settled in full before completion of the Sale and Purchase Agreement.

LETTER FROM THE BOARD

Information on Waldorf

Structure and business scope

Waldorf is an investment holding company incorporated in Macau on 23 October 2003 with a registered capital of MOP100,000 (approximately HK$97,087). The Waldorf Group is principally engaged in the operation of the Hotel in Macau and property investment in Hong Kong.

The diagram below shows the current corporate and shareholding structure of the Waldorf Group with the principal activities of each member of the Waldorf Group:

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The diagram below shows the corporate and shareholding structure of the Waldorf Group upon completion of the Sale and Purchase Agreement:

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Notes:

incorporated in Macau
incorporated in BVI incorporated in Hong Kong

LETTER FROM THE BOARD

Wealth Access initially owned 50% of the registered capital of Waldorf as at its date of incorporation. Its investment cost in such interest was MOP50,000 (approximately HK$48,543). From time to time, Wealth Access contributed shareholder’s loans to the Waldorf Group, which total up to a maximum of approximately MOP378 million (approximately HK$367 million) so far. In April, 2004, Wealth Access further acquired 45% of the registered capital of Waldorf at MOP45,000. In December 2004, Wealth Access transferred 25% of the registered capital of Waldorf to Sunling at MOP25,000 (approximately HK$24,272).

At present, the board of directors of Waldorf consists of five directors, three of them (namely, Mr. Yeung, Mr. Chung Siu Wah and Mr. Au Edmond Wah) are also Directors. The Company does not intend to change the composition of the board of directors of Waldorf following completion of the Sale and Purchase Agreement.

Financial information

Set out below is a summary of the consolidated audited results of the Waldorf Group from 23 October 2003 (date of incorporation of Waldorf) to 31 March 2005 (extracted from the accountants’ report on the Waldorf Group, the text of which is set out in Appendix I) and is prepared on the basis as set out in Notes 2 to 5 to such accountants’ report:

			From 23 October 2003	From 23 October 2003
	Year ended 31	March 2005	to 31 March 2004
	HK$’ million	MOP’ million	HK$’ million	MOP’ million
Turnover_(Note)_	100.7	103.7	–	–
Profit/(loss) before taxation	5.1	5.3	(8.0)	(8.2)
Net Profit/(loss)	5.1	5.3	(8.0)	(8.2)
			As at 31	March 2005
			HK$’ million	MOP’ million
Total assets			508.0	523.2
Net assets			0.62	0.64

Note: Turnover represents the reveune from hotel operation and provision of food and beverage and gross rental income received and receivable during the period.

The Hotel

The Waldorf Group owns and operates the Hotel, a three star hotel known as Waldo Hotel in Macau, situated at Plot J – Block 6, Outer Harbour Landfills Zone (Zona de Aterros do Porto Exterior (ZAPE)), Macau. The Hotel commenced its business in July 2004.

Consisting of 21 storey (inclusive of three basement levels), the Hotel has a total of 161 guest rooms. The Hotel occupies a total site area of approximately 1,636 sq.m. and has a total gross floor area of approximately 24,035 sq.m.. Facilities in the Hotel include hotel accommodation, restaurants, casino, sauna and massage centre, shops, conference room, and car parking area.

LETTER FROM THE BOARD

The market value of the Hotel (inclusive of land and buildings), as appraised by the Valuer, was MOP500 million (approximately HK$485 million) as at 31 July 2005.

Portion of non-hotel accommodation floor area of the Hotel is leased to a number of tenants, including the Galaxy Casino, S.A. (being one of the three concessionaires having been granted gaming concessions by the Macau government). Galaxy Casino, S.A. leases a total floor area of approximately 5,920 sq.m. of the Hotel for casino operation and also four sign boards erected on the external wall and roof of the Hotel of approximately 1,800 sq.m. for a term of two years from 1 January 2004, which may be renewed at the option of Galaxy Casino, S.A., for a further term of three years thereafter. Under the relevant tenancy agreement, Galaxy Casino, S.A. was further granted a right to acquire the legal title of the premises at the Hotel which are subject to the existing tenancy from the Waldorf Group at a reasonable consideration to be determined in case the Macau government regards that a specific provision under the gaming concession agreement granted to Galaxy Casino, S.A. by the Macau government is applicable to the Casino. That specific provision requires a concessionaire to surrender the premises where the casino is located to the Macau government. In order to surrender the premises to the Macau government, the concessionaire must have the legal title of the said premises.

The Waldorf Group expects that the said ‘‘reasonable consideration’’ for the aforesaid disposal will be determined with reference to the then independent valuation of the leased premises by professional valuer subject to negotiation and agreement with Galaxy Casino, S.A.. If the said disposal materialises after completion of the Sale and Purchase Agreement and the disposal constitutes a notifiable transaction of the Company under the Listing Rules, the Company will comply with all applicable requirements under the Listing Rules.

Other than a 2.1% minority interests of Wealth Access (which is beneficially owned as to 50% by Mr. Yeung) in Galaxy Casino, S.A., the Directors confirm that, to their best knowledge, information and belief having made reasonable enquiries, all tenants of the Hotel as at the Latest Practicable Date are Independent Third Parties.

Property investment in Hong Kong

The Waldorf Group owns Unit No. 3001 on 3rd Floor of the Podium of Shun Tak Centre, Nos. 168-200 Connaught Road Central, Hong Kong. The market value of this shop unit, as appraised by the Valuer, was HK$3 million as at 31 July 2005. It is leased to an Independent Third Party for a term of three years up to 31 December 2005.

Reasons for the Acquisition

The Group is principally engaged in restaurant operations, property investment and wedding services business.

The Directors intend to leverage on their extensive experience and business network in the hospitality industry to capture the tourism-related opportunities in Macau with a view to expand the business operation of the Group. Given the liberation of the gaming sector in Macau and the influx of PRC tourists, the Directors consider that the Acquisition represents a valuable opportunity for the Group to capitalise on the growth potential of the hotel and hospitality industry in Macau. In view of the recent profitable track record of the Waldorf Group, the Directors believe that the Acquisition will bring recurrent income and enhance the revenue base of the Group. The Directors consider that the terms of the Sale and Purchase Agreement are of normal commercial terms and fair and reasonable and the Acquisition is in the interests of the Company and the Shareholders as a whole.

LETTER FROM THE BOARD

(2) INCREASE IN AUTHORISED SHARE CAPITAL

As at the Latest Practicable Date, the authorised share capital of the Company is HK$100,000,000 divided into 2,000,000,000 Shares, of which 1,315,060,800 Shares have been issued and credited as fully paid. In order to facilitate the Open Offer (completion of which is a condition for completion of the Sale and Purchase Agreement) mentioned below and allow flexibility to the Company to raise funds by issue of shares, the Directors propose to increase the authorised share capital of the Company to HK$190,000,000 divided into 3,800,000,000 Shares by the creation of an additional 1,800,000,000 Shares. At this stage, the Directors have no intention to issue new Shares other than the Offer Shares.

(3) OPEN OFFER

Issue statistics

Basis of the Open Offer: One Offer Share for every one Share held on the Record Date

Number of Shares in issue 1,315,060,800 Shares as at the Latest Practicable Date: Number of Offer Shares 1,315,060,800 Offer Shares to be issued: Subscription price: HK$0.15 per Offer Share payable in full on application

As at the Latest Practicable Date, the Company does not have any outstanding options, warrants or securities in issue which are convertible into Shares.

Subscription price

The subscription price of HK$0.15 per Offer Share will be payable in full on application. The subscription price per Offer Share represents:

(i) a discount of approximately 67.39% to the closing price of HK$0.460 per Share as quoted on the Stock Exchange on 16 August 2005, being the last trading day of the Shares on the Stock Exchange prior to the suspension of the trading in the Shares pending publication of the Announcement;
(ii) a discount of approximately 68.22% to the average closing price of approximately HK$0.472 per Share quoted on the Stock Exchange for the five trading days up to and including 16 August 2005;
(iii) a discount of approximately 69.01% to the average closing price of approximately HK$0.484 per Share quoted on the Stock Exchange for the 10 trading days up to and including 16 August 2005;
(iv) a discount of approximately 50.82% to the theoretical ex-rights price of approximately HK$0.305 based on the closing price of HK$0.460 per Share as quoted on the Stock Exchange on 16 August 2005; and

LETTER FROM THE BOARD

(v) a discount of approximately 58.33% to the closing price of approximately HK$0.360 per Share quoted on the Latest Practicable Date;
(vi) a discount of approximately 41.18% to the theoretical ex-rights price of approximately HK$0.255 based on the closing price of HK$0.360 per Share as quoted on the Latest Practicable Date; and
(vii) a discount of approximately 32.74% to the audited consolidated net asset value per Share of approximately HK$0.223 as at 31 March 2005 (based on 1,095,884,000 Shares then in issue).

The subscription price per Offer Share was arrived at after arm’s length negotiation between the Company and the Underwriters. The Directors consider the terms of the Open Offer to be fair and reasonable and in the interests of the Company and the Shareholders as a whole and would attract Qualifying Shareholders to subscribe for the Offer Shares.

Qualifying Shareholders

The Company will send the Prospectus Documents to the Qualifying Shareholders only.

To qualify for the Open Offer, a Shareholder must be registered as a member of the Company as at the close of business on the Record Date; and not be an Excluded Shareholder.

In order to be registered as members on the Record Date, Shareholders must lodge any transfers of Shares (together with the relevant share certificates) with the Company’s branch share registrars and transfer office in Hong Kong, Secretaries Limited, at Ground Floor, BEA Harbour View Centre, 56 Gloucester Road, Wanchai, Hong Kong by 4:00 p.m. on Monday, 26 September 2005.

The invitation to subscribe for the Offer Shares to be made to the Qualifying Shareholders will not be transferable or capable of renunciation and there will not be any trading of nil-paid entitlements on the Stock Exchange nor arrangement for application in excess of assured entitlement of the Qualifying Shareholders under the Open Offer. Any Offer Shares not taken up by the Qualifying Shareholders and/or the Excluded Shareholders will be taken up by the Underwriters pursuant to the Underwriting Agreement.

Closure of register of members

The register of members of the Company will be closed from Tuesday, 27 September 2005 to Monday, 3 October 2005, both dates inclusive, to determine the eligibility of the Shareholders to the Open Offer. No transfer of Shares will be registered during this period.

Rights of Excluded Shareholders

The Prospectus Documents will not be registered under the applicable securities legislation of any jurisdiction other than Hong Kong and Bermuda. The Company will exclude from the Open Offer Shareholders whose addresses on the register of members of the Company on the Record Date are outside Hong Kong and who the Directors, after making enquiry regarding the legal restrictions under the laws of the relevant places and the requirements of the relevant regulatory bodies or stock exchanges, consider it necessary or expedient to do so. The Company will send the Prospectus to the Excluded Shareholders for their information only and the Company will not send any related application forms to the Excluded Shareholders.

LETTER FROM THE BOARD

Status of the Offer Shares

The Offer Shares (when allotted and fully paid) will rank pari passu in all respects with the then existing Shares in issue on the date of allotment and issue of the Offer Shares. Holders of the Offer Shares will be entitled to receive all future dividends and distributions which are declared, made or paid after the date of allotment and issue of the Offer Shares.

Share certificates for Offer Shares

Subject to the fulfillment of the conditions of the Open Offer set out in the section headed ‘‘Conditions of the Open Offer’’ below, certificates for the Offer Shares are expected to be posted on or before Tuesday, 25 October 2005 to those Shareholders who have validly applied for and paid for the Offer Shares at their own risks.

Fractions of Offer Shares

Given that the Open Offer is made on the basis of one Offer Share for every Share held on the Record Date, there will be no fraction of Offer Shares.

Application for listing

The Company has applied to the Listing Committee of the Stock Exchange for the listing of, and permission to deal in, the Offer Shares. Dealings in the Offer Shares on the Stock Exchange will be subject to the payment of stamp duty and any other applicable fees and charges in Hong Kong.

UNDERWRITING ARRANGEMENT

Underwriting Agreement dated 16 August 2005 (as amended on 29 August 2005)

Underwriters: Chung Nam and World Possession Number of Underwritten Shares: 727,738,593 Offer Shares (World Possession will first be obliged to subscribe for up to 592,738,593 Underwritten Shares (representing about 22.5% of the issued share capital of the Company as enlarged by completion of the Open Offer); and Chung Nam will take up the balance of up to 135,000,000 Underwritten Shares by Chung Nam (representing about 5.1% of the issued share capital of the Company as enlarged by completion of the Open Offer)).

The remaining 587,322,207 Offer Shares (being the pro-rata entitlement of World Possession under the Open Offer) will be taken up by World Possession pursuant to its undertaking described below. Commission: 1.5% of the subscription price of 135,000,000 Shares underwritten by Chung Nam, totalling HK$303,750. World Possession has waived its underwriting commission

LETTER FROM THE BOARD

World Possession, a limited company incorporated in the BVI, is the controlling Shareholder owned by Madam Ma, Mr. Yeung and Ms. Yeung (all executive Directors) in equal shares and so is a connected person of the Company. To the best knowledge of the Directors after making all reasonable enquiries, Chung Nam, being a company licensed to carry on type 1 (dealing in securities) of the regulated activities of the SFO and incorporated in Hong Kong with limited liability, is an Independent Third Party.

As at the Latest Practicable Date, World Possession was interested in 587,322,207 Shares, representing approximately 44.66% of the issued share capital of the Company. Pursuant to the Underwriting Agreement, World Possession has undertaken to subscribe for (or procure the subscription of) its pro-rata entitlement to 587,322,207 Offer Shares under the Open Offer in full. The Open Offer, other than 587,322,207 Offer Shares which have been undertaken to be subscribed by World Possession, have been fully underwritten by the Underwriters pursuant to the Underwriting Agreement.

Termination of the Underwriting Agreement

The Underwriters may terminate the Underwriting Agreement by notice in writing to the Company on or before 5:00 p.m. on the business day immediately prior to the date of despatch of Offer Share certificates if:

(a) there develops, occurs or comes into force:
(i) any new law or government regulation or other occurrence of any nature whatsoever which in the reasonable opinion of the Underwriters adversely affects or may adversely affect the business of the Group or any part thereof to a material extent or is materially adverse in the context of the Open Offer; or
(ii) any change in local, national, international, financial, political or economic conditions which in the reasonable opinion of the Underwriters is materially adverse in the context of the Open Offer; or
(iii) any adverse change in market conditions which in the reasonable opinion of the Underwriters materially prejudicially affects the Open Offer and makes it inadvisable or inexpedient to proceed therewith, or
(b) there comes to the notice of any of the Underwriters any matter or event showing any of the representations and warranties referred to in the Underwriting Agreement to be untrue or inaccurate in any respect which the Underwriters consider to be material.

If the Underwriters terminate the Underwriting Agreement, the Open Offer will not proceed.

CONDITIONS OF THE OPEN OFFER

The Open Offer is conditional upon:

(a) the approval of the Open Offer, the absence of arrangements for the disposal of Offer Shares not validly applied for by way of application in excess of assured entitlement, and the Whitewash Waiver by the Independent Shareholders at a general meeting to be held at which voting will be taken on a poll and in accordance with the Listing Rules and the Takeovers Code respectively;

LETTER FROM THE BOARD

(b) the performance in full by World Possession of its undertaking to subscribe for its assured allotment of 587,322,207 Offer Shares in full under the Open Offer;
(c) the Listing Committee of the Stock Exchange granting or agreeing to grant (subject only to allotment) listing of and permission to deal in the Offer Shares;
(d) the granting of the Whitewash Waiver to World Possession by the Executive;
(e) the Sale and Purchase Agreement becoming unconditional (except for the condition on completion of the Open Offer); and
(f) the obligations of the Underwriters under the Underwriting Agreement becoming unconditional and the Underwriting Agreement not being terminated in accordance with its terms or otherwise.

None of aforesaid conditions can be waived. As at the Latest Practicable Date, none of the conditions above had been fulfilled.

WARNING OF RISKS OF DEALING IN SHARES

If the Underwriters terminate the Underwriting Agreement or the conditions of the Open Offer are not fulfilled, the Open Offer will not proceed. Accordingly, the Open Offer may or may not proceed and the Shareholders and potential investors are advised to exercise caution when dealing in the Shares and consult their professional advisers if they are in any doubt about their positions.

Shareholders should note that the Shares will be dealt with on an ex-entitlement basis commencing from Friday, 23 September 2005 and that dealings in such Shares will take place while the conditions to which the Open Offer is subject to remain unfulfilled. Any Shareholder or other person dealing in such Shares up to the date on which all conditions to which the Open Offer is subject are fulfilled (which is expected to be on or before 5:00 p.m. on Monday, 24 October 2005) will accordingly bear the risk that the Open Offer cannot become unconditional and may not proceed.

SHAREHOLDING STRUCTURE

The effects of the Open Offer on the shareholding structure of the Company are illustrated as follows:

LETTER FROM THE BOARD

		As at the	Immediately	Immediately	Immediately
	Latest Practicable		following	following
		Date	completion of	completion of
			the Open	the Open
			Offer on the	Offer on the
			assumption	assumption
			as set out	as set out
			in Note 1	in Note 2
	Number of		Number of	Number of
	Shares	%	Shares %	Shares	%
World Possession	587,322,207	44.661	1,174,644,414 44.661	1,767,383,007	67.198
Mr. Liu Yu Mo
(Note 3)	24,000	0.002	48,000 0.002	24,000	0.001
Chung Nam	0	0	0 0	135,000,000	5.133
Public
Shareholders	727,714,593	55.337	1,455,429,186 55.337	727,714,593	27.668
Total	1,315,060,800	100.000	2,630,121,600 100.000	2,630,121,600 100.000

Notes:

1. Assuming all Shareholders take up their respective entitlements under the Open Offer.

2. Assuming none of the Shareholders (save for World Possession which has undertaken to subscribe for (or procure the subscription of) its entitlement in full under the Open Offer) takes up their respective entitlements under the Open Offer and, accordingly, World Possession shall take up its share of the Underwritten Shares in full.

3. An executive Director.

As illustrated in the above table, the Company will fulfill the public float requirement under the Listing Rules even if World Possession takes up fully its entitlement under the Open Offer and its share of the Underwritten Shares.

FUNDS RAISED BY WAY OF ISSUANCE OF NEW SHARES DURING THE PAST 12 MONTHS

During the past 12 months, the Company raised funds by way of a top-up placing of 219,176,800 new Shares at a subscription price of HK$0.60 per Share. In its announcement dated 12 May 2005, the Company stated that the net proceeds of approximately HK$128.1 million would be used as working capital to strengthen the cash position of the Company to acquire assets when suitable opportunities arise, including Macau hotel projects from associates of Mr. Yeung. So far the said net proceeds had been earmarked as to approximately HK$81 million towards payment of the Consideration and as to the balance of approximately HK$47.1 million for general working capital.

USE OF PROCEEDS AND REASONS FOR THE OPEN OFFER

The estimated net proceeds of the Open Offer of approximately HK$193 million will be used to satisfy part of the Consideration.

LETTER FROM THE BOARD

Having considered various methods of financing other than the Open Offer, such as private placement of securities, rights issue and bank borrowing, the Directors consider the Open Offer the appropriate means for the Company to raise funds for the Acquisition. Notwithstanding the substantial discount of the subscription price per Offer Share relative to market price per Share and the absence of transferable rights for nil-paid entitlement, the Directors are of the view that it is in the interests of the Company and its Shareholders as a whole to raise funds through the Open Offer given that (i) the subscription price per Offer Share was determined after arms’ length negotiation with Chung Nam, being an Independent Third Party; (ii) administrative costs can be saved in the absence of transferable rights arrangement; (iii) Qualifying Shareholders are offered a chance to subscribe for the Offer Shares at a relatively low price and to maintain their respective pro-rata shareholdings in the Company, thereby participating in the future growth and development of the Company; and (iv) the Open Offer is subject to the approval of the Independent Shareholders. Unlike many other rights issues or open offers announced in the market, both the closing prices and the trading turnover of the Shares increased immediately after date of the Announcement.

Absence of arrangement for excess application

As stated above, the Qualifying Shareholders are offered a chance to subscribe for the Offer Shares at a relatively low price and to maintain their respective pro-rata shareholdings in the Company. The relatively low subscription price per Offer Share (as compared with the then market price per Share) represented the price level acceptable to and agreeable by the Underwriters (one of which is an Independent Third Party) during the course of negotiations on the terms of the Open Offer. In view of the discount of the subscription price per Offer Share to the market price per Share, the Board believed that there would be a high level of acceptance of Offer Shares by the Qualifying Shareholders and, accordingly, there would not be a significant number of Offer Shares which are not taken up by the Shareholders and available for excess application. Given the above belief and taking into further account the facts that World Possession is willing to take up the underwriting commitment in support of the Open Offer without underwriting commission which should be in the amount of approximately HK$1.33 million (based on 1.5% of subscription price as charged by Chung Nam), the Board was of the view that the exclusion of the excess application arrangement of Offer Shares under the Open Offer would not jeopardize the interests of the Independent Shareholders. Pursuant to the terms of the Underwriting Agreement, no provision is stipulated for any arrangement for excess application of Offer Shares, and it was on such basis that the Underwriters (one of which is an Independent Third Party) agreed to enter into the Underwriting Agreement.

As discussed with the registrar and the printer of the Company, the extra administrative costs to be incurred for providing an arrangement for excess application under the Open Offer are estimated to be around HK$45,000, which include charges of printing, translation, and issuing of Excess Application Forms ("EAFs") and refund cheques, service fees and handling charges payable to registrar in (i) acting as receiving agent for EAFs, setting up a computer programme for EAFs, (ii) submitting daily reports in respect of the level of acceptance for EAFs, (iii) preparing allotment scenario in case of over-subscription of Offer Shares, (iv) submitting refund cheque tape to the banker, and (v) processing acceptances of EAFs.

LETTER FROM THE BOARD

As discussed with the registrar of the Company, the extra time normally required for providing an arrangement for excess application under an open offer is estimated to be around 1-2 day for the purpose of (i) balloting and allotment of offer shares and (ii) refund arrangement.

The Board acknowledges that the savings in administrative costs and time may not be very significant. However, taking into account the commercial rationale as above and given that:

the Independent Shareholders will be offered a chance to express their view on the terms of the Open Offer, including the absence of the arrangement for application in excess of assured entitlement under the Open Offer (which has been specifically pointed out for the attention of Independent Shareholders both in this section and in the resolution proposed under the notice of SGM), through voting; and
the Qualifying Shareholders are offered a chance to maintain their respective pro-rata shareholdings in the Company under the open offer of new issue of equity securities,

the Board considers that the right of the Shareholders (other than World Possession who acts as the Underwriter) has not been jeopardised in the absence of the arrangement for excess application for the Offer Shares.

(4) WHITEWASH WAIVER

As at the Latest Practicable Date, World Possession and its Concert Parties held 587,322,207 Shares (representing approximately 44.66% of the total issued Shares) and did not hold any other securities of the Company.

Assuming (i) World Possession is required to take up its share of the Underwritten Shares in full and (ii) there is no change in the shareholding structure of the Company from the Latest Practicable Date until immediately prior to the issue of the Offer Shares, the shareholding of World Possession and its Concert Parties in the Company will increase from approximately 44.66% to 67.20% immediately after completion of the Open Offer, which exceeds the 2% creeper limit as stipulated under the Takeovers Code. World Possession has applied to the Executive for a waiver of its obligation under the Takeovers Code to make a mandatory general offer to acquire all the issued Shares other than those already owned by World Possession and its Concert Parties as a result of the fulfillment of its underwriting commitment under the Underwriting Agreement pursuant to Note 1 on dispensations from Rule 26 of the Takeovers Code. The Executive has indicated that it will grant the Whitewash Waiver subject to the approval of Independent Shareholders with votes taken by poll and compliance with the Takeovers Code.

The Open Offer is conditional upon World Possession obtaining the Whitewash Waiver. If the Whitewash Waiver is not approved by the Independent Shareholders or granted by the Executive, the Open Offer will not proceed.

LETTER FROM THE BOARD

In the event that World Possession and its Concert Parties hold more than 50% of the voting rights of the Company upon completion of the Open Offer and the Whitewash Waiver is approved by the Independent Shareholders and granted by the Executive, World Possession and its Concert Parties may increase their shareholdings in the Company without incurring any further obligation under Rule 26 of the Takeovers Code to make a general offer.

World Possession confirms that save for the Placing, none of World Possession or any of its Concert Parties had dealt in the Shares in the six month period immediately before the date of the Announcement. World Possession confirms that it and its Concert Parties will not deal in the Shares from the date of the Announcement up to the SGM.

(5) ONGOING CONNECTED TRANSACTIONS

1. Memorandum dated 25 August 2005 (as amended on 29 August 2005)

Parties

Service provider: Waldo Hotel

Recipient: Waldo Entertainment. It is a service provider for the Casino.

Services

Pursuant to the Memorandum, Waldo Hotel agrees to provide certain services and/or facilities to the Casino and its customers (including extra staff members to support such services for Waldo Entertainment), namely, (i) serving food and beverage and provision of cleansing services in the Casino; (ii) provision of storage, ticketing and transportation services for the customers of the Casino; and (iii) provision of additional or upgraded security services at non-casino areas of the Hotel. Waldo Hotel further agrees to provide hotel accommodation service and food and beverage service to Waldo Entertainment.

Charges

Pursuant to the Memorandum, Waldo Hotel shall:

(i) be reimbursed by Waldo Entertainment all costs/expenses incurred in the employment of the extra staff members for provision of the Related Services;
(ii) be reimbursed by Waldo Entertainment the cost for all sundries consumed or used by customers of the Casino;
(iii) charge Waldo Entertainment for providing hotel accommodation service and food and beverage service to Waldo Entertainment at prevailing prices offered by Waldo Hotel to independent regular customers and on normal commercial terms; and

LETTER FROM THE BOARD

(iv) be responsible for all capital expenses and maintenance of such equipment for provision of the Related Services in the Casino.

The charges receivable by Waldo Hotel have been determined on arm’s length negotiations between the parties to the Memorandum. For items (i) and (ii) above, Waldo Hotel is reimbursed by Waldo Entertainment in cash roughly on a monthly basis. For item (iii) above, Waldo Hotel shall charge Waldo Entertainment as and when the consumption arises and the said charges are settled on a monthly basis.

The Waldorf Group confirms that the annual capital expenses and maintenance of equipment for provision of the Related Services in the Casino accounted for roughly 1% of the total capital expenses and maintenance cost of Waldo Hotel for the year ended 31 March 2005.

Term

Commencing from the date of the Memorandum up to 31 March 2008

The cap

According to the audited accounts of the Waldorf Group for the year ended 31 March 2005 and the unaudited management accounts for the four months ended 31 July 2005, the historical (i) reimbursement of salary and all costs/expenses incurred by Waldo Hotel for the extra staff members employed for provision of the Related Services; (ii) reimbursement of all sundries consumed by customers of the Casino; and (iii) charges paid for consumption of hotel accommodation service and food and beverage service by Waldo Entertainment were summarized in the following table:

		For the year ended	For the year ended	For the four months ended	For the four months ended
		31 March 2005		31 July 2005
		MOP	HK$	MOP	HK$
(i)	Reimbursement of salary	8,742,000	8,487,000	4,830,000	4,690,000
	and all costs/expenses
	for extra staff members
(ii)	Reimbursement of	592,000	575,000	400,000	390,000
	sundries consumed
(iii)	Provision of hotel	489,000	475,000	870,000	845,000
	accommodation service
	and food and beverage
	service to
	Waldo Entertainment
Total		9,823,000	9,537,000	6,100,000	5,925,000

Based on the above historical figures and after making allowance for inflation of labour and material costs in Macau, the Directors estimate that the cap in respect of the reimbursement/payment by Waldo Entertainment to Waldo Hotel for the Related Services for each of three years ending 31 March 2008 as follows:

LETTER FROM THE BOARD

			For the year ending
		31 March 2006	31 March 2007	31 March 2008
		(Note)
		HK$	HK$	HK$
(i)	Reimbursement of salary	8,000,000	20,000,000	22,000,000
	and all costs/expenses
	for extra staff members
(ii)	Reimbursement of	500,000	1,200,000	1,200,000
	sundries consumed
(iii)	Provision of hotel	1,500,000	2,800,000	3,000,000
	accommodation service
	and food and beverage
	service to
	Waldo Entertainment
Total		10,000,000	24,000,000	26,200,000

Note: Commencing from the date of completion of the Sale and Purchase Agreement, which is estimated to be around the end of October 2005.

Reasons for the Ongoing Connected Transactions

In acting as a service provider for the Casino, Waldo Entertainment entered into the Memorandum in order to secure Waldo Hotel to provide the Related Services to the Casino and its customers. Waldo Hotel is reimbursed at cost (i) the salary and all costs/expenses incurred by Waldo Hotel in the employment of the extra staff members for provision of the Related Services to the Casino and (ii) all sundries consumed by customers of the Casino. The Directors consider that the services contemplated under the Memorandum enable Waldo Hotel to secure, at no extra fixed cost or salary cost, additional source of income through provision of food and beverages in the Casino. For the year ended 31 March 2005, the food and beverages revenue of Waldo Hotel attributable to the Casino amounted to approximately MOP14.2 million (approximately HK$13.7 million). Waldo Hotel charges the Casino directly for the food and beverage served in the Casino.

Provision of hotel accommodation service and food and beverage service to Waldo Entertainment under the Memorandum also secures an additional source of income for the Waldorf Group.

The Directors consider that (i) the services contemplated under the Memorandum will be entered into in the ordinary course of business of the Group upon completion of the Sale and Purchase Agreement on normal commercial terms; and (ii) the payment schedules and terms of the Memorandum are fair and reasonable and are in the interests of the Group and the Shareholders as a whole.

Connections between the parties

Waldo Entertainment is a wholly-owned subsidiary of Wealth Access (which in turn is beneficially owned as to 50% by Mr. Yeung). It is therefore a connected person of the Company. Accordingly, the

LETTER FROM THE BOARD

transactions contemplated under the Memorandum will constitute continuing connected transactions for the Company upon completion of the Sale and Purchase Agreement under Rule 14A.35 of the Listing Rules and will be subject to the reporting, announcement, annual review and the Independent Shareholders’ approval requirements under Chapter 14A of the Listing Rules.

FINANCIAL EFFECTS OF THE ACQUISITION ON THE GROUP

Earnings

For the year ended 31 March 2005, the audited net profit attributable to the Group was approximately HK$15,568,000 and the earnings per Share would be approximately HK$0.0142 on the basis of 1,095,884,000 Shares. Upon completion of the Sale and Purchase Agreement, the Group shall, on a consolidated basis, be entitled to effectively account for 95% of the net earning/loss of the Waldorf Group. As set out in Appendix III to this circular, the unaudited pro forma net profit of the Enlarged Group upon completion of the Sale and Purchase Agreement would be approximately HK$20,494,000 and the earnings per Share would be HK$0.0085 on the basis of 2,410,944,800 Shares then in issue. Thus, completion of the Acquisition has positive effect on the net profit of the Group but negative impact on earnings per Share.

Net tangible assets and net tangible asset value per Share

The audited consolidated net tangible assets of the Group as at 31 March 2005 were approximately HK$225,862,000, equivalent to approximately HK$0.2061 per Share on the basis of 1,095,884,000 Shares.

As set out in Appendix III to this circular, upon completion of the Sale and Purchase Agreement, the unaudited pro forma consolidated net tangible assets of the Enlarged Group would be approximately HK$413,307,000, equivalent to approximately HK$0.1714 per Share on the basis of 2,410,944,800 Shares then in issue. The net tangible assets of the Enlarged Group is arrived at after taking into account of (i) the goodwill brought forward of the Group of HK$18,988,000; (ii) the goodwill brought forward of the Waldorf Group of HK$15,000; and (iii) the estimated goodwill arising from the Acquisition of HK$5,541,000, which is determined on the excess of the aggregate cost of acquisition of approximately HK$273,786,408 over the fair value of the Sale Shares and Sale Loans of approximately HK$268,246,000, which in turn is taken to be the sum of (a) the audited consolidated net tangible asset of Waldorf as at 31 March 2005 after adjustment for the revaluation surplus (after deferred taxation effect) arising from the valuation of the property interests of the Waldorf Group and (b) the amount of the Sale Loan. After completion of the Acquisition, an assessment of the fair value of the separable assets and liabilities of Waldorf will be undertaken, and as a result the fair value of the assets and liabilities of Waldorf may be different from their adjusted book value as at 31 March 2005.

Thus, completion of the Acquisition has positive effect on the net tangible assets of the Group, but a negative effect on the net tangible asset value per Share.

LETTER FROM THE BOARD

MANAGEMENT DISCUSSION AND ANALYSIS OF THE RESULTS AND FINANCIAL POSITION OF THE GROUP

For the year ended 31 March 2003

Group results

For the year ended 31 March 2003, the Group’s turnover was HK$37.6 million, representing a decrease of approximately 3% as compared with the previous financial year. The decrease in the turnover was mainly due to the closure of most of its loss making restaurants during that year.

The operating profit of the Group amounted to HK$4.4 million as compared to a loss of HK$1.7 million in the previous year. This increase in operating profit was mainly due to the closure of most of its loss making restaurants in prior years and successful downsizing of the Group.

Business review

During the year, the Group was principally engaged in restaurant operations and property investment. Detailed analysis of each of the Group’s business segments are stated below.

Restaurant operations business

The business of the Star House Branch was stable and profitable. It recorded a turnover of about HK$33.1 million. The segment result contribution was approximately HK$2.6 million.

Investment properties business

The investment properties contributed steady rental income to the Group. It recorded a turnover of about HK$4.5 million. The segment result contribution was approximately HK$3.3 million.

Investment in convertible note

The investment in the convertible note of Opal Technologies Inc, (‘‘Opal’’) was unsuccessful. A full provision was made for the investment in the previous year. Opal has defaulted in payment of interest on the note since the second quarter of 2001. Trading of Opal’s shares on the NASDAQ Bulletin Board has been suspended since 23 May 2001 due to its failure to file its audited accounts for the year ended 31 December 2000 and subsequent financial years with the Securities and Exchange Commission of the United States of America. Legal action was taken by the Group against Opal in 2002. The court adjudged that Opal had to pay the Group a sum of US$10.3 million representing the principal of and interest accrued on the note up to 7 January 2002. As at 31 March 2003, Opal had made no payment since the court judgement.

Liquidity and financial resources

The Group financed its operations with internally generated resources. The Group maintained good business relationship with banks and had banking facilities available for future business development.

LETTER FROM THE BOARD

At 31 March 2003, the Group’s current ratio was 1.9, with currents assets of approximately HK$10.1 million against current liabilities of approximately HK$5.3 million. Cash and bank balances was approximately HK$7.4 million.

No financial instrument was used for hedging. The Directors consider that the Group was not exposed to any exchange rate risk and any related hedges.

Employees and remuneration policies

As at 31 March 2003, the Company had a total of 96 employees. The Group remunerated its employees based on their performance, experience and prevailing industry practices.

Charges on Group Assets

At 31 March 2003, investment properties and leasehold land and buildings pledged as security to banks amounted to HK$120 million for the banking facilities of HK$52 million.

Dividend

The Group did not pay any dividend for the period ended 31 March 2003.

For the year ended 31 March 2004

Group results

For the year ended 31 March 2004, the Group’s turnover was HK$39.5 million, representing an increase of approximately 5% as compared with the previous financial year. The increase in the turnover was mainly due to increase in turnover of HK$4.9 million contributed by new wedding operations. Such increase was reduced by decrease in turnover from restaurant operations of HK$2.9 million due to the impact of the Severe Acute Respiratory Syndrome.

The operating profit of the Group amounted to HK$14.5 million as compared to a profit of HK$4.4 million in the previous year. This increase in operating profit was mainly due to the Group’s settlement with Opal (with settlement sum of US$2.5 million) and receipt of the first installment of US$1.42 million under the settlement (terms of such settlement are detailed below).

Business review

During the year, the Group was principally engaged in restaurant operations, property investment and wedding services business. Detailed analysis of each of the Group’s business segments are stated below.

Restaurant operations business

The business of the Star house Branch was stable and profitable. It recorded a turnover of about HK$30.2 million. The segment result contribution was approximately HK$1.4 million.

Investment properties business

The investment properties had contributed steady rental income to the Group. It recorded a turnover of about HK$4.4 million. The segment result contribution was approximately HK$4.1 million.

LETTER FROM THE BOARD

Wedding operations business

The Group acquired the business of provision of wedding services under the trade names of ‘‘Cite Du Louvre’’ and ‘‘Wonderful Arts Wedding Services’’ in Hong Kong for a cash consideration of HK$24 million in March 2004. This acquisition provided a good opportunity for the Group to diversify its business portfolio and venture into the leisure servicing industry in Hong Kong.

The wedding operations business had contributed a segment result of approximately HK$0.1 million and a turnover of about HK$4.9 million.

Investment in convertible note

On 19th January 2004, Marlborough Gold Limited (‘‘MGL’’), a wholly owned subsidiary of the Company, entered into a deed of settlement with Opal (the ‘‘Settlement Deed’’).

Under the Settlement Deed, MGL agreed to accept Opal’s payment of US$2.5 million (about HK$19.5 million) in full settlement of the debts of US$10.3 million (about HK$80.34 million) with interest at the rate of 8.72% per annum from 4 February 2002 to 22 March 2002 and thereafter at judgement rate until payment and HK$1,550.00 fixed costs under a judgement dated 22 March 2002 (the ‘‘Judgement Debts’’) provided that the US$2.5 million was paid punctually by 2 instalments:

1 US$1.42 million within 1 month from the date of the Settlement Deed; and
2 US$1.08 million within 6 months from the date of the Settlement Deed.

MGL received the first instalment of US$1.42 million during the year. By a letter dated 30th June 2004 from Opal to MGL, Opal requested for three months’ extension for payment of the second instalment of US$1.08 million to 19 October 2004. As the financial position of Opal was unknown, it would be difficult and costly to take legal action to enforce the payment immediately, the Company and MGL agreed to grant the extension as requested by Opal.

The Judgement Debts related to moneys due to MGL under a US$10 million 4% convertible note due on 9 April 2003 issued by Opal (the ‘‘Note’’). The Company made a full provision of HK$78 million for the Note in its accounts for the year ended 31 March 2001 in view of Opal’s uncertain financial position.

The Company was not able to obtain any update financial information from Opal. As the financial position of Opal was uncertain and the costs of taking further legal action to recover the Judgement Debts might be substantial, the Company and MGL accepted the terms of the Settlement Deed.

Liquidity and financial resources

The Group financed its operations with internally generated resources. The Group maintained good business relationship with banks and has banking facilities available for future business development. The Group had HK$6 million bank borrowings which were fully repaid in June 2004.

At 31 March 2004, the Group’s current ratio was 0.78, with currents assets of approximately HK$16.9 million against current liabilities of approximately HK$21.6 million. Cash and bank balances was approximately HK$9.9 million.

LETTER FROM THE BOARD

The gearing ratio of the Group, based on total borrowings to shareholder’s equity, was 2.9% as at 31 March 2004.

No financial instrument was used for hedging. The Directors consider that the Group was not exposed to any exchange rate risk and any related hedges.

Employees and remuneration policies

As at 31 March 2004, the Company had a total of about 280 employees. The Group remunerated its employees based on their performance, experience and prevailing industry practices. The Company adopted a new share option scheme on 30 August 2002 in order to attract and retain quality personnel and other persons to provide incentive to them to contribute to the business and operation of the Group. The Group also provided in-house and external training programme for its staff.

Charges on Group Assets

At 31 March 2004, investment properties and leasehold land and buildings of HK$138 million were pledged as security to banks for the banking facilities of HK$52 million.

Dividend

The Group did not pay any dividend for the period ended 31 March 2004.

For the year ended 31 March 2005

For the year ended 31 March 2005, the Group’s turnover was HK$143.7 million, representing an increase of approximately 263.8% as compared with the previous financial year. The improvement in turnover was mainly due to completion of the acquisition of wedding services business in March 2004, which recorded a total turnover of about HK$105.3 million and a segment result contribution of HK$15 million.

The operating profit of the Group for the year amounted to HK19.7 million as compared to an operating profit of HK$14.5 million in the previous year. The increase in operating profit was mainly due to the contribution of HK$15 million from the wedding services business. If the first installment of US$1.42 million received under a dispute settlement (with settlement sum of US$2.5 million) from Opal were excluded from the previous year’s operating profit, the increase in the operating profit this year would be about 467%.

Business review

During the year, the Group is principally engaged in restaurant operations, property investment and wedding services business. Detailed analysis of each of the Group’s business segments are stated below.

Restaurant operations business

The business of the Star House Branch was stable and profitable. It recorded a turnover of about HK$33.6 million.

LETTER FROM THE BOARD

Investment properties business

The investment properties had contributed steady rental income to the Group. It recorded a turnover of about HK$4.8 million.

Wedding operations business

The business of provision of wedding services under the trade name of ‘‘Cite Du Louvre’’ and ‘‘Wonderful Arts Wedding Services’’ in Hong Kong had contributed significant income to the Group. It recorded a turnover of about HK$105.3 million.

Investment in convertible note

Opal requested for further extension of time for payments of the second instalment of the settlement sum to 19 October 2005, which therefore was still outstanding. As the financial position of Opal was not known, it would be difficult and costly to take legal action to enforce the payment immediately, and the Company and MGL agreed to grant the extension requested by Opal.

Liquidity and financial resources

At 31 March 2005, the Group’s current ratio was 2.27, with currents assets of approximately HK$32.7 million against current liabilities of approximately HK$14.4 million. Cash and bank balances was approximately HK$24.5 million. The Group’s geraing ratio at 31 March 2005 was 0% based on total borrowings to shareholder’s equity.

No financial instrument was used for hedging. The Directors consider that the Group was not exposed to any exchange rate risk and any related hedges.

