THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

Transcription

1 THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION The circular is for information purpose only and does not constitute an invitation or offer to acquire, purchase or subscribe for the securities of the Company. If you are in any doubt as to any aspect of this circular or as to the action to be taken, you should consult your licensed securities dealer, bank manager, solicitor, professional accountant or other professional adviser. If you have sold or transferred all your shares in EMPEROR ENTERTAINMENT HOTEL LIMITED (formerly known as EMPEROR (CHINA CONCEPT) INVESTMENTS LIMITED), you should at once hand this circular to the purchaser(s) or the transferee(s) or to the bank, licensed securities dealer or other agent through whom the sale or transfer was effected for transmission to the purchaser(s) or the transferee(s). The Stock Exchange of Hong Kong Limited takes no responsibility for the contents of this circular, makes no representation as to its accuracy or completeness and expressly disclaims any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this circular. EMPEROR ENTERTAINMENT HOTEL LIMITED * (formerly known as EMPEROR (CHINA CONCEPT) INVESTMENTS LIMITED) (Incorporated in Bermuda with limited liability) (Stock Code: 296) VERY SUBSTANTIAL ACQUISITION AND CONNECTED TRANSACTION, SUBSCRIPTION OF NEW SHARES AND REFRESHMENT OF GENERAL MANDATES WORTHLY STRONG INVESTMENT LIMITED (Incorporated in Hong Kong with limited liability) WHITEWASH WAIVER Financial adviser to the Company Emperor Capital Limited Joint independent financial advisers to the Independent Board Committee and the Independent Shareholders Menlo Capital Limited Grand Vinco Capital Limited A letter from the board of directors of Emperor Entertainment Hotel Limited (formerly known as Emperor (China Concept) Investments Limited) is set out on pages 7 to 19 of this circular. A letter from the independent board committee of Emperor Entertainment Hotel Limited (formerly known as Emperor (China Concept) Investments Limited) containing its advice to the independent shareholders of Emperor Entertainment Hotel Limited (formerly known as Emperor (China Concept) Investments Limited) in connection with the Vessel Acquisition, the Vessel Whitewash Waiver and the refreshment of the Issue Mandate is set out on page 20 of this circular. A joint letter from Menlo and Grand Vinco, the joint independent financial advisers to the independent board committee and the independent shareholders of Emperor Entertainment Hotel Limited (formerly known as Emperor (China Concept) Investments Limited), containing its advice to the independent board committee and the independent shareholders of Emperor Entertainment Hotel Limited (formerly known as Emperor (China Concept) Investments Limited) in connection with the Vessel Acquisition, the Vessel Whitewash Waiver and the refreshment of the Issue Mandate is set out on pages 21 to 43 of this circular. A notice convening a special general meeting of Emperor Entertainment Hotel Limited (formerly known as Emperor (China Concept) Investments Limited) to be held at 10:30 a.m. on Thursday, 3rd February, 2005 at 28th Floor, Emperor Group Centre, 288 Hennessy Road, Wanchai, Hong Kong, is set out on pages 117 to 119 of this circular. A form of proxy for use at the special general meeting is enclosed. Whether or not you intend to attend and vote at the special general meeting or any adjourned meeting in person, you are requested to complete and return the enclosed form of proxy in accordance with the instructions printed thereon and return it to the principal office of Emperor Entertainment Hotel Limited (formerly known as Emperor (China Concept) Investments Limited) at 28th Floor, Emperor Group Centre, 288 Hennessy Road, Wanchai, Hong Kong as soon as possible, but in any event not less than 48 hours before the time appointed for holding such meeting or any adjourned meeting. Completion and return of the form of proxy will not preclude you from attending and voting in person at the special general meeting or any adjourned meeting should you so wish. * For identification purposes only 18th January, 2005

2 CONTENTS Pages DEFINITIONS LETTER FROM THE BOARD Introduction The Vessel Sale and Purchase Agreement Vessel Whitewash Waiver Subscription Agreement Fund raising activities conducted and/or announced in the past 12 months Refreshment of General Mandates Special General Meeting Recommendation Additional Information LETTER FROM THE INDEPENDENT BOARD COMMITTEE LETTER FROM MENLO AND GRAND VINCO APPENDIX I FINANCIAL INFORMATION OF THE GROUP APPENDIX II FINANCIAL INFORMATION OF THE VESSEL APPENDIX III PROFORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP APPENDIX IV VALUATION REPORT OF THE VESSEL APPENDIX V PROPERTY VALUATION APPENDIX VI EXPLANATORY STATEMENT TO THE REPURCHASE MANDATE APPENDIX VII GENERAL INFORMATION NOTICE OF SPECIAL GENERAL MEETING i