Employees and remuneration policies

As at 31 March 2005, the Group had a total of about 280 employees. The Group remunerated its employees based on their performance, experience and prevailing industry practices.

Charges on Group Assets

At 31 March 2005, the net book value of investment properties and leasehold land and buildings charged as security for the Group’s bank facilities amounted to HK$154 million for the Group’s banking facilities of HK$52 million.

Dividend

The Group did not pay any dividend for the period ended 31 March 2005.

MANAGEMENT DISCUSSION AND ANALYSIS OF THE RESULTS AND FINANCIAL POSITION OF THE WALDORF GROUP

The following is a discussion and analysis of the financial results of the Waldorf Group for the period from 23 October 2003 (date of incorporation of Waldorf) to 31 March 2004 and the year ended 31 March 2005 (based on the accountants’ report on the Waldorf Group, the text of which is set out in Appendix I and according to information provided by the Waldorf Group):

LETTER FROM THE BOARD

For the period from 23 October 2003 (date of incorporation of Waldorf) to 31 March 2004

Turnover

The Waldorf Group owns and operates the Hotel in Macau, which commenced business on 4 July 2004. No revenue was recorded in this period. The Waldorf Group recorded a net loss of MOP8,230,512 (approximately HK$7,990,788).

Cost of operations

No cost of sales was recorded in the period ended 31 March 2004. Administrative expenses of MOP8,230,512 (approximately HK$7,990,788) was recorded for this period. This included staff cost of MOP2,874,675 (approximately HK$2,790,947).

Property, plant and equipment

Deposits for acquisition of property, plant and equipment amounted to MOP61,396,177 (approximately HK$59,607,939) as of 31 March 2004.

Liquidity and capital resources

As at 31 March 2004, the Waldorf Group’s current ratio was 0.12, with currents assets of MOP9,595,786 (approximately HK$9,316,297) against current liabilities of MOP79,122,475 (approximately HK$76,817,937) (which essentially represented amount due to a fellow subsidiary). Cash and cash equivalents totalled MOP6,818,683 (approximately HK$6,620,081).

For the period ended 31 March 2004, the Waldorf Group recorded net cash outflow form operating activities of MOP10,902,540 (approximately HK$10,584,990), which was funded by shareholders loans. The Waldorf Group had no bank borrowing during the period.

No financial instrument was used for hedging. The directors of the Waldorf Group consider that the Waldorf Group was not exposed to any exchange rate risk and any related hedges.

Employee and remuneration policies

As at 31 March 2004, the Waldorf Group employed a full-time workforce of 38. Total staff costs amounted to MOP2,874,675 (approximately HK$2,790,947). No bonus was paid and there was no share option scheme or similar incentive scheme for the Waldorf Group during the period.

Dividend

The Waldorf Group did not pay any dividend for the period ended 31 March 2004.

For the year ended 31 March 2005

Turnover

For the year ended 31 March 2005, the total revenue was MOP103,706,820 (approximately HK$100,686,233) which was derived from two sources, namely (i) the hotel and food and beverage revenue and (ii) the rental income. For this year, the hotel and food and beverage revenue was MOP79,394,640

LETTER FROM THE BOARD

(approximately HK$77,082,175), whereas the rental income was MOP24,312,180 (approximately HK$23,604,058), representing 77% and 23% of total revenue of the Waldorf Group respectively. The Waldorf Group recorded a net profit of MOP5,340,971 (approximately HK$5,185,408).

Cost of operations

Cost of operations (inclusive of cost of sales and administrative expenses) for the year was MOP96,578,792 (approximately HK$93,765,817) (2004: MOP8,230,512 (approximately HK$7,990,788)). This included staff cost of MOP24,467,307 (approximately HK$23,754,667), depreciation and amortization for property, plant and equipment of MOP36,759,243 (approximately HK$35,688,585), and realization of prepaid lease rentals of MOP1,333,333 (approximately HK$1,294,498).

Property, plant and equipment

Property, plant and equipment amounted to MOP205,708,519 (approximately HK$199,717,008) as of 31 March 2005, which comprised as to MOP199,885,415 (approximately HK$194,063,510) or 97% for hotel property in Macau and as to MOP5,823,104 (approximately HK$5,653,499) or 3% for motor vehicles.

Liquidity and capital resources

As at 31 March 2005, the Waldorf Group’s current ratio was 0.63 (2004: 0.12), with currents assets of MOP237,477,692 (approximately HK$230,560,866) against current liabilities of MOP379,133,076 (approximately HK$368,090,365). Cash and cash equivalents was MOP23,857,411 (approximately HK$23,162,535).

For the year ended 31 March 2005, the Waldorf Group generated net cash inflow from operation of MOP31,390,736 (approximately HK$30,476,443). The Waldorf Group had a secured bank borrowing of MOP172,550,927 (approximately HK$167,525,172) which was repayable as follows:

	MOP	HK$
Within one year	29,140,326	28,291,579
In the second year	30,102,249	29,225,484
In the third to fifth year	96,401,082	93,593,283
After five years	16,907,270	16,414,825
	172,550,927	167,525,171

At 31 March 2005, the bank borrowings were secured by (a) the Waldorf Group’s prepaid lease rentals and hotel properties in Macau with an aggregate net book value of approximately MOP278,552,000 (approximately HK$270,438,834); (b) the Waldorf Group’s investment property in Hong Kong with an aggregate net book value of MOP3,090,000 (approximately HK$3,000,000); and (c) the personal guarantees of MOP230,000,000 (approximately HK$223,300,971) from certain directors of Waldorf. As at the date hereof, the relevant bank has consented to release the said personal guarantees and replace them by a corporate guarantee of the Group after Completion.

LETTER FROM THE BOARD

The Waldorf Group was able to generate sufficient cash flow from operation to fulfill its repayment obligation and meet the cash requirement for its day to day operation for the year. No financial instrument was used for hedging. The directors of the Waldorf Group consider that the Waldorf Group was not exposed to any exchange rate risk and any related hedges.

Employee and remuneration policies

As at 31 March 2005, the Waldorf Group employed a full-time workforce of about 526. Total staff costs amounted to MOP24,467,307 (approximately HK$23,754,667) (2004: MOP2,874,675 (approximately HK$2,790,947). Bonus of approximately MOP1,123,583 (2004: nil) was paid and there was no share option scheme or similar incentive scheme for the Waldorf Group during the year.

Dividend

The Waldorf Group did not pay any dividend for the year ended 31 March 2005.

Credit risk

The Waldorf Group’s principal financial assets are bank balances and cash, trade and other receivables. The credit risk on liquid funds was limited because the counterparties were banks with high credit-ratings assigned by international credit-rating agencies. With exposure spread over a large number of counterparties and customers, the Waldorf Group had no significant credit risk.

Market risk

The number of tourists visiting Macau increased to over 16 millions in 2004 mainly due to the relaxation of restrictions on overseas travelling of individual citizens by the PRC government. Hotel room in Macau is in demand. Even though more new hotels are under construction, the Waldorf Group believes the demand will still exceed supply at least in the next few years.

If the PRC government changes the existing policy and resumes the restriction on travelling, the number of tourists visiting Macau may drop which in turn may have an adverse impact on the Waldorf Group’s business. However, as Macau is one of the two models of ‘‘One Country, Two Systems’’, the Waldorf Group considers unlikely that the PRC government will change any policy which will hinder the economic development of Macau.

INFORMATION AND INTENTION OF WORLD PROCESSION

World Possession is a company incorporated in BVI with limited liability and owned by Madam Ma, Mr. Yeung and Ms. Yeung (all executive Directors) in equal shares. Its directors are Madam Ma and Mr. Yeung. World Possession is an investment holding company whose ordinary course of business does not include underwriting of securities.

It is the intention of World Possession to continue the existing business of the Group and not to introduce any major changes to the Group’s business, including any redeployment of the Group’s fixed assets. World Possession has no plan to cause any material changes to the continued employment of the Group’s employees. The Open Offer, which is underwritten by the Underwriters including World Possession, serves to fund partly the Acquisition which may bring recurrent income to the Group and enhance the revenue base of the Group.

LETTER FROM THE BOARD

PROSPECT OF THE ENLARGED GROUP

Currently the Group is principally engaged in restaurant operations, property investment and wedding services business. After completion of the Acquisition, the Enlarged Group will also be engaged in the operation of the Hotel in Macau.

Restaurant operations

The Group operates a Chiu Chau restaurant in Star House, Tsimshatsui, which business is stable and profitable. To expand the scope of its restaurant operations, the Group acquired 51% equity interest in Wellprecise Limited (‘‘Wellprecise’’) in June 2005 to engage in the operation of Japanese restaurant. The restaurant is located at Kowloon Centre, Ashley Road, Tsimshatsui, Hong Kong. It is expected to commence trial operation in September 2005. Full operation is expected in October 2005.

Investment properties

The Group’s investment properties at Tung Ning Building, Sheung Wan, Hong Kong and BCC Building, Carnarvon Road, Tsimshatsui, Kowloon are let to Independent Third Parties and have contributed steady rental income to the Group. Particulars of these properties are set out in the valuation report in Appendix V.

The tenancy agreement in respect of the shop unit in Shun Tak Centre owned by the Waldorf Group will expiry on 31 December 2005. It is intended that this unit will be repossessed by the Enlarged Group for self use after the expiry of the existing tenancy agreement.

Wedding operations

The Group provides wedding services under the trade names of ‘‘Cite Du Louvre’’ and ‘‘Wonderful Arts Wedding Services’’ in Hong Kong. This business has contributed significant income to the Group since its acquisition in March 2004. The recent increase in rental bring pressure on the performance of the business and the management is taking steps to control the operation costs. With the improved economy in Hong Kong and the established reputation of ‘‘Cite Du Louvre’’ and ‘‘Wonderful Arts Wedding Services’’ in the wedding services sector, the Group is optimistic that this business will continue to contribute significantly to the Group.

Hotel operation

The Directors consider that the Acquisition will enable the Group to capitalise on the growth potential of the hotel and hospitality industry in Macau.

The number of tourists visiting Macau increased to over 16 millions in 2004 mainly due to the relaxation of restrictions on overseas travelling of individual citizens by the PRC government. As a result of the increase in tourist arrival, hotel room in Macau is in demand. Even though more new hotels are under construction, the Group believes the demand will still exceed supply at least in the next few years.

LETTER FROM THE BOARD

Other businesses

In April 2005, the Group acquired 60% equity interest in Reli-a-bo Entertainment Limited (‘‘Reli-a-bo’’), which carries on the business of talent management in the entertainment industry. Besides acting as manager for artistes, Reli-a-bo also provides models for the wedding services shows organised by the Group to promote its wedding services.

In July 2005, the Group acquired 51% equity interest in Witty Ventures Limited (‘‘Witty’’), which is engaged in the retail trading of watches. Witty has leased a shop unit in Golden Mile Holiday Inn, Tsimshatsui. It offers a wide range of watches of various brands, and its customers include both local residents and tourists.

SGM

You will find on pages 189 and 190 of this circular a notice of the SGM to be held at 11:30 a.m. on 3 October 2005 at Golden Island Bird’s Nest Chiu Chau Restaurant, 2nd Floor, East Wing, Star House, 3 Salisbury Road, Tsimshatsui, Kowloon, Hong Kong at which an ordinary resolution will be proposed to approve the Proposals, voting of which will be taken on a poll.

There is enclosed a form of proxy for use at the SGM. You are requested to complete the form of proxy and return it to the principal office of the Company in accordance with the instructions printed thereon not less than 48 hours before the time fixed for holding the meeting, whether or not you intend to be present at the meeting. The completion and return of the form of proxy will not prevent you from attending and voting in person should you so wish.

As at the Latest Practicable Date, to the extent that the Company is aware having made all reasonable enquiries, World Possession and its associates (including Madam Ma, Mr. Yeung and Ms. Yeung) had beneficial interests in a total of 587,322,207 Shares, whereas Mr. Cheng Kwee, Chung Nam and all other Directors (except Mr. Liu Yu Mo who held 24,000 Shares) had no interests in Shares. World Possession and its associates, including Madam Ma, Mr. Yeung and Ms. Yeung, Mr. Cheng Kwee, Chung Nam, Messrs. Chung Siu Wah, Au Edmond Wah and their respective associates will be required to abstain from voting in respect of the resolution approving the Proposals, including the absence of arrangements for the disposal of Offer Shares not validly applied for by way of application in excess of assured entitlement, at the SGM under the Listing Rules and the Takeovers Code.

RECOMMENDATIONS

You are advised to read carefully the letters from the Independent Board Committee and Baron which set out their recommendations in respect of the Acquisition, the Open Offer, the Whitewash Waiver and the Ongoing Connected Transactions and the principal factors considered by them in arriving at their recommendations before deciding whether to vote for or against the resolution to be proposed at the SGM to approval the Proposals.

POLL DEMANDED BY SHAREHOLDERS

According to the bye-laws of the Company, before or on the declaration of the result of voting on a show of hands on a resolution by the chairman of a general meeting, a poll may be demanded by:

LETTER FROM THE BOARD

(a) at least three members present in person (or, in the case of a member being a corporation, by its duly authorised representative) or by proxy entitled to vote at the meeting; or
(b) any member or members present in person (or, in the case of a member being a corporation, by its duly authorised representative) or by proxy and representing not less than 10 per cent. of total voting rights of all the members having the right to vote at the meeting; or
(c) any member or members present in person (or, in the case of a member being a corporation, by its duly authorised representative) or by proxy and holding shares in the Company conferring a right to vote at the meeting being shares on which an aggregate sum has been paid up equal to not less than 10 per cent. of the total sum paid up on all the shares conferring that right.

ADDITIONAL INFORMATION

Your attention is drawn to the additional information contained in the appendices to this circular.

By Order of the Board United Power Investment Limited Liu Yu Mo Chief Executive Officer

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

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UNITED POWER INVESTMENT LIMITED

(Incorporated in Bermuda with limited liability)

(Stock Code: 674)

VERY SUBSTANTIAL ACQUISITION AND CONNECTED TRANSACTION OPEN OFFER OF NEW SHARES ON THE BASIS OF ONE OFFER SHARE FOR EVERY SHARE HELD ON THE RECORD DATE APPLICATION FOR THE GRANT OF WHITEWASH WAIVER AND ONGOING CONNECTED TRANSACTIONS

16 September 2005

To the Independent Shareholders

Dear Sir or Madam,

We refer to the letter from the Board set out on pages 1 to 30 of the circular dated 16 September 2005 issued by the Company (the ‘‘Circular’’) of which this letter forms part. Capitalised terms used herein shall have the same meanings as those defined in the Circular unless the context otherwise requires.

We have been appointed to constitute the Independent Board Committee to consider the Acquisition, the Open Offer, the Whitewash Waiver and the Ongoing Connected Transactions and to advise the Independent Shareholders as to whether or not it would be fair and reasonable and in the interests of the Independent Shareholders to vote in favour of the ordinary resolution to be proposed at the SGM to approve the Proposals. Baron has been appointed to advise the Independent Board Committee and the Independent Shareholders in relation to the Acquisition, the Open Offer, the Whitewash Waiver and the Ongoing Connected Transactions.

We wish to draw your attention to the letter from the Board and the letter from Baron to the Independent Board Committee and the Independent Shareholders which contains its advice to us in relation to the Acquisition, the Open Offer, the Whitewash Waiver and the Ongoing Connected Transactions as set out in the Circular.

Having taken into account the principal factors and reasons considered by and the opinion of Baron as stated in its letter of advice as set out on pages 32 to 60 of the Circular, we consider that the terms of the Acquisition, the Open Offer, including the Underwriting Agreement and the absence of arrangements for the disposal of Offer Shares not validly applied for by way of application in excess of assured entitlement, the Whitewash Waiver and the Ongoing Connected Transactions are on normal commercial terms and fair and reasonable in so far as the Independent Shareholders are concerned and they are in the interests of the Company and its shareholders as a whole. We therefore recommend the Independent Shareholders to vote in favour of the ordinary resolution in respect of the Proposals to be proposed at the SGM.

Lee Wai Loun

Yours faithfully, Independent Board Committee Lee Yuk Sang, Angus Independent non-executive Directors

LETTER FROM BARON

The following is the text of a letter of advice to the Independent Board Committee from Baron Capital dated 16 September 2005 prepared for the purpose of incorporation in this circular:

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4th Floor, Aon China Building 29 Queen’s Road Central Central, Hong Kong

��September 2005

To the Independent Board Committee and the Independent Shareholders of United Power Investment Limited

Dear Sirs,

(1) VERY SUBSTANTIAL ACQUISITION AND CONNECTED TRANSACTION, (2) OPEN OFFER, (3) APPLICATION FOR THE GRANT OF WHITEWASH WAIVER AND (4) ONGOING CONNECTED TRANSACTIONS

INTRODUCTION

We refer to our engagement by the Company as independent financial adviser to advise you in respect of (i) the Acquisition; (ii) the Open Offer; (iii) the application for the grant of Whitewash Waiver; and (iv) Ongoing Connected Transactions, details of which are set out in the “Letter from the Board” contained in the circular issued by the Company to the Shareholders dated 16 September 2005 (the “Circular”) of which this letter forms part. Terms used in this letter shall have the same meanings as defined in the Circular unless the context requires otherwise.

The Purchaser, a wholly-owned subsidiary of the Company, entered into the Sale and Purchase Agreement on 16 August 2005 with the Vendors and Waldorf for the Acquisition of (i) the Sale Shares (representing 95% of the registered capital of Waldorf) from the Vendors; and (ii) the rights and benefits of the Sale Loan from Wealth Access. As the Vendors are directly and indirectly owned as to 50% by Mr. Yeung and are associates of Mr. Yeung, the Acquisition constitutes a connected transaction for the Company under Chapter 14A of the Listing Rules and is subject to the approval of the Independent Shareholders at the SGM with votes taken by poll where World Possession and its associates will be required to abstain from voting.

To finance part of the Consideration under the Sale and Purchase Agreement, the Company proposes to raise approximately HK$197.3 million before expenses by issuing 1,315,060,800 Offer Shares on the basis of one Offer Share for every existing Share held on the Record Date at a subscription price of HK$0.15 per Offer Share. The Offer Shares will be fully underwritten by the Underwriters on the terms and subject to the conditions set out in the Underwriting Agreement. Given that the Open Offer would subsequently increase the issued share capital of the Company by more than 50%, the Open Offer (including the Underwriting Agreement) is subject to the approval of the Independent Shareholders under Rule 7.24 (5) of the Listing Rules. Under the Open Offer, there was no arrangement for application in excess of assured entitlement of the Shareholders whereas World Possession is one of the Underwriters. Such arrangement is subject to the approval of the Independent Shareholders at the SGM with votes taken by poll where World Possession and its associates will be required to abstain from voting under the requirements of Rule 7.26A of the Listing Rules.

LETTER FROM BARON

World Possession, being the controlling Shareholder, is owned by Madam Ma, Mr. Yeung and Ms. Yeung (all executive Directors) in equal shares and is one of the Underwriters. Under the Underwriting Agreement, World Possession has agreed to underwrite up to 592,738,593 Underwritten Shares and to subscribe for (or procure the subscription of) its pro-rata entitlement of 587,322,207 Offer Shares under the Open Offer in full. In the event that World Possession is required to take up fully its 592,738,593 Underwritten Shares and assuming that there is no other change in the shareholding structure of the Company from the Latest Practicable Date until immediately prior to the issue of the Offer Shares, the interests of World Possession and its Concert Parties in the Company will increase from approximately 44.66% to 67.20%, which exceeds the 2% creeper limit as stipulated under the Takeovers Code, such that World Possession and its Concert Parties would be required to make a mandatory general offer to acquire all the issued Shares other than those already owned by them under Rule 26 of the Takeovers Code. World Possession has made an application to the Executive for the grant of the Whitewash Waiver. The Whitewash Waiver, if granted by the Executive, would be subject to, among other things, the approval of the Independent Shareholders at the SGM with votes taken by poll where World Possession and its Concert Parties will be required to abstain from voting.

On 25 August 2005, Waldo Hotel and Waldo Entertainment entered into a memorandum (as amended on 29 August 2005) and pursuant to which, Waldo Hotel agrees to provide (i) certain services and/or facilities to the Casino and it customers; and (ii) hotel accommodation service and food and beverage service to Waldo Entertainment, of a term commencing from the date of the Memorandum up to 31 March 2008. As Waldo Entertainment (a wholly owned subsidiary of Wealth Access, in which Mr. Yeung has 50% interest), is a connected person of the Company within the meaning of the Listing Rules, the Ongoing Connected Transactions constitute non-exempt continuing connected transactions for the Company under Rule 14A.35 of the Listing Rules. The Ongoing Connected Transactions and the respective caps are subject to the approval of the Independent Shareholders at the SGM with votes taken by poll where World Possession and its associates will be required to abstain from voting.

Madam Ma, Mr. Yeung and Ms. Yeung (all executive Directors), being shareholders of World Possession and associates of the Vendors, are interested in the Proposals (save for the increase in authorised share capital of the Company). Messrs. Chung Siu Wah and Au Edmond Wah (both executive Directors) are interested in the Proposals (save for the increase in authorised share capital of the Company) as they are directors of the Vendors. Messrs. Liu Yu Mo and Chik To Pan (both executive Directors) are salaried employees of the Group. Ms. Chan Lai Mei (an independent non-executive Director) had been a director of the auditor of certain associates of Madam Ma and Mr. Yeung until 11 June 2004 and her husband also had been a director and a shareholder of the company secretary of such associates of Madam Ma and Mr. Yeung until 11 June 2004. Hence, Ms. Chan Lai Mei is not considered independent. Messrs. Lee Wai Loun and Lee Yuk Sang, Angus (both being independent non-executive Directors) have no interest in the Proposals and an Independent Board Committee comprising the said two independent non-executive Directors, has been formed to give advice and a recommendation to the Independent Shareholders on the Acquisition, the Open Offer, including the Underwriting Agreement and the absence of the arrangement for excess application of Offer Shares, the Whitewash Waiver and the Ongoing Connected Transactions.

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.

LETTER FROM BARON

We consider that we have been provided with sufficient information 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, nor have we considered the taxation implication on the Group or the Shareholders as a result of the Acquisition, the Open Offer, the Whitewash Waiver and the Ongoing Connected Transactions.

PRINCIPAL FACTORS AND REASONS CONSIDERED

In arriving at our opinion and recommendation to the Independent Board Committee and the Independent Shareholders in respect of the Acquisition, the Open Offer, including the Underwriting Agreement and the absence of the arrangement for excess application of Offer Shares, the Whitewash Waiver and the Ongoing Connected Transactions, we have considered the principal factors and reasons set out below:

I. THE ACQUISITION

1. Background and reason for the Acquisition

Business of the Company

The Group is principally engaged in restaurant operations, property investment and wedding services business.

Acquisition

The Purchaser entered into the Sale and Purchase Agreement with the Vendors, on 16 August 2005. The assets to be acquired by the Purchaser include:

Sale Loan: the interest free unsecured loans in the total amount of MOP90,557,600 (approximately HK$87,920,000) advanced by Wealth Access to Waldorf

Description of the Waldorf Group

LETTER FROM BARON

The Waldorf Group owns a shopping arcade unit in Hong Kong. The market value of this shopping arcade unit, as appraised by the Valuer, was HK$3 million as at 31 July 2005. It is leased to an Independent Third Party for a term of three years up to 31 December 2005.

Apart from the property investment in Hong Kong, the principal business operated by the Waldorf Group is the Hotel, which commenced business in July 2004. The Hotel is a three-star hotel in Macau with 161 guest rooms. Other facilities in the Hotel include restaurants, casino, sauna and massage centre, shops, conference room and car parking area. The market value of the Hotel (inclusive of land and buildings), as appraised by the Valuer, was MOP500 million (approximately HK$485 million) as at 31 July 2005. Portion of the non-hotel accomodation floor area of the Hotel (the “Casino Area”) is leased to Galaxy Casino, S.A. (one of the three concessionairies having been granted gaming concessions by the Macau government) for casino operation for a term of two years from 1 Janaury 2004, which may be renewed at the option of Galaxy Casino, S.A. for a further term of three years thereafter. For the period from the commencement date of the Hotel to 31 August 2005, the average monthly occupancy rate of the Hotel was over 90%.

For the year ended 31 March 2005, the audited revenue of the Waldorf Group was approximately MOP103.7 million (approximately HK$100.7 million) which was derived from two sources, namely (i) the hotel and food and beverage revenue; and (ii) the rental income. For the year ended 31 March 2005, the hotel and food beverage revenue was approximately MOP79.4 million (approximately HK$77.1 million), whereas the rental income was approximately MOP24.3 million (approximately HK$23.6 million), representing approximately 77% and 23% of total revenue of the Waldorf Group respectively. The net profit of the Waldorf Group recorded for the year ended 31 March 2005 was approximately MOP5.3 million (approximately HK$5.2 million). No revenue was recorded in the year ended 31 March 2004 and the net loss of Waldorf Group was approximately MOP8.2 million (approximately HK$8.0 million). As at 31 March 2005, the audited consolidated total asset and net asset of Waldorf Group were approximately MOP523 million (approximately HK$508 million) and approximately MOP637,000 (approximately HK$618,000) respectively. The Waldorf Group also recorded a net cash inflow of approximately MOP17 million (approximately HK$16.5 million) for the year ended 31 March 2005 and with cash and bank balance amounted to approximately MOP24 million (approximately HK$23 million) as at 31 March 2005. As at 31 March 2005, Waldorf Group had total bank borrowings of approximately MOP172.6 million (approximately HK$167.9 million), of which approximately MOP29.1 million (approximately HK$28.3 million) was attributable to secured bank borrowings due within one year.

Under the relevant tenancy agreement, Galaxy Casino, S.A., was further granted a right to acquire the legal title of the Casino Area which are subject to the existing tenancy from the Waldorf Group at a reasonable consideration to be determined in case the Macau government regards that a specific provision under the gaming concession agreement granted to Galaxy Casino, S.A. by the Macau government is applicable to the Casino. That specific provision requires a concessionaire to surrender the premises where the casino is located to the Macau government. In order to surrender the Casino Area to the Macau government, Galaxy Casino, S.A. must have the legal title of the said premises. As disclosed in the “Letter from the Board” in the event that the Group has to dispose of the Casino Area to Galaxy Casino, S.A., the “reasonable consideration” for the said disposal will be determined with reference to the then independent valuation of the leased premises by professional valuer subject to negotiation and agreement with Galaxy Casino, S.A.. Having said that, we have no doubt the then consideration can be agreed in a fair and reasonable market value. In view of the said arrangement is a governmental policy that is applicable to all concessionaires with casinos located in Macau, we are of the opinion that the possible future forced disposal of the Casino Area may have adverse impact on the Hotel’s business.

LETTER FROM BARON

The Hotel commenced its business in July 2004 with only about 9 months of operating record were consolidated in the financial statement of Waldorf Group in the year ended 31 March 2005. In light of the profitable track record of Waldorf Group, especially the revenue generating ability of the Hotel as a newly established hotel in Macau, the Directors believe that the Acquisition would enhance the revenue base of the Group and bring recurrent income to the Group.

Operating environment in Macau

According to the Yearbook of Statistics 2004 published by Statistics and Census Service, Government of Macau Special Administrative Region, the Macau’s gross domestic product (“GDP”) was MOP82,685 million in 2004, representing an increase of 30.1% from 2003. Tourism is the main industry supporting Macau’s economy, contributing to approximately 30% of its GDP. The Directors are of the view that the tourism of Macau will continue to expand as a result of the relaxation of the rules governing the entry of PRC travelers to Macau and Hong Kong after the execution of individual visit scheme in July 2003. In assessing the operating environment of Macau, we have looked into the tourism in Macau in particular by visitor arrivals and hotel occupancy rates during the period from 2001 to 2004.

Chart 1: Visitors arrivals in Macau from 2001 to 2004

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Source: Statistics and Census Service, Government of Macau Special Administrative Region

Since 1999, Macau’s tourism has been expanding rapidly. As shown from the above chart, total visitor arrivals exceed 10 million in 2001 and increased 12% to approximately 11.5 million in 2002. Despite the outbreak of severe acute respiratory syndrome (“SARS”) in 2003, total visitors still soared by 3.1% to approximately 11.8 million. Total number of visitors arrivals increased 40% over 2003 to a historical high of approximately 16.7 million in 2004. It was contributable to the predominately increase of visitors from the PRC, a total of approximately 9 million visitors from the PRC was recorded in 2004, representing a 66% increase compared to the figures of 2003.

LETTER FROM BARON

Chart 2: Hotel Occupancy Rates in Macau from 2001 to 2004

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Source: Statistics and Census Service, Government of Macau Special Administrative Region

As shown in the above chart, the average occupancy rate of the hotel sector has been increasing steadily from 2001 to 2004. The plunge of the occupancy rates in second quarter of 2003 was attributable to the outbreak of SARS incident. The average occupancy rates rebounded from approximately 42% in second quarter of 2003 to approximately 79% at the year end of 2004.

Furthermore, we have made reference to occupancy rates in terms of hotel classifications; the following chart illustrates the average hotel occupancy rates by classification establishments:

Chart 3: Average hotel occupancy rates by classification establishments

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Source: Statistics and Census Service, Government of Macau Special Administrative Region

As shown from the chart above, three-star hotels had the highest occupancy rate in 2004 with about 86.3%. Assuming the growth of visitors in choosing three-star hotels will be similar to the existing growth rate of 12.5% as shown in the chart above, the existing three-star hotels will be over 95% occupied in 2005 and will be fully occupied in 2006.

LETTER FROM BARON

The Directors are of the view that the tourism of Macau is in great potential to further develop as well as the relevant hotel and hospitality industry. The Directors intend to seize this valuable opportunity through the Acquisition with a view to expanding the business operations of the Group by leveraging on the Group’s extensive experience and business network in the hospitalisty industry. Based on the above statistics, we consider that the relaxation of travel restrictions in the PRC will continue to stimulate the tourism in Macau as well as its casino and hotels business and if such policies remain unchanged, there will be good business opportunities in and a favorable operating environment for Macau. Moreover, Macau’s prosperous tourism is inextricably linked with the gaming business, which is a significant business sector of Macau. The liberation of the gaming sector by the Government of Macau in 2002 has led to a more competitive environment among the gaming operators which may in turn inject new impetus to the gaming industry and further enhance the development in the hotel and hospitality sectors in Macau.

By entering into the Sale and Purchasing Agreement, the Directors consider that they can leverage their existing experience in the hotel and hospitality industry to further explore business opportunities in Macau. We concur with the Directors’ view that the Acquisition will allow the Group to seize the upside trend of the tourism of Macau, which in turn may enhance the revenue base and bring recurrent income to the Group.

2. Consideration

Basis

The total consideration for the Acquisition is MOP282,000,000 (approximately HK$273,786,408) which comprises the consideration for the Sale Shares and the Sale Loan. The consideration for the Sale Shares of MOP191,442,400 (approximately HK$185,866,408) represents 95% of the registered capital of Waldorf and the consideration for the Sale Loan of MOP90,557,600 (approximately HK$87,920,000) represents the face value of the interest free unsecured shareholders’ loan advanced by Wealth Access to Waldorf.

The Consideration was arrived at after arm’s length negotiations between the Purchaser and the Vendors and represents a discount of approximately 5.3% to the sum of:

(i) MOP207,157,086 (approximately HK$201,123,385), being the attributable interest of 95% of the unaudited consolidated net tangible asset of Waldorf as at 31 July 2005 of approximately MOP9.2 million (approximately HK$8.9 million) after adjustment for the revaluation surplus of approximately MOP237.3 million (approximately HK$230.4 million) (and taking into account deferred taxation effect of approximately MOP28.5 million (approximately HK$27.7 million)) arising from the valuation of the property interests of the Waldorf Group; and
(ii) MOP90,557,600 (approximately HK$87,920,000), being the amount of the Sale Loan.

The Consideration of MOP 282,000,000 (approximately HK$ 273,786,408) is payable in cash upon completion of the Sale and Purchase Agreement. The Consideration will be satisfied as to approximately HK$193 million by the net proceeds of the Open Offer and as to the balance of approximately HK$81 million by the net proceeds of the Placing which was completed in May 2005. Details of which will be discussed under the section headed “The Open Offer”.

LETTER FROM BARON

In accessing the fairness and reasonableness of revaluation surplus arising from the valuation of the properties held by Waldorf Group as at 31 July 2005, we have reviewed the valuation report contained in Appendix IV to the Circular (“Valuation Report”) prepared by the Valuer. We have also discussed with the Valuer on the methodology adopted and assumptions used in arriving at their valuations of such properties held by Waldorf Group as at 31 July 2005. We have no reason to doubt the fairness and appropriateness of the methodology adopted and assumptions used by the Valuer in arriving at the valuation of the properties held by Waldorf Group.

Under the Sale and Purchase Agreement, the Vendors warrant to and undertake with the Purchaser that the consolidated net tangible asset value of the Waldorf Group as at the date of completion of the Sale and Purchase Agreement will not be less than MOP218,000,000 (approximately HK$211,650,000) (based on and after adjustment of the valuation by the Valuer as at 31 July 2005 of the properties owned by the Waldorf Group in Macau and Hong Kong at MOP500 million (approximately HK$485 million) and HK$3 million respectively). The Vendors also warrant to and undertake with the Purchaser that the amounts due from and to directors and related companies of the Waldorf Group other than the Sale Loan shall be settled in full before completion of the Sale and Purchase Agreement. Shareholders should note that the Company will publish an announcement in the newspaper together with the proposed course of action if the net tangible asset value of Waldorf Group as at the date of completion of the Sale and Purchase Agreement is less than the amount warranted. As confirmed by the Directors, in the event of shortfall, the Group may take legal action against the Vendors for breach of warranty and claim for compensation of its loss arising from such breach. Shareholders should note that the outcome of lawsuit (if proceed by the Group) and the amount of compensation (if any), is uncertain.

Analysis

In assessing the fairness and reasonableness of the Consideration, we are of the view that the analysis of the price with reference to net tangible asset value and the price to earnings ratio may serve as an appropriate valuation benchmarks. The Consideration under the Sale and Purchase Agreement represented:

�� a discount of approximately 5.3% to the sum of 95% interest of the unaudited consolidated net tangible asset of Waldorf Group of approximately HK$201,123,385 as at 31 July 2005 and the face amount of the Sale Loan of approximately HK$ 87,920,000; and
�� a price to earnings ratio of approximately 55.6 times, based on the 95% net profit of Waldorf Group amounted to approximately HK$4,925,750 for the year ended 31 March 2005 (with the Hotel operated its business for only about 9 months during the financial year).

For the purpose of comparison, we have reviewed, to our best endeavor, similar transactions of listed companies on the Stock Exchange in relation to the acquisition of equity interests in relation to hotel and tourism/entertainment related business in Macau within 12 months prior to the release of the Announcement (“Comparables”), in particular, the premium/discount of the valuation represented by the consideration (“Premium/Discount”) and the price to earnings ratio of the asset acquired (“PE ratio”). Set out below are the details of the Comparables:

LETTER FROM BARON

					Business/
					operations
					commenced as
		Consideration/			at the date of
Company Name	Date of	nature of the	Premium/	PE ratio	respective
(Stock Code)	announcement(s)	transaction(s)	Discount	(times)	announcement
Macau Success	9/11/2004	HK$1.4 million for	Not available	Not	No
Limited (487)		14.5% interest of a		available
		company which will
		develop a hotel with
		casino in Macau.
Shun Tak	5/11/2004 &	HK$15 million for the	7.4% discount	Not	No
Holdings	11/11/2004	entire issued capitals of	to the valuation	available
Limited (242)		the holding companies
		of a land which may be
		developed into a
		premise with operation
		of casino.
Emperor (China	18/11/2004	HK$290 million for the	At valuation	Not	No
Concept)		acquisition of 45% of a		available
Investments		property to be
Limited (296)		developed into a hotel
		with a casino operation
Massive	25/11/2004	HK$35 million for	67% premium	143	Yes
Resources		acquisition of 70% of a	over the net	(Note 1)
International		company which in	asset value and
Corporation		turns holds 5% interest	outstanding
Limited (70)		in another company	shareholders’
		which entitled to share	loan of the
		80% of profit from a	company
		casino.
A-Max Holdings	7/12/2004	HK$640 million for the	Not available	Not	No
Limited (959)		subscription of 7.41%		available
		of the enlarged issued
		capital of a company
		engaging in gaming
		and entertainment
		business in Macau.
Medtech Group	14/12/2004	HK$500 million for	At valuation	55	Yes
Company		acquisition of entire		(Note 2)
Limited (1031)		interest of a hotel in
		Macau with operation
		of casino.

LETTER FROM BARON

					Business/
					operations
					commenced as
		Consideration/			at the date of
Company Name	Date of	nature of the	Premium/	PE ratio	respective
(Stock Code)	announcement(s)	transaction(s)	Discount	(times)	announcement
Pearl Oriental	6/1/2005	HK$514 million for	24% discount	6.4	Yes
Enterprises		acquisition of 40%	to the valuation	(Note 3)
Limited (600)		interest of a company
		which possesses a hotel
		with casino operations.
Golden Resorts	19/1/2005	HK$1.25 billion for	10.7% discount	Not	Yes
Group Limited		acquisition of entire	to the valuation	available
(1031)		interest of a company,
		whose principal asset is
		a hotel with casino
		operations.
139 Holdings	27/1/2005 &	HK$500 million for	3.8% discount	24.9	Yes
Limited (139)	4/2/2005	acquisition of entire	to the valuation	(Note 4)
		issued share capital of a
		company, of which the
		principal asset is a hotel
		in Macau.
International	17/3/2005	HK$363.2 million for	Approximately	Not	No
Entertainment		acquisition of 40%	at valuation	available
Corporation		interest in a company,
(8118)		of which the principal
		asset is a land in Macau
		to be developed into a
		hotel with casino
		operations.
The Company	30/8/2005	HK$274 million for	5.3% discount	55.6	Yes
		acquisition of 95%	to the
		interest in Waldorf of	aggregate of
		which the principal	net tangible
		asset is a hotel in	asset and sale
		Macau	loan

Note:

1. Based on 70% of the annualised unaudited profit of the acquired company for the period from 28 July 2004 (date of incorporation) to 31 October 2004 of approximately HK$0.25 million.

2. Based on the audited profit of the hotel for the financial year ended 31 December 2004 of approximately HK$9.1 million, which was disclosed in the circular dated 22 February 2005.

LETTER FROM BARON

3. Based on 40% of the annual guaranteed net profit after taxation of not less than HK$80 million.

4. Based on the audited profit of the acquired company for the financial year ended 31 December 2004 of approximately HK$20.1 million, which was disclosed in the circular dated 10 June 2005.

As shown from the above table, the Premium/Discount ranged from premium of 67% to discount of 24%. The Consideration represents a 5.3% discount to the aggregate of unaudited net tangible asset of the Waldorf Group as at 31 July 2005 and the Sale Loan, lies within this range. Regarding the PE ratio to the transactions of the Comparables, six out of ten Comparables do not provide PE ratio, it could be interpreted as those acquired assets/ companies in the respective transactions cannot provide earnings as at the date of respective announcements. The maximum PE ratio from the Comparables is approximately 143 times as the minimum PE ratio of the Comparables is approximately 6.4 times. The Acquisition with PE ratio of approximately 55.6 times lies within the range of the PE ratio of the Comparables. As mentioned before, the Hotel has operated business for about 9 months during the financial year ended 31 March 2005. We consider the PE ratio of the Acquisition should be further reduced if the Waldorf Group recorded a full year of operating results for the Hotel, assuming that there was no material change in the market environment which may adversely affect the performance of the Hotel. Having considered the Waldorf Group, which could contribute net asset and positive earnings to the Group after completion of the Acquisition; and the Premium/ Discount and PE ratio of the Acquisition and the Comparables, we consider the Consideration is determined on a fair and reasonable basis.

Moreover, amongst the transactions of the ten Comparables, five of which had not established business or commenced operations as at the date of their respective announcements. We consider those transactions without existing operations may imply a longer period of investment, hence cannot realise an immediate benefit in terms of the earning base and cash flow stream. As stated in Appendix I “Accountants’ Report on the Waldorf Group”, the audited revenue and the net profit of the Waldorf Group were approximately MOP 103.7 million and approximately MOP5.3 million respectively for the year ended 31 March 2005. Since the Hotel has profitable track record and is ready to provide immediate revenue and cashflow to the Group after Acquisition, we are of the view that the Acquisition is in the interests of the Company and its Shareholders as a whole.

3. Financial Effects of the Acquisition

As completion of the Open Offer is a condition precedent for the Acquisition and the net proceeds from the Open Offer will be used for satisfying part of the Consideration. Accordingly, we are of the view that the financial effect of the Acquisition should be analysed together with the financial effect of the Open Offer, which are disclosed under the heading “Financial Effects of the Open Offer and the Acquisition” in this letter.

4. Conclusion

Having considered (i) the Acquisition may enhance the revenue base and bring recurrent income to the Group; (ii) the good prospect of tourism of Macau; and (iii) the Consideration represents a discount of approximately 5.3% of the aggregate of the unaudited consolidated net tangible asset of Waldorf as at 31 July 2005 and the face amount of the Sale Loan, we consider the Acquisition is in the interests of the Group and the Shareholders taken as a whole.

LETTER FROM BARON

II. THE OPEN OFFER

1. Background and reason of the Open Offer

The Directors are of the view that the Acquisition is a valuable opportunity for the Company to capitalise on the growth potential of the hotel and hospitality industry in Macau and enhance the recurrent income base of the Group in the long run. The Directors consider that the Open Offer provides a good opportunity for the Company to strengthen its capital base and financial position so as to facilitate the Company to partially finance the Acquisition. The Directors are also of the view that it is in the interests of the Company to raise the required capital by way of Open Offer, which offers a chance for all Qualifying Shareholders to maintain their respective pro rata shareholdings in the Company at a relatively low price and to participate in the future growth and development of the Company.