3 DEFINITIONS In this circular, unless the context otherwise requires, the following expressions have the following meaning: associates AY Trust Board Company connected person(s) Director(s) Emperor International Emperor Securities Executive General Mandates Grand Vinco Great Assets has the same meaning as defined in the Listing Rules The Albert Yeung Discretionary Trust (of which Mr. Albert Yeung is the founder), a substantial Shareholder of the Company the board of Directors Emperor Entertainment Hotel Limited (formerly known as Emperor (China Concept) Investments Limited), an exempted company incorporated in Bermuda with limited liability, the Shares of which are listed on the Stock Exchange has the meaning ascribed to it in the Listing Rules director(s) of the Company Emperor International Holdings Limited, an exempted company incorporated in Bermuda with limited liability, the directors of which are Ms. Luk Siu Man Semon, Mr. Wong Chi Fai, Ms. Fan Man Seung Vanessa, Mr. Yeung Lik Shing Michael, Ms. Mok Fung Lin Ivy, Mr. Chan Pak Lam Tom, Mr. Law Ka Ming Michael, Mr. Chan Man Hon Eric and Mr. Liu Hing Hung, the shares of which are listed on the Stock Exchange and 65.04% of its shareholding interest is indirectly held by AY Trust Emperor Securities Limited, a deemed licensed corporation to carry on types 1, 4, 6, 7 and 9 regulated activities as defined in schedule 5 of the SFO, being one of the Underwriters to the Underwriting Agreement the Executive Director of the Corporate Finance Division of the Securities and Futures Commission and any delegate of the Executive Director the Issue Mandate and the Repurchase Mandate Grand Vinco Capital Limited, a corporation licensed to carry on business in types 1 & 6 regulated activities (dealing in securities and advising on corporate finance) under the SFO Great Assets Holdings Limited, a company incorporated in the British Virgin Islands with limited liability 1

4 DEFINITIONS Group Hong Kong Independent Board Committee Independent Shareholders Independent Third Parties Issue Mandate Keen Million Latest Practicable Date Listing Rules Luck United Macau Macau Company Menlo the Company and its subsidiaries the Hong Kong Special Administrative Region of the People s Republic of China the independent board committee formed by the independent directors of the Company, namely Ms. Chan Sim Ling, Irene, Mr. Lam San Keung and Ms. Chan Wiling, Yvonne, to advise the Independent Shareholders on the Vessel Acquisition, the Vessel Whitewash Waiver and the refreshment of the Issue Mandate Shareholders other than Worthly Strong, the Vessel Vendor, their respective associates and their respective concert parties third parties which are not connected persons of the Company within the meaning of the Listing Rules and will become shareholders of Luck United holding 50% of the issued share capital of Luck United the general mandate granted to the Directors to issue further securities not exceeding 20% of the issued share capital of the Company as at the date of passing the relevant resolution Keen Million Limited, a company incorporated in the British Virgin Islands with limited liability 14th January, 2005 being the latest practicable date prior to the printing of this circular for the purpose of ascertaining certain information contained in the circular the Rules Governing the Listing of Securities on the Stock Exchange Luck United Holdings Limited, a company incorporated in the British Virgin Islands with limited liability the Macau Special Administrative Region of the People s Republic of China, a company incorporated in Macau with limited liability and is an independent third party which is not a connected person of the Company within the meaning of the Listing Rules Menlo Capital Limited, a corporation licensed to carry on business in type 6 regulated activities (advising on corporate finance) under the SFO 2

5 DEFINITIONS Mr. Albert Yeung Other Assets Placees Placing Placing Agreement Property Repurchase Mandate Repurchase Resolution Rights Issue Rights Issue Announcement Rights Issue Circular Mr. Yeung Sau Shing, Albert, spouse of Ms. Luk Siu Man, Semon (a Director and Chairperson of the Company) furniture and fixture of the Vessel including all furniture and fittings on board, slot machines and other gambling equipment in the casino area the subscribers who subscribed for the shares of the Company of HK$0.001 each pursuant to the Placing Agreement the placing of 2,200,000 new shares of the Company of HK$0.001 each pursuant to the Placing Agreement as set out in the Rights Issue Announcement the placing agreement dated 16th November, 2004 entered into between the Company and China Everbright Securities (HK) Limited in relation to the placing of 2,200,000 new shares of the Company of HK$0.001 each at a placing price of HK$10.00 per share of the Company of HK$0.001 each (equivalent to HK$1.00 per Share) as set out in the Rights Issue Announcement, completion of which took place on 6th December, ; 120; 130; 140; 148 Avenida Doutor Mario Soares, 251; 252-A; 252-B; 252-C; 252-D; 254; 262; 272; 282; 284; 290; 291; 292-A; 292-B; 292-C; 292-D, Avenida Comercial De Macau the general mandate granted to the Directors to repurchase securities not exceeding 10% of the issued share capital of the Company as at the date of passing the relevant resolution the proposed ordinary resolution numbered 5 in the notice of the Vessel SGM the proposed rights issue of the Company as set out in the Rights Issue Announcement and the Rights Issue Circular the announcement of the Company dated 18th November, 2004 in relation to, inter alia, a very substantial acquisition and connected transaction, the Placing, the Share Subdivision, the Rights Issue and the Rights Issue Whitewash Waiver the circular of the Company dated 10th December, 2004 in relation to, inter alia, a very substantial acquisition and connected transaction, the Placing, the Share Subdivision, the Rights Issue and the Rights Issue Whitewash Waiver 3