The gross proceeds of the Open Offer are estimated to be approximately HK$197.3 million. After deducting the estimated fees and expenses in relation to the Open Offer amount to approximately HK$4.3 million, the net proceeds of the Open Offer are estimated to be approximately HK$193 million. The Directors intend to use the net proceeds of the Open Offer of approximately HK$193 million for satisfying part of the Consideration of the Acquisition.

2. Terms of the Open Offer

Basis of the Open Offer: One Offer Share for every one Share held on the Record Date Number of Shares in issue 1,315,060,800 Shares as at the Latest Practicable Date: Number of Offer Shares to be issued: 1,315,060,800 Offer Shares Subscription price: HK$0.15 per Offer Share payable in full on application

As at the Latest Practicable Date, the Company did not have any outstanding options, warrants or securities in issue which are convertible into Shares.

The subscription price of HK$0.15 per Offer Share (the “Subscription Price”) represents:

(i) a discount of approximately 67.39% to the closing price of HK$0.460 per Share as quoted on the Stock Exchange on 16 August 2005, being the last trading day of the Shares on the Stock Exchange prior to the suspension of the trading in the Shares pending publication of this announcement;
(ii) a discount of approximately 68.22% to the average closing price of approximately HK$0.472 per Share quoted on the Stock Exchange for the five trading days up to and including 16 August 2005;
(iii) a discount of approximately 69.01% to the average closing price of approximately HK$0.484 per Share quoted on the Stock Exchange for the 10 trading days up to and including 16 August 2005;
(iv) a discount of approximately 50.82% to the theoretical ex-rights price of approximately HK$0.305 based on the closing price of HK$0.460 per Share as quoted on the Stock Exchange on 16 August 2005;

LETTER FROM BARON

(v) a discount of approximately 58.33% to the closing price of approximately HK$0.36 per Share quoted on the Latest Practicable Date;
(vi) a discount of approximately 41.18% to the theoretical ex-rights price of approximately HK$0.255 based on the closing price of HK$0.360 per Share as quoted on the Latest Practicable Date; and
(vii) a discount of approximately 32.74% to the audited consolidated net asset value per Share of approximately HK$0.223 as at 31 March 2005 (based on 1,095,884,000 Shares then in issue).

The subscription price of HK$0.15 per Offer Share was arrived at after arm’s length negotiation between the Company and the Underwriters.

Set out below is the graph showing the closing prices of the Shares for an approximately 6-month period from February 2005 up to the Latest Practicable Date (the “Review Period”):

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Source: www.hkex.com.hk

During the Review Period, the Shares have traded above the Subscription Price, ranging from HK$0.275 to HK$0.80. In fact, on 30 August 2005, the first trading day after which the Announcement was published and disseminated, the price of the Shares rose to daily high of HK$0.64 from HK$0.46 (the last closing price prior to suspension of the trading of Shares on 17 August 2005), representing an increase of approximately 39%. We consider the immediate increase in the price of the Shares subsequent to the publication of the Announcement to be a positive and welcoming sign by the market and investors on the Open Offer and the Acquisition.

We have also reviewed the trading volume of the Shares during the Review Period, a summary of which is set out below:

LETTER FROM BARON

	Trading volume of	Number of issued	Trading volume during the
	Shares during the	Shares as the Latest	month/period to issued
	month/period	Practicable Date	share capital as the Latest
			Practicable Date
2005	(million shares)	(million shares)	(%)
February	17.9	1,315	1.36
March	201.6	1,315	15.33
April	200.3	1,315	15.23
May	615.6	1,315	46.81
June	74.4	1,315	5.66
July	47.8	1,315	3.63
1 to 16 August	25.1	1,315	1.91
17 to 29 August		Suspension of trading
30 to 31 August	43.5	1,315	3.31
August (total)	68.6	1,315	5.22
1 September to the Latest	31.5	1,315	2.40
Practicable Date

Source: Bloomberg

As illustrated in the table above, the monthly trading volume of the Shares ranged from 17.9 million Shares to 615.6 million Shares during the Review Period. The aggregate monthly traded Shares in February 2005 were as low as approximately 1.36% of the Company’s issued share capital and the turnover were peaked in May 2005 where the monthly traded Shares to the issued share capital of the Company amounted to approximately 46.81%. Shareholders should note that after the exceptional trading volume in May 2005 due to the Placing, the Shares have been thinly traded from June 2005 to 16 August 2005 (last trading day prior to suspension of trading of the Shares). The proportion of monthly traded Shares to the total number of issued share capital of the Company ranged between approximately 3.63% to approximately 5.66% during the period from June 2005 to July 2005. The proportion of traded Shares to the total number of issued share capital of the Company during the period from 1 to 16 August 2005 was low, representing an approximately of 1.91%. After the publication of the Announcement, the trading volume of Shares increased in the period of 30 to 31 August 2005 which we consider is a positive response from the market on the Proposals. From 1 September 2005 to the Latest Practicable Date, the trading volume again remained inactive and the proportion of the trading volume for this period to issued share capital dropped back to approximately 2.40%. Given the illiquidity in the trading volume of the Shares, we are of the view that the trading price range may not necessarily be a reasonable representation of the price level in which the Company can expect to raise fund through further placing in the market. Further, taking into account the illiquidity of the trading volume of the Shares, we consider a greater discount of the Subscription Price to the market price of Shares may be a solution to raise the attractiveness of the Shares in the market. Independent Shareholders should note that it is uncertain as to whether the relatively better trading volume of the Shares may sustain following completion of the Open Offer.

In order to compare the Subscription Price with the market price of the Shares, we have identified, to the best of our knowledge, all the open offer announced by the companies that are listed on the main board of the Stock Exchange (“Comparable Open Offer”) within 12 months prior to the date of the Announcement, details of which are set out below:

LETTER FROM BARON

				Discount to the
		Basis of		closing price on	Discount to
		provisional		the last trading	the theoretical
		allotment		day prior to the	ex-entitlement
Company Name	Date of	for the open	Subscription	open offer	price
(Stock Code)	announcement	offer	Price(HK$)	(%)	(%)
Gorient (Holdings)
Limited (729)	5 August 2005	3 for 1	0.10	60.00	27.54
Shang Hua Holdings
Ltd. (371)	7 July 2005	1 for 2	0.10	83.33	76.91
Sino Gas Group
Limited (260)	30 May 2005	2 for 1	0.02	48.72	23.08
U-Right International
Holdings Ltd. (627)	23 May 2005	1 for 2	0.25	31.5	23.48
Ngai Hing Hong
Company Ltd. (1047)	11 May 2005	1 for 5	0.60	6.25	5.21
Omnicorp Ltd. (94)	7 April 2005	1 for 2	0.38	63.10	53.30
Orient Industries
Holdings Ltd. (353)	21 February 2005	1 for 2	0.20	60.00	50.00
Northern
International
Holdings Limited
(736)	28 January 2005	1 for 1	0.02	33.33	20.00
Xin Corporation Ltd.
(1141)	14 January 2005	1 for 2	0.04	25.90	18.90
Maxx Bioscience
Holdings Ltd. (512)	6 January 2005	2 for 1	0.11	41.50	19.10
Jackin International
Holdings Ltd. (630)	3 December 2004	1 for 2	0.10	50.00	40.00
Radford Capital
Investment Limited
(901)	28 October 2004	1 for 2	0.02	4.80	3.20

LETTER FROM BARON

				Discount to the
		Basis of		closing price on	Discount to
		provisional		the last trading	the theoretical
		allotment		day prior to the	ex-entitlement
Company Name	Date of	for the open	Subscription	open offer	price
(Stock Code)	announcement	offer	Price(HK$)	(%)	(%)
Tse Sui Luen
Jewellery
(International) Ltd.
(417)	6 October 2004	1 for 5	1.03	80.19	77.00
Theme International
Holdings Ltd. (990)	17 September 2004	1 for 1	0.03	42.31	26.83
Mean				45.07	33.18
Median				45.52	25.16
Range				4.80 to 83.33	3.20 to 77.00
The Company	30 August 2005	1 for 1	0.15	67.39	50.82

As shown in the above table, the subscription prices of the Comparable Open Offer to their respective closing prices on the last trading day prior to the announcement of their open offers (the “Closing Price Range”) ranged from a discount of 4.80% to 83.33%, with the mean and median of discounts of 45.07% and 45.52% respectively. The discounts of the subscription prices of the Comparable Open Offer to their respective theoretical ex-rights prices per share based on the closing price per price on the last trading day prior to the date of announcement (the “Theoretical Price Range”) ranged from a discount of 3.20% to 77.00%, with the mean and median of discounts of 33.18% and 25.16% respectively.

We note that the discount of the Subscription Price to the closing price of the Shares of 67.39% as at the last trading day prior to the Announcement falls within the Closing Price Range and is above the mean and median of those of the Comparable Open Offer. In addition, the discount of the Subscription Price to the theoretical ex-rights price of the Shares of 50.82% falls within the Theoretical Price Range and is deeper than the mean and median of the Theoretical Price Range. Despite the discounts of the Subscription Price are deeper than the means and medians of the Closing Price Range and Theoretical Price Range respectively, they fall within the Closing Price Range and Theoretical Price Range.

In order to enhance the attractiveness of an open offer exercise, it is a market practice that the subscription price of an open offer represents a discount to the prevailing market prices of the relevant shares. Hence, the fact that the Subscription Price is lower than the prevailing market prices of the Shares is in line with the normal market practice. Accordingly, we consider the discount and the Subscription Price to be fair and reasonable and in-line with normal market practice.

LETTER FROM BARON

3. Dilution effect on shareholding interests of the Independent Shareholders and the absence of the arrangement for excess application of Offer Shares

All Qualifying Shareholders are entitled to subscribe for the Offer Shares. For those Qualifying Shareholders who take up their entitlements in full under the Open Offer, their respective stake in the Company will remain unchanged after the Open Offer. The effects of the Open Offer on the shareholding structure of the Company are illustrated as follows:

World Possession Mr. Liu Yu Mo (Note 3) Chung Nam Public Shareholders Total	As at the Latest Practicable Date Number of Shares 587,322,207 24,000 0 727,714,593 1,315,060,800	% 44.661 0.002 0 55.337 100.000	Immediately following completion of the Open Offer on the assumption as set out in Note 1 Number of Shares 1,174,644,414 48,000 0 1,455,429,186 2,630,121,600	% 44.661 0.002 0 55.337 100.000	Immediately following completion of the Open Offer on the assumption as set out in Note 2 Number of Shares 1,767,383,007 24,000 135,000,000 727,714,593 2,630,121,600	% 67.198 0.001 5.133 27.668
						100.000

Notes:

1. Assuming all Shareholders take up their respective entitlements of Offer Shares under the Open Offer.

2. Assuming none of the Shareholders (save for World Possession which has undertaken to subscribe for (or procure the subscription of) its pro-rata entitlement of Offer Shares in full under the Open Offer) takes up their respective entitlements of Offer Shares under the Open Offer and, accordingly, World Possession shall further take up its share of the Underwritten Shares in full.

3. An executive Director.

Under the Open Offer, there will be no trading arrangement for nil-paid entitlement. Those Independent Shareholders who do not accept the Open Offer will not be able to sell their nil-paid entitlement in the open market. Pursuant to the terms of the Underwriting Agreement, no provision is stipulated for any arrangement for excess application of Offer Shares, and it was on such basis that the Underwriters (one of which is an Independent Third Party) agreed to enter into the Underwriting Agreement. In this regard, the Qualifying Shareholders will not be entitled to subscribe for any Offer Shares in excess of their assured entitlements to subscribe for the Offer Shares. For those Excluded Shareholders who will not be entitled to take part in the Open Offer and the Qualifying Shareholders who do not accept the Open Offer, their shareholdings in the Company will be diluted by approximately 50% upon completion of the Open Offer. Under the Open Offer, the Qualifying Shareholders are offered a chance to subscribe for their pro-rata Offer Shares at a relatively low price to maintain their interests in the Company unchanged. In view of the discount of the Subscription Price to the market price per Share, the Board believed that there would be a high level of acceptance of the Offer Shares by the existing Shareholders and, accordingly, there would not be any significant number of Offer Shares available for

LETTER FROM BARON

excess application. Based on the 14 Comparable Open Offer listed on pages 46 to 47, four of which did not offer arrangement for excess application. We are of the view that absence of the arrangement for excess application is not an uncommon market practice, but it will affect the rights of the Qualifying Shareholders (other than the Underwriters) by limiting them to further participate in the Open Offer at a relatively low Subscription Price.

4. Other financing alternatives

As advised by the Directors, they have considered alternative means of financing other than an open offer, including bank borrowings, private placement of securities and right issues. However, considering the Group’s current financial position and the pro forma financial position after the Open Offer and the Acquisition, the Directors believe that taking on additional borrowings would be imprudent particularly when the interest rate in Hong Kong is hiking which will increase the Group’s gearing ratio and borrowing cost. Private placements of new shares, open offer and rights issue are common means of equity financing. The Directors consider that a private placement of Shares by its nature excludes existing Shareholders, and at the same time, results in dilution of existing Shareholders’ interests. Both open offer and rights issue offer all the Shareholders equal opportunities to participate in the enlargement of the capital base of the Company and allow them to maintain their proportionate interests in the Company.

We have conducted an analysis of the trading volume of nil-paid rights in the period of six months prior to the date of the Announcement (sources from Bloomberg) and found, to our best endeavor, ten nil-paid rights that were traded in the main board of the Stock Exchange during such period (“Rights-Comparables”). The percentage of total number of nil-paid rights traded to the total allotted nil-paid rights (“Percentage”) for the Rights-Comparables ranged from 0% to 34.35% with an average Percentage of approximately 9.03%. Three of the Rights-Comparables had zero trading during their respective trading periods and four of them had Percentage of less than 10%. Taking into account the average Percentage and the number of Rights-Comparables with zero trading volume, we concluded that the trading of nil-paid rights were not active in the market and hence we concur with the Directors’ view that the Open Offer may save additional cost in respect arrangement for the trading of nil-paid rights, which is more cost effective and is in the interest of the Company and the Shareholders as a whole to raise capital. Therefore, the Directors decided to proceed with the Open Offer. In that regard, we consider the Open Offer to be an acceptable and equitable means to raise funds for the Company to finance the Acquisition.

5. Underwriting arrangements

Pursuant to the Underwriting Agreement, the Open Offer will be fully underwritten as to 592,738,593 Underwritten Shares (representing about 22.5% of the issued share capital of the Company as enlarged by completion of the Open Offer) by World Possession, the single largest Shareholder and as to 135,000,000 Underwritten Shares (representing about 5.1% of the issued share capital of the Company as enlarged by completion of the Open Offer) by Chung Nam, an Independent Third Party and a commercial underwriter. World Possession was beneficially interested in 587,322,207 Shares as at Latest Practicable Date and had undertaken to subscribe for (or procure the subscription of) its pro-rata entitlement to 587,322,207 Offer Shares under the Open Offer in full. According to the management of the Company, they have contacted other independent commercial underwriters to participate in the proposed Open Offer. Based on the market response, the Company decided to select World Possession and Chung Nam to act as the Underwriters for the Open Offer.

LETTER FROM BARON

We consider that it is not unusual for a company to approach its single largest shareholder or substantial shareholder for underwriting the fund raising exercise. Considering that World Possession (beneficially owned by Mr. Yeung, Madam Ma and Ms. Yeung) is the single largest Shareholder and the beneficial owners of which are all executive Directors, the Directors believe that the participation of World Possession as one of the Underwriters would be an indication of confidence optimism in the Company and its prospect to other Shareholders.

From the Comparable Open Offer as set out in pages 46 to 47, we note that the commissions of the respective commercial underwriters ranged from 1.25% to 3%. We consider the commission charged by Chung Nam of 1.5% is within the range of normal commissions charged by commercial underwriters and is comparable to the market practice. In addition, we are of the view that World Possession agreed to waive its underwriting commission is beneficial to the Group and the Shareholders as a whole as the cost incurred from the fund raising exercise can be reduced.

After negotiations, the Company decided that World Possession met the Company’s requirements in respect of the amount to be raised and that the terms agreed upon were fair and reasonable and in line with normal market practice. In fact, among the Comparable Open Offer, two of them were underwritten by the controlling shareholder or its associates of the companies proposing open offers. Hence, we consider the Company’s choice of World Possession as one of the Underwriters of the Open Offer to be in-line with normal market practice.

Subject to the fulfillment of the conditions contained in the Underwriting Agreement, it should also be noted that the Open Offer would not proceed if the Underwriters exercise their termination rights under the Underwriting Agreement, details of the provisions granting the Underwriters such termination rights are included in the “Letter from the Board”. We consider such provisions are in normal commercial terms and in line with the normal market practice.

6. Financial Effects of the Open Offer and the Acquisition

As the Open Offer and the Acquisition are inter-conditional, we will quantify the financial effects of the Open Offer and Acquisition together. We have made reference to the section headed “Pro forma Financial Information of the Enlarged Group” in Appendix III of the Circular and the Shareholders are advised to refer to this section for further details.

Financial review of the Group

The following table illustrates some of the key financial information of the Group for the last two financial years ended 31 March 2005 extracted from Appendix II “Financial Information of the Group”:

LETTER FROM BARON

For the year ended 31 March	2005	2004
	(HK$ million)	(HK$ million)
Turnover	143.7	39.5
Operating profit	19.7	14.5
Net profit	15.6	11.9
Current Assets	32.7	16.9
Current Liabilities	14.4	21.6
Total Asset	262.0	233.1
Total Liabilities	17.2	24.7
Net Assets	244.8	208.4
Total borrowings	0	6.0
Working Capital	18.3	(4.7)
Current Ratio	2.27	0.78
Gearing Ratio_(Note)_	0	0.03

Note: Gearing Ratio defined as total borrowings to net assets

As illustrated above, for the financial year ended 31 March 2005, the Group recorded a turnover of approximately HK$143.7 million, increased by approximately 264.1% from the turnover of approximately HK$39.5 million for the year ended 31 March 2004. The increase can be explained by the completion of the acquisition of wedding services business in March 2004, which recorded a total turnover of about HK$105.3 million.

For the financial year ended 31 March 2005, the Group recorded a net profit of approximately HK$15.6 million. The operating profit of the Group for the year amounted to HK$19.7 million as compared to an operating profit of HK$14.5 million last year. The increase in operating profit can be explained by the contribution of HK$15 million from the wedding services business.

As shown above, as at 31 March 2005, the Group had a current ratio of 2.27 and a net working capital of approximately HK$18.3 million, increased from current ratio of 0.78 and negative working capital of approximately HK$4.7 million as at 31 March 2004. The gearing ratio was approximately 0.03 as at 31 March 2004, as the bank borrowings of HK$6 million of the Group were fully repaid in June 2004. Therefore, the gearing ratio of the Group as at 31 March 2005 was zero.

Given that the aggregate amount of the aforesaid current assets of HK$32.7 million, the net proceeds from the Placing of approximately HK$128.1 million and the net proceeds of the Open Offer of approximately HK$193 million, which are in far excess of the Consideration of approximately HK$274 million, we believe that the Group does have sufficient funding for the Acquisition from these fund raising exercises.

Net tangible asset

The following table extracted the information from Appendix III “Pro forma Financial Information of the Enlarged Group” and illustrates the financial effects of the Open Offer and the Acquisition on the Group’s net tangible asset (without taken into account the effect of the Placing):

LETTER FROM BARON

Audited consolidated net tangible asset of the Group as at 31 March 2005

HK$’000 225,862

Audited consolidated net tangible asset per Share as at 31 March 2005 (on the basis of 1,095,884,000 Shares in issue) HK$0.2061

Pro forma adjusted unaudited net tangible asset of the Enlarged Group 413,307 following the Open Offer and completion of the Acquisition (on the basis of 2,410,944,800 Shares then in issue) (Note)

Pro forma adjusted unaudited net tangible assets per Share

HK$0.1714

Note: The unaudited pro forma consolidated net tangible assets of the Enlarged Group would be approximately calculated by total net asset of HK$437,851,000 net of the goodwill of HK$24,544,000 of the Enlarged Group.

The audited tangible assets of the Group amounted to approximately HK$225.9 million as at 31 March 2005. Following the Open Offer and completion of the Acquisition, the unaudited pro forma consolidated net tangible assets of the Enlarged Group will be increased to approximately HK$413.3 million immediately, representing an increase of approximately 83.0% as compared to the figures as at 31 March 2005. The audited consolidated net tangible assets per Share after the Open Offer and completion of the Acquisition however will be diluted to approximately HK$0.1714 (based on 2,410,944,800 Shares then in issue after the Open Offer). The decrease was mainly due to the fact that the Subscription Price for the Open Offer is at a discount to the audited consolidated net tangible asset per Share prior to the Open Offer. We take into account that the Open Offer will enlarge the capital base of the Group so as to facilitate the Acquisition, we consider the overall increase in the Group’s unaudited consolidated net tangible asset to be favorable to the Company as a whole.

Earnings

Upon completion of the Acquisition, 95% of the net earnings/loss of the Waldorf Group will be shared for the consolidated net earnings/loss for the Group. As set out in Appendix III to this circular, the net profit after tax of for the Waldorf Group as at 31 March 2005 amounted to approximately HK$5.2 million. We would like to draw your attention that the Hotel has operated business for about 9 months during the financial year. The full year earnings of the Waldorf Group may be higher (as the case may be), assuming that there was no material change in the market environment which may adversely affect the performance of the Hotel. The unaudited pro forma net profit of the Enlarged Group upon completion of the Sale and Purchase Agreement would be approximately HK$20.5 million as compared to the audited net profit of the Group of approximately HK$15.6 million as at 31 March 2005, representing an increase of approximately 31.6%. The unaudited pro forma earnings per Share will be approximately HK$0.0085 per Share on the basis of 2,410,944,800 Shares then in issue, representing approximately 40.1% dilution from approximately HK$0.0142 per Share of the Group as at 31 March 2005. Despite the decrease in earnings per Share, Waldorf Group will provide a new source of income stream to the Enlarged Group after the Acquisition and the Open Offer. The revenue of the Waldorf Group was amounted to approximately MOP103.7 million for the financial year ended 31 March 2005, which was entirely attributable to the hotel revenue and food beverage revenues and the rental income. We consider that the Open Offer and the Acquisition are favorable to the Group as Waldorf Group can improve the turnover and enhance the steady earnings base of the Group on the assumption that there will be no significant change of the operation expense in the Waldorf Group and the Hotel after the Open Offer and the Acquisition.

LETTER FROM BARON

Gearing ratio

As at 31 March 2005, the Group had no interest-bearing borrowing, and the audited consolidated net tangible asset was approximately HK$225.9 million, representing a gearing ratio of approximately zero. As shown above, the audited pro forma consolidated net tangible asset of the Enlarged Group as at 31 March 2005, immediately following the Open Offer and the Acquisition will increase to approximately HK$413.3 million. As a result, the gearing ratio of the Group will increase to approximately 0.405 (using the pro forma total borrowings of approximately HK$167.5 million and pro forma consolidated net tangible asset of the Group of approximately HK$413.3 million) as a result of the Open Offer and the Acquisition. The borrowings mainly represent bank loans of about MOP172.6 million from Waldorf Group that are secured by the Hotel and a property in Hong Kong. While the gearing ratio is adversely affected, we consider the gearing position of the Group is still healthy as the ratio is far less than one. On the other hand, after recognizing the net proceeds from the Open Offer that are intended for the Acquisition which may potentially enhance the revenue base and recurrent income of the Group, we consider such a minor increase in the Group’s gearing ratio is acceptable.

Liquidity

The net proceeds of approximately HK$193 million from the Open Offer are intended to satisfy part of the Consideration. The balance of approximately HK$81 million will be paid by cash and funded by the net proceeds from the Placing. The current ratio of the Group before the pro forma adjustments, based on its audited accounts at 31 March 2005, will further decrease from approximately 2.26 (calculated by approximately HK$32.7 million current asset divided by HK$14.4 million current liabilities) to approximately 0.23 (calculated by approximately HK$33.6 million adjusted unaudited pro forma current asset divided by HK$147.5 million adjusted unaudited pro forma current liabilities, with the assumption that the negative cash balance of approximately HK$55.7 million were reclassified as current liabilities) immediately after the pro forma adjustments. Cash position of the Group will be significantly reduced after the Acquisition. In view of the Acquisition would enhance the revenue base of the Group and bring recurrent income to the Group, we are of the opinion that the decrease in working capital to this extent is reasoanble and acceptable.

Prospects of the Enlarged Group

The current principal activities of the Group are restaurant operations, property investment and wedding services business. The operating profit of the Group for the year ended 31 March 2005 increased by 35.8% which was mainly contributed by the completion of acquisition of the wedding business in March 2004. During the year ended 31 March 2005, there was no material acquisitions nor disposals of subsidiaries and associated companies by the Group. Subsequent to the financial year ended 31 March 2005, the Group has expanded its business into the business of talent management, Japanese restaurant and retail trading of watches business.

Regarding the blooming of tourism in Macau as a result of liberation of its gaming sector and the execution of individual visit scheme (details of which are refer to in the heading “Operating environment in Macau” in this letter), the hotel and hospitality industry in Macau is well poised with good potential. In view of this, the Directors consider that they may leverage on their extensive experience and business network in the hospitality industry to expand its operation through the Acquisition. As Waldorf Group is principally engaged in the operation of the Hotel in Macau and to develop new business opportunities in Macau, the Directors consider that the Acquisition may create synergy in consolidating the existing businesses of the Group and the hotel business of the Waldorf Group. Mr. Chung Siu Wah and Mr. Au

LETTER FROM BARON

Edmond Wah (both the Directors and directors of Waldorf) had been directors of hotel companies with hotel management experience in Philippines and China respectively. The Company considers their past experience in hotel business would be an advantage in operating the Hotel and would bring in new business opportunities to the Enlarged Group leveraging on their expertise in hotel management.

Besides, the Directors consider the Waldorf Group will bring stable recurrent income to the Group attributable to the income from the Hotel. Since the Hotel commenced operation in July 2004, the Hotel has already provided 9 months’ operating record to the financial statement of Waldorf Group. The audited revenue of the Waldorf Group for the year ended 31 March 2005 was approximately MOP103.7 million (approximately HK$100.7 million), which was derived from two sources of the Hotel business, namely (i) the hotel and food and beverage revenue (accounting for 77% of the total revenue); and (ii) the rental income (accounting for 23% of the total revenue). The net profit of the Waldorf Group recorded for the year ended 31 March 2005 was approximately MOP5.3 million (approximately HK$5.2 million). The Waldorf Group also recorded a net cash inflow of approximately HK$16.5 million for the year ended 31 March 2005.

In light of the fact that the Waldorf Group became profitable for the year ended 31 March 2005 after the Hotel commenced its operation in July 2004, especially the revenue generating ability of the Hotel as a newly established hotel in Macau, the Directors believe that the Acquisition would enhance the revenue base of the Group and bring recurrent income to the Group. We concur with the Directors’ view that the Open Offer and the Acquisition is beneficial to the prospect of the Group in long run.

7. Conclusion

We consider that the Open Offer is fair and reasonable as a whole after taking into account the following terms and factors of the Open Offer:

(i) those Independent Shareholders (who are also Qualifying Shareholders) are offered a chance to subscribe for the Offer Shares at a relatively low price and to maintain their interests unchanged in the Company after the Open Offer. However, the Independent Shareholders (including those Excluded Shareholders) not accepting the Open Offer shall have their interests in the Company diluted but they shall be able to participate in the growth and development of the Company and share the potential enhancement of the capital base and the possible increase of recurrent income of the Group after completion of the Acquisition and the Open Offer;
(ii) Qualifying Shareholders who do not accept the Open Offer will not be able to sell their nil-paid entitlement in the open market;
(iii) Qualifying Shareholders will not be entitled to subscribe for any Offer Shares in excess of their assured entitlements to subscribe for the Offer Shares, which will be fully underwritten by the Underwriters (one of which is World Possession, controlling shareholder of the Company) and therefore limiting the right of the Qualifying Shareholders (other than the Underwriters) to further participate in the Open Offer;
(iv) the Subscription Price is set at a discount to the prevailing marketing price of the Shares, which is within the Closing Price Range and Theoretical Price Range of the Comparable Open Offer and provides reasonable attractiveness to the Independent Shareholders;

LETTER FROM BARON

(v) World Possession is willing to take up the underwriting commitment for the purpose of supporting the Open Offer and has agreed given up its right to receive the underwriting commission that would have amounted to approximately HK$1.33 million (based on the rate charged by Chung Nam) for the purpose of saving the cost in relation to the Open Offer;
(vi) positive market response in terms of share price and trading volume of the Shares immediately after the date of announcement of the Open Offer;
(vii) the Company will benefit from additional financing from the Open Offer to fund its Acquisition;
(viii) the discount of the Subscription Price to the closing pricing on the last trading day and the theoretical ex-rights price is fair and reasonable and in-line with normal industry practices;
(ix) the underwriting arrangement is consistent with and comparable to normal industry practices;
(x) the Open Offer will increase the Company’s revenue base through the Acquisition and provide an opportunity to the Independent Shareholders in participating the future growth and development of the Company; and
(xi) the Open Offer is an interest-free avenue of fund raising which will not increase the gearing of the Group for the purpose of the Acquisition.

After balancing the above factors, including no trading arrangement for nil-paid entitlement and the absence of the arrangement of excess application of Offer Shares, we consider the terms of the Open Offer are fair and reasonable as a whole so far as the interests of the Shareholders and the Company are concerned. Accordingly, we recommend the Independent Shareholders to vote in favour of the ordinary resolution to be proposed at the SGM to approve the Open Offer including the Underwriting Agreement and the absence of the arrangement for excess application of Offer Shares.

III. The Whitewash Waiver

1. Background

As stated in the “Letter from the Board” of the Circular, the Open Offer is essential to fund the Acquisition without deteriorating the financial position of the Group and providing opportunity to the Independent Shareholders in participating the future growth and development of the Company. In the event that World Possession is required to take up fully its 592,738,593 Underwritten Shares and assuming that there is no other change in the shareholding structure of the Company from the date of this Circular until immediately prior to the issue of the Offer Shares, the shareholding interests of World Possession and its Concert Parties in the Company will increase from approximately 44.66% to 67.20%, which exceeds the 2% creeper limit as stipulated under the Takeovers Code. Accordingly, the underwriting by World Possession of the Open Offer may trigger a mandatory general offer by World Possession for all the Shares not already owned or agreed to be acquired by World Possession or its Concert Parties.

World Possession has applied to the Executive for the Whitewash Waiver, and the Executive has indicated that the Whitewash Waiver will be granted subject to the approval of the Independent Shareholders on a vote taken by way of a poll at the SGM. It is the intention of World Possession to maintain the listing of Shares on the Stock Exchange after the completion of the Open Offer and the

LETTER FROM BARON

Company will be able to fulfill the public float of the Shares of less than 25% even if World Possession takes up fully its entitlement under the Open Offer and its share of the Underwritten Shares.

2. The Whitewash Waiver as the condition of the Open Offer

The Acquisition is going to be funded partially by the proceeds of the Open Offer. Shareholders should note that the Open Offer is conditional on, among others, (i) the Executive granting to World Possession the Whitewash Waiver; (ii) the passing of the relevant resolution by the Independent Shareholders at the SGM approving the Open Offer and the Whitewash Waiver and (iii) the Sale and Purchase Agreement become unconditional (except for the condition on completion of the Open Offer).

None of the above conditions can be waived and if any of them is not fulfilled, the Open Offer will not proceed. As the completion of the Open Offer is one of the conditions which cannot be waived in the Sale and Purchase Agreement, the Acquisition will not become unconditional if the Open Offer is not completed. Therefore, if the Whitewash Waiver is not granted by the Executive, the Shareholders will not have the chance to benefit from the Open Offer which serves as an opportunity to subscribe the Shares at a subscription price lower than the market price of the Shares as at the Latest Practicable Date, and to enjoy the potential benefits of the Open Offer and the Acquisition as outlined above.

In fact, on 30 August 2005, the first trading day after which the Announcement was published and disseminated, the prices of the Shares rose from HK$0.46 to a daily high of HK$0.64. Furthermore, in view of the improved liquidity of the trading of Shares in the market immediately following the release of the Announcement, we consider the release of the Announcement to be a positive and welcoming response by the market and investors on the Open Offer, together with the Acquisition and the prospect of the Group. Since the granting of the Whitewash Waiver is not a waivable condition, the approval of the Whitewash Waiver by the Independent Shareholders is necessary for the Open Offer to proceed and for the Company and the Shareholders to enjoy the benefits of the Open Offer and the Acquisition. Accordingly, we consider that it would be in the interest of the Independent Shareholders to vote in favour of the grant of the Whitewash Waiver.

3. Conclusion

As mentioned above, the terms of the Open Offer are fair and reasonable so far as the interests of the Shareholders and the Company are taken as a whole. Furthermore, taking into account the fact that the Open Offer is essential to fund the Acquisition which will likely facilitate the Group’s future development and enhance the revenue base and recurrent income of the Group, we are of the view that the Open Offer is ultimately beneficial to the Shareholders and the Company. An application has been made by World Possession to the Executive for the granting of the Whitewash Waiver. We are of the opinion that it would be in the interest of the Independent Shareholders to vote in favour of the grant of the Whitewash Waiver.

IV. ONGOING CONNECTED TRANSACTIONS

1. Background and reasons for the Ongoing Connected Transactions

Waldo Entertainment, being an associate of Mr. Yeung, is a service provider for the Casino. Waldo Entertainment and Waldo Hotel entered into a memorandum dated 25 August 2005 (as amended on 29 August 2005), pursuant to which Waldo Hotel agreed to provide certain services and/or facilities to the Casino and its customers commencing from the date of the Memorandum up to 31 March 2008. Related Services include (i) serving of food and beverages and provision of cleaning services in the Casino; (ii)

LETTER FROM BARON

provision of storage, ticketing and transportation services for the customers of the Casino; and (iii) additional or upgraded security services at non-casino areas of the Hotel. Waldo Hotel further agrees to provide hotel accommodation services and food and beverages service (together “Hotel Service”) to Waldo Entertainment. Upon completion of the Acquisition, provision of the Related Services and Hotel Services to Waldo Entertainment by Waldo Hotel constitutes a non-exempt ongoing connected transaction for the Company under Rule 14A.35 of the Listing Rules and will be subject to Independent Shareholders’ approval, with votes taken by poll. World Possession and its associates will abstain from voting in relation to the resolution for approving the Ongoing Connected Transactions.

We consider the Related Services that are mainly basic services in hospitality industry, are provided by Waldo Hotel in its ordinary course of business. The Directors consider and we concur that the services contemplated under the Memorandum enable Waldo Hotel to secure, at no extra fixed cost or salary cost, additional source of income through provision of food and beverages to the Casino’s customers. Provision of Hotel Services to Waldo Entertainment under the Memorandum also secures an additional source of income for the Waldorf Group. For the year ended 31 March 2005, the food and beverages revenue of Waldo Hotel attributable to the Casino amounted to approximately MOP14.2 million (approximately HK$13.7 million).

2. Terms

Pursuant to the Memorandum, Waldo Hotel shall:

(i) be reimbursed by Waldo Entertainment all costs/expenses incurred in the employment of the extra staff members for provision of the Related Services;
(ii) be reimbursed by Waldo Entertainment the cost for all sundries consumed or used by customers of the Casino;
(iii) charge Waldo Entertainment for providing Hotel Services to Waldo Entertainment at prevailing prices offered by Waldo Hotel to regular independent customers and on normal commercial terms; and
(iv) be responsible for all capital expenses and maintenance of such equipment for provision of the Related Services in the Casino.

The charges receivable by Waldo Hotel have been determined on arm’s length negotiations between the parties to the Memorandum. For items (i) and (ii) above, Waldo Hotel is reimbursed by Waldo Entertainment in cash roughly on a monthly basis. We have reviewed the nature of such employment and the sundries consumed and consider the terms for such reimbursement are determined on arm’s length negotiation and under normal commercial terms. For item (iii) above, Waldo Hotel shall charge Waldo Entertainment as and when the consumption arises and the said charges are settled on a monthly basis. We have compared the Hotel Services charged to Waldo Entertainment with price charged to independent regular customers. We are of the opinion that Hotel Services are provided on terms no less favourable than terms to regular independent customers. For item (iv), we consider the capital expenses and maintenance cost in relation to the provision of Related Services that accounted for about 1% of the relevant expense of the Waldo total for the year ended 31 March 2005 to be immaterial. On that basis, we consider the terms of the Ongoing Connected Transactions to be fair and reasonable so far as the Independent Shareholders are concerned.

LETTER FROM BARON

We agreed with the Directors’ view that so long as (i) Waldo Entertainment can procure stable revenue streams to the Hotel; (ii) the services contemplated under the Memorandum will be carried out in the ordinary course of business of the Group upon completion of the Sale and Purchase Agreement on normal commercial terms; and (iii) the payment schedules and terms of the Memorandum are fair and reasonable, the Ongoing Connected Transactions are in the interests of the Group and the Shareholders as a whole.

3. Basis of determining the cap

The cap for the Ongoing Connected Transactions are determined by the Group with reference to the reimbursement/payment by Waldo Entertainment to Waldo Hotel of (i) salary and all costs/expenses incurred by Waldo Hotel for the extra staff members employed; (ii) all sundries consumed by customers of the Casino; and (iii) charges for hotel accommodation service and food and beverages service consumed.

Listed below are the summary of historical figures in respect of the Related Services and Hotel Services reimbursed or received by Waldorf Group:

(i) Reimbursement of salary and all costs/expenses for extra staff member (ii) Reimbursement of sundries consumed (iii) Provision of Hotel Services to Waldo Entertainment Total	For the year ended 31 March 2005 MOP HK$ 8,742,000 8,487,000 592,000 575,000 489,000 475,000 9,823,000 9,537,000	For the four months ended 31 July 2005 MOP HK$ 4,830,000 4,690,000 400,000 390,000 870,000 845,000 6,100,000 5,925,000	For the four months ended 31 July 2005 MOP HK$ 4,830,000 4,690,000 400,000 390,000 870,000 845,000 6,100,000 5,925,000
			5,925,000

The proposed cap for each of the three years ending 31 March 2008 to amount to approximately HK$10.0 million, HK$24.0 million and HK$26.2 million respectively (the “Annual Caps”), which are detailed in the following table:

(i) Reimbursement of salary and all costs/expenses for extra staff members (ii) Reimbursement of sundries consumed (iii) Provision of Hotel Services to Waldo Entertainment Total	31 March 2006 (Note) HK$ 8,000,000 500,000 1,500,000 10,000,000	For the year ending 31 March 2007 HK$ 20,000,000 1,200,000 2,800,000 24,000,000	31 March 2008 HK$ 22,000,000 1,200,000 3,000,000
			26,200,000

LETTER FROM BARON

Note: Commencing from the date of completion of the Sale and Purchase Agreement, which is estimated to be around the end of October 2005.

The Annual Caps have been arrived at the Directors’ estimation with reference to the audited accounts of the Waldorf Group for the year ended 31 March 2005 and the unaudited management account of the Waldorf Group for the four months ended 31 July 2005 on the historical amount of (i) the salary and all costs/expenses incurred by Waldo Hotel in the employment of the extra staff members employed for provision of the Related Services to the Casino or its customers; (ii) the sundries consumed by customers of the Casino; and (iii) charges for Hotel accommodation service and food and beverages service consumed by Waldo Entertainment and after taking into account of allowance for the inflation of labour cost and material cost in Macau. We have reviewed the basis and assumption made by the Company and made reference to the historical figures in respect of the Related Services and Hotel Services and we consider the Annual Caps to be fair and reasonable so far as the Independent Shareholders are concerned.

3. Annual review of the Related Services and Hotel Services

In compliance with the annual review requirements under Chapter 14A of the Listing Rules, in addition to obtaining Independent Shareholders’ approval for the Ongoing Connected Transactions and the Annual Caps at the SGM, the Company will comply with the following during the term of the Memorandum:

(a) The reimbursement/payment by Waldo Entertainment to Waldo Group cannot exceed the Annual Caps for each of the three financial years ending 31 March 2008.
(b) The independent non-executive Directors will review the reimbursement/payment annually and confirm in the relevant annual report of the Company that the Related Services and Hotel Services have been provided:
(i) in the ordinary and usual course of business of the Company;
(ii) either on normal commercial terms or, if there are no sufficient comparable transactions to judge whether they are on normal commercial terms, on terms no less favorable to the Company than terms available to/from independent third parties; and
(iii) in accordance with the relevant agreements governing the provision of Related Services and Hotel Services on terms that are fair and reasonable and in the interests of the Shareholders as a whole.
(c) The auditors of the Company shall review annually the reimbursement/payment from Waldo Entertainment and confirm in writing to the Directors (a copy of which shall be provided to the Stock Exchange at least 10 business days prior to the bulk printing of the Company’s annual report) that the provision of Related Services and Hotel Services:
(i) have received the approval of the Board;
(ii) have been entered into in accordance with the terms of the Memorandum;
(iii) have been entered into in accordance with the pricing policy of the Group; and

LETTER FROM BARON

(iv) have not exceeded the Annual Caps as set out in paragraph (a) above.
(d) The Company will, and will procure Waldorf Group to, provide the auditors of the Company with full access to the relevant records of the Ongoing Connected Transactions for the purpose of the auditors’ review as referred to in paragraph (c) above.
(e) Brief details of the Ongoing Connected Transactions will be disclosed in the Company’s annual report for each of the financial years ending 31 March 2008, each accompanied with a statement of opinion of the independent non-executive Directors in such manner as referred to in paragraph (b) above.
(f) The Company will comply with the applicable provisions of the Listing Rules governing connected transactions or will make announcement and comply with the relevant provisions of the Listing Rules in the event that the total amount of the Ongoing Connected Transactions exceeds the relevant Annual Caps, or that there is any material amendment to the terms of the Memorandum.

Given the above, we are of the opinion that there will be sufficient procedures and arrangements in place to ensure that the Ongoing Connected Transactions will be conducted on terms that are fair and reasonable so far as the Independent Shareholders are concerned.

4. Conclusion

Having considered the services arrangement, the terms and the Annual Caps of the Ongoing Connected Transactions, we are of the opinion that the terms of the Memorandum are in the interests of the Company and its Shareholders as a whole and the basis of determining the Caps for the Memorandum are fair and reasonable. Accordingly, we advise the Independent Board Committee to recommend the Independent Shareholders to vote in favor of the resolution to approve the Ongoing Connected Transactions and the Annual Caps at the SGM.

RECOMMENDATION

Having considered the above principal factors and reasons, we are of the opinion that (i) the Acquisition; (ii) the Open Offer, including the Underwriting Agreement and the absence of the arrangement for excess application of Offer Shares; (iii) the application for the grant of Whitewash Waiver; and (iv) Ongoing Connected Transactions are in the interest of the Company and 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 favour of the resolution to be proposed at the SGM to approve (i) the Acquisition; (ii) the Open Offer; (iii) the application for the grant of Whitewash Waiver; and (iv) Ongoing Connected Transactions.

Yours faithfully, For and on behalf of

Baron Capital Limited Chiu Sui Keung, Thomas Managing Director

ACCOUNTANTS’ REPORT ON THE WALDORF GROUP

APPENDIX I

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16 September 2005

The Directors United Power Investment Limited Partners Capital International Limited

Dear Sirs,

We set out below our report on the financial information ("Financial Information") regarding Waldorf Holding Limited ("Waldorf") and its subsidiaries (hereinafter collectively referred to as the "Waldorf Group") for the period from 23 October 2003 (date of incorporation of Waldorf) to 31 March 2004 and the year ended 31 March 2005 (the "Relevant Periods"), for inclusion in the circular of the United Power Investment Limited dated 16 September 2005 (the "Circular"), issued in connection with the proposed acquisition of 95% equity interest in Waldorf (the "Acquisition").

Waldorf was incorporated in Macau with limited liability and acted as an investment holding company. As at the date of this report, Waldorf has the following subsidiaries, all of which are private limited companies or, if incorporated/established outside Hong Kong, have substantially the same characteristics as a private limited company in Hong Kong.

	Place and	Issued and	Attributable
	date of	fully paid	equity interest
	incorporation/	quota capital/	directly held
Name of subsidiary	establishment	share capital	by Waldorf	Principal activities
		(Note)
Waldo Hotel Limited *	Macau	Quota capital	100%	Hotel operation
��	12 November 2003	MOP1,000,000
Waldo Travel Limited *	Macau	Quota capital	100%	Inactive
��	12 November 2003	MOP1,500,000
Waldorf Realty Company	Macau	Quota capital	100%	Property holding
Limited *	7 July 2003	MOP100,000
��
World Honour Investments	Hong Kong	Share capital	100%	Property holding
Limited **	31 March 2003	HK$100
��

No audited financial statements have been prepared since their respective dates of incorporation as there are no statutory requirements for these entities to prepare audited financial statements. For the purpose of this report, we have carried out independent audit procedures in accordance with Statements of Auditing Standards issued by the Hong Kong Institute of Certified Public Accountants on the management accounts of these companies prepared under accounting principles generally accepted in Hong Kong for the Relevant Periods.

** We have acted as auditors of this entity for the Relevant Periods.

Note: Quota capital represents the Portuguese equivalence of registered capital as Portuguese is the official language of Macau.

APPENDIX I ACCOUNTANTS’ REPORT ON THE WALDORF GROUP

For the purpose of this report, the directors of Waldorf have prepared consolidated financial statements of the Waldorf Group for the Relevant Periods, in accordance with Hong Kong Financial Reporting Standards promulgated by the Hong Kong Institute of Certified Public Accountants (the "HKICPA"). We have undertaken independent audits of the consolidated financial statements in accordance with the Statements of Auditing Standards issued by the HKICPA.

The Financial Information of the Waldorf Group for the Relevant Periods set out in this report has been prepared from the consolidated financial statements of the Waldorf Group ("Underlying Financial Statements"). We have examined the Financial Information of the Waldorf Group in accordance with the Auditing Guideline "Prospectuses and the Reporting Accountant" as recommended by the HKICPA.

The Underlying Financial Statements are the responsibility of the directors of Waldorf who approved their issue. The directors of Waldorf are responsible for the contents of the Circular in which this report is included. It is our responsibility to compile the Financial Information set out in this report from the Underlying Financial Statements, to form an independent opinion on the Financial Information and to report our opinion to you.

In our opinion, the Financial Information together with the notes thereon give, for the purpose of this report, a true and fair view of the state of affairs of Waldorf and the Waldorf Group as at 31 March 2004 and 2005, and of the results and cash flows of the Waldorf Group for the Relevant Periods.

APPENDIX I ACCOUNTANTS’ REPORT ON THE WALDORF GROUP

A. FINANCIAL INFORMATION

CONSOLIDATED INCOME STATEMENT

		23.10.2003	1.4.2004
		to	to
	NOTES	31.3.2004	31.3.2005
		MOP	MOP
Revenue	6	-	103,706,820
Cost of sales		-	(84,375,277)
		___	_____
Gross profit		-	19,331,543
Other operating income		-	2,782,443
Administrative expenses		(8,230,512)	(12,203,515)
Decrease in fair value of an investment property		-	(86,808)
		___	_____
(Loss) profit from operations	8	(8,230,512)	9,823,663
Finance costs	10	-	(4,473,806)
		___	_____
(Loss) profit before income tax expense		(8,230,512)	5,349,857
Income tax expense	11	-	(8,886)
		___	_____
(Loss) profit for the period/year attributable
to the equity holders of the parent		(8,230,512)	5,340,971
		_ _	__ __
Dividend	12	-	-
		_ _	_ _
(Loss) earning per share - basic	13	(823)	534
		_ _	_ _

APPENDIX I ACCOUNTANTS’ REPORT ON THE WALDORF GROUP

CONSOLIDATED BALANCE SHEET

CONSOLIDATED BALANCE SHEET
		As at 31 March
	NOTES	2004	2005
		MOP	MOP
Non-current assets
Non-current portion of prepaid lease rentals	15	-	76,888,889
Property, plant and equipment	16	-	205,708,519
Investment property	17	-	3,090,000
Deposits for acquisition of property, plant and
equipment		61,396,177	-
Goodwill	18	-	15,450
		____	_____
		61,396,177	285,702,858
		____	_____
Current assets
Inventories	19	-	2,338,106
Trade and other receivables	20	2,677,103	23,835,551
Current portion of prepaid lease rentals	15	-	1,777,778
Amount due from ultimate holding company	21	50,000	-
Amounts due from fellow subsidiaries	21	-	185,668,846
Amounts due from shareholders	21	50,000	-
Bank balances and cash	20	6,818,683	23,857,411
		____	_____
		9,595,786	237,477,692
		____	_____
Current liabilities
Trade and other payables	22	5,075	29,931,024
Amount due to ultimate holding company	23	-	299,457,840
Amount due to a fellow subsidiary	23	79,117,400	-
Amount due to a shareholder	23	-	20,595,000
Tax liability		-	8,886
Secured bank borrowings - due within one year	24	-	29,140,326
		____	_____
		79,122,475	379,133,076
		____	_____
Net current liabilities		(69,526,689)	(141,655,384)
		____	_____
Total assets less current liabilities		(8,130,512)	144,047,474
Non-current liability
Secured bank borrowings
- due after one year	24	-	143,410,601
		____	_____
		(8,130,512)	636,873
		_ _	_ _
Capital and reserves
Quota capital		100,000	100,000
Reserves		(8,230,512)	536,873
		____	_____
		(8,130,512)	636,873
		_ _	_ _

ACCOUNTANTS’ REPORT ON THE WALDORF GROUP

APPENDIX I

BALANCE SHEET

BALANCE SHEET
		As at 31 March
	NOTES	2004	2005
		MOP	MOP
Non-current asset
Investments in subsidiaries	14	2,600,000	2,600,103
		___	_____
Current assets
Amount due from ultimate holding company	21	50,000	-
Amounts due from subsidiaries	21	-	89,828,761
Amounts due from shareholders	21	50,000	5,000
Bank balances and cash	20	3,959	540,813
		___	_____
		103,959	90,374,574
		___	_____
Current liabilities
Other payables	22	-	166,475
Amount due to ultimate holding company	23	-	91,884,000
Amounts due to subsidiaries	23	2,600,000	1,015,103
Amount due to a fellow subsidiary	23	13,100	-
		___	_____
		2,613,100	93,065,578
		___	_____
Net current liabilities		(2,509,141)	(2,691,004)
		___	_____
		90,859	(90,901)
		_ _	_ _
Capital and reserve
Quota capital		100,000	100,000
Accumulated losses	25	(9,141)	(190,901)
		___	_____
		90,859	(90,901)
		_ _	_ _

ACCOUNTANTS’ REPORT ON THE WALDORF GROUP

APPENDIX I

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

	Quota	Capital	Accumulated	Total
	capital	reserve	losses	equity
	MOP	MOP	MOP	MOP
Quota capital issued on date of incorporation	100,000	-	-	100,000
Net loss for the period	-	-	(8,230,512)	(8,230,512)
	_	___	___	___
At 31 March 2004 and 1 April 2004	100,000	-	(8,230,512)	(8,130,512)
Net profit for the year	-	-	5,340,971	5,340,971
Gain on disposal of a subsidiary to
its ultimate holding company	-	3,426,414	-	3,426,414
	_	___	___	___
At 31 March 2005	100,000	3,426,414	(2,889,541)	636,873
	_ _	_ _	_ _	_ _

APPENDIX I ACCOUNTANTS’ REPORT ON THE WALDORF GROUP

CONSOLIDATED CASH FLOW STATEMENT

CONSOLIDATED CASH FLOW STATEMENT
		23.10.2003	1.4.2004
		to	to
	NOTES	31.3.2004	31.3.2005
		MOP	MOP
OPERATING ACTIVITIES
(Loss) profit from operations		(8,230,512)	9,823,663
Adjustments for:
Interest income		-	(2,504)
Amortisation of prepaid lease rentals		-	1,333,333
Depreciation and amortisation of property,
plant and equipment		-	36,759,243
Decrease in fair value of an investment property		-	86,808
		____	_____
Operating cash flows before movements in working
capital		(8,230,512)	48,000,543
Increase in inventories		-	(2,338,106)
Increase in trade and other receivables		(2,677,103)	(23,691,130)
Increase in trade and other payables		5,075	9,419,429
		____	_____
NET CASH (USED IN) FROM OPERATING
ACTIVITIES		(10,902,540)	31,390,736
		____	_____
INVESTING ACTIVITIES
Advances to fellow subsidiaries		-	(154,352,739)
Payments to acquire property, plant and equipment		-	(110,010,327)
Disposal of a subsidiary	27	-	(6,141,406)
Acquisition of an investment property		-	(3,176,808)
Payments for deposits for acquisition of property,
plant and equipment		(61,396,177)	-
Acquisition of subsidiaries	26	-	31,290,475
Interest received		-	2,504
		____	_____
NET CASH USED IN INVESTING ACTIVITIES		(61,396,177)	(242,388,301)
		____	_____
FINANCING ACTIVITIES
Repayment of bank and other borrowings		-	(115,894,073)
Interest paid		-	(4,473,806)
New bank and other borrowings raised		-	288,445,000
Advances from fellow subsidiaries		79,117,400	39,969,052
Advances from ultimate holding company		-	19,945,120
Advances from shareholders		-	45,000
		____	_____
NET CASH FROM FINANCING ACTIVITIES		79,117,400	228,036,293
		____	_____
NET INCREASE IN CASH AND CASH
EQUIVALENTS		6,818,683	17,038,728
CASH AND CASH EQUIVALENTS AT
BEGINNING OF THE PERIOD/YEAR		-	6,818,683
		____	_____
CASH AND CASH EQUIVALENTS AT END OF
THE PERIOD/YEAR, represented by bank balances
and cash		6,818,683	23,857,411
		_ _	__ __

APPENDIX I ACCOUNTANTS’ REPORT ON THE WALDORF GROUP

NOTES

1. GENERAL

Waldorf is a private limited company incorporated in Macau. Its ultimate holding is Wealth Access Holdings Limited, a company incorporated in the British Virgin Islands.

Waldorf is an investment holding company. The principal activities of its subsidiaries are set out in note 14.

2. BASIS OF PREPARATION OF FINANCIAL INFORMATION

The financial information has been prepared on a going concern basis because its ultimate holding company has agreed to provide adequate funds to enable the Waldorf Group to meet in full its financial obligations as they fall due in the foreseeable future.

3. ADOPTION OF RECENTLY ISSUED ACCOUNTING STANDARDS

In 2004, the Hong Kong Institute of Certified Public Accountants (the “HKICPA”) issued a number of new and revised Hong Kong Accounting Standards (“HKAS”) and Hong Kong Financial Reporting Standards ("HKFRS") (hereinafter collectively referred to as the "new HKFRSs") which are effective for accounting periods beginning on or after 1 January 2005 except for HKFRS 3 Business Combinations, which is applicable to business combinations for which the agreement date is on or after 1 January 2005. The Waldorf Group has early adopted these new HKFRSs throughout the Relevant Periods.

The HKICPA has issued the following standards and interpretations ("INT") that are not yet effective. The Waldorf Group has considered the following standards and interpretations but does not expect they will have a material effect on how the results of operations and financial position of the Waldorf Group are prepared and presented.

HKAS 19 Amendments	Actuarial Gains and Losses, Group Plans and Disclosures
HKAS 39 Amendments	Transition and Initial Recognition of Financial Assets and
	Financial Liabilities
	Cash Flow Hedge Accounting of Forecast Intragroup Transactions
	The Fair value Option
HKFRS 6	Exploration for and Evaluation of Mineral Resources
HKFRS - INT 4	Determining whether an Arrangement contains a Lease
HKFRS - INT 5	Rights to Interests arising from Decommissioning, Restoration
	and Environmental Rehabilitation Funds
HK - INT 4	Leases - Determination of the Length of Lease Term in respect
	of Hong Kong Land Leases

4. SIGNIFICANT ACCOUNTING POLICIES

The financial information has been prepared under the historical cost convention, as modified for the revaluation of an investment property, and in accordance with accounting principles generally accepted in Hong Kong. The principal accounting policies adopted are as follows:

Basis of consolidation

The consolidated financial information incorporates the financial information of Waldorf and entities controlled by Waldorf (its subsidiaries). Control is achieved where Waldorf has the power to govern the financial and operating policies of an investee entity so as to obtain benefits from its activities.

APPENDIX I ACCOUNTANTS’ REPORT ON THE WALDORF GROUP

4. SIGNIFICANT ACCOUNTING POLICIES - continued

Basis of consolidation - continued

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

Where necessary, adjustments are made to the financial information of subsidiaries to bring their accounting policies into line with those used by other members of the Waldorf Group.

All intra-group transactions, balances, income and expenses are eliminated on consolidation.

Minority interests in the net assets of consolidated subsidiaries are identified separately from the Waldorf Group's equity therein. Minority interests consist of the amount of those interests at the date of the original business combination and the minority's share of changes in equity since the date of the combination. Losses applicable to the minority in excess of the minority's interest in the subsidiary's equity are allocated against the interests of the Waldorf Group except to the extent that the minority has a binding obligation and is able to make an additional investment to cover the losses.

Business combinations

The acquisition of subsidiaries is accounted for using the purchase method. The cost of the acquisition is measured at the aggregate of the fair values, at the date of exchange, of assets given, liabilities incurred or assumed, and equity instruments issued by the Waldorf Group in exchange for control of the acquiree, plus any costs directly attributable to the business combination. The acquiree's identifiable assets, liabilities and contingent liabilities that meet the conditions for recognition under HKFRS 3 are recognised at their fair values at the acquisition date, except for non-current assets that are classified as held for sale, which are recognised and measured at fair value less costs to sell.

Goodwill arising on acquisition is recognised as an asset and initially measured at cost, being the excess of the cost of the business combination over the Waldorf Group's interest in the net fair value of the identifiable assets, liabilities and contingent liabilities recognised. If, after reassessment, the Waldorf Group's interest in the net fair value of the acquiree's identifiable assets, liabilities and contingent liabilities exceeds the cost of the business combination, the excess is recognised immediately in profit or loss.

The interest of minority shareholders in the acquiree is initially measured at the minority's proportion of the net fair value of the assets, liabilities and contingent liabilities recognised.

Goodwill

Goodwill arising on the acquisition of a subsidiary represents the excess of the cost of acquisition over the Waldorf Group's interest in the net fair value of the identifiable assets, liabilities and contingent liabilities of the subsidiary recognised at the date of acquisition. Goodwill is initially recognised as an asset at cost and is subsequently measured at cost less any accumulated impairment losses.

For the purpose of impairment testing, goodwill is allocated to each of the Waldorf Group's cashgenerating units expected to benefit from the synergies of the combination. Cash-generating units to which goodwill has been allocated are tested for impairment annually, or more frequently when there is an indication that the unit may be impaired. If the recoverable amount of the cashgenerating unit is less than the carrying amount of the unit, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro-rata on the basis of the carrying amount of each asset in the unit. An impairment loss recognised for goodwill is not reversed in a subsequent period.

On disposal of a subsidiary, the attributable amount of goodwill is included in the determination of the profit or loss on disposal.

APPENDIX I ACCOUNTANTS’ REPORT ON THE WALDORF GROUP

4. SIGNIFICANT ACCOUNTING POLICIES - continued

Revenue recognition

Hotel revenue is recognised when hotel rooms are occupied. Food and beverage revenues are recognised when the goods are consumed.

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

Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to that asset's net carrying amount.

Leases

Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases.

Rentals payable under operating leases are charged to profit or loss on a straight-line basis over the term of the relevant lease. Benefits received and receivable as an incentive to enter into an operating lease are also spread on a straight-line basis over the lease term.

Foreign currencies

The financial information of each group entity is presented in the currency of the primary economic environment in which the entity operates (its functional currency). For the purpose of the consolidated financial information, the results and financial position of each entity are expressed in Macau Pataca ("MOP"), which is the functional currency of Waldorf, and the presentation currency for the consolidated financial information.

In preparing the financial information of the individual entities, transactions in currencies other than the entity's functional currency (foreign currencies) are recorded at the rates of exchange prevailing on the dates of the transactions. At each balance sheet date, monetary items denominated in foreign currencies are re-translated at the rates prevailing on the balance sheet date. Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing on the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not re-translated.

Exchange differences arising on the settlement of monetary items, and on the re-translation of monetary items, are included in profit or loss for the period. Exchange differences arising on the re-translation of non-monetary items carried at fair value are included in the income statement for the period except for differences arising on the re-translation of non-monetary items in respect of which gains and losses are recognised directly in equity. For such non-monetary items, any exchange component of that gain or loss is also recognised directly in equity.

For the purpose of presenting consolidated financial information, the assets and liabilities of the Waldorf Group's foreign operations are expressed in MOP using exchange rates prevailing on the balance sheet date. Income and expense items are translated at the average exchange rates for the period, unless exchange rates fluctuated significantly during that period, in which case the exchange rates at the dates of the transactions are used. Exchange differences arising, if any, are classified as equity and transferred to the Waldorf Group's translation reserve. Such translation differences are recognised in profit or loss in the period in which the foreign operation is disposed of.

APPENDIX I ACCOUNTANTS’ REPORT ON THE WALDORF GROUP

4. SIGNIFICANT ACCOUNTING POLICIES – continued

Taxation

Income tax expense represents the sum of the tax currently payable and deferred tax.

The tax currently payable is based on taxable profit for the period. Taxable profit differs from profit as reported in the income statement because it excludes items of income or expense that are taxable or deductible in other periods and it further excludes items that are never taxable or deductible. The Waldorf Group's liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the balance sheet date.

Deferred tax is recognised on differences between the carrying amounts of assets and liabilities in the financial information and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.

Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries, except where the Waldorf Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future.

Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised. Deferred tax is charged or credited to the income statement.

Prepaid lease rentals

Prepaid lease rentals for land are released to the income statement using straight-line method over the term of the operating lease.

Property, plant and equipment

Property, plant and equipment are stated in the balance sheet at cost, less any subsequent accumulated depreciation and amortisation and subsequent accumulated impairment losses.

Depreciation and amortisation are charged so as to write off the cost of assets, over their estimated useful lives, using the straight-line method, at the following rates per annum:

Hotel property
- Building	Over the term of the land lease
- Leasehold improvements	10% - 50%
Motor vehicles	20%

The gain or loss arising on the disposal or retirement of an item of property, plant and equipment is determined as the difference between the sale proceeds and the carrying amount of the asset and is recognised in profit or loss.

APPENDIX I ACCOUNTANTS’ REPORT ON THE WALDORF GROUP

4. SIGNIFICANT ACCOUNTING POLICIES – continued

Investment property

Investment property, which is property held to earn rentals and/or for capital appreciation, is stated at its fair value at the balance sheet date. Gains or losses arising from changes in the fair value of investment property are included in profit or loss for the period/year in which they arise.

Impairment of assets excluding goodwill

At each balance sheet date, the Waldorf Group reviews the carrying amounts of its assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the Waldorf Group estimates the recoverable amount of the cashgenerating unit to which the asset belongs.

Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset.

If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in the income statement, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease.

Where an impairment loss subsequently reverses, the carrying amount of the asset is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognised immediately in the income statement, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase.

Inventories

Inventories are stated at the lower of cost and net realisable value. Cost is calculated using the weighted average method.

Financial instruments

Financial assets and financial liabilities are recognised on the consolidated balance sheet when the Waldorf Group becomes a party to the contractual provisions of the instrument.

Trade and other receivables

Trade and other receivables are measured at initial recognition at fair value, and are subsequently measured at amortised cost using the effective interest rate method. Appropriate allowances for estimated irrecoverable amounts are recognised in income statement when there is objective evidence that the asset is impaired. The allowance recognised is measured as the difference between the asset's carrying amount and the present value of estimated future cash flows discounted at the effective interest rate computed at initial recognition.

APPENDIX I ACCOUNTANTS’ REPORT ON THE WALDORF GROUP

4. SIGNIFICANT ACCOUNTING POLICIES - continued

Financial instruments - continued

Cash and cash equivalents

Cash and cash equivalents comprise cash on hand and demand deposits, and other short-term highly liquid investments that are readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value.

Financial liabilities and equity

Financial liabilities and equity instruments issued by the Waldorf Group are classified according to the substance of the contractual arrangements entered into and the definitions of a financial liability and an equity instrument. An equity instrument is any contract that evidences a residual interest in the assets of the Waldorf Group after deducting all of its liabilities. The accounting policies adopted for specific financial liabilities and equity instruments are set out below.

Bank borrowings

Interest-bearing bank loans are initially measured at fair value, and are subsequently measured at amortised cost, using the effective interest rate method. Any difference between the proceeds and the settlement or redemption of borrowings is recognised over the term of the borrowings.

Trade and other payables

Trade and other payables are initially measured at fair value, and are subsequently measured at amortised cost, using the effective interest rate method.

Equity instruments

Equity instruments issued by Waldorf are recorded at the proceeds received, net of direct issue costs.

Retirement benefit costs

Payments to defined contribution retirement benefit plans are charged as an expense as they fall due. Payments made to government-managed retirement benefit schemes are dealt with as payments to defined contribution plans where the Waldorf Group's obligations under the plans are equivalent to those arising in a defined contribution retirement benefit plan.

APPENDIX I ACCOUNTANTS’ REPORT ON THE WALDORF GROUP

5. CRITICAL JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY

The key assumptions concerning the future, and other key sources of estimation uncertainty at the balance sheet dates, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are discussed below.

Useful lives and impairment assessment of property, plant and equipment

Property, plant and equipment are stated on the consolidated balance sheet at cost less accumulated depreciation and identified impairment losses. The estimation of their useful lives impacts the level of annual depreciation expense recorded. Property, plant and equipment are evaluated for possible impairment on a specific asset basis or in groups of similar assets, as applicable. This process requires management's estimate of future cash flows generated by each asset or group of assets. For any instance where this evaluation process indicates impairment, the appropriate asset's carrying values are written down to the recoverable amount and the amount of the write-down is charged against the results of operations. No impairment has been recognised during the period/year.

6. REVENUE

Revenue principally represents the income from hotel operation, provision of food and beverage and gross rental income from letting of floor area in a hotel property and an investment property under operating leases received and receivable and is summarised as follows:

	23.10.2003	1.4.2004
	to	to
	31.3.2004	31.3.2005
	MOP	MOP
Hotel revenue and food and beverage revenues	-	79,394,640
Rental income	-	24,312,180
	_	_____
	-	103,706,820
	_ _	__ __

APPENDIX I ACCOUNTANTS’ REPORT ON THE WALDORF GROUP

7. SEGMENT INFORMATION

No geographical segment information is presented as over 90% of the activities of the Waldorf Group during the Relevant Periods were carried out in Macau and over 90% of assets and liabilities of the Waldorf Group were located in Macau at the balance sheet dates.

No business segment information is presented for the period from 23 October 2003 (date of incorporation) to 31 March 2004 as there was no operation during the period. The activities of the Waldorf Group in this period mainly represented the construction of a hotel property.

No business segment information is presented for the year ended 31 March 2005 as over 90% of the business activities are the operating of a hotel, which includes provision of food and beverage and letting of floor area in a hotel property.

8. (LOSS) PROFIT FROM OPERATIONS

(LOSS) PROFIT FROM OPERATIONS
	23.10.2003	1.4.2004
	to	to
	31.3.2004	31.3.2005
	MOP	MOP
(Loss) profit from operations has been arrived
at after charging:
Auditors' remuneration	-	-
Directors' remuneration (Note 9)	927,000	690,100
Other staff costs:
Salaries and other allowances	1,947,675	23,777,207
	___	____
Total staff costs	2,874,675	24,467,307
	___	____
Cost of inventories recognised as an expense	-	12,866,287
Depreciation and amortisation for property, plant and equipment	-	36,759,243
Amortisation of prepaid lease rentals	-	1,333,333
Property tax on rental income (included in cost of sales)	-	1,482,800
and after crediting:
Interest income	-	2,504
	_ _	_ _

The auditors' remuneration for both periods has been borne by its ultimate holding company.

APPENDIX I ACCOUNTANTS’ REPORT ON THE WALDORF GROUP

9. DIRECTORS' AND EMPLOYEES' EMOLUMENTS

Details of directors' emoluments for the Relevant Periods were as follows:

	23.10.2003	1.4.2004
	to	to
	31.3.2004	31.3.2005
	MOP	MOP
Directors
- fee	-	-
- salaries and other benefits	927,000	690,100
	_	_
Total emoluments	927,000	690,100
	_ _	_ _
The emoluments of the directors of Waldorf were as follows:
	23.10.2003	1.4.2004
	to	to
	31.3.2004	31.3.2005
	MOP	MOP
Au Edmond Wah	412,000	298,700
Chung Siu Wah	515,000	391,400
	_	_
	927,000	690,100
	_ _	_ _

Other directors of Waldorf did not receive any emoluments from the Waldorf Group during the Relevant Periods.

The five highest paid individuals included one director (23.10.2003 to 31.3.2004: two directors), details of whose emoluments are set out above. The emoluments of the remaining four (23.10.2003 to 31.3.2004: three) individuals were as follows:

	23.10.2003	1.4.2004
	to	to
	31.3.2004	31.3.2005
	MOP	MOP
Employees:
- salaries and other benefits	607,700	2,225,830
- bonus	-	193,640
	_	___
	607,700	2,419,470
	_ _	_ _

APPENDIX I ACCOUNTANTS’ REPORT ON THE WALDORF GROUP

9. DIRECTORS' AND EMPLOYEES' EMOLUMENTS - continued

Their emoluments are within following bands

	Number	of employees
	23.10.2003	1.4.2004
	to	to
	31.3.2004	31.3.2005
	MOP	MOP
Nil to MOP1,000,000	3	4
	_ _	_ _

During the Relevant Periods, no emoluments were paid by the Waldorf Group to any of the directors or the five highest paid individuals (including directors and non-director employees) as an inducement to join or upon joining the Waldorf Group or as compensation for loss of office. No director waived any emoluments during the Relevant Periods.

10. FINANCE COSTS

FINANCE COSTS
	23.10.2003	1.4.2004
	to	to
	31.3.2004	31.3.2005
	MOP	MOP
Interest on:
- secured bank borrowings not wholly repayable
within five years	-	3,023,587
- secured bank borrowings wholly repayable within five years	-	57,602
- other borrowings wholly repayable within five years	-	1,392,617
	_	___
	-	4,473,806
	_ _	_ _

11. INCOME TAX EXPENSE

For the year ended 31 March 2005, Macau Complementary Tax was calculated at 15.75% on the estimated assessable profit of the subsidiaries operating in Macau. No provision of Hong Kong Profits Tax has been made in the financial statements for the subsidiary operating in Hong Kong as it incurred tax loss for the year.

For the period ended 31 March 2004, no provision for Macau Complementary tax and Hong Kong Profits Tax has been made in the financial statements as the Waldorf Group has no estimated assessable profits in Macau and Hong Kong.

APPENDIX I ACCOUNTANTS’ REPORT ON THE WALDORF GROUP

11. INCOME TAX EXPENSE - continued

The income tax expense for the period/year can be reconciled to the (loss) profit before income tax expense as follows:

	23.10.2003	1.4.2004
	to	to
	31.3.2004	31.3.2005
	MOP	MOP
(Loss) profit before income tax expense	(8,230,512)	5,349,857
	_ _	_ _
Tax at Macau Complementary Tax rate of 15.75%	(1,296,306)	842,602
Tax effect of income not taxable for tax purpose	-	(4,476,516)
Tax effect of expenses not deductible for tax purpose	1,282,538	814,299
Tax effect of tax losses not recognised	13,768	2,828,688
Effect of different tax rates of subsidiaries operating
in other jurisdictions	-	(187)
	___	___
Income tax expense	-	8,886
	_ _	_ _

At the balance sheet date, the Waldorf Group has unused tax losses of approximately MOP18,047,000 (31.3.2004: MOP87,000) available for offset against future profits, subject to agreement with relevant tax authorities. No deferred tax has been recognised due to the unpredictability of future profit streams. Included in the unrecognised tax losses are losses of MOP18,044,000 (31.3.2004: MOP87,000) that will expire within 3 years from the balance sheet date. Other losses may be carried forward indefinitely.

In July 2005, Macau Complementary Tax rate was decreased from 15.75% to 12% with effect from 2004 year of assessment. The change in tax rate did not have significant impact on the results of Waldorf and its subsidiaries that operated in Macau.

12. DIVIDEND

No dividend has been paid or declared by the Waldorf Group during the Relevant Periods.

13. (LOSS) EARNING PER SHARE

The calculation of basic (loss) earning per share is based on the (loss) profit for the period/year and on 100,000 quota capital in issue during the Relevant Periods.

Diluted (loss) earning share per share has not been presented as Waldorf has no potential dilutive shares outstanding throughout the Relevant Periods.

APPENDIX I ACCOUNTANTS’ REPORT ON THE WALDORF GROUP

14. INVESTMENTS IN SUBSIDIARIES

WALDORF

WALDORF
	As at	31	March
	2004		2005
	MOP		MOP
Unlisted shares, at cost	2,600,000		2,600,103
	_ _		_ _

Details of Waldorf's subsidiaries are as follows:

		Issued and
	Place and	fully paid	Attributable equity
	date of	quota capital/	interest directly held		Principal
Name of subsidiary	incorporation	share capital	by Waldorf		activities
		(Note)	31.3.2004	31.3.2005
Waldo Entertainment	Macau	Quota capital	100%	-	Inactive
Limited	12 November 2003	MOP100,000
("Waldo Entertainment")
��
Waldo Hotel Limited	Macau	Quota capital	100%	100%	Hotel operation
��	12 November 2003	MOP1,000,000
Waldo Travel Limited	Macau	Quota capital	100%	100%	Inactive
��	12 November 2003	MOP1,500,000
Waldorf Realty Company	Macau	Quota capital	-	100%	Property holding
Limited ("Waldorf Realty")	7 July 2003	MOP100,000
��
World Honour Investments	Hong Kong	Share capital	-	100%	Property holding
Limited ("World Honour")	31 March 2003	HK$100
��

Note : Quota capital represents the Portuguese equivalence of registered capital as Portuguese is the official language of Macau.

ACCOUNTANTS’ REPORT ON THE WALDORF GROUP

APPENDIX I

15. PREPAID LEASE RENTALS

THE WALDORF GROUP

	MOP
COST
At 23 October 2003, 31 March 2004 and 1 April 2004	-
Arising from acquisition of a subsidiary	80,000,000
	____
At 31 March 2005	80,000,000
	____
AMORTISATION
At 23 October 2003, 31 March 2004 and 1 April 2004	-
Released for the year	1,333,333
	____
At 31 March 2005	1,333,333
	____
NET BOOK VALUES
At 31 March 2005	78,666,667
	_ _
At 31 March 2004	-
	_ _

The prepaid lease rentals are on land held under medium-term lease in Macau.

Analysis of prepaid lease rentals as follow:

	2004	2005
	MOP	MOP
Non-current portion	-	76,888,889
Current portion	-	1,777,778
	_	____
	-	78,666,667
	_ _	_ _

APPENDIX I ACCOUNTANTS’ REPORT ON THE WALDORF GROUP

16. PROPERTY, PLANT AND EQUIPMENT

THE WALDORF GROUP

		Hotel property in Macau	Hotel property in Macau
			Leasehold	Motor
		Building	improvements	vehicles	Total
		MOP	MOP	MOP	MOP
	COST
	At 23 October 2003, 31 March 2004
	and 1 April 2004	-	-	-	-
	Arising from acquisition of
	a subsidiary	70,757,920	-	-	70,757,920
	Additions during the year	5,130,000	159,747,308	6,832,534	171,709,842
		____	_____	___	_____
	At 31 March 2005	75,887,920	159,747,308	6,832,534	242,467,762
		____	_____	___	_____
	DEPRECIATION AND
	AMORTISATION
	At 23 October 2003, 31 March 2004
	and 1 April 2004	-	-	-	-
	Provided for the year	1,263,650	34,486,163	1,009,430	36,759,243
		____	_____	___	_____
	At 31 March 2005	1,263,650	34,486,163	1,009,430	36,759,243
		____	_____	___	_____
	NET BOOK VALUES
	At 31 March 2005	74,624,270	125,261,145	5,823,104	205,708,519
		_ _	__ __	_ _	__ __
	At 31 March 2004	-	-	-	-
		_ _	__ __	_ _	__ __
17.	INVESTMENT PROPERTY
				THE WALDORF
					GROUP
					MOP
	VALUATION
	At 23 October 2003, 31 March 2004 and 1 April 2004				-
	Addition during the year				3,176,808
	Decrease in fair value during the year				(86,808)
					___
	At 31 March 2005				3,090,000
					_ _

The Waldorf Group's investment property is held under a medium-term lease in Hong Kong and is leased out under an operating lease.

The fair value of the Waldorf Group's investment property at 31 March 2005 has been arrived at on the basis of a valuation carried out at that date by Vigers Appraisal & Consulting Ltd., an independent valuers not connected with the Waldorf Group. The staff from Vigers Appraisal & Consulting Ltd. carrying out the valuation is a member of the Hong Kong Institute of Surveyors ("HKIS") and Royal Institution of Chartered Surveyors ("RICS"), and has appropriate qualifications and recent experience in the valuation of properties in the relevant location. The valuation, which conforms to Valuation Standards on Properties published by the HKIS and the Guidance Notes on Valuation of Property Assets published by the RICS, was arrived at by reference to market evidence of transaction prices for similar properties.

APPENDIX I ACCOUNTANTS’ REPORT ON THE WALDORF GROUP

18. GOODWILL

GOODWILL
	THE WALDORF
	GROUP
	MOP
COST
At 23 October 2003, 31 March 2004 and 1 April 2004	-
Arising from acquisition of a subsidiary	15,450
	_
At 31 March 2005	15,450
	_ _

The Waldorf Group tests goodwill annually for impairment, or more frequently if there are indications that goodwill might be impaired.

At 31 March 2005, the directors of Waldorf performed an impairment review and no impairment loss was considered necessary.

19. INVENTORIES

INVENTORIES
	THE WALDORF GROUP
	2004	2005
	MOP	MOP
Hotel merchandises, at cost	-	2,338,106
	_ _	_ _

APPENDIX I ACCOUNTANTS’ REPORT ON THE WALDORF GROUP

20. OTHER FINANCIAL ASSETS

THE WALDORF GROUP

Trade and other receivables

Trade receivables relate to the provision of hotel services to third parties. The average credit period is about 30 to 60 days. The directors consider that the carrying amount of trade receivables approximates to their fair value.

The directors consider that the carrying amount of other receivables and prepaid expenses approximates to their fair value at the respective balance sheet dates.

The following is an aged analysis of trade receivables at the respective balance sheet dates:

	THE WALDORF GROUP	THE WALDORF GROUP
	2004	2005
	MOP	MOP
Trade receivables
Up to 30 days	-	9,670,464
31 - 60 days	-	6,259,378
61 - 90 days	-	811,552
Over 90 days	-	457,103
	___	____
	-	17,198,497
Other receivables and prepaid expenses	2,677,103	6,637,054
	___	____
	2,677,103	23,835,551
	_ _	_ _

THE WALDORF GROUP AND WALDORF

Bank balances and cash

Bank balances and cash comprise cash held by the Waldorf Group and Waldorf and short-term bank deposits with an original maturity of three months or less. The carrying amount of these assets approximates their fair value at the respective balance sheet dates.

Credit Risk

THE WALDORF GROUP

The Waldorf Group's principal financial assets are bank balances and cash, trade and other receivables and amounts due from fellow subsidiaries.

The credit risk on liquid funds is limited because the counterparties are banks with high creditratings assigned by international credit-rating agencies.

The amounts due from fellow subsidiaries have been fully settled subsequent to 31 March 2005. The Waldorf Group has no other significant concentration of credit risk at the respective balance sheet dates, with exposure spread over a large number of counterparties and customers.

WALDORF

Waldorf’s principal financial assets are amounts due from subsidiaries and bank balances and cash.

APPENDIX I ACCOUNTANTS’ REPORT ON THE WALDORF GROUP

21. AMOUNTS DUE FROM ULTIMATE HOLDING COMPANY, SUBSIDIARIES, FELLOW SUBSIDIARIES AND SHAREHOLDERS

THE WALDORF GROUP AND WALDORF

The amounts are unsecured, non-interest bearing and are repayable on demand. The directors consider that the carrying amounts approximate their fair value at the respective balance sheet dates.

22. OTHER FINANCIAL LIABILITIES

Trade and other payables principally comprise amounts outstanding for trade purchases and ongoing costs. The directors consider that the carrying amount of trade and other payables approximates to their fair value.

	THE WALDORF GROUP	THE WALDORF GROUP	WALDORF	WALDORF
	2004	2005	2004	2005
	MOP	MOP	MOP	MOP
Trade payables (up to 30 days)	-	1,854,113	-	-
Payables for acquisition of property,
plant and equipment	-	19,297,280	-	-
Other payables	5,075	8,779,631	-	166,475
	_	____	_	_
	5,075	29,931,024	-	166,475
	_ _	_ _	_ _	_ _

23. AMOUNTS DUE TO ULTIMATE HOLDING COMPANY, SUBSIDIARIES, A FELLOW SUBSIDIARY AND A SHAREHOLDER

THE WALDORF GROUP AND WALDORF

The amounts are unsecured, non-interest bearing and are repayable on demand. The directors consider that the carrying amounts approximate their fair value at the respective balance sheet dates.

APPENDIX I ACCOUNTANTS’ REPORT ON THE WALDORF GROUP

24. SECURED BANK BORROWINGS

SECURED BANK BORROWINGS
	THE WALDORF GROUP
	2004	2005
	MOP	MOP
Secured bank borrowings are repayable as follows:
Within one year	-	29,140,326
In the second year	-	30,102,249
In the third to fifth year	-	96,401,082
After five years	-	16,907,270
	_	_____
	-	172,550,927
Less: Amount due within one year shown under
current liabilities	-	(29,140,326)
	_	_____
Amount due after one year	-	143,410,601
	_ _	__ __

The carrying amounts of the Waldorf Group's bank borrowings are denominated in the following currencies:

	THE WALDORF GROUP	THE WALDORF GROUP
	2004	2005
	MOP	MOP
Currency
MOP	-	171,181,672
Hong Kong Dollar	-	1,369,255
	_	_____
	-	172,550,927
	_ _	__ __

For the year ended 31 March 2005, the average interest rate paid was 3.128% per annum.

At 31 March 2005, the bank borrowings were secured by:

(a) the Waldorf Group's prepaid lease rentals and hotel property in Macau with an aggregate net book value of approximately MOP278,552,000 (31.3.2004: Nil);
(b) the Waldorf Group's investment property in Hong Kong with an aggregate net book value of MOP3,090,000 (31.3.2004: Nil); and
(c) personal guarantees of MOP230,000,000 (31.3.2004: Nil) from certain directors of Waldorf.

The directors consider that the carrying amount of the bank borrowings approximates to their fair value.

Subsequent to 31 March 2005, the personal guarantees from certain directors of Waldorf will be released upon the completion of the Acquisition.

APPENDIX I ACCOUNTANTS’ REPORT ON THE WALDORF GROUP

25. ACCUMULATED LOSSES

WALDORF

WALDORF
	MOP
Loss for the period, balance at 31 March 2004 and 1 April 2004	(9,141)
Loss for the year	(181,760)
	_
At 31 March 2005	(190,901)
	_ _

26. ACQUISITION OF SUBSIDIARIES

During the year ended 31 March 2005, Waldorf's acquisition of subsidiaries mainly represented the acquisition of the entire interest in Waldorf Realty and World Honour.

	1.4.2004 to	31.3.2005
	Book	Fair value	Fair
	value	adjustment	value
	MOP	MOP	MOP
Net assets acquired:
Prepaid lease rentals	80,000,000	-	80,000,000
Property, plant and equipment	70,689,000	68,920	70,757,920
Amounts due from fellow subsidiaries	119,086,452	-	119,086,452
Other receivables	128,971	-	128,971
Bank balances and cash	31,390,578	-	31,390,578
Trade and other payables	(1,216,548)	-	(1,216,548)
Amount due to ultimate holding company	(279,462,720)	-	(279,462,720)
Amount due to a shareholder	(20,600,000)	-	(20,600,000)
	_____	_	_____
	15,733	68,920	84,653
	__ __	_ _
Goodwill arising on acquisition			15,450
			_____
Total consideration			100,103
			__ __
Satisfied by:
Cash			100,103
			__ __

The acquisitions have been accounted for by the acquisition method of accounting.

The goodwill arising on the acquisition of a subsidiary is attributable to the anticipated profitability of the subsidiary.

APPENDIX I ACCOUNTANTS’ REPORT ON THE WALDORF GROUP

26. ACQUISITION OF SUBSIDIARIES – continued

	1.4.2004
	to
	31.3.2005
	MOP
Net cash inflow arising on acquisition
Cash consideration paid	(100,103)
Bank balance and cash acquired	31,390,578
	____
	31,290,475
	_ _

The subsidiaries acquired during the year ended 31 March 2005 contributed approximately MOP232,000 and MOP100,000 to the Waldorf Group's revenue and profit from operations.

If the acquisition had been completed on 1 April 2004, the total revenue and profit for the year ended 31 March 2005 for the Waldorf Group would have been MOP103,706,820 and MOP5,314,518 respectively.

27. DISPOSAL OF A SUBSIDIARY

During the year ended 31 March 2005, the disposal of a subsidiary represented the disposal of the entire interest in Waldo Entertainment to its ultimate holding company.

	23.10.2003	1.4.2004
	to	to
	31.3.2004	31.3.2005
	MOP	MOP
Net liabilities disposed of:
Deposits for acquisition of property, plant and equipment	-	18,993,942
Other receivables	-	2,661,653
Amount due from ultimate holding company	-	100,000
Bank balances and cash	-	6,241,406
Other payables	-	(7,308)
Amounts due to fellow subsidiaries	-	(31,316,107)
	_	____
	-	(3,326,414)
Gain on disposal credited to capital reserve	-	3,426,414
	_	____
Total consideration	-	100,000
	_ _	_ _
Satisfied by:
Cash	-	100,000
	_ _	_ _
Net cash outflow arising from disposal:
Cash consideration	-	100,000
Bank balances and cash disposed of	-	(6,241,406)
	_	____
	-	(6,141,406)
	_ _	_ _

The subsidiary disposed of during the period did not contribute significantly to the revenue and the results of the Waldorf Group.

APPENDIX I ACCOUNTANTS’ REPORT ON THE WALDORF GROUP

28. OPERATING LEASES

As a lessee

As a lessee
	THE WALDORF GROUP
	23.10.2003	1.4.2004
	to	to
	31.3.2004	31.3.2005
	MOP	MOP
Minimum lease payments paid under
operating leases for office premises
and staff quarters during the period/year	216,407	1,093,701
	_ _	_ _

At the balance sheet date, the Waldorf Group had commitments for future minimum lease payments under non-cancellable operating leases which fall due as follows:

	THE WALDORF GROUP	THE WALDORF GROUP
	2004	2005
	MOP	MOP
Within one year	764,000	1,002,000
In the second to fifth year inclusive	624,000	311,000
	___	___
	1,388,000	1,313,000
	_ _	_ _

Leases are negotiated for terms of one to five years and rentals are fixed over the lease terms.

As a lessor

	THE WALDORF GROUP	THE WALDORF GROUP
	23.10.2003	1.4.2004
	to	to
	31.3.2004	31.3.2005
	MOP	MOP
Rental income earned under operating
leases during the period/year
- investment property in Hong Kong	-	231,750
- hotel property in Macau	-	24,080,430
	_	____
	-	24,312,180
	_ _	_ _

The properties held have committed tenants for one to ten years.

APPENDIX I ACCOUNTANTS’ REPORT ON THE WALDORF GROUP

28. OPERATING LEASES - continued

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

	THE WALDORF GROUP	THE WALDORF GROUP
	2004	2005
	MOP	MOP
Within one year	-	1,873,000
In the second to fifth year inclusive	-	6,029,000
Over five years	-	1,483,000
	_	___
	-	9,385,000
	_ _	_ _

WALDORF

Waldorf had no operating lease arrangements and commitments as at 31 March 2004 and 2005.

29. CAPITAL COMMITMENTS

CAPITAL COMMITMENTS
	THE WALDORF	GROUP
	2004	2005
	MOP	MOP
Capital expenditure contracted for but not provided in the
financial statement in respect of:
Hotel property	81,600,000	-
Property, plant and equipment	9,255,000	-
	_ _	_ _

Waldorf had no capital commitments as at 31 March 2004 and 2005.

30. RELATED PARTY TRANSACTIONS

(I) Related party transactions

In April 2004, Waldorf transferred its entire interest in Waldo Entertainment to its ultimate holding company at a cash consideration of MOP100,000.

In April 2004, Waldorf acquired the entire interest in World Honour at a cash consideration of MOP103 from a fellow subsidiary.

In April 2004, Waldorf acquired the entire interest in Waldorf Realty at a cash consideration of MOP100,000 from a fellow subsidiary, a shareholder of Waldorf and a shareholder of its ultimate holding company.

ACCOUNTANTS’ REPORT ON THE WALDORF GROUP

APPENDIX I

30. RELATED PARTY TRANSACTIONS - continued

(I) Related party transactions - continued

During the period/year, the Waldorf Group had significant transactions with a fellow subsidiary, Waldo Entertainment, details of which are as follows:

	23.10.2003	1.4.2004
	to	to
	31.3.2004	31.3.2005
	MOP	MOP
Hotel revenue, food and beverage revenues_(note a)_	-	489,321
Reimbursement of salaries and other allowances_(note b)_	-	8,742,333
Reimbursement of administrative expenses_(note b)_	-	591,856

Notes: (a) The transaction was carried out at terms by reference to market prices of similar transactions.

(b) The transactions were determined at cost.

(II) Related party balances

Details of balances with related parties as at the respective balance sheet dates are set out on the consolidated balance sheet and in notes 21 and 23.

(III) Bank facilities

Certain of the Waldorf Group's banking facilities were secured by the guarantees from directors and shareholders of Waldorf. Such guarantee will be released upon the completion of the Acquisition.

B. DIRECTORS' REMUNERATION

Save as disclosed in this report, no remuneration was paid or is payable by the companies comprising the Waldorf Group to Waldorf's directors in respect of the Relevant Periods.

C. SUBSEQUENT EVENTS

Subsequent to 31 March 2005, the amounts due from fellow subsidiaries of MOP185,668,846 have been fully settled and the amount due to ultimate holding company of MOP208,900,240 has been repaid. The remaining balance of MOP90,557,600 will be assigned to Widelead Group Limited, a wholly owned subsidiary of United Power Investment Limited, which a director of Waldorf has a beneficial interest, upon the completion of the Acquisition.

D. SUBSEQUENT FINANCIAL STATEMENTS

No audited financial statements of Waldorf or any of its subsidiaries have been prepared in respect of any period subsequent to 31 March 2005.

Yours faithfully, Deloitte Touche Tohmatsu Certified Public Accountants Hong Kong

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

1. SUMMARY OF AUDITED FINANCIAL STATEMENTS

Set out below is a summary of the audited consolidated results and assets and liabilities of the Group for each of the three years ended 31 March 2005 as extracted from the respective published audited financial statements.

RESULTS

Turnover
Cost of sales
Gross profit
Other revenue
Net operating expenses
Operating profit
Finance costs
Profit before taxation
Taxation
Profit attributable to shareholders
Earnings per share
Basic
Diluted
Dividend

2005
HK$
143,650,259
(35,672,933)
107,977,326
597,009
(88,917,499)
19,656,836
(28,479)
19,628,357
(4,060,611)
15,567,746
1.42 cents
N/A
Nil
2004
HK$
39,450,091
(12,947,838)
26,502,253
12,766,665
(24,748,871)
14,520,047
(23,671)
14,496,376
(2,550,459)
11,945,917
1.09 cents
N/A
Nil
For the year ended 31 March
As restated
2003
HK$
37,599,238
(13,008,675)
24,590,563
1,090,541
(21,275,465)
4,405,639
–
4,405,639
2,276,220
6,681,859
0.61 cent
N/A
Nil

Notes:

For the three years ended 31 March 2005, the Group did not have any extraordinary items, exceptional items and minority interests.
For the three years ended 31 March 2005, the auditors reports of the Company were not qualified.

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

ASSETS AND LIABILITIES

ASSETS AND LIABILITIES
		As at 31 March
			As restated
	2005	2004	2003
	HK$	HK$	HK$
Non-current assets	229,424,872	216,222,033	169,220,837
Current assets	32,670,842	16,869,121	10,101,346
Total assets	262,095,714	233,091,154	179,322,183
Current liabilities	14,431,322	21,600,020	5,312,010
Non-current liabilities	2,815,402	3,050,289	3,390,131
Total liabilities	17,246,724	24,650,309	8,702,141
Shareholders’ funds	244,848,990	208,440,845	170,620,042

2. FINANCIAL STATEMENTS OF THE GROUP

Set out below are the audited financial statements of the Group as extracted from the annual report of the Group for the year ended 31 March 2005:

Consolidated Income Statement

For the year ended 31 March 2005

Turnover 5 Cost of sales Gross profit Other revenue 5 Net operating expenses Operating profit 6 Finance costs 7 Profit before taxation Taxation 8 Profit attributable to shareholders 9 Earnings per share Basic 10 Diluted 10 Notes	2005 HK$ 143,650,259 (35,672,933) 107,977,326 597,009 (88,917,499) 19,656,836 (28,479) 19,628,357 (4,060,611) 15,567,746 1.42 cents N/A	2004 HK$ 39,450,091 (12,947,838) 26,502,253 12,766,665 (24,748,871) 14,520,047 (23,671) 14,496,376 (2,550,459) 11,945,917 1.09 cents N/A

The accompanying notes form an integral part of these financial statements.

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

Consolidated Balance Sheet

As at 31 March 2005

Non-current assets Goodwill 12 Fixed assets 13 Interest in an associated company 15 Investment in convertible note 16 Deferred tax assets 17 Current assets Inventories 18 Accounts receivable, deposits and prepayments 19 Cash and bank balances Current liabilities Accounts payable and accrued charges 20 Short-term bank loan, secured Net current assets (liabilities) Non-current liabilities Provision for long service payments 23 Net assets Capital and reserves Share capital 21 Reserves 22(a) Notes	2005 HK$ 18,988,140 193,736,979 – – 16,699,753 229,424,872 --------------- 1,729,001 6,471,545 24,470,296 32,670,842 --------------- 14,431,322 – 14,431,322 --------------- 18,239,520 --------------- 2,815,402 --------------- 244,848,990 54,794,200 190,054,790 244,848,990	2004 HK$ 19,991,918 175,469,751 – – 20,760,364 216,222,033 --------------- 1,046,015 5,905,392 9,917,714 16,869,121 --------------- 15,600,020 6,000,000 21,600,020 --------------- (4,730,899) --------------- 3,050,289 --------------- 208,440,845 54,794,200 153,646,645 208,440,845

The accompanying notes form an integral part of these financial statements.

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

Balance Sheet

As at 31 March 2005

Non-current assets Interests in subsidiaries 14 Deferred tax assets 17 Current assets Accounts receivable, deposits and prepayments 19 Cash and bank balances Current liabilities Accounts payable and accrued charges 20 Short-term bank loan, secured Net current liabilities Net assets Capital and reserves Share capital 21 Reserves 22(b) Notes	2005 HK$ 129,470,667 – 129,470,667 --------------- 31,209 133,261 164,470 --------------- 312,769 – 312,769 --------------- (148,299) --------------- 129,322,368 54,794,200 74,528,168 129,322,368	2004 HK$ 145,478,743 – 145,478,743 --------------- 31,209 1,614,286 1,645,495 --------------- 183,905 6,000,000 6,183,905 --------------- (4,538,410) --------------- 140,940,333 54,794,200 86,146,133 140,940,333

The accompanying notes form an integral part of these financial statements.

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

Consolidated Statement of Changes in Equity

For the year ended 31 March 2005

	Notes	2005	2004
		HK$	HK$
Total equity at beginning of year		208,440,845	170,620,042
		---------------	---------------
Revaluation surplus on investment properties	22(a)	9,000,000	10,000,000
Net revaluation surplus on other properties,
net of taxation	22(a)	11,840,399	15,874,886
Net gains not recognised in the income statement		20,840,399	25,874,886
Profit for the year	22(a)	15,567,746	11,945,917
Total equity at end of year		244,848,990	208,440,845

The accompanying notes form an integral part of these financial statements.

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

Consolidated Cash Flow Statement

For the year ended 31 March 2005

Operating activities Net cash inflow generated from operations 24(a) Interest paid Interest received Net cash inflow from operating activities Investing activities Acquisition of wedding services business, net of cash acquired 24(b) Purchases of fixed assets Proceeds from settlement deed relating to investment in convertible note Net cash outflow from investing activities Net cash inflow/(outflow) before financing Net cash from financing activities Bank loan repayment Proceeds from short-term bank loan Net cash (used in)/from financing activities Increase in cash and bank balances Cash and bank balances at the beginning of year Cash and bank balances at the end of year Notes	2005 HK$ 23,048,317 (28,479) 23,438 23,043,276 – (2,490,694) – (2,490,694) --------------- 20,552,582 --------------- (6,000,000) – (6,000,000) --------------- 14,552,582 9,917,714 24,470,296	2004 HK$ 10,015,241 (23,671) 15,509 10,007,079 (23,960,061) (559,834) 11,051,860 (13,468,035) --------------- (3,460,956) --------------- – 6,000,000 6,000,000 --------------- 2,539,044 7,378,670 9,917,714

The accompanying notes form an integral part of these financial statements.

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

Notes to the Financial Statements

For the year ended 31 March 2005

1. GENERAL

United Power Investment Limited (the ‘‘Company’’) is incorporated in Bermuda as a limited liability company. The Company is engaged in investment holding. The principal activities of the subsidiaries are set out in note 14.

2. BASIS OF PREPARATION

The consolidated financial statements are prepared under the historical cost convention, as modified for the revaluation of leasehold land and buildings and investment properties.

The consolidated financial statements have been prepared on a going concern basis.

3. RECENTLY ISSUED ACCOUNTING STANDARDS

The Hong Kong Institute of Certified Public Accountants has issued a number of new and revised Hong Kong Financial Reporting Standards and Hong Kong Accounting Standards (‘‘new HKFRSs’’) that are effective for accounting periods beginning on or after 1 January 2005.

The Company has not early adopted these new HKFRSs in the financial statements for the year ended 31 March 2005. The Company has commenced an assessment of the impact of these new HKFRSs but is not yet in a position to state whether these new HKFRSs would have a significant impact on its results of operations and financial position.

4. PRINCIPAL ACCOUNTING POLICIES

The financial statements have been prepared in accordance with all applicable Hong Kong Financial Reporting Standards issued by the Hong Kong Institute of Certified Public Accountants. The principal accounting policies adopted are set out below:

(a) Basis of consolidation

The consolidated financial statements incorporate the financial statements of the Company and enterprises controlled by the Group made up to 31 March each year. Control is achieved where the Group has the power to govern the financial and operating policies of an investee enterprise so as to obtain benefits from its activities.

On acquisition, the assets and liabilities of the relevant subsidiaries are measured at their fair values at the date of acquisition. The interest of minority shareholders is stated at the minority’s proportion of the fair values of the assets and liabilities recognised.

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

In the Company’s balance sheet, the interests in subsidiaries are stated at cost less impairment loss, if any. All significant inter-company transactions and balances among group companies are eliminated on consolidation.

Minority interests represent the interests of outside shareholders in the operating results and net assets of subsidiaries.

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

4. PRINCIPAL ACCOUNTING POLICIES (continued)

(b) Associated company

An associated company is an enterprise over which the Group is in a position to exercise significant influence through participation in the financial and operating policy decisions of the investee.

Investments in associated companies are accounted for in the consolidated financial statements under the equity method of accounting whereby the investment is initially recorded at cost and adjusted thereafter for the post-acquisition change in the Group’s share of net assets of the investees. The consolidated income statement reflects the Group’s share of the results of operation of the investees.

In the Company’s balance sheet, investments in associated companies are carried at cost less impairment losses, if any. The results of associated companies are accounted for by the Company on the basis of dividends received and receivable during the year.

Unrealised profit and losses resulting from transactions between the Group and its associated companies are eliminated to the extent of the Group’s interest in the associated company, except where unrealised losses provide evidence of an impairment of the asset transferred, in which case they are immediately recognised in the income statement.

Equity accounting is discontinued when the carrying amount of the investment in an associated company reaches zero, unless the Group has incurred obligations or guaranteed obligations in respect of the associated company.

(c) Goodwill

Goodwill arising on consolidation represents the excess of the cost of acquisition over the Group’s interests in the fair values of the identifiable assets and liabilities of the subsidiary at the date of acquisition. Goodwill is amortised on a straight line basis to the income statement over its estimated useful economic life of not more than twenty years.

On disposal of an investment in subsidiary, the relevant portion of attributable goodwill, net of accumulated amortisation and any impairment losses is included in the determination of the profit or loss on disposal.

(d) Investment properties

Investment properties are interests in land and buildings in respect of which construction work has been completed and which are held for their long term investment potential, any rental income being negotiated at arm’s length.

Investment properties are stated at their open market value based on independent professional valuations carried out at each balance sheet date. The valuations are based on individual properties and separate values are not attributed to land and buildings.

Increases in valuation are credited to the investment property revaluation reserve. Decreases in valuation are first set off against increases on earlier valuations on a portfolio basis and thereafter are charged to the income statement. Any subsequent increases are credited to the income statement up to the amount previously charged.

Investment properties are not depreciated except where the unexpired term of the lease is 20 years or less in which case depreciation is provided on the carrying amount over the remaining term of the lease.

Upon the disposal of an investment property, the relevant portion of the revaluation reserve realised in respect of previous valuations is released from the investment property revaluation reserve to the income statement.

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

4. PRINCIPAL ACCOUNTING POLICIES (continued)

(e) Income taxes

Income taxes for the year comprise current tax and deferred tax.

Current tax is based on the profit or loss from ordinary activities adjusted for items that are non-assessable or disallowable for income tax purposes and is calculated using tax rates that have been enacted or substantively enacted at the balance sheet date.

Deferred tax arises from temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the corresponding amounts used for tax purposes and is accounted for using the balance sheet liability method. Except for recognised assets and liabilities that affect neither accounting nor taxable profits, deferred tax liabilities are recognised for all temporary differences. Deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Deferred tax is measured at the tax rates expected to apply in the period when the liability is settled or the asset is realised based on tax rates that have been enacted or substantively enacted at the balance sheet date.

Income taxes are recognised in the income statement except when they relate to items directly recognised to equity in which case the taxes are also directly recognised in equity.

(f) Fixed assets

Fixed assets are stated at cost or valuation less accumulated depreciation and impairment losses, if any. The cost of an asset comprises its purchase price and any directly attributable costs of bringing the asset to its present working condition and location for its intended use. Expenditure incurred after assets have been put into operation, such as repairs and maintenance and overhaul costs, is normally charged to the income statement in the year in which it is incurred. In situations where it can be clearly demonstrated that the expenditure has resulted in an increase in the future economic benefits expected to be obtained from the use of the asset, the expenditure is capitalised as an additional cost of the asset.

When assets are sold or retired, their cost and accumulated depreciation and impairment losses are eliminated from the financial statements and any gain or loss resulting from their disposal is included in the income statement.

Land and buildings are stated in the balance sheet at their revalued amount, being the fair value on the basis of their existing use at the date of revaluation less any subsequent accumulated depreciation. Revaluations are performed with sufficient regularity such that the carrying amount does not differ materially from that which would be determined using fair value at the balance sheet date.

Any surplus arising on revaluation of land and buildings is credited to the property revaluation reserve except to the extent that it reverses a revaluation decrease of the same asset previously recognised as an expense, in which case the surplus is credited to the income statement to the extent of the deficit previously charged. A decrease in the carrying amount arising on the revaluation of an asset is recognised as an expense to the extent that it exceeds the balance, if any, of the revaluation reserve from a previous revaluation of that asset. On the subsequent sale or retirement of a revalued asset, the attributable revaluation surplus is transferred to retained profits.

Depreciation is provided to write off the cost of the assets over their estimated useful lives on a straight line basis at the following annual rates:

Leasehold land Over the term of the lease Buildings 2.5% Leasehold improvements 20%-50% Furniture, fixtures and equipment 20%-33% Motor vehicles 20% Wardrobe 100%

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

4. PRINCIPAL ACCOUNTING POLICIES (continued)

(g) Convertible note

The convertible note is stated at cost less provision for impairment loss.

(h) Inventories

Inventories are stated at the lower of cost and net realisable value.

Cost, which comprises the purchase prices of inventories and direct expenses, is calculated using the first-in first-out method.

Net realisable value represents the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale.

(i) Accounts receivable

Provision is made against accounts receivable to the extent they are considered to be doubtful. Accounts receivable in the balance sheet are stated net of such provision.

(j) Cash and cash equivalents

Cash includes cash on hand and demand deposits with any bank or other financial institution. Cash equivalents are short-term, highly liquid investments that are readily convertible to known amounts of cash which are subject to an insignificant risk of changes in value.

(k) Revenue recognition

Revenue from restaurant operations is recognised when food and beverages are sold and services are provided.

Rental income from operating leases is recognised on a straight-line basis over the term of the relevant lease.

Management fee income is recognised when services are provided.

Revenue from provision of services is recognised when services are rendered.

Interest income is accrued on a time basis on the principal outstanding at the applicable interest rate.

(l) Foreign currencies

Foreign currency transactions during the year are translated into Hong Kong dollars at the exchange rates ruling at the transaction dates. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are translated into Hong Kong dollars at the market rates of exchange ruling at that date. All exchange differences are dealt with in the income statement.

(m) Impairment

The carrying amounts of the Group’s tangible and intangible assets are reviewed annually at each balance sheet date to determine whether they have been impaired during the year. Where an asset has been impaired, the recoverable amount of the asset (or cash generating unit where applicable) is determined. Where the carrying amount exceeds the recoverable amount, the asset is written down to its recoverable amount. The resultant impairment loss is recognised as an expense in the income statement unless the asset is carried at revalued amounts and the revaluation surplus is recognised in equity in which case the impairment is recognised directly against the revaluation surplus to the extent the impairment loss does not exceed the surplus.

100

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

4. PRINCIPAL ACCOUNTING POLICIES (continued)

(m) Impairment (continued)

An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. When an impairment loss subsequently reverses, the carrying amount of the asset is increased to the reversed estimate of its recoverable amount, to the extent that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset in prior years. A reversal of an impairment loss is recognised as income immediately, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase.

(n) Leases

Lease payments under operating leases are expensed on a straight-line basis over the accounting periods covered by the lease terms.

(o) Provisions and contingent liabilities

Provisions are recognised for liabilities of uncertain timing or amount when the Group has a legal or constructive obligation arising as a result of a past event, which will probably result in an outflow of economic benefits that can be reasonably estimated.

Where it is not probable that an outflow of economic benefits will be required, or the amount cannot be estimated reliably, the obligation is disclosed as a contingent liability, unless the probability of outflow of economic benefits is remote. Possible obligations, the existence of which will only be confirmed by the occurrence or non-occurrence of one or more future events, are also disclosed as contingent liabilities unless the probability of outflow of economic benefits is remote.

(p) Employee benefits

(i) Employee leave entitlements

Employee entitlements to annual leave are recognised when they accrue to employees. A provision is made for the estimated liability for annual leave as a result of services rendered by employees up to the balance sheet date.

Employee entitlements to sick leave and maternity leave are not recognised until the time of leave.

(ii) Profit-sharing and bonus plans

The expected costs of profit sharing and bonus payments are recognised as a liability when the Group has a present legal or constructive obligation as a result of services rendered by employees and a reliable estimate of the obligation can be made.

Liabilities for profit-sharing and bonus plans are expected to be settled within twelve months and are measured at the amounts expected to be paid when they are settled.

(iii) Equity compensation benefits

Share options are granted to selected directors and employees. No employee benefit cost is recognised when options are granted. When the options are exercised, equity is increased by the amount of proceeds received net of any transaction costs.

101

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

4. PRINCIPAL ACCOUNTING POLICIES (continued)

(p) Employee benefits (continued)

(iv) Post-employment benefits

Pension obligations

The Group’s contributions to the Mandatory Provident Fund scheme (‘‘MPF’’) are expensed as incurred. The contributions to MPF by the Group and employees are calculated based on a percentage of the employees’ basic salaries but subject to a cap in accordance with the statutory requirements.

Long service payments

The Group has recorded provisions for long service payments for employees who had completed the required number of years of service under Hong Kong’s Employment Ordinance (the ‘‘Employment Ordinance’’) to be obligated for long service payment on termination of their employment.

The obligations for long service payments are assessed using the projected unit credit method, under which the provision for long service payment is charged to the income statement so as to spread the cost over the service lives of employees. The obligations are determined based on actuarial assumptions that are the Group’s best estimates of the variables that will determine the ultimate cost of providing post-employment benefits. The provisions are calculated as the present values of the estimated future cash outflows for each employee using interest rates of high quality corporate bonds that have terms to maturity approximating the terms of the related liabilities, less the fair value of the Group’s contributions to MPF for that employee. Plan assets are measured at fair values. Actuarial gains and losses are recognised over the average remaining service lives of employees.

(q) Segment reporting

In accordance with the Group’s internal financial reporting, the Group has determined that business segments be presented as the primary reporting format.

Unallocated costs represent corporate income and expenses. Segment assets consist primarily of goodwill, fixed assets, inventories and receivables, and exclude cash and bank balances. Segment liabilities comprise operating liabilities and exclude accruals for corporate expenses and certain corporate borrowings. Capital expenditure comprises additions to property, plant and equipment, including additions resulting from acquisition of wedding services business.

No geographical segment is presented as all customers are based in Hong Kong.

102

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

5. TURNOVER, OTHER REVENUE AND SEGMENT INFORMATION

The Group is principally engaged in restaurant operations, property investment and wedding services business.

An analysis of turnover and other revenue is as follows:

Turnover Sales of food and beverages from restaurant operations Gross rental income from investment properties Provision of wedding services Other revenue Management fee income Bank and other interest income Customer deposits forfeited Legal dispute settlement (note 16) Others Total revenue	2005 HK$ 33,566,901 4,824,000 105,259,358 143,650,259 --------------- – 23,438 – – 573,571 597,009 --------------- 144,247,268	2004 HK$ 30,166,829 4,352,000 4,931,262 39,450,091 --------------- 1,260,010 15,509 439,286 11,051,860 – 12,766,665 ---------------
		52,216,756

103

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

5. TURNOVER, OTHER REVENUE AND SEGMENT INFORMATION (continued)

An analysis of the Group’s business segments is set out as follows:

Turnover Segment results Unallocated income Unallocated costs Operating profit Finance costs Profit before taxation Taxation Profit attributable to shareholders Segment assets Unallocated assets Total assets Segment liabilities Unallocated liabilities Total liabilities Capital expenditure – segment – unallocated Depreciation – segment – unallocated	2005 HK$ 33,566,901 4,521,504 99,529,281 (6,172,657) 465,840 1,862,084 Restaurant operations 2004 HK$ 30,166,829 1,402,174 88,281,036 (5,451,584) 327,274 1,629,532	2005 HK$ 4,824,000 4,430,771 93,271,227 (1,675,500) – – Property	investment 2004 HK$ 4,352,000 4,132,362 84,335,227 (1,554,000) – –	2005 HK$ 105,259,358 14,991,434 27,809,974 (8,506,030) 2,024,854 3,242,512 Wedding services 2004 HK$ 4,931,262 136,644 29,463,071 (10,503,923) 5,286,742 247,920	2005 HK$ 143,650,259 23,943,709 23,438 (4,310,311) 19,656,836 (28,479) 19,628,357 (4,060,611) 15,567,746 220,610,482 41,485,232 262,095,714 (16,354,187) (892,537) (17,246,724) 2,490,694 – 2,490,694 5,104,596 18,870 5,123,466 Total 2004 HK$ 39,450,091 5,671,180 12,327,379 (3,478,512) 14,520,047 (23,671) 14,496,376 (2,550,459) 11,945,917 202,079,334 31,011,820 233,091,154 (17,509,507) (7,140,802) (24,650,309) 5,614,016 6,800 5,620,816 1,877,452 80,463 1,957,915	2005 HK$ 143,650,259 23,943,709 23,438 (4,310,311) 19,656,836 (28,479) 19,628,357 (4,060,611) 15,567,746 220,610,482 41,485,232 262,095,714 (16,354,187) (892,537) (17,246,724) 2,490,694 – 2,490,694 5,104,596 18,870 5,123,466 Total 2004 HK$ 39,450,091 5,671,180 12,327,379 (3,478,512) 14,520,047 (23,671) 14,496,376 (2,550,459) 11,945,917 202,079,334 31,011,820 233,091,154 (17,509,507) (7,140,802) (24,650,309) 5,614,016 6,800 5,620,816 1,877,452 80,463 1,957,915
						5,671,180 12,327,379 (3,478,512) 14,520,047 (23,671) 14,496,376 (2,550,459) 11,945,917
						202,079,334 31,011,820 233,091,154
						(17,509,507) (7,140,802) (24,650,309)
						5,614,016 6,800 5,620,816
						1,877,452 80,463 1,957,915

104

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

6. OPERATING PROFIT

Operating profit is stated at after charging: Amortisation of goodwill Depreciation of fixed assets Staff costs (excluding directors’ emoluments) Wages and salaries Provision for long-service payments Operating lease rentals in respect of land and buildings Auditors’ remuneration and after crediting: Surplus on revaluation of other properties 7. FINANCE COSTS Interest on short-term bank loans 8. TAXATION	2005 HK$ 1,003,778 5,123,466 42,619,421 646,235 9,964,017 370,000 59,601 2005 HK$ 28,479	2004 HK$ 83,648 1,957,915 9,105,827 867,072 1,300,165 340,000
		21,950
		2004 HK$ 23,671

The amount of taxation in the consolidated income statement represents:

		2005	2004
		HK$	HK$
Deferred tax (note	17)	4,060,611	2,550,459

No provision for Hong Kong profits tax has been made in the financial statements as the Group has available tax losses carried forward to offset against the current year’s assessable profits.

The tax expense for the year can be reconciled to the profit per the consolidated income statement as follows:

Profit before tax Tax calculated at Hong Kong profits tax rate of 17.5% (2004: 17.5%) Deferred tax not recognised Tax effect of non-deductible expenses Tax effect of non-taxable revenue Others Income tax expense	2005 HK$ 19,628,357 3,434,962 104,274 585,087 (14,732) (48,980) 4,060,611	2004 HK$ 14,496,376 2,536,866 – 2,377,567 (2,363,974) – 2,550,459

105

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

9. PROFIT ATTRIBUTABLE TO SHAREHOLDERS

Included in profit attributable to shareholders is a loss of HK$11,617,965 (2004: Profit of HK$9,781,846) that has been dealt with in the financial statements of the Company.

10. EARNINGS PER SHARE

The calculation of basic earnings per share is based on the Group’s profit attributable to shareholders of HK$15,567,746 (2004: HK$11,945,917) and the weighted average of 1,095,884,000 (2004: 1,095,884,000) ordinary shares in issue during the year.

No diluted earnings per share is disclosed as there are no outstanding share options.

11. DIRECTOR AND SENIOR MANAGEMENT EMOLUMENTS

(a) Directors’ emoluments

The aggregate amounts of directors’ emoluments payable to directors of the Company during the year are as follows:

Fees Other emoluments: Salaries and other benefits Performance related bonus	2005 HK$ 256,800 --------------- 3,000,210 767,119 3,767,329 --------------- 4,024,129	2004 HK$ 192,000 --------------- 2,154,435 – 2,154,435 ---------------
		2,346,435

No directors waived their emoluments in respect of the year ended 31 March 2005 (2004: HK$ Nil). Directors’ fees represent fees paid to independent non-executive directors.

During the year, no share options were granted to or exercised by directors.

The emoluments of the directors fell within the following bands:

	Number of directors	Number of directors
	2005	2004
Emolument bands:
HK$Nil – HK$1,000,000	10	6
HK$1,000,001 – HK$1,500,000	–	1
HK$1,500,001 – HK$2,000,000	2	–

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

11. DIRECTOR AND SENIOR MANAGEMENT EMOLUMENTS (continued)

(b) Five highest paid individuals

The five individuals whose emoluments were the highest in the Group for the year include two directors (2004: two directors). The emoluments payable to the five highest paid individuals during the year are as follows:

	2005	2004
	HK$	HK$
Basic salaries, housing allowances,
other allowances and benefits in kind	4,527,500	3,224,859
Performance related bonus	760,000	–
	5,287,500	3,224,859

The emoluments fell within the following bands:

	Number of individuals	Number of individuals
	2005	2004
Emolument bands:
HK$Nil – HK$1,000,000	3	4
HK$1,000,001 – HK$1,500,000	–	1
HK$1,500,001 – HK$2,000,000	2	–

12. GOODWILL

Cost At 31 March 2004 and 2005 Accumulated amortisation At 1 April 2004 Amortisation At 31 March 2005 Net book value At 31 March 2005 At 31 March 2004	HK$ 20,075,566
	83,648 1,003,778 1,087,426 ---------------
	18,988,140
	19,991,918

107

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

13. FIXED ASSETS

				Group
					Furniture,
		Leasehold			fixtures
	Investment	land and	Leasehold		and	Motor
	properties	buildings	improvements	Wardrobe	equipment	vehicles	Total
	HK$	HK$	HK$	HK$	HK$	HK$	HK$
Cost or valuation
At 1 April 2004	84,000,000	85,900,000	2,629,283	1,137,797	2,753,891	41,656	176,462,627
Surplus on revaluation	9,000,000	10,150,000	–	–	–	–	19,150,000
Additions	–	–	786,714	–	1,703,980	–	2,490,694
At 31 March 2005	93,000,000	96,050,000	3,415,997	1,137,797	4,457,871	41,656	198,103,321
	---------------	---------------	---------------	---------------	---------------	---------------	---------------
Accumulated depreciation
At 1 April 2004	–	–	145,806	–	843,519	3,551	992,876
Charge for the year	–	1,750,000	1,100,499	1,137,797	1,097,065	38,105	5,123,466
Surplus on revaluation	–	(1,750,000)	–	–	–	–	(1,750,000)
At 31 March 2005	–	–	1,246,305	1,137,797	1,940,584	41,656	4,366,342
	---------------	---------------	---------------	---------------	---------------	---------------	---------------
Net book value
At 31 March 2005	93,000,000	96,050,000	2,169,692	–	2,517,287	–	193,736,979
At 31 March 2004	84,000,000	85,900,000	2,483,477	1,137,797	1,910,372	38,105	175,469,751

The analysis of the cost or valuation of the above assets at 31 March 2005 is as follows:

				Group
					Furniture,
	Leasehold				fixtures
Investment	land and		Leasehold		and	Motor
properties	buildings	improvements		Wardrobe	equipment	vehicles	Total
HK$	HK$		HK$	HK$	HK$	HK$	HK$
At cost –	–		3,415,997	1,137,797	4,457,871	41,656	9,053,321
At 2005 professional
valuation 93,000,000	96,050,000		–	–	–	–	189,050,000
93,000,000	96,050,000		3,415,997	1,137,797	4,457,871	41,656	198,103,321
The analysis of the cost or valuation	of the above assets at 31 March 2004				is as follows:
At cost –	–		2,629,283	1,137,797	2,753,891	41,656	6,562,627
At 2004 professional
valuation 84,000,000	85,900,000		–	–	–	–	169,900,000
84,000,000	85,900,000		2,629,283	1,137,797	2,753,891	41,656	176,462,627

108

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

13. FIXED ASSETS (continued)

The Group’s investment properties and leasehold land and buildings, which are all located in Hong Kong, are analysed at their net book values as follows:

	2005	2004
	HK$	HK$
Leases of over 50 years	154,000,000	138,000,000
Leases of between 10 to 50 years	35,050,000	31,900,000
	189,050,000	169,900,000

All properties were revalued at 31 March 2005 on the open market value basis by Vigers Hong Kong Ltd., an independent firm of professional valuers. A revaluation surplus of HK$11,840,399 was credited to other properties revaluation reserve, net of applicable deferred income taxes, while a revaluation surplus of HK$59,601 was credited to the consolidated income statement.

The carrying amount of leasehold land and buildings of the Group would have been HK$20,808,355 (2004: HK$21,531,275) had they been stated at cost less accumulated depreciation.

At 31 March 2005, the net book value of investment properties and leasehold land and buildings pledged as security for the Group’s banking facilities amounted to HK$154,000,000 (2004: HK$138,000,000).

14. INTERESTS IN SUBSIDIARIES

Unlisted shares, at cost Less: Provision for impairment loss Amounts due from subsidiaries Less: Provision for doubtful debts Amounts due to subsidiaries	2005 HK$ 53,284,020 (1,200,000) 52,084,020 --------------- 359,626,093 (274,943,958) 84,682,135 --------------- (7,295,488) --------------- 129,470,667 Company 2004 HK$ 53,284,028 (1,200,000) 52,084,028 --------------- 375,634,161 (274,943,958) 100,690,203 --------------- (7,295,488) --------------- 145,478,743

The amounts due from/(to) subsidiaries are unsecured, interest free and have no fixed terms of repayment.

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APPENDIX II

14. INTERESTS IN SUBSIDIARIES (continued)

The following is a list of the principal subsidiaries at 31 March 2005:

		Principal activities	Particulars of	Percentage of	Percentage of
	Place of	and place of	issued/	equity interest
Name	incorporation	operation	share capital		held
				2005	2004
Held directly
Athenian Investments	The British	Investment holding in	1 ordinary	100	100
Limited	Virgin Islands	Hong Kong	share of US$1
Golden Island Bird’s Nest	Hong Kong	Investment holding in	100 ordinary	100	100
Chiu Chau Restaurant		Hong Kong	shares of HK$100
(Star House) Limited			each and 240,000
			deferred shares
			of HK$100 each
Golden Island Catering	Hong Kong	Restaurant operations	2 ordinary shares	100	100
Group Company Limited		and provision of wedding	of HK$1 each
		services in Hong Kong
Golden Island (Chine	Hong Kong	Investment holding in	2 ordinary shares	100	100
Pax) Limited		Hong Kong	of HK$1 each
Golden Island	Hong Kong	Provision of	10,000 ordinary	100	100
(Management) Limited		management services	shares of HK$1
		to group companies	each
		in Hong Kong
Marlborough Gold	The British	Investment holding in	1 ordinary	100	100
Limited	Virgin Islands	Hong Kong	share of US$1
Held indirectly
Golden Island Bird’s Nest	Hong Kong	Property holding in	12,000 ordinary	100	100
Chiu Chau Restaurant		Hong Kong	shares of HK$100
(Causeway Bay)			each
Limited

The above table includes the subsidiaries of the Company which, in the opinion of the directors, principally affected the results of 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.

110

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

15. INTEREST IN AN ASSOCIATED COMPANY

		Group		Company
	2005	2004	2005	2004
	HK$	HK$	HK$	HK$
Share of net assets
other than goodwill	–	–	–	–
Amount due from
associated company	–	4,489,648	–	28,850
Provision for doubtful debts	–	(4,489,648)	–	(28,850)
	–	–	–	–

Details of the associated company are as follows:

		Principal		Percentage of
	Place of	activity and	Description	equity interest
Name	incorporation	place of operation	of shares held	held indirectly
				2005 2004
Goldpoint Investment	The British	Investment holding	51,283	50% 50%
Limited	Virgin Islands	in Hong Kong	ordinary shares
			of US$1 each

The associated company is not audited by BDO McCabe Lo & Company.

The amount due from the associated company was unsecured, interest free and had no fixed terms of repayment. The directors are of the opinion that the balance due from the associated company is irrecoverable and thus the balance due was fully written off against the provision.

16. INVESTMENT IN CONVERTIBLE NOTE

		Group
	2005	2004
	HK$	HK$
Unlisted investment, at cost	78,000,000	78,000,000
Less: Provision	(78,000,000)	(78,000,000)
	–	–

The investment was a convertible note (‘‘Note’’) of Opal Technologies Inc. (‘‘Opal’’) for a principal amount of US$10 million. Opal is engaged in the manufacturing, trading and distribution of organic fertilisers and its shares were traded on the NASDAQ Bulletin Board in the United States of America. The Note was unsecured, interest bearing at 4% per annum payable quarterly in arrears.

The Note was convertible, in whole or in part, into fully paid shares of common stock of Opal (par value US$0.001) at US$0.20 per share (subject to adjustment) after 10 October 2000. The Group did not exercise the right to convert the Note into shares of Opal. The Note matured on 9 April 2003.

Trading of shares of Opal on NASDAQ Bulletin Board has been suspended since 23 May 2001 due to its failure to file audited financial statements for the year ended 31 December 2000 and subsequent financial years with the Securities and Exchange Commission of the United States of America. The directors were of the opinion that the recoverability of the Note was doubtful and a full provision on the Note was made in 2001.

111

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

16. INVESTMENT IN CONVERTIBLE NOTE (continued)

Legal action was taken by the Group against Opal in 2002. The court adjudged that Opal had to pay the Group, inter alia, a sum of US$10,300,000 representing the principal and interest accrued on the Note up to 7 January 2002 (the ‘‘Judgement Debts’’).

On 19 January 2004, the Group entered into a deed of settlement (the ‘‘Settlement Deed’’) with Opal. Under the Settlement Deed, the Group agreed to accept Opal’s payment of US$2,500,000 in full settlement of the Judgement Debts. The first instalment of the settlement of US$1,420,000 (HK$11,051,860) was received on 19 January 2004 in accordance with the terms of the Settlement Deed.

The second instalment of US$1,080,000 was scheduled to be received on 19 October 2004. However, Opal has requested a further extension and thus, the second instalment of the settlement is still outstanding. As the financial position of Opal was unknown, it would be difficult and costly to take legal action to enforce the payment immediately, and the Company agreed to grant the extension requested by Opal.

17. DEFERRED TAXATION

Deferred taxation is calculated in full on temporary differences under the liability method using a taxation rate of 17.5% (2004: 17.5%)

The movements on the net deferred tax assets during the year are as follows:

	Group	Company
	HK$	HK$
At 1 April 2003	22,886,437	253,014
Deferred taxation charged to income statement	(2,550,459)	(253,014)
Taxation credited to other properties revaluation reserve (note 22(a))	424,386	–
At 31 March 2004	20,760,364	–
Deferred taxation charged to income statement (note 8)	(4,060,611)	–
At 31 March 2005	16,699,753	–

Deferred income tax assets are recognised for tax losses carried forward to the extent that realisation of the related tax benefit through future taxable profits is probable. At 31 March 2005, the Group and the Company had unutilised tax losses of HK$8,203,157 (2004: HK$7,613,587) and HK$2,647,415 (2004: HK$2,065,790) respectively. The tax losses may be carried forward indefinitely.

The movement in deferred tax assets and liabilities (prior to offsetting of balances within the same taxation jurisdiction) during the year is as follows:

	Accelerated	Accelerated
	accounting
Deferred tax assets	depreciation		Tax	losses		Total
	2005	2004	2005	2004	2005	2004
	HK$	HK$	HK$	HK$	HK$	HK$
At the beginning
of the year	7,811	95,662	21,220,316	23,326,668	21,228,127	23,422,330
Credited/(charged) to
income statement	251	(87,851)	(4,292,103)	(2,106,352)	(4,291,852)	(2,194,203)
At the end of the year	8,062	7,811	16,928,213	21,220,316	16,936,275	21,228,127

112

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

17. DEFERRED TAXATION (continued)

		Accelerated
Deferred tax liabilities	taxation depreciation
	2005	2004
	HK$	HK$
At the beginning of the year	(467,763)	(535,893)
Credited/(charged) to income statement	231,241	(356,256)
Credited to equity	–	424,386
At the end of the year	(236,522)	(467,763)

Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when the deferred income taxes relate to the same fiscal authority. The following amounts, determined after appropriate offsetting, are shown in the Group’s and the Company’s balance sheets:

Deferred tax assets Deferred tax liabilities Amount shown in balance sheet INVENTORIES Food and beverages	2005 HK$ 16,936,275 (236,522) 16,699,753 Group 2004 HK$ 21,228,127 (467,763) 20,760,364	2005 HK$ – – – Company 2004 HK$ – – – 2005 HK$ 1,729,001 Group 2004 HK$ 1,046,015

18. INVENTORIES

At 31 March 2005, the carrying amount of inventories that were carried at net realisable value was $114,861 (2004: HK$140,611).

19. ACCOUNTS RECEIVABLE, DEPOSITS AND PREPAYMENTS

		Group		Company
	2005	2004	2005	2004
	HK$	HK$	HK$	HK$
Trade receivables	833,264	365,621	–	–
Deposits, prepayments
and other receivables	5,638,281	4,617,022	31,209	31,209
Deferred expenses	–	922,749	–	–
	6,471,545	5,905,392	31,209	31,209

The Group’s general credit terms granted to its customers range from 30 to 60 days.

113

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

19. ACCOUNTS RECEIVABLE, DEPOSITS AND PREPAYMENTS (continued)

At 31 March 2005, the ageing analysis of the trade receivables was as follows:

		Group
	2005	2004
	HK$	HK$
Within 30 days	813,313	345,713
31 to 60 days	19,951	19,908
	833,264	365,621

20. ACCOUNTS PAYABLE AND ACCRUED CHARGES

		Group		Company
	2005	2004	2005	2004
	HK$	HK$	HK$	HK$
Trade payables	4,771,718	3,225,360	–	–
Other payables and accruals	7,984,104	4,426,647	312,769	183,905
Deposits received	1,675,500	5,467,018	–	–
Deferred revenue	–	2,480,995	–	–
	14,431,322	15,600,020	312,769	183,905

At 31 March 2005, the ageing analysis of the trade payables was as follows:

	2005	2004
	HK$	HK$
Within 30 days	3,890,952	2,645,206
31 to 60 days	677,907	429,123
61 to 90 days	91,944	–
Over 90 days	110,915	151,031
	4,771,718	3,225,360

21. SHARE CAPITAL

Authorised 2,000,000,000 ordinary shares of $0.05 each Issued and fully paid 1,095,884,000 ordinary share of $0.05 each	2005 HK$ 100,000,000 54,794,200	2004 HK$ 100,000,000
		54,794,200

On 30 August 2002, the Company adopted a share option scheme (the ‘‘Scheme’’) pursuant to which the Company may grant options without initial payment to (i) any director, employee, or consultant of the Group or a company in which the Group holds an equity interest or a subsidiary of such company (‘‘Affiliate’’); or (ii) any discretionary trust whose discretionary objects include any director, employee or consultant of the

114

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

21. SHARE CAPITAL (continued)

Group or an Affiliate; or (iii) a company beneficially owned by any director, employee or consultant of the Group or any Affiliate; or (iv) any customer, supplier or adviser whose service to the Group or business with the Group contributes or is expected to contribute to the business or operation of the Group as may be determined by the directors from time to time to subscribe for shares of the Company. The subscription price of the shares under the Scheme will be the highest of (i) the nominal value of the shares; (ii) the closing price per share as stated in daily quotation sheets of The Stock Exchange of Hong Kong Limited (the ‘‘Stock Exchange’’) on the date of grant; and (iii) the average closing price per share as stated in the daily quotation sheets of the Stock Exchange for the five business days immediately preceding the date of grant and such price may be adjusted from time to time pursuant to the Scheme. No share options under the Scheme were granted since adoption.

22. RESERVES

(a) Group

			Investment	Other
			properties	properties
	Share	Contribution	revaluation	revaluation	Accumulated
	premium	surplus	reserve	reserve	losses	Total
	HK$	HK$	HK$	HK$	HK$	HK$
At 1 April 2003	293,365,856	28,784,000	28,530,053	58,194,071	(293,048,138)	115,825,842
Surplus on revaluation	–	–	10,000,000	15,450,500	–	25,450,500
Deferred taxation	–	–	–	424,386	–	424,386
Profit for the year	–	–	–	–	11,945,917	11,945,917
At 1 April 2004	293,365,856	28,784,000	38,530,053	74,068,957	(281,102,221)	153,646,645
Surplus on revaluation	–	–	9,000,000	11,840,399	–	20,840,399
Profit for the year	–	–	–	–	15,567,746	15,567,746
At 31 March 2005	293,365,856	28,784,000	47,530,053	85,909,356	(265,534,475)	190,054,790

(b) Company

	Share	Contribution	Accumulated
	premium	surplus	losses	Total
	HK$	HK$	HK$	HK$
At 1 April 2003	293,365,856	28,784,000	(245,785,569)	76,364,287
Profit for the year	–	–	9,781,846	9,781,846
At 1 April 2004	293,365,856	28,784,000	(236,003,723)	86,146,133
Loss for the year	–	–	(11,617,965)	(11,617,965)
At 31 March 2005	293,365,856	28,784,000	(247,621,688)	74,528,168

The contributed surplus represents the difference between the consolidated shareholders’ funds of the subsidiaries at the date when they were acquired by the Company and the nominal amount of the Company’s shares issued for the acquisition at the time of the group reorganisation prior to the listing of the Company’s shares in 1991. Under the Companies Act 1981 of Bermuda (as amended), the contributed surplus is available for distribution to the shareholders provided that the Company is able to meet its obligations after distribution and the net realisable value of the Company’s assets would not be less than the aggregate of its liabilities, issued share capital and share premium accounts.

115

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

23. PROVISION FOR LONG SERVICE PAYMENTS

The Group has recorded provisions for long service payment obligations for employees who had completed the required number of years of service under the Employment Ordinance. The provisions are calculated based on the Group’s best estimates using the projected unit credit method.

The amounts recognised in the balance sheet are as follows:

		Group
	2005	2004
	HK$	HK$
Present value of funded obligations	2,815,402	3,050,289

The amounts recognised in the consolidated income statement are as follows:

		Group
	2005	2004
	HK$	HK$
Current service cost	433,163	834,141
Interest cost	140,631	150,205
Net actuarial losses/(gains) recognised during the year	72,441	(117,274)
	646,235	867,072

Movements in the provision for long service payments are as follows:

		Group
	2005	2004
	HK$	HK$
At beginning of year	3,050,289	3,390,131
Total expense recognised in the income statement	646,235	867,072
Payments made during the year:
– MPF contributions	(507,972)	(582,298)
– Long service payments	(373,150)	(624,616)
At end of year	2,815,402	3,050,289

The principal actuarial assumptions used were as follows:


	2005	2004
Discount rate	4.3%	4.3%
Expected rate of future salary increases	1.2%	1.2%

116

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

24. NOTES TO THE CONSOLIDATED CASH FLOWS STATEMENT

(a) Reconciliation of operating profit to net cash inflow generated from operations:

	2005	2004
	HK$	HK$
Operating profit	19,628,357	14,520,047
Interest income	(23,438)	(15,509)
Surplus on revaluation of other properties	(59,601)	(21,950)
Legal dispute settlement	–	(11,051,860)
Amortisation of goodwill	1,003,778	83,648
Depreciation	5,123,466	1,957,915
Interest expenses	28,479	–
Operating profit before working capital changes	25,701,041	5,472,291
Increase in inventories	(682,986)	(91,934)
Increase in accounts receivable, deposits and prepayments	(566,153)	(1,333,747)
(Decrease)/increase in accounts payable and accrued charges	(1,168,698)	6,308,473
Decrease in provision for long service payments	(234,887)	(339,842)
Net cash inflow generated from operations	23,048,317	10,015,241

(b) Acquisition of wedding services business

	2005	2004
	HK$	HK$
Net assets acquired
Fixed assets	–	5,060,982
Deposits and other receivables	–	2,803,050
Cash	–	39,939
Deposits received in advance	–	(3,533,982)
Other payables and accruals	–	(445,555)
	–	3,924,434
Goodwill	–	20,075,566
Consideration satisfied by cash	–	24,000,000

Analysis of the net cash outflow on acquisition of the wedding services business:

	2005	2004
	HK$	HK$
Cash consideration	–	24,000,000
Cash acquired	–	(39,939)
	–	23,960,061

117

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

25. COMMITMENTS

(a) Operating lease commitments

At 31 March 2005, the Group had future aggregate minimum lease payments under non-cancellable operating leases in respect of office premises, shops and warehouse premises as follows:

		Group
	2005	2004
	HK$	HK$
Within one year	8,549,008	9,358,000
Within two to five years	2,350,926	8,120,000
	10,899,934	17,478,000

The Company did not have any commitments under operating lease at 31 March 2005 (2004: Nil).

(b) Operating lease rental receivables

At 31 March 2005, the Group’s future aggregate minimum rental receivables under non-cancellable operating leases in respect of investment properties are as follows:

		Group
	2005	2004
	HK$	HK$
Within one year	4,526,000	4,764,000
Within two to five years	4,968,000	9,494,000
	9,494,000	14,258,000

The Company did not have any commitments under operating lease rental receivables at 31 March 2005 (2004: Nil).

(c) Capital commitments


	2005	2004
	HK$	HK$
Commitments for acquisition of fixed assets
– contracted but not provided for	292,246	–

The Company did not have any capital commitments at 31 March 2005 (2004: Nil).

118

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

26. RELATED PARTY TRANSACTIONS

Significant related party transactions during the year were:

		Group
	2005	2004
	HK$	HK$
Acquisition of the wedding services business
from a related company (Note (a))	–	24,000,000
Management fees charged to a related company (Note (b))	–	1,260,010
Rental expenses charged by related companies (Note (c))	2,232,000	156,000

(a) During the 2004 financial year, the Group entered into a sale and purchase agreement (‘‘Agreement’’) with a related company to purchase from the related company the business of provision of wedding services under the trade names of ‘‘Cite Du Louvre’’ and ‘‘Wonderful Arts Wedding Services’’ in Hong Kong at a consideration of HK$24,000,000, which was approved by the shareholders on 5 March 2004.
(b) Management fees of HK$Nil (2004: HK$1,117,145) were charged at 1.5% of the revenue of these related companies and management fees of HK$Nil (2004: HK$142,865) were charged for warehouse usage by related companies.
(c) Rental expenses were charged based on the tenancy agreements signed between both parties. These tenancy agreements related to the wedding services business of the Group acquired from an associate of a director of the Company mentioned in note (a) above.
(d) Two directors of the Company have beneficial interests in the related companies, one of whom also holds directorship in those companies.

27. POST BALANCE SHEET EVENTS

(a) On 13 April 2005, the Company’s wholly owned subsidiary, Well Prime International Limited (‘‘Well Prime’’), entered into an agreement to subscribe for 600 ordinary shares in Reli-a-bo Entertainment Limited (‘‘Reli-a-bo’’), representing 60% equity interest in Reli-a-bo, for a consideration of HK$600. Pursuant to the agreement, Well Prime advanced an interest-free loan of HK$5,999,400 to Reli-a-bo, and the minority shareholders made similar advances in proportion to their shareholdings in Reli-a-bo. Reli-a-bo carrys on the business of talent management in the entertainment industry.
(b) On 25 May 2005, the Company issued 219,176,800 shares to its major shareholder pursuant to a top-up placing entered into on 11 May 2005 and announced on 12 May 2005. The net proceeds from the issue of shares were approximately HK$128.4 million.
(c) On 3 and 6 June 2005, the Company’s wholly owned subsidiary, Worldaim Enterprises Limited (‘‘Worldaim’’), subscribed for 51 shares in Wellprecise Limited (‘‘Wellprecise’’), representing 51% equity interest in Wellprecise, for a consideration of HK$51. Pursuant to a shareholders’ agreement dated 18 June 2005, Worldaim advanced an interest-free loan of HK$2,039,949 to Wellprecise, and the minority shareholders made similar advances in proportion to their shareholdings in Wellprecise. Wellprecise will be engaged in the operation of a Japanese restaurant.
(d) On 12 July, 2005, the Company’s wholly owned subsidiary, Winkler Profits Limited (‘‘Winkler’’), subscribed for 51 shares in Witty Ventures Limited (‘‘Witty’’), representing 51% equity interest in Witty, for a consideration of HK$51. Pursuant to a shareholders’ agreement dated 12 July 2005, Winkler advanced an interest-free loan of HK$8,160,000 to Witty, and the minority shareholder made a similar advance in proportion to his shareholding in Witty. Witty is engaged in the retail trading of watches.

119

APPENDIX II FINANCIAL INFORMATION OF THE GROUP

28. ULTIMATE HOLDING COMPANY

The directors consider the ultimate holding company at 31 March 2005 to be World Possession Assets Limited, a company incorporated in the British Virgin Islands.

29. APPROVAL OF FINANCIAL STATEMENTS

The financial statements were approved and authorised for issue by the Board of Directors on 28 July 2005.

120

APPENDIX III PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

1. UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

Introduction

The unaudited pro forma consolidated income statement and the unaudited pro forma consolidated cash flow statement for the year ended 31 March 2005 and the unaudited pro forma consolidated balance sheet as at 31 March 2005 of the Enlarged Group are prepared based on the audited consolidated financial statements of the Group as set out in Appendix II and the audited financial information of the Waldorf Group as set out in the Accountants’ Report in Appendix I, after GAAP adjustments and pro forma adjustments to reflect respectively the effect to the financial information of the Waldorf Group using the same Hong Kong Financial Reporting Standards (‘‘HKFRSs’’) as the Group and the effect of the completion of the Open Offer and the Acquisition which are inter-conditional. For the purpose of the unaudited pro forma financial information, the financial information of the Waldorf Group for the year ended 31 March 2005 is translated at the exchange rate of HK$1 = MOP1.03.

The unaudited pro forma financial information has been prepared to provide the information on the Enlarged Group as a result of the completion of the Open Offer and the Acquisition (the ‘‘Completion’’). As it has been prepared for illustrative purpose only and because of its nature, it may not give a true picture of the financial position of the Enlarged Group as at 31 March 2005 or at any future dates. Also, it may not give a true picture of the results and the cash flows of the Enlarged Group for the year ended 31 March 2005 or for any future financial periods.

121

APPENDIX III PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

Unaudited Pro Forma Income Statement of the Enlarged Group

Turnover Cost of sales Gross Profit Other revenue Net operating expenses/ administrative expenses Decrease in fair value of an investment property Operating profit Finance costs Profit before taxation Taxation Profit after taxation Minority interests Profit attributable to shareholders Earnings per share UPIL Group for the year ended 31 March 2005 HK$’000 (audited) 143,650 (35,673) 107,977 597 (88,917) – 19,657 (28) 19,629 (4,061) 15,568 – 15,568 HK$0.0142 31	Waldorf Group for the year ended March 2005 MOP’000 (audited) 103,707 (84,375) 19,332 2,782 (12,203) (87) 9,824 (4,474) 5,350 (9) 5,341 – 5,341 GAAP adjustments MOP’000 31	Waldorf Group for the year ended March 2005 HK$’000 (unaudited) 100,686 (81,917) 18,769 2,701 (11,848) (84) 9,538 (4,344) 5,194 (9) 5,185 – 5,185 Notes (5) (4) Pro forma adjustments HK$’000 (259)	Unaudited Pro forma Enlarged Group HK$’000 244,336 (117,590) 126,746 3,298 (100,765) (84) 29,195 (4,372) 24,823 (4,070) 20,753 (259) 20,494
			HK$0.0085

122

APPENDIX III PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

Unaudited Pro Forma Balance Sheet of the Enlarged Group

Non-current assets Goodwill Fixed assets Investment properties Non-current portionof prepaid lease rentals Interest in anassociated company Investment inconvertible note Deferred tax assets/(liabilities) Current assets Inventories Accounts receivable,depositsandprepayments Current portionof prepaidlease rentals Amountsdue from fellowsubsidiaries Cash and bankbalances Current liabilities Accounts payable and accruedcharges Amount due toultimate holdingcompany Amount due toa shareholder Tax payable Securedbankborrowings– due withinone year Net current assets/(liabilities) Non-current liabilities Provisionfor longservice payments Securedbankborrowing – due after one year Minority interests Financedbyowner’s equity Net asset value per share Net tangible asset value per share UPIL Group as at 31 March 2005 HK$’000 (audited) 18,988 193,737 – – – – 16,700 229,425 1,729 6,472 – – 24,470 32,671 14,431 – – – – 14,431 ~~---------------~~ 18,240 2,815 – – 2,815 ~~---------------~~ 244,850 HK$0.223 HK$0.2061 Waldorf Group as at 31 March 2005 MOP’000 (audited) 15 205,709 3,090 76,889 – – – 285,703 2,338 23,836 1,778 185,669 23,857 237,478 29,931 299,458 20,595 9 29,140 379,133 ~~---------------~~ (141,655) – 143,411 – 143,411 ~~---------------~~ 637 GAAP adjustments MOP’000 Note 1 78,667 (76,889) (1,778) Waldorf Group as at 31 March 2005 HK$’000 (unaudited) 15 276,093 3,000 – – – – 279,108 2,270 23,142 – 180,261 23,162 228,835 29,059 290,736 19,995 9 28,291 368,090 ~~---------------~~ (139,255) – 139,234 – 139,234 ~~---------------~~ 619 Notes (3)(iv) (3)(iii) (3)(iii) (2) (2) (3)(i) (3)(vi) (2) (3)(v) (4) (4) Pro forma adjustments HK$’000 5,541 214,998 (25,800) (180,261) (22,555) (80,786) (87,920) (202,816) 9,491	Unaudited Pro forma Enlarged Group HK$’000 24,544 684,828 3,000 – – – (9,100) 703,272 3,999 29,614 – – (55,709) (22,096) 43,490 – 19,995 9 28,291 91,785 ~~---------------~~
	(113,881) 2,815 139,234 9,491 151,540 ~~---------------~~
	437,851
	HK$0.182 HK$0.1714

123

APPENDIX III PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

Unaudited Pro Forma Cash Flow Statement of the Enlarged Group

Operating activities
Operatingprofit
Adjustmentsfor:
Interest income
Surplusonrevaluationof other properties
Amortisationof goodwill
Depreciation
Decrease infair value of aninvestmentproperty
Amortisationof prepaidleaserentals
Interest expenses
Operatingprofit beforeworkingcapital changes
Increase ininventories
Increase inaccounts receivable, depositsandprepayments
(Decrease)/increase inaccountspayable andaccruedcharges
Decrease inprovisionfor longservicepayments
Net cashinflowgeneratedfromoperations
Interestpaid
Interestreceived
Net cashinflowfromoperatingactivities
Investing activities
Advances tofellowsubsidiaries
Disposalof asubsidiary
Purchase of fixedassets
Acquisitionof investment properties
Acquisitionof subsidiaries
Interestreceived
Net cashoutflowfrom investingactivities
Net cash inflow/(Outflow) before financing
Net cash from financing activities
Issueof shares
Bankloanrepayment
Interestpaid
Newbankandother borrowingsraised
Advances fromfellowsubsidiaries
Advances from/(repayment to) ultimate
holding company
Advances fromshareholders
Net cash (used in)/from financing activities
Increase/(decrease) in cash and bankbalances
Cash and bankbalances at the beginning of the year
Cash and bankbalances at the endof the year
UPILGroup
forthe
year ended
31 March2005
HK$’000
(audited)
19,628
(23)
(60)
1,004
5,123
–
–
28
25,700
(683)
(566)
(1,169)
(235)
23,047
(28)
23
23,042
–
–
(2,491)
–
–
–
(2,491)
20,551
–
(6,000)
–
–
–
–
–
(6,000)
14,551
9,918
24,469
Waldorf
Group
for the
year ended
31 March 2005
MOP’000
(audited)
9,824
(3)
–
–
36,759
87
1,333
–
48,000
(2,338)
(23,691)
9,419
–
31,390
–
–
31,390
(154,353)
(6,141)
(110,010)
(3,177)
31,290
3
(242,388)
(210,998)
–
(115,894)
(4,474)
288,445
39,969
19,945
45
228,036
17,038
6,819
23,857
GAAP
adjustments
MOP’000
Note1
1,333
(1,333)
Waldorf
Group
forthe
year ended
31 March 2005
HK$’000
(unaudited)
9,538
(3)
–
–
36,982
84
–
–
46,601
(2,270)
(23,001)
9,145
–
30,475
–
–
30,475
(149,857)
(5,962)
(106,806)
(3,084)
30,379
3
(235,327)
(204,852)
–
(112,518)
(4,344)
280,044
38,805
19,364
44
221,395
16,543
6,620
23,163
Notes
(2)
(3)
(3)(ii)
(3)(vi)
(2)
Pro forma
adjustments
HK$’000
180,261
(185,866)
193,000
(87,920)
(202,816)

Unaudited
Pro forma
Enlarged
Group
HK$’000
29,166
(26)
(60)
1,004
42,105
84
–
28
72,301
(2,953)
(23,567)
7,976
(235)
53,522
(28)
23
53,517
30,404
(5,962)
(109,297)
(3,084)
(155,487)
3
(243,423)
(189,906)

193,000
(118,518)
(4,344)
280,044
38,805
(271,372)
44
117,659
(72,247)
16,538
(55,709)

124

APPENDIX III PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

Notes:

1 New and revised Hong Kong Financial Reporting Standards and Hong Kong Accounting Standards (‘‘new HKFRSs’’) are effective for accounting periods beginning on or after 1 January 2005. The Group did not early adopt the new HKFRSs but the Waldorf Group had early adopted these new HKFRSs throughout the Relevant Periods. As such, GAAP adjustments were made to restate the financial information of the Waldorf Group using the same HKFRSs adopted by the Group for consistency, as follows:
a. Prepaid lease rentals were reallocated to fixed assets
b. Amortisation of prepaid lease rentals was reallocated to depreciation
2 Prior to the Completion, settlements were made in the inter-company balances among the Waldorf Group’s related companies in accordance with the sale and purchase agreement. The Waldorf Group received payments from its fellow subsidiaries totalling MOP185.7 million (approximately HK$180.2 million) and made payments to its ultimate holding company of MOP208.9 million (approximately HK$202.8 million). This adjustment reflects the net change resulting from these transactions.
3 The consideration for the Acquisition is MOP$282 million (approximately HK$274 million) comprising MOP$191 million (approximately HK$186 million) for the acquisition of the Sale Shares (representing 95% of the registered capital of Waldorf) and MOP$91 million (approximately HK$88 million) for the acquisition of the Sale Loan. The Consideration will be satisfied by way of net proceeds of approximately HK$193 million to be raised from the Open Offer and the balance of approximately HK$81 million from cash.

Under accounting principles generally accepted in Hong Kong, the Group will apply the purchase method to account for the Acquisition in the consolidated financial statements of the Enlarged Group. In applying the purchase method, the identifiable assets and liabilities of the Waldorf Group will be recorded on the balance sheet of the Enlarged Group at their fair values at the date of the Completion. Any goodwill or negative goodwill arising on the Acquisition will be determined as the excess or deficit of the purchase price to be incurred by the Group over the Group’s interests in the net fair values of the identifiable assets and liabilities of the Waldorf Group at the date of the Completion.

The adjustments reflect the following:

(i) HK$81 million of the total consideration of HK$274million will be satisified by cash.
(ii) HK$193 million of the total consideration of HK$274 million will be satisfied by the net proceeds from the issue of 1,315,060,800 new Shares at HK$0.15 per Share under the Open Offer.
(iii) The adjustment represented the revaluation surplus of Waldorf Group’s hotel properties of HK$215 million, based on fair value of the hotel properties as at 31 March 2005 of MOP500 million (approximately HK$485million) and net of the related deferred tax effect of HK$26 million.
(iv) Goodwill arising from the acquisition of the Waldorf Group by the Company, which is calculated from the consideration payable for the acquisition of HK$186 million minus 95% of the net assets of the Waldorf Group and considering the fair value adjustment in 3 (iii) above.
(v) 5% minority interests in the Waldorf Group (after considering the fair value adjustments in 3 (iii) above) upon completion of the Acquisition.
(vi) The loan of HK$88 million will be assigned to the Group as Sale Loan.

125

APPENDIX III PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

4 The number of Shares used for the calculation of basic earnings per Share, net asset value per Share and net tangible asset value per Share is 2,410,944,800 Shares, comprising 1,095,884,000 existing Shares in issue as at 31 March 2005 and 1,315,060,800 new Shares to be issued by the Company pursuant to the Open Offer to finance the Acquisition.
5 It represented 5% minority interests in the Waldorf Group.
6 Adoption of New Hong Kong Financial Reporting Standards

Had the Group adopted the new HKFRSs in preparing the financial statements for the year ended 31 March 2005, the GAAP adjustments relating to the adoption of new HKFRSs would be as follows:

(a) Investment properties would be reallocated from fixed assets.
(b) Changes in valuation of the investment properties were previously dealt with in the investment property revaluation reserve. On the adoption of HKAS 40, all changes in valuation of the investment property would be recognised in the income statement as part of other income. The increase in fair value for the year ended 31 March 2005 of HK$9,000,000 would be recognised as other income and the investment property revaluation reserve of HK$38,530,053 as at 31 March 2004 would be adjusted to retained earnings.
(c) The adoption of HKAS-INT 21 would result in a change in accounting policy relating to deferred taxation of the Group’s investment properties. Previously, deferred tax arising from the revaluation of an investment property was calculated on the basis that the property was held for sale. In accordance with HKAS-INT 21, the deferred tax arising from the revaluation of the property would be recalculated as if the property was held for use, and charged to the income statement. The change in accounting policy would increase the deferred tax charge for the year by HK$1,575,000 and opening retained earnings would be reduced by HK$6,742,759, which is the cumulative effect of the change in accounting policy on the results for periods prior to 31 March 2004.
7 The ‘amount due to a shareholder’ is payable to Sentosa.

126

APPENDIX III PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

2. LETTER FROM THE AUDITORS ON THE UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

16 September 2005

The Directors United Power Investment Limited Room 2810-2811 28/F Shun Tak Centre West Tower 200 Connaught Road Central Hong Kong

Dear Sirs,

UNITED POWER INVESTMENT LIMITED

We report on the unaudited pro forma financial information of United Power Investment Limited (the ‘‘Company’’) and its subsidiaries (collectively the ‘‘Group’’) and Waldorf Holding Limited and its subsidiaries (hereinafter referred to as the ‘‘Enlarged Group’’), set out on pages 121 to 126 under the heading ‘‘Unaudited Pro Forma Financial Information of the Enlarged Group’’ in section I of Appendix III to the Company’s circular dated 16 September 2005 (the ‘‘Circular’’) in connection with the proposed acquisition of 95% of the registered capital of Waldorf Holding Limited by the Company’s subsidiary, Widelead Group Limited (the ‘‘Acquisition’’) pursuant to the sale and purchase agreement dated 16 August 2005 between Widelead Group Limited, Waldorf Holding Limited, Wealth Access Holdings Limited and Sunling Resources Limited. The unaudited pro forma financial information has been prepared by the directors of the Company, for illustrative purposes only, to provide information about how the Acquisition might have affected the relevant financial information of the Enlarged Group as at 31 March 2005, and for the year then ended.

Responsibilities

It is the responsibility solely of the directors of the Company to prepare the unaudited pro forma financial information in accordance with paragraph 4.29 and paragraph 13 of Appendix 1B of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the ‘‘Listing Rules’’).

It is our responsibility to form an opinion, as required by paragraph 4.29 of the Listing Rules, on the unaudited 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 unaudited 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 with reference to 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 in 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 unaudited pro forma financial information with the directors of the Company.

127

APPENDIX III PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

Our work does not constitute an audit or a review 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 assurance on the unaudited pro forma financial information.

The unaudited pro forma financial information has been prepared on the basis set out on pages 121 to 126 in Appendix III to the Circular for illustrative purposes only and, because of its nature, it may not be indicative of the financial position of:

(a) the financial position of the Enlarged Group at any future date;
(b) the results and cash flows of the Enlarged Group for any future periods; or
(c) the earnings per share of the Enlarged Group for any future periods.

Opinion

In our opinion:

(a) the unaudited pro forma financial information has been properly compiled by the directors of the Company on the basis stated;
(b) such basis is consistent with the accounting policies of the Group; and
(c) the adjustments are appropriate for the purposes of the unaudited pro forma financial information as disclosed pursuant to paragraph 4.29 of the Listing Rules.

Yours faithfully,

BDO McCABE LO LIMITED

Certified Public Accountants

Tony Yuk Tung Chan

Practising Certificate Number P04654

3. INDEBTEDNESS

As at the close of business on 31 July 2005, being the latest practicable date for the purpose of this indebtedness statement prior to the printing of this Circular, the Group had no outstanding borrowings, while the Waldorf Group had outstanding mortgage loans of approximately HK$158 million. The Waldorf Group’s mortgage loans were secured by certain investment properties, hotel properties and prepaid lease rentals of the Waldorf Group with a total carrying value of HK$258 million. The bank loans of the Waldorf Group were secured by personal guarantees of two directors of Waldorf. The relevant bank has consented to release and replace such personal guarantees by a corporate guarantee of the Company upon completion of the Acquisition.

Save as aforesaid and apart from intra-group liabilities, none of the companies in the Group or the Enlarged Group had outstanding at the close of business on 31 July 2005 any mortgages, charges or debentures, loan capital, bank overdrafts, loans, debt securities or other similar indebtedness or any finance lease commitments, liabilities under acceptances or acceptance credits or any guarantees or other material contingent liabilities.

For the purpose of the above indebtedness statement, foreign currency amounts have been translated into Hong Kong dollars at the approximate rates of exchange prevailing at the close of business on 31 July 2005.

128

APPENDIX III PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

Except as disclosed above, the Directors are not aware of any material changes in the Group or the Enlarged Group’s indebtedness and contingent liabilities at the close of business on 31 July 2005.

4. MATERIAL CHANGE

Subsequent to the last published audited accounts of the Company (which was contained in the annual report of the Company for the year ended 31 March 2005), the Directors are not aware of any material changes in the financial or trading position or prospects of the Group.

5. WORKING CAPITAL

The Directors are of the opinion that, upon completion of the Acquisition and after taking into account the Enlarged Group’s internally generated funds and available banking facilities, the Enlarged Group has sufficient working capital to satisfy its present requirement and for the period ending 12 months from the date of this circular.

129

APPENDIX IV PROPERTY VALUATION OF THE WALDORF GROUP

The following is the texts of letters and valuation certificates, prepared for the purpose of incorporation in this circular, received from the Valuer, an independent property valuer, in connection with their valuation as at 31 July 2005 of the property interests of the Waldorf Group in Macau and Hong Kong:

1. The Hotel

Vigers Appraisal & Consulting Limited International Asset Appraisal Consultants

10th Floor, The Grande Building 398 Kwun Tong Road Kowloon Hong Kong

==> picture [75 x 73] intentionally omitted <==

16 September 2005

The Directors United Power Investment Limited Rooms 2810-2811, 28th Floor West Tower Shun Tak Centre 200 Connaught Road Central Hong Kong

Dear Sirs,

WALDO HOTEL J-QUARTEIRAO 6 ZONA DE ATERROS DO PORTO EXTERIOR (ZAPE) MACAU

In accordance with the instruction from United Power Investment Limited (hereinafter referred to as the ‘‘Company’’) to us to value the above property interests for the purpose to be included in a circular in relation to very substantial acquisition and connected transaction on the basis as a fully operating hotel, we confirm that we have carried out an inspection, made relevant enquiries and obtained such further information as we consider necessary for the purpose of providing you with our opinion of the market value of such property interest as at 31 July 2005.

Our valuation is our opinion of the market value of the property interest which we would define market value as intended to mean ‘‘the estimated amount for which a property should exchange on the date of valuation between a willing buyer and a willing seller in an arm’s-length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently and without compulsion’’.

The hotel has been valued as fully operational hotel entities regards to the trading accounts, where these are available, and based on our opinion as to the future trading potential and level of turnover likely to be achieved. To this income stream, and appropriate annual present value discount rate is applied to arrive at the market rate.

130

PROPERTY VALUATION OF THE WALDORF GROUP

APPENDIX IV

Our valuation has been made on the assumption that the owner sells the relevant property interests on an existing use basis on the open market without the benefit of deferred term contracts, leaseback, joint ventures, management agreements or any similar arrangement which would serve to increase the values of such interests. In addition, no forced sale situation in any manner is assumed in our valuation.

For the purpose of our valuation, we would provide our opinion of the apportionment between the values for land and building of the property by making an assessment of the net replacement cost of the building as at the date of valuation and deducting this from the valuation of the whole property.

In valuing the interest in the property, we have assumed that the owner of the property has a free and uninterrupted right to use such property for the whole of the unexpired term as granted. Further, we have valued the property on the assumption that it can be freely disposable and transferable in its existing usage to third parties in the open market without payment of any additional premium to the government. We believe that the assumptions so made by us are reasonable in the circumstances. We have also assumed that all consents, approvals and licences from relevant government authorities for the property have been granted without any onerous conditions or undue delay which might affect its value.

We have been provided with copies of title document. We have not, however, searched the original documents to verify ownership or to verify any amendments which may not appear on the copies handed to us. All documents and leases have been used for reference only. All dimensions, measurements and areas are approximate.

We have not carried out detailed site measurements to verify the correctness of the site areas in respect of property but have assumed that the site areas shown on the documents and official site plans handed to us are correct. Based on our experience of valuation of similar properties, we consider the assumptions so made to be reasonable. No on-site measurements have been taken.

We have inspected the property included in the attached valuation certificate. However, no structural survey has bee made and we are therefore unable to report as to whether the property is or is not free of rot, infestation or any other structural defects. No tests were carried out on any of the services.

Having reviewed all relevant documentation, we have relied to a very considerable extent on the information provided by the Company and have accepted advice given to us by the Company on such matters as planning approvals, statutory notices, easements, tenure, occupation, lettings, construction costs, rentals, site and floor area and in the identification of the property in which by the Company has valid interests. We have had no reason to doubt the truth and accuracy of the information provided to us by the Company. We were also advised by the Company that no material factors have been omitted from the information provided, and we have no reason to suspect that any material information provided is incorrect, and we have no reason to suspect that any material information has been withheld.

In valuing the property interests, we have complied with all the requirements set out in Chapter 5 and Practice Note 12 and 16 to the Rules Governing the Listing of Securities issued by the Stock Exchange of Hong Kong Limited. Our valuation are prepared in accordance with the Valuation Standards on Properties (First Edition 2005) published by the Hong Kong Institute of Surveyors (HKIS).

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

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APPENDIX IV PROPERTY VALUATION OF THE WALDORF GROUP

Unless otherwise stated, all monetary amounts stated are in Macau dollar. The exchange rate used in valuing the property interest in Macau on 31 July 2005 was HK$ 1 = MOP 1.03. There has been no significant fluctuation in exchange rate between that date and the date of this letter.

We enclose herewith our valuation certificate.

Yours faithfully, For and on behalf of

VIGERS APPRAISAL & CONSULTING LIMITED

Raymond Ho Kai Kwong

Registered Professional Surveyor MRICS MHKIS MSc (e-com) Executive Director

Note: Raymond Ho Kai Kwong, Chartered Surveyor, MRICS, MHKIS MSc(e-com), has over nineteen years’ experience in undertaking valuations of properties in Hong Kong and has over eleven years’ experiences in valuations of properties in PRC and Macau respectively.

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APPENDIX IV

VALUATION CERTIFICATE

Market Value as a fully operating hotel in existing state Particulars of as at 31 July 2005 Occupancy

Description and Tenure

Property

WALDO HOTEL, The property comprises a 21-storey J-QUARTEIRAO 6, (inclusive of 3 basement levels) hotel ZONA DE ATERROS completed in or about 2004. DO PORTO EXTERIOR (ZAPE), It accommodates 161 guest rooms, MACAU coffee shop, shops, slotting machine, casino, Chinese restaurant, conference room, recreational facilities and car parking area.

The property comprises a 21-storey The property is currently MOP 500,000,000 (inclusive of 3 basement levels) hotel used and being operated (Land portion: completed in or about 2004. as hotel. MOP 269,000,000 Building portion: It accommodates 161 guest rooms, Portions of the hotel are MOP 231,000,000) coffee shop, shops, slotting machine, leased out under various casino, Chinese restaurant, conference lease agreements at an room, recreational facilities and car aggregate monthly rent of parking area. about HK$2,648,300, currently is occupied as The hotel has a total gross floor area shops, bank, sauna centre of approximately 24,035 sq.m. and casino.

Notes:

According to the title registry document issued by Conservatoria do Registo Predial ( ), the owner of the property is COMPANHIA DE FOMENTO PREDIAL WALDORF, LIMITADA (Waldorf Realty Company Limited ) (a wholly-owned subsidiary of Waldorf Holding Limited). Waldorf Realty Company Limited has leased the property to Waldo Hotel Limited (a wholly-owned subsidiary of Waldorf Holding Limited) for a term commencing from 1 January 2004 to 31 December 2006 with rent free period between 1 January 2004 to 30 June 2004 at a monthly rent of HK$1,000,000 exclusive for utilities; with a right of renewal for a futher term of three years.
The property is subject to a mortgage in favour of Banco Tai Fung, S.A.R.L ( ).
According to the legal opinion prepared by SA CARNEIRO & PINHEIRO TORRES Advogados e Notarios Privados Lawyers & Private Notaries, the property was granted by the Government of Macau through lease concession for 25 years counting from 27 April 1994 to a company named ‘‘Companhia de Investimentos Chee Lee, Limitada’’, for construction of a building under the ‘‘propriedade horizontal’’ regime (registration of the building by units), for office, business and car parking purposes. By Decision from the Secretary for Public Works and Transpiration no. 78/2004, dated from 11 August 2004, published in the Official Gazette no. 32, Series II, the Government approved the transfer of the lease concession to Waldorf Realty Company Limited, which may on payment of premium renew the existing lease up to 2049 with renewal of not more than 10 years for each renewal. Based on the present rent, the land premium of renewal is MOP350,390 (approximately HK$340,184) times 10 years but the Macau Government has the right to adjust the rent every five years.
As advised by the Waldorf Group, the above payment of premium is only payable on renewal in future and the Waldorf Group has not paid any premium for the purpose of renewal of the existing lease.
In valuing the property, we have assumed that the design and construction of the property are in compliance with the local planning regulators and have been approved by the relevant authorities, the existing lease will be renewed up to 2049 and the property can be freely transferred in the open market.
A right to purchase portion of the property where the existing casino is located (the ‘‘Casino Area’’) at reasonable consideration is granted to the tenant of the Casino Area on certain conditions set out in the tenancy agreement relating to the Casino Area.

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APPENDIX IV

2. The Hong Kong and Macau Properties

Vigers Appraisal & Consulting Limited International Asset Appraisal Consultants

10th Floor, The Grande Building 398 Kwun Tong Road Kowloon Hong Kong

==> picture [75 x 73] intentionally omitted <==

16 September 2005

The Directors United Power Investment Limited Rooms 2810-2811, 28th Floor West Tower Shun Tak Centre 200 Connaught Road Central Hong Kong

Dear Sirs,

Re: Various Properties in Hong Kong and Macau

In accordance with your instructions to us to value the property interests of Waldorf Holding Limited (‘‘Waldorf’’) and its subsidiaries (together referred to as the ‘‘Waldorf Group’’) in Hong Kong and Macau for the purpose to be included in a circular of United Power Investment Limited in relation to very substantial acquisition and connected transaction, we confirm that we have carried out inspection, made relevant enquiries and obtained such further information as we consider necessary for the purpose of providing you with our opinion of the market values of such property interests as at 31 July, 2005.

Our valuation is our opinion of the market value and here we would define market value as intended to mean ‘‘the estimated amount for which a property should exchange on the date of valuation between a willing buyer and a willing seller in an arm’s-length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently and without compulsion’’.

Our valuations have been made on the assumption that the owner sells the property interest on the open market in their existing state without the benefit of deferred terms contracts, leasebacks, joint ventures, management agreements or any similar arrangement which would serve to increase the value of the property interests.

In assessing the property no. I.1, we have capitalized the net rental income of the property and made allowance for reversionary income potential and by making reference to recent transactions.

Properties which are rented by the Group (no. II.1 to II.14) have no commercial value due to prohibitions against assignment of the properties or otherwise due to the lack of substantial profit rents.

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APPENDIX IV

In valuing properties in Hong Kong, the Government Leases of which expire prior to 30th June, 1997, we have taken account of the statement contained in Annex III of the Joint Declaration of the Government of the United Kingdom and the Government of the People’s Republic of China on the question of Hong Kong and the New Territories Leases (Extension) Ordinance 1988 that such leases will be extended without premium until 30th June, 2047 and that an annual rent of three percent of the rateable value will be charged from the date of extension.

For all properties in Hong Kong, we have caused searches to be made at the relevant Land Registries and in some instances we have been provided with extracts from title documents relating to those properties. We have not, however, searched the original documents to verify ownership or to verify the existence of any lease amendments which do not appear on the copies handed to us. All documents and leases have been used for reference only. All dimensions, measurements and areas are approximate.

We have inspected the exterior of all the properties valued 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 defects. We are not, however, able to report that the properties are free from rot, infestation or any other structural defects. No tests were carried out on any of the services.

We have relied to a considerable extent on information provided by you and have accepted advice given to us by you on such matters as planning approvals or statutory notices, easements, tenure, occupation, lettings, site and floor areas and in the identification of those properties in which the Group has a valid interest.

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

We enclosed herewith a summary of valuation and an extract of the valuation certificates.

Yours faithfully, For and on behalf of

VIGERS APPRAISAL & CONSULTING LIMITED

Raymond Ho Kai Kwong,

Registered Professional Surveyor MRICS MHKIS MSc(e-com)

Executive Director

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APPENDIX IV PROPERTY VALUATION OF THE WALDORF GROUP

SUMMARY OF VALUATION

– Group I Property interests owned by the Waldorf Group in Hong Kong

Market Value in existing state Property as at 31 July 2005 I.1. Unit no. 3001 on 3rd Floor of the Podium of HK$ 3,000,000 Shun Tak Centre, Nos. 168-200 Connaught Road Central, Sheung Wan, Hong Kong. Sub-total: HK$3,000,000

– Group II Property interests leased by the Waldorf Group in Macau

Market Value
in existing state
Property as at 31 July 2005
II.1 Unit E on Level 4, Block 1, Sun On Garden, No commercial value No. 875 Avenida Da Amizade, Macau
II.2 Unit N on Level 12, Block 3, Sun On Garden, No commercial value No. 875 Avenida Da Amizade, Macau
II.3 Unit Z on Level 5, Block 4, Sun On Garden, No commercial value No. 875 Avenida Da Amizade, Macau
II.4 Units A and F on Level 3, Nam Fong Building, No commercial value No. 1009 Avenida Da Amizade, Macau
II.5 Units G and H on Level 3, Nam Fong Building, No commercial value No. 1009 Avenida Da Amizade, Macau
II.6 Units A and B on Level 6, Sai Mao Chong Sam No commercial value (also known as World Trade Centre), No. 918 Avenida Da Amizade, Macau
II.7 Unit D on Level 6, Nam Fong Building, No commercial value No. 1009 Avenida Da Amizade, Macau
II.8 Unit C on Level 6, Lei Keng Kok, Hoi Keng Fa Un, No commercial value Zona Dos Novos Aterros Do Porto Exterior (Nape), Macau
II.9 Unit L on Level 7, Block 2, Kam Fung Building, No commercial value No. 176 Rua De Luis Gonzaga Gomes, Macau

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PROPERTY VALUATION OF THE WALDORF GROUP

APPENDIX IV

Property

Market Value in existing state as at 31 July 2005

II.10 Unit A on Level 6 together with carparking space No. 1 on Level 2, Un Leong Ka Un, No. 1137-A Avenida Da Amizade, Macau
II.11 Unit L on Level 5, Block 2, Sun On Garden, No. 875 Avenida Da Amizade, Macau
No commercial value No commercial value
II.12 Unit L on Level 6, Block 2, Sun On Garden, No. 875 Avenida Da Amizade, Macau
No commercial value
II.13 Unit S on Level 4, Block A, Wong Chio Kuong Cheong (also known as Praca Wong Chio), No. 392 Avenida Sir Anders Ljungstedt, Macau
No commercial value
II.14 Unit V on Level 4, Block A, Wong Chio Kuong Cheong (also known as Praca Wong Chio), No. 392 Avenida Sir Anders Ljungstedt, Macau

No commercial value Sub-total: Nil Total: HK$ 3,000,000

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PROPERTY VALUATION OF THE WALDORF GROUP

APPENDIX IV

VALUATION CERTIFICATE

– Group I Property interests owned by the Waldorf Group in Hong Kong

Property

Description and tenure

Market value Particulars of in Existing state occupancy as at 31 July 2005

I.1 Unit no. 3001 Shun Tak Centre comprises a on 3rd Floor of commercial podium with two the Podium of high-rise office towers erect thereon Shun Tak Centre, and it was completed in 1986. Nos. 168-200 Connaught Road The property comprises a shop unit on Central, the 3rd floor of the commercial Sheung Wan, podium. Hong Kong. The gross and saleable floor area of
15/33888th shares the property are approximately 418 of and in Inland sq.ft. (38.83 sq.m.) and 230 sq.ft. Lot No. 8517 (21.37 sq.m.) respectively..

The property is leased to HK$3,000,000 an independent third party for a term of 3 years commencing from 1st January, 2003 to 31st December, 2005 at a monthly rent of HK$25,000.

The property is held under a Government Lease for a term of 75 years commencing on 31st December, 1980, with the right of renewal for a term of 75 years..

The Government rent payable for the subject section of the Lot is $1,000 per annum.

Notes:

The registered owner of the property is World Honour Investments Limited (a wholly-owned subsidiary of Waldorf Holding Limited).
The property is subject to a mortgage to secure general banking facilities in favour of Chiyu Banking Corporation Limited vide Memorial No. UB9284891 dated 30th June, 2004.

138

APPENDIX IV PROPERTY VALUATION OF THE WALDORF GROUP

EXTRACT OF VALUATION CERTIFICATE

– Group II Property interests leased by the Waldorf Group in Macau

				Market Value
			Particulars of	in existing state
	Property	Description	occupancy	as at 31 July 2005
II.1.	Unit E on Level 4,	The property comprises a residential	The property at present	No commercial value
	Block 1,	unit on Level 4 of a 15-storey building	is leased to the Waldorf
	Sun On Garden,	completed in or about 1991.	Group by an
	No. 875 Avenida Da		independent third party
	Amizade, Macau	The property has a gross floor area of	for a term of two years
		approximately 128.48 sq.m.	commencing from 25
			April 2004 to 24 April
			2006.
			The property at present
			is occupied by the
			Waldorf Group for
			residential use as staff
			quarter.
II.2.	Unit N on Level 12,	The property comprises a residential	The property at present	No commercial value
	Block 3,	unit on Level 12 of a 15-storey	is leased to the Waldorf
	Sun On Garden,	building completed in or about 1991.	Group by an
	No. 875 Avenida Da		independent third party
	Amizade, Macau	The property has a gross floor area of	for a term of two years
		approximately 87.74 sq.m.	commencing from 8
			April 2004 to 7 April
			2006.
			The property at present
			is occupied by the
			Waldorf Group for
			residential use as staff
			quarter.
II.3.	Unit Z on Level 5,	The property comprises a residential	The property at present	No commercial value
	Block 4,	unit on Level 5 of a 15-storey building	is leased to the Waldorf
	Sun On Garden,	completed in or about 1991.	Group by an
	No. 875 Avenida Da		independent third party
	Amizade, Macau	The property has a gross floor area of	for a term of two years
		approximately 143.51 sq.m.	commencing from 15
			October 2003 to 14
			October 2005.
			The property at present
			is occupied by the
			Waldorf Group for
			residential use as staff
			quarter.

139

PROPERTY VALUATION OF THE WALDORF GROUP

APPENDIX IV

Property

Description

Market Value Particulars of in existing state occupancy as at 31 July 2005

II.4. Units A and F The property comprises two office on Level 3, units on Level 3 of an 18-storey Nam Fong Building, composite building completed in or No. 1009 Avenida Da about 1993. Amizade, Macau The property has a total gross floor area of approximately 208.77 sq.m.

The property at present No commercial value is leased to the Waldorf Group by an independent third party for a term of two years commencing from 1 January 2004 to 31 December 2005.

The property at present is occupied by the Waldorf Group for office use.

Notes:

According to the record in the Conservato' ria do Registo Predial , the current registered owner of the property is the lessor, Zeng Guannian.
The lessor is an independent third party, which is not connected with and is independent of, any of the directors, or any of their respective associates of the Waldorf Group.

140

PROPERTY VALUATION OF THE WALDORF GROUP

APPENDIX IV

Property

Description

Market Value Particulars of in existing state occupancy as at 31 July 2005

II.5. Units G and H on Level 3, Nam Fong Building, No. 1009 Avenida Da Amizade, Macau

The property comprises two office units on Level 3 of an 18-storey composite building completed in or about 1993. The property has a total gross floor area of approximately 201.11 sq.m.

The property at present No commercial value is leased to the Waldorf Group by an independent third party for a term of two years commencing from 1 January 2004 to 31 December 2005.

The property at present is occupied by the Waldorf Group for office use.

Notes:

According to the record in the Conservato' ria do Registo Predial , the current registered owner of the property is the lessor, Luo Qiuhong.
The lessor is an independent third party, which is not connected with and is independent of, any of the directors, or any of their respective associates of the Waldorf Group.

141

PROPERTY VALUATION OF THE WALDORF GROUP

APPENDIX IV

Property

Description

Market Value Particulars of in existing state occupancy as at 31 July 2005

II.6. Units A and B The property comprises two office on Level 6, units on Level 6 of an 18-storey Sai Mao Chong Sam building completed in or about 1996. (also known as World Trade Centre), The property has a total gross floor No. 918 Avenida Da area of approximately 304.85 sq.m. Amizade, Macau

The property at present No commercial value is leased to the Waldorf Group by independent third parties for a term of three years commencing from 1 January 2004 to 31 December 2006.

The property at present is occupied by the Waldorf Group for office use.

Notes:

According to the record in the Conservato' ria do Registo Predial , the current registered owners of the property are Ma Yau Wai, Kuk Po Shun and Hung Hon Man.
The lessors are independent third parties, which are not connected with and are independent of, any of the directors, or any of their respective associates of the Waldorf Group.

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PROPERTY VALUATION OF THE WALDORF GROUP

APPENDIX IV

				Market Value
			Particulars of	in existing state
	Property	Description	occupancy	as at 31 July 2005
II.7.	Unit D on Level 6,	The property comprises a residential	The property at present	No commercial value
	Nam Fong Building,	unit on Level 6 of an 18-storey	is leased to the Waldorf
	No. 1009 Avenida Da	composite building completed in or	Group by an
	Amizade, Macau	about 1993.	independent third party
			for a term of two years
		The property has a gross floor area of	commencing from 15
		approximately 95.51 sq.m.	October 2003 to 14
			October 2005.
			The property at present
			is occupied by the
			Waldorf Group for
			residential use as staff
			quarter.
II.8.	Unit C on Level 6,	The property comprises a residential	The property at present	No commercial value
	Lei Keng Kok,	unit on Level 6 of a 15-storey building	is leased to the Waldorf
	Hoi Keng Fa Un,	completed in or about 2000.	Group by an
	Zona Dos Novos		independent third party
	Aterros Do Porto	The property has a gross floor area of	for a term of one year
	Exterior (Nape),	approximately 37.5 sq.m.	commencing from 21
	Macau		October 2003 to 20
			October 2004 .
			The property at present
			is occupied by the
			Waldorf Group for
			residential use as staff
			quarter.
II.9.	Unit L on Level 7,	The property comprises a residential	The property at present	No commercial value
	Block 2,	unit on Level 7 of an 18-storey	is leased to the Waldorf
	Kam Fung Building,	building completed in or about 1994.	Group by independent
	No. 176 Rua De Luis		third parties for a term
	Gonzaga Gomes,	The property has a gross floor area of	of two years
	Macau	approximately 103.92 sq.m.	commencing from 16
			June 2004 to 15 June
			2006.
			The property at present
			is occupied by the
			Waldorf Group for
			residential use as staff
			quarter.

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PROPERTY VALUATION OF THE WALDORF GROUP

APPENDIX IV

				Market Value
			Particulars of	in existing state
	Property	Description	occupancy	as at 31 July 2005
II.10.	Unit A on Level 6	The property comprises a residential	The property at present	No commercial value
	together with	unit on Level 6 together with a	is leased to the Waldorf
	carparking space	carparking space on Level 2 of an 18-	Group by an
	No. 1 on Level 2,	storey building completed in or about	independent third party
	Un Ieong Ka Un,	2003.	for a term of two years
	No. 1137-A Avenida		commencing from 19
	Da Amizade, Macau	The property has a gross floor area of	July 2004 to 18 July
		approximately 101.12 sq.m.	2006.
			The property at present
			is occupied by the
			Waldorf Group for
			residential as staff
			quarter and carparking
			uses.
II.11.	Unit L on Level 5,	The property comprises a residential	The property at present	No commercial value
	Block 2,	unit on Level 5 of a 15-storey building	is leased to the Waldorf
	Sun On Garden,	completed in or about 1991.	Group by an
	No. 875 Avenida Da		independent third party
	Amizade, Macau	The property has a gross floor area of	for a term of two years
		approximately 133 sq.m.	commencing from 1
			October 2004 to 30
			September 2006.
			The property at present
			is occupied by the
			Waldorf Group for
			residential use as staff
			quarter.
II.12.	Unit L on Level 6,	The property comprises a residential	The property at present	No commercial value
	Block 2,	unit on Level 6 of a 15-storey building	is leased to the Waldorf
	Sun On Garden,	completed in or about 1991.	Group by an
	No. 875 Avenida Da		independent third party
	Amizade, Macau	The property has a gross floor area of	for a term of one year
		approximately 133 sq.m.	commencing from 21
			March 2005 to 20 March
			2006 .
			The property at present
			is occupied by the
			Waldorf Group for
			residential use as staff
			quarter.

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PROPERTY VALUATION OF THE WALDORF GROUP

APPENDIX IV

				Market Value
			Particulars of	in existing state
	Property	Description	occupancy	as at 31 July 2005
II.13.	Unit S on Level 4,	The property comprises a residential	The property at present	No commercial value
	Block A, Wong Chio	unit on Level 4 of a 15-storey building	is leased to the Waldorf
	Kuong Cheong (also	completed in or about 1999.	Group by a brother of a
	known as Praca		director of Waldorf for a
	Wong Chio),	The property has a gross floor area of	term of two years
	No. 392 Avenida Sir	approximately 128.93 sq.m.	commencing from 1
	Anders Ljungstedt,		January 2004 to 31
	Macau		December 2005.
			The property at present
			is occupied by the
			Waldorf Group for
			residential use as staff
			quarter.
II.14.	Unit V on Level 4,	The property comprises a residential	The property at present	No commercial value
	Block A, Wong Chio	unit on Level 4 of a 15-storey building	is leased to the Waldorf
	Kuong Cheong (also	completed in or about 1999.	Group by an
	known as Praca		independent third party
	Wong Chio),	The property has a gross floor area of	for a term of two years
	No. 392 Avenida Sir	approximately 117.68 sq.m.	commencing from 1
	Anders Ljungstedt,		January 2004 to 31
	Macau		December 2005.
			The property at present
			is occupied by the
			Waldorf Group for
			residential use as staff
			quarter.

In accordance with Practice Note 16(3)(4) of the Listing Rules, a full valuation report for the above leased interests is available for public inspection.

145

PROPERTY VALUATION OF THE GROUP

APPENDIX V

The following is the texts of a letter, summary of valuation and valuation certificate, prepared for the purpose of incorporation in this circular, received from the Valuer, an independent property valuer, in connection with their valuation as at 31 July 2005 of the property interests of the Group:

Vigers Appraisal & Consulting Limited International Asset Appraisal Consultants

10th Floor, The Grande Building 398 Kwun Tong Road Kowloon Hong Kong

==> picture [75 x 73] intentionally omitted <==

16 September 2005

The Directors United Power Investment Limited Rooms 2810-2811, 28th Floor West Tower Shun Tak Centre 200 Connaught Road Central Hong Kong

Dear Sirs,

Re: Various Properties in Hong Kong

In accordance with your instructions to us to value the property interests of United Power Investment Limited (the ‘‘Company’’) and its subsidiaries (together referred to as the ‘‘Group’’) in Hong Kong for the purpose to be included in a circular in relation to very substantial acquisition and connected transaction, we confirm that we have carried out inspection, made relevant enquiries and obtained such further information as we consider necessary for the purpose of providing you with our opinion of the market values of such property interests as at 31 July, 2005.

In assessing the values of Properties Nos. I.1 and I.4, we have assessed these properties on a vacant possession basis with reference to recent market transactions, which are comparable sales transactions as

146

PROPERTY VALUATION OF THE GROUP

APPENDIX V

available in Hong Kong and upon which the market value of the property are derived. In assessing the Property No. I.2 and I.3 which are subject to existing tenancies, we have capitalized the net rental income of the property and made allowance for reversionary income potential and by making reference to recent transactions.

Properties which are rented by the Group (no. II.1 to II.21) have no commercial value due to prohibits against assignment of the properties or otherwise due to the lack of substantial profit rents.

According to the information provided by the Company, the potential tax liability which will arise on the disposal of the properties in Hong Kong is stamp duty. However, our valuation has not considered such tax liability.

147

APPENDIX V PROPERTY VALUATION OF THE GROUP

We enclosed herewith a summary of valuation and certificates.

Yours faithfully, For and on behalf of

VIGERS APPRAISAL & CONSULTING LIMITED Raymond Ho Kai Kwong,

Registered Professional Surveyor MRICS MHKIS MSc(e-com)

Executive Director

148

PROPERTY VALUATION OF THE GROUP

APPENDIX V

SUMMARY OF VALUATION

– Group I Properties owned by the Group in Hong Kong

		Maket value
		in existing state
	Property	as at 31 July 2005
I.1.	Portion A2 of Portion A and Portion B on 2nd Floor,	HK$95,000,000
	Star House, No. 3 Salisbury Road, Tsim Sha Tsui,
	Kowloon, Hong Kong
I.2.	3rd and 4th Floors including flat roof, BCC Building,	HK$34,000,000
	Nos. 25-31 Carnarvon Road, Tsim Sha Tsui, Kowloon,
	Hong Kong
I.3.	Shops 9 and 10 on Ground Floor, the whole of	HK$59,000,000
	1st Floor and 2nd Floor, Tung Ning Building,
	125-126 Connaught Road Central, 2, 2A-2D Hillier Street,
	249-251 Des Voeux Road Central, Sheung Wan, Hong Kong.
I.4.	Factory Flat A on 21st Floor, On Dak Industrial Building,	HK$1,050,000
	Nos. 2-6 Wah Sing Street, Kwai Chung, New Territories,
	Hong Kong
	Sub-total:	HK$189,050,000

149

PROPERTY VALUATION OF THE GROUP

APPENDIX V

– Group II Properties rented by the Group in Hong Kong

Property

Market Value in existing state as at 31 July 2005

II.1.	No. 139 Waterloo Road, Kowloon Tong,	No commercial value
	Kowloon, Hong Kong
II.2.	Shop B on LG Floor (formerly known as Shop B	No commercial value
	on Ground Floor), Carson Mansion,
	Nos. 61 and 63 Kimberley Road, Kowloon,
	Hong Kong
II.3.	Shop No. 8 on the 2nd Floor, Citimall,	No commercial value
	Nos. 36-46 Tai Tong Road and No. 1 Kau Yuk Road,
	Yuen Long, New Territories, Hong Kong
II.4.	Shop No. 7 on the Ground Floor, Citimall,	No commercial value
	Nos. 36-46 Tai Tong Road and No. 1 Kau Yuk Road,
	Yuen Long, New Territories, Hong Kong
II.5.	Unit No. 2810 in 28th Floor of West Tower Shun Tak Centre,	No commercial value
	Nos. 168-200 Connaught Road Central, Hong Kong
II.6.	Unit No. 2811 on 28th Floor of West Tower, Shun Tak Centre,	No commercial value
	Nos. 168-200 Connaught Road Central, Hong Kong
II.7.	Shops 5, 6 and 7 on the Ground Floor of	No commercial value
	Marina Magic Shopping Mall, the Commercial Centre
	of Hong Kong Gold Coast, No. 1 Castle Peak Road,
	Castle Peak Bay, Tuen Mun, New Territories, Hong Kong
II.8.	Shop 2A on Ground Floor of Tung Wui Building,	No commercial value
	No. 46 Kimberley Road, Tsim Sha Tsui, Kowloon, Hong Kong
II.9.	Office C on 12th Floor, 10 Knutsford Terrace,	No commercial value
	Tsim Sha Tsui, Kowloon, Hong Kong
II.10.	Office B on 7th Floor, 10 Knutsford Terrace,	No commercial value
	Tsim Sha Tsui, Kowloon, Hong Kong
II.11.	Shop No. B113A on the First basement, Holiday Inn Golden Mile,	No commercial value
	No 50 Nathan Road, Tsim Sha Tsui, Kowloon, Hong Kong
II.12.	No. 135 Waterloo Road, Kowloon Tong, Kowloon, Hong Kong	No commercial value

150

PROPERTY VALUATION OF THE GROUP

APPENDIX V

Property

Market Value in existing state as at 31 July 2005

II.13. Basement and Ground Floor, No. 50 Kimberley Road, Tsim Sha Tsui, Kowloon, Hong Kong
No commercial value
II.14. The basement, Ground Flood and 1st Floor, No. 52 Kimberley Road, Tsim Sha Tsui, Kowloon, Hong Kong
No commercial value
II.15. The 1st Floor, No. 50 Kimberley Road, Tsim Sha Tsui, Kowloon, Hong Kong
No commercial value
II.16. Portion of workshop space A on 2nd Floor, Fung Wah Factorial Building, Nos. 646, 648 and 648A Castle Peak Road, Kowloon, Hong Kong
- No commercial value
II.17. Workshop space B on 2nd Floor, Fung Wah Factorial Building, Nos. 646, 648 and 648A Castle Peak Road, Kowloon, Hong Kong
No commercial value No commercial value No commercial value No commercial value No commercial value
Sub-total: Nil Total: HK$189,050,000
II.18. Unit No. 2304 on 23/F of West Tower, Shun Tak Centre, Nos. 168-200 Connaught Road Central, Hong Kong
II.19. Room 209C-210 on 2nd Floor, Empire Centre, No. 68 Mody Road, Tsim Sha Tsui, Kowloon, Hong Kong
II.20. Basement, Tung Ning Building, No. 2 Hillier Street, Nos. 125 and 126 Connaught Road Central, (also known as Nos. 249-251 Des Voeux Road Central), Hong Kong
II.21. Shop A together with the exterior facade thereof on Ground Floor, Kowloon Centre, Nos. 29, 31, 35, 37 and 39 Ashley Road, Tsim Sha Tsui, Kowloon, Hong Kong

151

PROPERTY VALUATION OF THE GROUP

APPENDIX V

VALUATION CERTIFICATE

– Group I Properties owned by the Group in Hong Kong

Property

Description and tenure

Particulars of occupancy

Market value in Existing state as at 31 July 2005

I.1. Portion A2 of Portion A The property comprises two and Portion B commercial units on the 2nd floor on 2nd Floor, of a 21-storey (including a Star House, basement floor) commercial No. 3 Salisbury Road, building completed in about 1967. Tsim Sha Tsui, The saleable floor area of the Kowloon, property is approximately 12,700 Hong Kong sq.ft. (1,179.85 sq.m.). 392/19328th shares of The property is held under a and in Section A of Government Lease for a term of Kowloon Marine 999 years commencing on 25th Lot No. 10 July, 1864. (the ‘‘Lot’’). The Government rent payable for the subject section of the Lot is $736 per annum.

The property is occupied by the Group as a Chiu Chau restaurant and the rental income receivable by a member of the Group (from another member of the Group) was HK$390,000 per month for the period from 1st April 2004 to 31st March, 2005 and HK$420,000 per month from 1st April 2005 up to present. On consilidated basis, there is no income receivable by the Group.

HK$95,000,000

Notes:

The registered owner of the property is Golden Island Bird’s Nest Chiu Chau Restaurant (Causeway Bay) Limited (a wholly-owned subsidiary of the Company).
The property is subject to a legal charge in favour of Chiyu Banking Corporation Limited vide Memorial No. 8821602 dated 29th October, 2002.
The property is subject to the Deed of Mutual Covenant vide Memorial No. 2190469 dated 11th December, 1981.
The property is also subject to two Supplemental Deeds of Mutual Covenant vide Memorial Nos. 2675021 and 2675022 both dated 31st October, 1984.
Portion A2 of Portion A on 2nd Floor of the property is subject to the Sub-Deed of Mutual Covenant vide Memorial No. 4673986 dated 31st December, 1990.

152

PROPERTY VALUATION OF THE GROUP

APPENDIX V

Market value in Particulars of existing state as at Property Description and tenure occupancy 31 July 2005 I.2. 3rd and 4th Floors The property comprises the whole The property is leased to HK$34,000,000 including flat roof, of the 3rd and 4th floors of a an independent third BCC Building, 17-storey commercial building party for a term of 4 Nos. 25-31 completed in 1967. The saleable years from 1st Carnarvon Road, floor area of the property is December, 2001 to 30th Tsim Sha Tsui, approximately 9,874 sq.ft. (917.32 November, 2005 at a Kowloon, sq.m.) plus a flat roof area of about monthly rent of Hong Kong 1,626 sq.ft. (151.06 sq.m.). HK$100,000 (exclusive of government rent, 28/320th shares of and The property is held under three government rates, in the Remaining Portions Conditions of Regrant and a management fees and all of Kowloon Inland Conditions of Renewal each for a other outgoings) with an Lot Nos. 6538, 9593, term of 150 years commencing on option to rent the 9926 and 9966. 25th December, 1898. property for a further term of 3 years. The Government rent payable for the property is $80 per annum.

Notes:

The registered owner of the property is Golden Island Bird’s Nest (Chiu Chau) Restaurant (Causeway Bay) Limited (a wholly-owned subsidiary of the Company).
The property is subject to the Deed of Mutual Covenant vide Memorial No. 2127065 dated 27th May, 1981.

153

PROPERTY VALUATION OF THE GROUP

APPENDIX V

Market value in Particulars of existing state as at Property Description and tenure occupancy 31 July 2005 I.3. Shops 9 and 10 The property comprises two shops The property is leased to HK$59,000,000 on Ground Floor, on the ground floor and the whole an independent third the whole of 1st Floor of the 1st and 2nd floors of a party for a term of 6 and 2nd Floor, 22-storey (including a basement years from 1st August, Tung Ning Building, floor) commercial building 2001 to 31st July, 2007 125-126 Connaught completed in about 1977. The with an option to renew Road Central, 2, saleable floor areas of the ground for a further term of 2 2A-2D Hillier Street, floor and the total of 1st and 2nd years from 1st August, 249-251 Des Voeux floors are approximately 602 sq.ft. 2007 to 31st July, 2009. Road Central, (55.93 sq.m.) and 11,100 sq.ft. The rent of the property Sheung Wan, (1,031.22 sq.m.) respectively. (exclusive of Hong Kong. management and The property is held under three air-conditioning fees, 882/5200th shares of Government Leases each for a term government rent and and in Marine Lot of 999 years commencing on 4th rates) is listed as follows: Nos. 303, 304 and March, 1901 for Marine Lot Nos. 351 (the ‘‘Lots’’). 303 and 304 and commencing on (a) HK$270,000 per 13th September, 1901 for Marine month from 1st Lot No. 351. August, 2001 to 31st July, 2004; The total Government rent payable for the Lots is $126 per annum. (b) HK$310,500 per month from 1st August, 2004 to 31st July, 2007; (c) Open market rent from 1st August, 2007 to 31st July, 2009.

Notes:

The registered owner of the property is Golden Island Bird’s Nest Chiu Chau Restaurant (Causeway Bay) Limited (a wholly-owned subsidiary of the Company).
The property is subject to the Deed of Covenant vide Memorial No. 1351723 dated 26th February, 1977.
The property is also subject to the Supplemental Deed of Covenant vide Memorial No. 1360923 dated 28th February, 1977.
According to the recent land search, the property comprises:
(a) Shops 9 and 10 on Ground Floor, the whole of 1st Floor and 2nd Floor including the store rooms and lavatories on such floor;
(b) The lift shaft and lift installed in Shops 9-10 and 1-2/F includes portion of lift shaft within Room 5A on 3rd Floor;
(c) Lift vent and water tank on 4th Floor level flat roof adjoining Room 5 with water pipes from such tank to 1st Floor and 2nd Floor;
(d) The space with installation on 4th Floor level flat roof adjoining Room 1 with pipes; and
(e) The ducts to 1st Floor and 2nd Floor.
The property is subject to a mortgage in favour of Bank of China (Hong Kong) Limited vide Memorial No. 8963369 dated 10th June, 2003.

154

PROPERTY VALUATION OF THE GROUP

APPENDIX V

Description and tenure

Property

I.4. Factory Flat A The subject property comprises on 21st Floor, one of the two units on the 21st On Dak Industrial floor of a 26-storey industrial Building, Nos. 2-6 building completed in about 1980. Wah Sing Street, The gross floor area of the property Kwai Chung, is approximately 4,122 sq.ft. New Territories, (382.94 sq.m.). Hong Kong

Market value in Particulars of existing state as at occupancy 31 July 2005 The property is currently HK$1,050,000 occupied by the Group for warehouse purposes.

The property is held under New
42/2542 shares of and Grant Nos. 5365 and 5397 both for in Kwai Chung Town a term of 99 years commencing on Lot Nos. 291 and 1st July, 1898 less the last three 318 (the ‘‘Lots’’). days thereof (extended to 30th June, 2047 under the New Territories Leases (Extension Ordinance).

The total Government rent payable for the Lots is $600 per annum.

Notes:

The registered owner of the property is Golden Island Bird’s Nest Chiu Chau Restaurant (Causeway Bay) Limited (a wholly-owned subsidiary of the Company).
The property is subject to the Deed of Mutual Covenant vide Memorial No. 1952233 dated 10th April, 1979.

155

PROPERTY VALUATION OF THE GROUP

APPENDIX V

EXTRACT OF VALUATION CERTIFICATE

– Group II Properties leased by the Group in Hong Kong

Market Value Particulars of in existing state Property Description occupancy as at 31 July 2005 II.1. No. 139 The property comprises a two-storey The property at present No commercial value Waterloo Road, residential building. is leased to the Group by Kowloon Tong, an independent third Kowloon, The property has a saleable area of party for a term of two Hong Kong approximately 2,861 sq.ft. years commencing from 15 July 2004 to 14 July 2006.

The property at present is occupied by the Group for wedding bridal services use.

Notes:

According to the Land Register in the Land Registry, the current registered owner of the property is the lessor, Broadic Investment Limited.
The lessor is an independent third party, which is not connected with and is independent of, any of the directors, or any of their respective associates of the Group.

156

PROPERTY VALUATION OF THE GROUP

APPENDIX V

Property

Description

Market Value Particulars of in existing state occupancy as at 31 July 2005

II.2. Shop B on LG Floor (formerly known as Shop B on Ground Floor), Carson Mansion, Nos. 61 and 63 Kimberley Road, Kowloon, Hong Kong

The property comprises a retail unit on The property at present No commercial value Ground Floor of a 17-storey building is leased to the Group by completed in 1978. an independent third party for a term of two The property has a saleable area of years commencing from approximately 1,571 sq.ft. 1 December 2003 to 30 November 2005 .

The property at present is occupied by the Group for wedding bridal services use.

Notes:

According to the Land Register in the Land Registry, the current registered owner of the property is Richard Li Lap Fung.
The lessor is an independent third party, which is not connected with and is independent of, any of the directors, or any of their respective associates of the Group.
The property is subject to an order no. D00218/K/04 under S. 26 of the Building Ordinance vide a memorial no. UB9439368 dated 3 December 2004.

157

PROPERTY VALUATION OF THE GROUP

APPENDIX V

Market Value Particulars of in existing state Property Description occupancy as at 31 July 2005 II.3. Shop No. 8 on the The property comprises a retail unit on The property at present No commercial value 2nd Floor, the 2nd Floor of a 5-storey and 2 is leased to the Group by Citimall, levels basement commercial building independent third parties Nos. 36-46 completed in 1994. for a term of two years Tai Tong Road commencing from 1 and No. 1 The property has a saleable area of October 2003 to 30 Kau Yuk Road, approximately 329 sq.ft. September 2005. Yuen Long, New Territories, The property at present Hong Kong is occupied by the Group for wedding bridal services use.

Notes:

According to the Land Register in the Land Registry, the current registered owners of the property are the lessors, Shung King Development Company Limited and Evercot Enterprise Company Limited.
The lessors are independent third parties, which are not connected with and are independent of, any of the directors, or any of their respective associates of the Group.

158

PROPERTY VALUATION OF THE GROUP

APPENDIX V

Market Value Particulars of in existing state Property Description occupancy as at 31 July 2005 II.4. Shop No. 7 on the The property comprises a retail unit on The property at present No commercial value Ground Floor, the Ground Floor of a 5-storey and 2 is leased to the Group by Citimall, levels basement commercial building independent third parties Nos. 36-46 completed in 1994. for a term of two years Tai Tong Road commencing from 28 and No. 1 The property has a saleable area of October 2003 to 27 Kau Yuk Road, approximately 149 sq.ft. October 2005 . Yuen Long, New Territories, The property at present Hong Kong is occupied by the Group for wedding bridal services use.

Notes:

According to the Land Register in the Land Registry, the current registered owners of the property are the lessors, Shung King Development Company Limited and Evercot Enterprise Company Limited.
The lessors are independent third parties, which are not connected with and are independent of, any of the directors, or any of their respective associates of the Group.

159

PROPERTY VALUATION OF THE GROUP

APPENDIX V

Property

Description

Market Value Particulars of in existing state occupancy as at 31 July 2005

II.5. Unit No. 2810 in The property comprises a unit on the The property at present No commercial value 28th Floor of 28th Floor of a 39-storey office is leased to the Group by West Tower building erected on a commercial an independent third Shun Tak Centre, podium completed in 1986. party for a term of Nos. 168-200 eighteen months Connaught Road The property has a gross floor area of commencing from 1 Central, approximately 1,400 sq.ft. January 2005 to 30 June Hong Kong 2006 .

The property at present is occupied by the Group for office use.

Notes:

According to the Land Register in the Land Registry, the current registered owner of the property is Founder Enterprises Limited.
The lessor is an independent third party, which is not connected with and is independent of, any of the directors, or any of their respective associates of the Group.
The property is subject to a mortgage in favour of Chiyu Banking Corporation Limited vide a memorial no. UB8156403 dated 28 July 2000.

160

PROPERTY VALUATION OF THE GROUP

APPENDIX V

Property

Description

Market Value Particulars of in existing state occupancy as at 31 July 2005

II.6. Unit No. 2811 on The property comprises a unit on the The property at present No commercial value 28th Floor of 28th Floor of a 39-storey office is leased to the Group by West Tower, building erected on a commercial a connected person of Shun Tak Centre, podium completed in 1986. the Company for a term Nos. 168-200 of seventeen months Connaught Road The property has a gross floor area of commencing from 1 Central, approximately 2,555 sq.ft. February 2005 to 30 Hong Kong June 2006.

The property at present is occupied by the Group for office use.

Notes:

According to the Land Register in the Land Registry, the current registered owner of the property is the lessor, High Brand Limited.
The lessor is a connected party of the Group.
The property is subject to a legal charge to secure general banking facilities in favour of Chiyu Banking Corporation Limited vide a memorial no. UB7476034 dated 15 April 1998.

161

PROPERTY VALUATION OF THE GROUP

APPENDIX V

Property

Description

Market Value Particulars of in existing state occupancy as at 31 July 2005

II.7. Shops 5, 6 and 7 The property comprises three retail on the Ground units on the Ground Floor of a Floor of 2-storey commercial building Marina Magic completed in 1992. Shopping Mall, the Commercial The property has a gross floor area of Centre of approximately 1,919 sq.ft. Hong Kong Gold Coast, No. 1 Castle Peak Road, Castle Peak Bay, Tuen Mun, New Territories, Hong Kong

The property at present No commercial value is leased to the Group by an independent third party for a term of two years commencing from 10 November 2004 to 9 November 2006. The property at present is occupied by the Group for wedding bridal services use.

Notes:

According to the Land Register in the Land Registry, the current registered owner of the property is the lessor, Commercial Ace Limited.
The lessor is an independent third party, which is not connected with and is independent of, any of the directors, or any of their respective associates of the Group.
The property is subject to a legal charge in favour of Citicorp International Limited on its own behalf and as agent and trustee for the lenders vide a memorial no. 05042800840116 dated 25 April 2005.

162

PROPERTY VALUATION OF THE GROUP

APPENDIX V

Property Description

Market Value Particulars of in existing state occupancy as at 31 July 2005

II.8. Shop 2A on The property comprises a retail unit on The property at present No commercial value Ground Floor of the Ground Floor of a 14- storey is leased to the Group by Tung Wui Building, building completed in 1979. an independent third No. 46 party for a term of two Kimberley Road, The property has a saleable area of years commencing from Tsim Sha Tsui, approximately 458 sq.ft. 19 July 2005 to 18 July Kowloon, 2007. Hong Kong

The property at present is vacant.

Notes:

According to the Land Register in the Land Registry, the current registered owner of the property is the lessor, Guidstar Limited.
The lessor is an independent third party, which is not connected with and is independent of, any of the directors, or any of their respective associates of the Group.
The property is subject to an order No. INVO00010/K/05 under S. 26A(1) of the Building Ordinance with plan vide a memorial no. 05042002620035 dated 10 March 2005.

163

PROPERTY VALUATION OF THE GROUP

APPENDIX V

Market Value Particulars of in existing state Property Description occupancy as at 31 July 2005 II.9. Office C on The property comprises an office unit The property at present No commercial value 12th Floor, on the 12th Floor of a 13-storey is leased to the Group by 10 Knutsford building completed in 1999. an independent third Terrace, party for a term Tsim Sha Tsui, The property has a saleable area of commencing from 1 Kowloon, approximately 882 sq.ft. July 2005 to 15 Hong Kong December 2006.

The property at present is occupied by the Group for office use.

Notes:

According to the Land Register in the Land Registry, the current registered owner of the property is the lessor, Mightyway Investments Limited.
The lessor is an independent third party, which is not connected with and is independent of, any of the directors, or any of their respective associates of the Group.

164

PROPERTY VALUATION OF THE GROUP

APPENDIX V

Market Value Particulars of in existing state Property Description occupancy as at 31 July 2005 II.10. Office B on The property comprises an office unit The property at present No commercial value 7th Floor, on the 7th Floor of a 13-storey is leased to the Group by 10 Knutsford building completed in 1999. an independent third Terrace, party for a term of two Tsim Sha Tsui, The property has a saleable area of years commencing from Kowloon, approximately 992 sq.ft. 1 July 2005 to 30 June Hong Kong 2007. The property at present is occupied by the Group for office use.

Notes:

According to the Land Register in the Land Registry, the current registered owner of the property is the lessor, Mightyway Investments Limited.
The lessor is an independent third party, which is not connected with and is independent of, any of the directors, or any of their respective associates of the Group.

165

PROPERTY VALUATION OF THE GROUP

APPENDIX V

Property Description

Market Value Particulars of in existing state occupancy as at 31 July 2005

II.11. Shop No. B113A The property comprises a retail unit on The property at present No commercial value on the First the First Basement of a 23-storey is leased to the Group by basement, building (inclusive of 3 basement an independent third Holiday Inn levels and mezzanine floor) completed party for a term Golden Mile, in 1975. commencing from 12 No 50 July 2005 to 31 July Nathan Road, The property has a saleable area of 2006. Tsim Sha Tsui, approximately 459 sq.ft. Kowloon, The property at present Hong Kong is occupied by the Group for exhibiting and selling watches use.

Notes:

According to the Land Register in the Land Registry, the current registered owner of the property is the lessor, Harilela Hotels Limited.
The lessor is an independent third party, which is not connected with and is independent of, any of the directors, or any of their respective associates of the Group.
The property is subject to a legal charge and debenture to secure general banking facilities in favour of United Overseas Bank Limited, Hong Kong Branch vide a memorial no. UB6480627 dated 30 November 1995.

166

PROPERTY VALUATION OF THE GROUP

APPENDIX V

Property

Description

Market Value Particulars of in existing state occupancy as at 31 July 2005

II.12. No. 135 The property comprises the whole of a The property at present No commercial value Waterloo Road, 2-storey building completed in 1986. is leased to the Group by Kowloon Tong, a connected person of Kowloon, The property has a saleable area of the Company for a term Hong Kong approximately 5,141 sq.ft. of one year commencing from 1 December 2005 to 30 November 2006.

The property at present is occupied by the Group for wedding bridal services use.

Notes:

According to the Land Register in the Land Registry, the current registered owner of the property is the lessor, West Global Investments Limited.
The lessor is a connected party to the Group.
The property is subject to a mortgage in favour of HSBC Republic Bank (Suisse) SA vide a memorial no. UB9132464 dated 2 February 2004.
The property is subject to an assignment of rental in favour of HSBC Republic Bank (Suisse) SA vide a memorial no. UB9132465 dated 2 February 2004.

167

PROPERTY VALUATION OF THE GROUP

APPENDIX V

Property

Description

Market Value Particulars of in existing state occupancy as at 31 July 2005

II.13. Basement and The property comprises the whole on The property at present No commercial value Ground Floor, basement and the Ground Floor of a is leased to the Group by No. 50 4-storey building and one basement an independent third Kimberley Road, level completed in 1952. party for a term of two Tsim Sha Tsui, years and six months Kowloon, The property has a saleable area of commencing from 1 Hong Kong approximately 1,623 sq.ft. October 2005 to 31 March 2008.

The property at present is occupied by the Group for wedding bridal services use.

Notes:

According to the Land Register in the Land Registry, the current registered owner of the property is Gold Charm Investment Limited.
The lessor is an independent third party, which is not connected with and is independent of, any of the directors, or any of their respective associates of the Group.

168

PROPERTY VALUATION OF THE GROUP

APPENDIX V

Property Description

Market Value Particulars of in existing state occupancy as at 31 July 2005

II.14. The basement, Ground Flood and 1st Floor, No. 52 Kimberley Road, Tsim Sha Tsui, Kowloon, Hong Kong

The property comprises the whole on The property at present No commercial value basement, Ground Floor and 1st Floor is leased to the Group by of a 4-storey building and one an independent third basement level completed in 1952. party for a term of two years eleven months and The property has a saleable area of twenty-nine days approximately 2,414 sq.ft. commencing from 3 January 2004 to 31 December 2006.

The property at present is occupied by the Group for wedding bridal services use.

Notes:

According to the Land Register in the Land Registry, the current registered owner of the property is the lessor, Lee Chan Land Investment Co., Ltd.
The lessor is an independent third party, which is not connected with and is independent of, any of the directors, or any of their respective associates of the Group.

169

PROPERTY VALUATION OF THE GROUP

APPENDIX V

Property

Description

Market Value Particulars of in existing state occupancy as at 31 July 2005

II.15. The 1st Floor, The property comprises the whole of The property at present No commercial value No. 50 1st Floor of a 4-storey building and is leased to the Group by Kimberley Road, one basement level completed in an independent third Tsim Sha Tsui, 1952. party for a term of two Kowloon, years commencing from Hong Kong The property has a gross floor area of 1 March 2005 to 28 approximately 784 sq.ft. February 2007.

The property at present is occupied by the Group for wedding bridal services use.

Notes:

According to the Land Register in the Land Registry, the current registered owner of the property is Gold Charm Investment Limited.
The lessor is an independent third party, which is not connected with and is independent of, any of the directors, or any of their respective associates of the Group.

170

PROPERTY VALUATION OF THE GROUP

APPENDIX V

Property

Description

Market Value Particulars of in existing state occupancy as at 31 July 2005

II.16. Portion of The property comprises a unit on 2nd workshop space Floor of a 7-storey industrial building A on 2nd Floor, completed in 1960. Fung Wah Factorial Building, The property has a saleable area of Nos. 646, 648 approximately 934 sq.ft. and 648A Castle Peak Road, Kowloon, Hong Kong

The property at present No commercial value is leased to the Group by independent third parties for a term of one year commencing from 1 March 2005 to 28 February 2006.

The property at present is occupied by the Group for production workshop use.

Notes:

According to the Land Register in the Land Registry, the current registered owners of the property are Tam Ting Kai and Wu Lan Wah Ida.
The lessors are independent third parties, which are not connected with and are independent of, any of the directors, or any of their respective associates of the Group.
The property is subject to a government notice No. 248 of 1971 pursuant to section 22(1) vide a memorial no. UB840897 dated 29 October 1971.
The property is subject to an order No. UBZ/U46/5203/01 under S.24(1) of the Building Ordinance vide a memorial no. UB9470851 dated 30 August 2002.

171

PROPERTY VALUATION OF THE GROUP

APPENDIX V

Property Description

Market Value Particulars of in existing state occupancy as at 31 July 2005

II.17. Workshop space The property comprises a unit on 2nd B on 2nd Floor, Floor of a 7-storey industrial building Fung Wah completed in 1960. Factorial Building, Nos. 646, 648 The property has a saleable area of and 648A approximately 1,916 sq.ft. Castle Peak Road, Kowloon, Hong Kong

The property at present No commercial value is leased to the Group by a connected person for a term of one year commencing from 1 January 2004 to 31 December 2005.

The property at present is occupied by the Group for production workshop use.

Notes:

According to the Land Register in the Land Registry, the current registered owner of the property is Source Expand Development.
The lessor is a connected party to the Group.
The property is subject to a government notice No. 248 of 1971 pursuant to section 22(1) vide a memorial no. UB840897 dated 29 October 1971.

172

PROPERTY VALUATION OF THE GROUP

APPENDIX V

Market Value Particulars of in existing state Property Description occupancy as at 31 July 2005 II.18. Unit No. 2304 The property comprises a unit on 23rd The property at present No commercial value on 23/F of Floor of a 39-storey office building is leased to the Group by West Tower, erected on a commercial podium an independent third Shun Tak Centre, completed in 1986. party for a term of two Nos. 168-200 years commencing from Connaught Road The property has a gross floor area of 5 July 2004 to 4 July Central, approximately 1,402 sq.ft. 2006. Hong Kong The property at present is vacant.

Notes:

According to the Land Register in the Land Registry, the current registered owner of the property is the lessor, The Trading People Limited
The lessor is an independent third party, which is not connected with and is independent of, any of the directors, or any of their respective associates of the Group.

173

PROPERTY VALUATION OF THE GROUP

APPENDIX V

Property

Description

Market Value Particulars of in existing state occupancy as at 31 July 2005

II.19. Room 209C-210 The property comprises a unit on 2nd The property at present No commercial value on 2nd Floor, Floor of a 14-storey and two basement is leased to the Group by Empire Centre, levels building completed in 1981. an independent third No. 68 party for a term of two Mody Road, The property has a saleable area of years commencing from Tsim Sha Tsui, approximately 2,067 sq.ft. 1 October 2003 to 30 Kowloon, September 2005. Hong Kong

The property at present is vacant.

Notes:

According to the Land Register in the Land Registry, the current registered owner of the property is the lessor, Hornbrook Investment Limited.
The lessor is an independent third party, which is not connected with and is independent of, any of the directors, or any of their respective associates of the Group.
The property is subject to a debenture and mortgage in favour of Citicorp International Limited (The Agent) vide a memorial no. UB8662775 dated 27 March 2002.

174

PROPERTY VALUATION OF THE GROUP

APPENDIX V

Market Value Particulars of in existing state Property Description occupancy as at 31 July 2005 II.20. Basement, The property comprises the whole of The property at present No commercial value Tung Ning Building, basement floor of a 22-storey building is leased to the Group by No. 2 Hillier Street, completed in 1977. an independent third Nos. 125 party for a term of two and 126 The property has a saleable area of years commencing from Connaught Road approximately 270 sq.ft. 1 July 2004 to 30 June Central, 2006. (also known as Nos. 249-251 The property at present Des Voeux Road is occupied by the Group Central), for lift machine room Hong Kong use.

Notes:

According to the Land Register in the Land Registry, the current registered owner of the property is Tung Wah Group of Hospitals.
The lessor is an independent third party, which is not connected with and is independent of, any of the directors, or any of their respective associates of the Group.

175

PROPERTY VALUATION OF THE GROUP

APPENDIX V

Market Value Particulars of in existing state occupancy as at 31 July 2005

Property Description occupancy as at 31 July 2005 II.21. Shop A together The property comprises a retail unit The property at present No commercial value with the exterior together with the exterior facade is leased to the Group by facade thereof on thereof on Ground Floor of a an independent third Ground Floor, 16-storey building and one basement party for a term of two Kowloon Centre, level completed in 1980. years commencing from Nos. 29, 31, 35, 1 July 2005 to 30 June 37 and 39 The property has a saleable area of 2007. Ashley Road, approximately 2,536 sq.ft. Tsim Sha Tsui, The property at present Kowloon, is occupied by the Group Hong Kong for restaurant use.

Notes:

According to the Land Register in the Land Registry, the current registered owner of the property is the lessor, Bright City Investment Limited.
The lessor is an independent third party, which is not connected with and is independent of, any of the directors, or any of their respective associates of the Group.
The property is subject to a mortgage to secure general banking facilities in favour of Bank of America (Asia) Limited vide a memorial no. UB9221001 dated 20 April 2004.
The property is subject to a legal charge/mortgage in favour the Bank of East Asia Limited vide a memorial no. 05042802360817 dated 29 March 2005.

In accordance with Practice Note 16(3)(4) of the Listing Rules, a full valuation report for the above leased interests is available for public inspection.

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RESPONSIBILITY STATEMENT

This circular includes particulars given in compliance with the Listing Rules and the Takeovers Code for the purpose of giving information with regard to the Group and the Proposals. The Directors jointly and severally 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, opinions expressed in this circular have been arrived at after due and careful consideration and there are no other facts not contained in this circular the omission of which would make any statement contained herein misleading.

SHARE CAPITAL

The authorised and issued share capital of the Company immediately following the completion of the Open Offer (assuming the Open Offer becoming unconditional) will be as follows:

Authorised		HK$
2,000,000,000	Shares	100,000,000
1,800,000,000	Shares to be increased	90,000,000
3,800,000,000		190,000,000

Issued, to be issued	and full paid:
1,315,060,800	Shares in issue	65,753,040
1,315,060,800	Shares to be issued pursuant to the Open Offer	65,753,040
2,630,121,600		131,506,080

All of the Shares currently in issue rank pari passu in all respects with each other, including, in particular, as to dividends, voting rights and return of capital. The Shares in issue are listed on the Stock Exchange.

All of the Offer Shares to be issued will rank pari passu in all respects with each other, including, in particular, as to dividends, voting rights and return of capital. The Shares in issue are listed on the Stock Exchange.

No part of the share capital or any other securities of the Company is listed or dealt in on any stock exchange other than the Stock Exchange and no application is being made or is currently proposed or sought for the Shares or Offer Shares or any other securities of the Company to be listed or dealt in on any other stock exchange.

There are no arrangements under which future dividends will be waived or agreed to be waived.

Save for the issue of 219,176,800 Shares on 25 May 2005 under the Placing, the Company had not issued any new Share since 31 March 2005, being the end of the last financial year of the Company, up to the Latest Practicable Date. As at the Latest Practicable Date, there was no outstanding option, convertible note, share option, warrant, derivative or other securities convertible into or exchangeable for the Shares.

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DIRECTORS

Executive Directors

Mr. Yeung Chi Hang, aged 26, is the Chairman of the Company. He first joined the Group as Assistant General Manager of Golden Island (Management) Limited (‘‘GI Management’’), a wholly owned subsidiary of the Company, in 2001. Mr. Yeung was appointed as a Director and the chairman of the Board on 1 May 2002 and 26 April 2004 respectively. Mr. Yeung worked in property investment and wedding services companies in Hong Kong prior to joining the Group. He is the son of Ms. Ma and the brother of Ms. Yeung, both executive Directors. Mr. Yeung is responsible for the overall business development of the Group.

Ms. Ma Shuk Kam, aged 51, joined the Group in January, 2000 and was the Chairperson of the Board from 29 December 2000 to 25 April 2004. Ms. Ma is a veteran property investor. She is the mother of Mr. Yeung and Ms. Yeung.

Mr. Liu Yu Mo, aged 46, was appointed as a Director and the Chief Executive Officer of the Company on 29 December 2000 and 8 March 2005 respectively. Mr. Liu has over 18 years of experience in management, auditing and accounting. He obtained a master of business administration degree in 2002. Mr. Liu is a certified practising accountant (Aust.) and a fellow member of the Hong Kong Institute of Certified Public Accountants.

Mr. Chung Siu Wah, aged 48, was appointed as a Director on 28 November 2001. He has been a solicitor practising in Hong Kong since 1989 and is a consultant of Messrs. Tony Kan and Company, Solicitors and Notaries. Ms. Yeung Kit Yu, Kitty, aged 24, obtained a bachelor’s degree of Arts in Asian Studies from the University of British Columbia, Canada. Ms. Yeung is also an Assistant General Manager of GI Management. She is the daughter of Ms. Ma and the sister of Mr. Yeung.

Mr. Au Edmond Wah, aged 51, has been holding senior management positions in various companies in Hong Kong, China, Canada and Macau for the past. He graduated from Hong Kong Polytechnic (now known as Hong Kong Polytechnic University) and is a fellow member of the Hong Kong Institute of Certified Public Accountants and a member of both the Association of Chartered Certified Accountants and The Certified General Accountants Association of Canada. Mr. Au had been a director of various major subsidiaries of the Company from January 2000 to November 2000.

Mr. Chik To Pan, aged 27, is in charge of business development of the Group’s wedding services business. He is also the General Manager of GI Management. Before joining the Group in March 2004, he worked in restaurant and wedding services companies in Hong Kong.

The business address of the executive Directors is at 2810-11, 28th Floor, Shun Tak Centre, West Tower, 200 Connaught Road Central, Hong Kong.

Independent non-executive Directors

Ms. Chan Lai Mei, aged 41, is a director of One One CPA Limited (Certified Public Accountants (Practising)). She has over 16 years of diversified experience in auditing, accounting, corporate governance, financial management and corporate finance activities. Ms. Chan graduated from Hong Kong

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Polytechnic University (formerly known as Hong Kong Polytechnic). She is a fellow member of Association of Chartered Certified Accountants and a certified public accountant of Hong Kong Institute of Certified Public Accountants, Macau Society of Certified Practising Accountants and Taxation Institute of Hong Kong. Her business address is at Rooms 501, 5th Floor, 113 Argyle Street, Mongkok, Kowloon, Hong Kong.

Mr. Lee Wai Loun, aged 71, is a managing director of Manlex International Co. Ltd., a trading company. He has over 22 years of experience in sales and management in trading and distribution of electronic components, integrated circuits and computer peripherals. His business address is at Unit 7, 6th Floor, Block B, Po Lung Centre, 11 Wang Chiu Road, Kowloon Bay, Kowloon, Hong Kong.

Mr. Lee Yuk Sang, Angus, aged 27, is a director of Everwin International Ind. Ltd. (a trading company) and Sun Mei Ngai Plastic Co. Ltd. (a manufacturing company). He has over 4 years of experience in sales, marketing, project and factory management and providing consulting services in trading of Christmas decoration goods and manufacturing of plastic goods. His business address is at 23A, Prince Industrial Building, 106 Prince Edward Road East, San Po Kong, Kowloon, Hong Kong.

SENIOR MANAGEMENT

Mr. Wong Hung Ting, aged 56, is a General Manager of Golden Island Catering Group Company Limited. He has over 36 years of experience in the catering field and has been with the Group for more than 20 years. Mr. Wong is in charge of the day-to-day operation of the Group’s restaurant at Star House, Tsimshatsui, Kowloon.

Mr. Ng Muk Hing, aged 59, is the Chief Chef of Golden Island Catering Group Company Limited. He has over 35 years of experience in catering and has been with the Group for more than 20 years.

Ms. Lam Siu Pou, Betty, aged 42, joined Golden Island Catering Group Company Limited as a Chief Executive Officer in August 2005. She supervises the wedding services business operation of both Wonderful Arts Wedding Services and Cite Du Louvre. She has over 15 years’ experience in sales, management and training in retail and hotel business.

CORPORATE INFORMATION

Registered office	Clarendon House
	Church Street
	Hamilton HM 11
	Bermuda
Head office and principal	2810-11, 28th Floor
place of business	Shun Tak Centre, West Tower
	200 Connaught Road Central
	Hong Kong
Company secretary	Cheung Mei Ha, Jennifer
	Solicitor practising in Hong Kong

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Qualified accountant

Authorised representatives

Auditors

Principal share registrar and transfer agent

Branch share registrar in Hong Kong

Principal bankers

Liu Yu Mo CPA (Aust.), FCPA

Liu Yu Mo Cheung Mei Ha, Jennifer BDO McCabe Lo Limited 29th Floor, Wing On Centre 111 Connaught Road Central Hong Kong Butterfield Corporate Services Limited 14 Bermudiana Road Pembroke Bermuda Secretaries Limited Ground Floor, Bank of East Asia Harbour View Centre 56 Gloucester Road Wanchai Hong Kong Hang Seng Bank Limited Shop No. 5, Ground Floor Manley House 86-98 Canton Road Kowloon Hong Kong Bank of China (Hong Kong) Limited Room 607-610, 6th Floor Telford House 16 Wang Hoi Road Kowloon Bay Kowloon Hong Kong Chiyu Banking Corporation Limited 4th Floor, Chiyu Banking Building 78 Des Voeux Road Central Hong Kong Nanyang Commercial Bank Limited Shop A, 1st Floor Hong Kong Pacific Centre 28 Hankow Road Tsim Sha Tsui Kowloon Hong Kong

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PARTIES INVOLVED IN THE OPEN OFFER

Underwriters

World Possession 2810-11, 28th Floor Shun Tak Centre, West Tower 200 Connaught Road Central Hong Kong

Chung Nam Securities Limited 31st Floor, China United Centre 28 Marble Road North Point Hong Kong

Legal advisers to the Company

As to Hong Kong law Jennifer Cheung & Co. Unit A, 19th Floor Two Chinachem Plaza 68 Connaught Road Central Hong Kong

As to Bermuda law

Conyers Dill & Pearman 2901 One Exchange Square 8 Connaught Place Hong Kong

MARKET PRICES

The table below shows the closing price of the Shares on the Stock Exchange on (i) the last day on which trading took place in each of the six calendar months immediately preceding the date of the Announcement; (ii) 16 August 2005, being the last trading day on which the Shares were traded before the Announcement; and (iii) the Latest Practicable Date:

Date	Closing price
	per Share
2005	HK$
28 February	0.320
31 March	0.670
29 April	0.495
31 May	0.710
30 June	0.710
29 July	0.500
16 August	0.460
Latest Practicable Date	0.360

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The (i) highest and (ii) lowest closing prices per Share recorded on the Stock Exchange during the Relevant Period were (i) HK$0.80 and (ii) HK$0.30 on (i) 23 May 2005 and (ii) 3 March 2005 and 4 March 2005 respectively.

The subscription price of HK$0.15 per Share under the Open Offer represents a discount of about 67.39% to the closing price of HK$0.46 per Share quoted on the Stock Exchange on 16 August 2005, the last trading day prior to the date of the Announcement.

DISCLOSURE OF INTERESTS

Interests of Directors in the Company

As at the Latest Practicable Date, the interests of the Directors in the share capital of the Company which were required to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests which they were taken or deemed to have under such provisions of the SFO), or were required, pursuant to section 352 of the SFO, to be entered in the register referred to therein, or were required, pursuant to the Model Takeovers Code for Securities Transactions by Directors of Listed Companies in the Listing Rules, to be notified to the Company and the Stock Exchange were as follows:

			Percentage of
Name	Number of Shares	Nature of interest	shareholding
Ma Shuk Kam	587,322,207	Corporate_(Note)_	44.66
Yeung Chi Hang	587,322,207	Corporate_(Note)_	44.66
Yeung Kit Yu, Kitty	587,322,207	Corporate_(Note)_	44.66
Liu Yu Mo	24,000	Personal	0.002

Note: These shares are owned by World Possession, which is beneficially owned by Madam Ma, Mr. Yeung and Ms. Yeung in equal shares.

Save as disclosed above, as at the Latest Practicable Date, none of the Directors or any chief executive of the Company had an interest or short position in any shares, underlying shares or debentures of the Company or any associated corporation (within the meaning of Part XV of the SFO) which would have 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 he was taken or deemed to have under such provisions of the SFO) or which was required, pursuant to section 352 of the SFO, to be entered in the register referred to therein, or pursuant to the Model Takeovers Code for Securities Transactions by Directors of Listed Companies in the Listing Rules to be notified to the Company and the Stock Exchange or required to be disclosed under the Takeovers Code.

Interests of other persons in the share capital of the Company

As at the Latest Practicable Date, so far as is known to the Directors, the following persons (other than a Director or chief executive of the Company) had an interest in the shares and 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:

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			Percentage of
Name	Number of Shares	Nature of interest	shareholding
World Possession	587,322,207	Beneficial owner	44.66

Save as disclosed above, taking no account of Shares which may be taken up under the Open Offer, the Directors are not aware of any person who will immediately following the Open Offer hold or be beneficially interested in 5% or more of the Shares then in issue.

Saved as disclosed in the sub-paragraphs headed ‘‘Interests of Directors in the Company’’ and ‘‘Interests of other persons in the share capital of the Company’’ above, none of World Possession or its directors or any person acting in concert with it was interested in the issued share capital or other securities of the Company as at the Latest Practicable Date.

Interests in other members of the Group

As at the Latest Practicable Date, so far as is known to the Directors, the following persons (other than a Director or chief executive of the Company) were, directly or indirectly, interested in 10% or more of the nominal value of the share capital carrying rights to vote in all circumstances at general meetings of the following subsidiaries of the Company:

(a) Mr. Poon Tak Yip was interested in (i) 25% of the issued share capital of Reli-a-bo and (ii) 20% of the issued share capital of Wellprecise;
(b) Mr. Wong Chor Ming was interested in 10% of the issued share capital of Reli-a-bo; and
(c) Mr. Yuen Tak Yau, Daniel (‘‘Mr. Yuen’’) was interested in 29% of the issued share capital of Wellprecise and 49% of the issued share capital of Witty.

None of the subsidiaries of the Company had any outstanding option as at the Latest Practicable Date.

Save as disclosed above, the Directors are not aware of any person who were, directly or indirectly, interested in 10% or more of the nominal value of the share capital carrying rights to vote in all circumstances at general meetings of the subsidiaries of the Company.

Interests in World Possession

As at the Latest Practicable Date, the Group did not have any beneficial interest in the issued share capital or other securities of World Possession or its associates.

Madam Ma, Mr. Yeung and Ms. Yeung (all executive Directors) beneficially own the entire issued share capital of World Possession in equal shares.

Dealings in securities of the Company

During the Relevant Period, save that World Possession sold 219,176,800 Shares at HK$0.60 per Share on 11 May 2005 and subscribed for the same number of Shares at the same price on 25 May 2005 pursuant to the Placing, none of the Directors, World Possession, its directors or parties acting in concert with it had any dealings in the securities of the Company.

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Dealings in securities of World Possession

During the Relevant Period, none of the Directors nor the Group had any dealings in the securities of World Possession.

Interests of experts in the Group

None of the experts named in the paragraph headed ‘‘Consents’’ in this appendix has any shareholding in any company in the Group or the right (whether legally enforceable or not) to subscribe for or to nominate persons to subscribe for securities in any company in the Group.

Interests in contract or arrangement

Save for the interests of Ms. Ma, Mr. Yeung and Ms. Yeung in the Sale and Purchase Agreement and the Underwriting Agreement, none of the Directors has any interests in contract or arrangement subsisting at the date of this circular which is significant in relation to the business of the Group taken as a whole.

Interests in assets

Save for the interests of Ms. Ma, Mr. Yeung and Ms. Yeung in the Sale and Purchase Agreement, none of the Directors or experts named in the paragraph headed ‘‘Consents’’ in this appendix has any direct or indirect interest in any assets acquired or disposed of by or leased to any member of the Group or is proposed to be acquired or disposed of by or leased to any member of the Group since 31 March 2005, being the date to which the latest published audited accounts of the Company were made up.

Service contracts

Mr. Chik To Pan (‘‘Mr. Chik’’) (an executive Director) had been employed as a personal assistant pursuant to an employment agreement entered into between him and Golden Island Catering Group Company Limited (‘‘Golden Island Catering’’), a wholly owned subsidiary of the Company, on 6 March 2004. Under such employment agreement (the ‘‘Previous Employment Agreement’’), Mr. Chik was entitled to a basic monthly salary of HK$15,000 and year-end bonus at the discretion of Golden Island Catering. Either party might terminate the Previous Employment Agreement by giving one month’s written notice to the other. His salary was increased to HK$20,000 effective from 1 August 2004. Mr. Chik’s employment was subsequently transferred to Golden Island (Management) Limited (‘‘Golden Island Management’’), a wholly owned subsidiary of the Company, and he is now employed as a general manager pursuant to an employment letter entered into between him and Golden Island Management on 1 June 2005 (the ‘‘Existing Employment Agreement’’). Mr. Chik is entitled to a monthly salary of HK$30,000 and discretionary bonus to be determined based on his performance each year. Either party may terminate the Existing Employment Agreement by giving two months’ written notice to the other.

Save as aforesaid, there is no existing or proposed service contract, excluding contract expiring or terminable within 12 months, and no service contract has been entered into or amended within the Relevant Period, between any company comprising the Enlarged Group and any of their directors.

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Competing business

None of the Directors nor their respective associates has any interest in any business which competes or is likely to complete, either directly or indirectly, with the Group’s business.

Miscellaneous

(a) No shareholding in the Company was owned or controlled by a subsidiary of the Company or by a pension fund of any member of the Group or by an adviser to the Company or any of its associates as at the Latest Practicable Date.
(b) None of the Company or any person who is an associate of the Company by virtue of classes (1), (2), (3) and (4) of the definition of associate under the Takeovers Code has any arrangement or indemnity of the kind described in note 8 to Rule 22 of the Takeovers Code with any person.
(c) None of World Possession or any person acting in concert with it has any arrangement or indemnity of the kind described in note 8 to Rule 22 of the Takeovers Code with any person.
(d) No shareholding in the Company was managed on a discretionary basis by fund managers connected with the Company at the Latest Practicable Date.
(e) No person has irrevocably committed himself to vote in favour of the resolution to be proposed at the SGM to approve the Sale and Purchase Agreement, the Open Offer, the Whitewash Waiver and the Ongoing Connected Transactions.
(f) As at the Latest Practicable Date, no benefit (other than statutory compensation) would be given to any Director as compensation for loss of office or otherwise in connection with the Sale and Purchase Agreement, the Open Offer, the Whitewash Waiver and the Ongoing Connected Transactions.
(g) As at the Latest Practicable Date, there is no agreement or arrangement between any of the Directors and any other person which is conditional on or dependent upon the outcome of the Sale and Purchase Agreement, the Open Offer, the Whitewash Waiver or the Ongoing Connected Transactions or otherwise in connection therewith.
(h) As at the Latest Practicable Date, there was no agreement, arrangement or understanding (including any compensation arrangement) between World Possession or any person acting in concert with it and any Director, recent Director, shareholder or recent shareholder of the Company which had any connection with or dependence upon the Sale and Purchase Agreement, the Open Offer, the Whitewash Waiver and the Ongoing Connected Transactions.
(i) Save for the agreement dated 11 May 2005 relating to the Placing and the Underwriting Agreement, no material contracts have been entered into by World Possession in which any Director has a material personal interest.

MATERIAL CONTRACTS

The following contracts (not being contracts in the ordinary course of business) had been entered into by members of the Enlarged Group within the two years preceding 29 August 2005 (being the date of the Announcement), and up to the Latest Practicable Date, and are or may be material:

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(a) a sale and purchase agreement dated 4 September 2003 between Companhia de Investimentos Chee Lee, Lda. and Eastern Base Investment Trading Company Limited (‘‘Eastern Base’’) relating to the acquisition of the commercial building located at J-Quarteirao 6, Zona de Aterros (ZAPE), Macau for a consideration of HK$140,300,000 by Eastern Base and a declaration of Eastern Base dated 15 October 2003 regarding the assignment of interests in such agreement to Waldorf Realty Company Limited, a wholly owned subsidiary of Waldorf;
(b) a deed of settlement dated 19 January 2004 between (i) Marlborough Gold Limited (‘‘MGL’’), a wholly owned subsidiary of the Company; and (ii) Opal Technologies Inc. (‘‘Opal’’) whereby Opal agreed to pay MGL US$2.5 million to settle the judgement debts of US$10.3 million with interests and costs;
(c) a sale and purchase agreement dated 20 January 2004 between Golden Island Catering Group Company Limited, a wholly owned subsidiary of the Company; and (ii) Golden Winner Limited (an associate of Mr. Yeung) relating to the acquisition of the business of provision of wedding services under the trade names of ‘‘Cite Du Louvre ’’ and ‘‘Wonderful Arts Wedding Services ’’ for a total cash consideration of HK$24 million;
(d) a sale and purchase agreement dated 31 May 2004 between Guangdong (H.K.) Tours Company Limited (in liquidation) (‘‘Guangdong’’) and World Honour Investments Limited (‘‘World Honour’’), a wholly owned subsidiary of Waldorf, relating to the acquisition of the property located at Unit 3001 on 3rd Floor of the Podium of Shun Tak Centre, Nos. 168-200 Connaught Road Central, Hong Kong for a consideration of HK$3 million (the ‘‘Property’’);
(e) an assignment dated 30 June 2004 between Guangdong and World Honour relating to the assignment of the Property to World Honour for a consideration of HK$3 million;
(f) a subscription agreement dated 13 April 2005 between (i) Well Prime International Limited (‘‘Well Prime’’), a wholly owned subsidiary of the Company; (ii) Poon Tak Yip; (iii) Wong Chor Ming and Chan Sai Ming; and (iv) Reli-a-bo whereby, inter alia, Well Prime agreed to subscribe for 600 shares of HK$1 each of Reli-a-bo for cash at par and advanced a shareholder’s loan of HK$5,999,400 to Reli-a-bo;
(g) a subscription agreement dated 11 May 2005 between (i) World Possession; and (ii) the Company relating to the Placing;
(h) a shareholders’ agreement dated 18 June 2005 between (i) Worldaim Enterprises Limited (‘‘Worldaim’’), a wholly owned subsidiary of the Company; (ii) Mr. Yuen; and (iii) Nation Group Limited in respect of a joint venture relating to Wellprecise pursuant to which Worldaim advanced a shareholder’s loan of HK$2,039,949 to Wellprecise, and the minority shareholders also made shareholders’ loans proportional to their shareholdings in Wellprecise;
(i) a shareholders’ agreement dated 12 July 2005 between (i) Winkler Profits Limited (‘‘Winkler’’), a wholly owned subsidiary of the Company; and (ii) Mr. Yuen in respect of a joint venture relating to Witty, pursuant to which Winkler made a shareholder’s loan of HK$8,160,000 to Witty, and Mr. Yuen also made a shareholder’s loan in proportion to his shareholding in Witty;

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(j) the Sale and Purchase Agreement; and
(k) the Underwriting Agreement.

LITIGATION

None of the members of the Enlarged Group is engaged in any litigation or arbitration of material importance and no litigation or claim of material importance is known to the Directors to be pending or threatened against the Enlarged Group.

CONSENTS

BDO McCabe Lo Limited, Deloitte Touche Tohmatsu, the Valuer and Baron have given and have not withdrawn their respective written consents to the issue of this circular with copies of their reports, valuation or letters (as the case may be) and the references to their names included herein in the form and context in which they are respectively included.

Expenses

The expenses in connected with the Open Offer, including the financial advisory fee, underwriting commission, printing, registration, translation, legal and accounting fee, are estimated to be approximately HK$4.3 million and will be payable by the Company.

QUALIFICATION OF EXPERTS

The qualifications of the experts who have given opinions in this prospectus are as follows:

Name	Qualification
BDO McCabe Lo Limited	Certified Public Accountants
Deloitte Touche Tohmatsu	Certified Public Accountants
Vigers Appraisal & Consulting Limited	International property consultants
Baron Capital Limited	a licensed corporation under the SFO

GENERAL

(a) The secretary of the Company is Cheung Mei Ha, Jennifer. She is a solicitor practising in Hong Kong.
(b) The qualified accountant of the Company is Liu Yu Mo. He is a certified practising accountant (Aust.) and a fellow member of the Hong Kong Institute of Certified Public Accountants.
(c) The registered office of the Company is situated at Clarendon House, Church Street, Hamilton HM 11, Bermuda.

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(d) The Hong Kong share registrar of the Company is Secretaries Limited of Ground Floor, Bank of East Asia Harbour View Centre, 56 Gloucester Road, Wanchai, Hong Kong.
(e) The registered office of World Possession is situated at P.O. Box 957, Offshore Incorporations Centre, Road Town, Tortola, British Virgin Islands. The parties acting in concert with World Possession are Ms. Ma, Mr. Yeung and Ms. Yeung all of 137 Waterloo Road, Kowloon, Hong Kong.
(f) The registered office of Partners Capital International Limited is situated at Room 1305, 13th Floor, 9 Queen’s Road Central, Hong Kong.
(g) The securities to be acquired by World Possession in pursuance to the Underwriting Agreement will not be transferred to any other persons.

DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents will be available for inspection at the offices of Jennifer Cheung & Co. at Unit A, 19th Floor, Two Chinachem Plaza, 68 Connaught Road Central, Hong Kong during normal business hours (from 9:30 a.m. to 5:30 p.m. for Mondays to Fridays and from 9:30 a.m. to 1:00 p.m. for Saturdays which are not public holidays) up to and including 3 October 2005, the date of the SGM:

(a) the memorandum of association and the bye-laws of the Company;
(b) memorandum and articles of association of World Possession;
(c) the annual reports of the Company for the two years ended 31 March 2005;
(d) the letter from Baron;
(e) the accountants’ report on the Waldorf Group, the text of which is set out in appendix I;
(f) the letters, summary of valuation and valuation certificates relating to the properties owned and leased by the Waldorf Group prepared by the Valuer, the texts of which are set out in appendix IV;
(g) the letter, summary of valuation and valuation certificates relating to the properties owned and leased by the Group prepared by the Valuer, the texts of which are set out in appendix V;
(h) the Existing Employment Agreement referred to in the paragraph headed ‘‘Services contracts’’ in this appendix;
(i) the material contracts referred to in the paragraph headed ‘‘Material contracts’’ in this appendix;
(j) the written consents referred to in the paragraph headed ‘‘Consents’’ in this appendix; and
(k) the Memorandum.

188

NOTICE OF SGM

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UNITED POWER INVESTMENT LIMITED

(Incorporated in Bermuda with limited liability)

(Stock Code: 674)

NOTICE IS HEREBY GIVEN that a special general meeting of the above mentioned company (the ‘‘Company’’) will be held at Golden Island Bird’s Nest Chiu Chau Restaurant at 2nd Floor, East Wing, Star House, 3 Salisbury Road, Tsimshatsui, Kowloon, Hong Kong on 3 October 2005 at 11:30 a.m. for the purpose of considering and, if thought fit, passing the following resolution as an ordinary resolution:

ORDINARY RESOLUTION

‘‘ THAT :

(a) the agreement dated 16 August 2005 between (i) Wealth Access Holdings Limited and Sunling Resources Limited; (ii) Waldorf Holding Limited (‘‘Waldorf’’); and (iii) Widelead Group Limited (the ‘‘Purchaser’’), a wholly owned subsidiary of the Company, relating to the acquisition of 95% of the entire registered capital of, and the benefits of shareholder’s loans in the total sum of MOP90,557,600 to, Waldorf by the Purchaser for a total cash consideration of MOP282 million (the ‘‘Agreement’’) (a copy of which is tabled at the meeting and signed by the Chairman for the purpose of identification) be and is hereby approved and that the directors of the Company be and are hereby authorised to implement the same (with any amendments to the terms of the Agreement as may be approved by the directors of the Company);
(b) (i) the authorised share capital of the Company be and is increased from HK$100 million to HK$190 million by the creation of an additional 1,800 million shares of HK$0.05 each of the Company;
(ii) the issue by way of an open offer (the ‘‘Open Offer’’) of 1,315,060,800 shares of the Company (‘‘Offer Shares’’) to shareholders on the register of members of the Company on 3 October 2005 (other than those shareholders whose registered addresses on the register of members of the Company on such date are outside Hong Kong and to whom the directors of the Company consider that it may be unlawful, impracticable or inconvenient to make an offer of the Offer Shares) on the terms and conditions set out in a circular dated 16 September 2005 of the Company, a copy of which is tabled at the meeting and signed by the Chairman for the purpose of identification (the ‘‘Circular’’), and a prospectus (subject to any amendment as may be approved by the directors of the Company) to be sent to the shareholders of the Company on or about 3 October 2005, a copy of which is tabled at the meeting and signed by the Chairman for the purpose of identification, be and is hereby approved and the directors of the Company be and are hereby authorised to issue and allot such Offer Shares pursuant to the Open Offer and otherwise on the terms set out in such prospectus;
(iii) the absence of arrangements for the disposal of Offer Shares not validly applied for by way of application in excess of the assured entitlement under the Open Offer;

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NOTICE OF SGM

(iv) the underwriting agreement dated 16 August 2005 (as amended on 29 August 2005) between (i) the Company; (ii) World Possession Assets Limited (‘‘World Possession’’) and (iii) Chung Nam Securities Limited relating to the Open Offer (the ‘‘Underwriting Agreement’’) (a copy of which is tabled at the meeting and signed by the Chairman for the purpose of identification) be and is hereby approved and that the directors of the Company be and are hereby authorised to implement the same (with any amendments to the terms of such agreement as may be approved by the directors of the Company); and
(v) the granting of a waiver to World Possession and parties acting in concert with it of any obligation to make a general offer under the Code on Takeovers and Mergers of Hong Kong for all the issued shares of the Company (other than those owned by World Possession and parties acting in concert with it) as a result of the underwriting of the Open Offer pursuant to the Underwriting Agreement be and is hereby approved; and
(c) conditional on completion of the Agreement, each of the Ongoing Connected Transactions (as defined in the Circular, a copy of which is tabled at the meeting and signed by the Chairman for the purpose of identification) and the cap set out in the section headed ‘‘Ongoing Connected Transactions’’ in the letter from the board of directors of the Company contained in the Circular be and are hereby approved and that the directors of the Company be and are hereby authorised to enter into and/or implement such transactions.’’

By Order of the Board Jennifer Cheung Mei Ha Secretary

Hong Kong, 16 September 2005

Principal office: 2810-11, 28th Floor Shun Tak Centre West Tower 200 Connaught Road Central Hong Kong

Notes:

A member entitled to attend and vote at the meeting convened by the above notice is entitled to appoint proxies to attend and vote in his stead. A proxy need not be a member of the Company.
In order to be valid, a form of proxy must be deposited at the Company’s principal office together with a power of attorney or other authority, if any, under which it is signed or a notarially certified copy of that power of attorney or authority, not less than 48 hours before the time for holding the meeting or adjourned meeting.

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AI assistant

Weiye Holdings Limited — Proxy Solicitation & Information Statement 2005

50009_rns_2005-09-20_885763bf-def5-4c63-9f2f-d4c65286dee6.pdf

UNITED POWER INVESTMENT LIMITED

(5) ONGOING CONNECTED TRANSACTIONS

Financial adviser to the Company

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

CONTENTS

DEFINITIONS

DEFINITIONS

DEFINITIONS

DEFINITIONS

EXPECTED TIMETABLE FOR THE OPEN OFFER

UNITED POWER INVESTMENT LIMITED

(Stock Code: 674)

(1) VERY SUBSTANTIAL ACQUISITION AND CONNECTED TRANSACTION (2) INCREASE IN AUTHORISED SHARE CAPITAL (3) OPEN OFFER OF NEW SHARES ON THE BASIS OF ONE OFFER SHARE FOR EVERY SHARE HELD ON THE RECORD DATE (4) APPLICATION FOR THE GRANT OF WHITEWASH WAIVER AND (5) ONGOING CONNECTED TRANSACTIONS

INTRODUCTION

(1) THE SALE AND PURCHASE AGREEMENT DATED 16 AUGUST 2005

Parties

Assets to be acquired

Consideration

Conditions

Warranties on net tangible asset value and others by the Vendors

Information on Waldorf

Structure and business scope

incorporated in BVI incorporated in Hong Kong

Financial information

The Hotel

Property investment in Hong Kong

Reasons for the Acquisition

(2) INCREASE IN AUTHORISED SHARE CAPITAL

(3) OPEN OFFER

Issue statistics

Subscription price

Qualifying Shareholders

Closure of register of members

Rights of Excluded Shareholders

Status of the Offer Shares

Share certificates for Offer Shares

Fractions of Offer Shares

Application for listing

UNDERWRITING ARRANGEMENT

Underwriting Agreement dated 16 August 2005 (as amended on 29 August 2005)

Termination of the Underwriting Agreement

If the Underwriters terminate the Underwriting Agreement, the Open Offer will not proceed.

CONDITIONS OF THE OPEN OFFER

WARNING OF RISKS OF DEALING IN SHARES

SHAREHOLDING STRUCTURE

LETTER FROM THE BOARD

FUNDS RAISED BY WAY OF ISSUANCE OF NEW SHARES DURING THE PAST 12 MONTHS

USE OF PROCEEDS AND REASONS FOR THE OPEN OFFER

LETTER FROM THE BOARD

Absence of arrangement for excess application

(4) WHITEWASH WAIVER

(5) ONGOING CONNECTED TRANSACTIONS

Parties

Services

Charges

LETTER FROM THE BOARD

Term

The cap

LETTER FROM THE BOARD

Reasons for the Ongoing Connected Transactions

Connections between the parties

FINANCIAL EFFECTS OF THE ACQUISITION ON THE GROUP

Earnings

Net tangible assets and net tangible asset value per Share

MANAGEMENT DISCUSSION AND ANALYSIS OF THE RESULTS AND FINANCIAL POSITION OF THE GROUP

For the year ended 31 March 2003

Group results

Business review

Restaurant operations business

Investment properties business

Investment in convertible note

Liquidity and financial resources

Employees and remuneration policies

Charges on Group Assets

Dividend

For the year ended 31 March 2004

Group results

Weiye Holdings Limited Proxy Solicitation & Information Statement 2005