6 DEFINITIONS Rights Issue Whitewash Waiver a waiver from the obligation of Worthly Strong, Emperor Securities, their associates and their respective concert parties to make a mandatory offer under Rule 26 of the Takeovers Code pursuant to Note 1 on Dispensations from Rule 26 of the Takeovers Code in the event that a mandatory offer is triggered under Rule 26 of the Takeovers Code as a result of the fulfillment of the underwriting commitments by Emperor Securities under the Underwriting Agreement Rights Shares 660,344,150 Shares to be issued pursuant to the Rights Issue SFO Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong) Shareholders Agreements the unconditional agreements dated 3rd November, 2004 entered into by Great Assets and Independent Third Parties for the purpose of the acquisition of the Macau Company and therefore the Property Share(s) ordinary share(s) of HK$ each in the share capital of the Company Share Subdivision the subdivision of each issued and unissued shares of the Company of HK$0.001 each into 10 Shares of HK$ each as set out in the Rights Issue Announcement and the Rights Issue Circular and became effective on 3rd January, 2005 Shareholder(s) holder(s) of the Share(s) SJM Sociedade de Jogos de Macau, S.A. a company incorporated under the laws of Macau and is not a connected person of the Company (within the meaning of the Listing Rules) Stock Exchange The Stock Exchange of Hong Kong Limited Subscriber Honour State International Limited, a company incorporated in Hong Kong and a wholly-owned subsidiary of SJM Subscription the subscription of 31,950,000 new Shares Subscription Agreement the subscription agreement dated 6th January, 2005 entered into between the Company and the Subscriber in relation to the Subscription Subscription Announcement the announcement of the Company dated 6th January, 2005 in relation to the Subscription 4

7 DEFINITIONS Subscription Shares 31,950,000 new Shares to be subscribed pursuant to the Subscription Agreement Takeovers Code The Hong Kong Code on Takeovers and Mergers Underwriters Emperor Securities, Tai Fook Securities Company Limited, Celestial Capital Limited, Kingston Securities Limited, Onshine Securities Limited, and Tung Tai Securities Co. Ltd. Underwriting Agreement the underwriting agreement dated 18th November, 2004 in relation to the Rights Issue entered into between the Company and the Underwriters Vessel Golden Princess, a cruise ship to be acquired by the Vessel Purchaser from the Vessel Vendor under Vessel Sale and Purchase Agreement Vessel Acquisition the acquisition of the Vessel Vessel Announcement the announcement of the Company dated 29th November, 2004 in relation to, inter alia, a very substantial acquisition and connected transaction, the Vessel Whitewash Waiver and refreshment of General Mandates Vessel Completion completion of the Vessel Sale and Purchase Agreement Vessel Consideration Shares 104,409,000 Shares to be issued by the Company to the Vessel Vendor pursuant to the Vessel Sale and Purchaser Agreement Vessel Purchaser Harbour Assets Limited, a company incorporated in the British Virgin Islands and an indirectly wholly-owned subsidiary of the Company Vessel Sale and the sale and purchase agreement dated 23rd November, 2004 Purchase Agreement entered into between the Vessel Vendor and the Vessel Purchaser in relation to the Vessel Acquisition Vessel SGM the special general meeting of the Company to be held at 10:30 a.m. on 3rd February, 2005 Vessel Vendor Pleasure Road Profits Limited, a company incorporated in the British Virgin Islands with limited liability and indirectly owned by the AY Trust and Mr. Albert Yeung respectively in the ratio of 21,742,615 to 1 5

8 DEFINITIONS Vessel Whitewash Waiver a waiver from the obligation of Worthly Strong, the Vessel Vendor, their associates and their respective concert parties to make a mandatory offer under Rule 26 of the Takeovers Code pursuant to Note 1 on Dispensations from Rule 26 of the Takeovers Code as a result of the allotment and issue of the Vessel Consideration Shares Worthly Strong Worthly Strong Investment Limited, a company incorporated in Hong Kong, directors of which are Mr. Wong Chi Fai and Ms. Mok Fung Lin, Ivy, an indirect wholly-owned subsidiary of Emperor International and a substantial shareholder of the Company HK$ Hong Kong dollars US$ United States dollars sq. m square meters % per cent. 6

9 LETTER FROM THE BOARD EMPEROR ENTERTAINMENT HOTEL LIMITED * (formerly known as EMPEROR (CHINA CONCEPT) INVESTMENTS LIMITED) (Incorporated in Bermuda with limited liability) (Stock Code: 296) Executive Directors: Registered office: Luk Siu Man, Semon (Chairperson) Clarendon House Wong Chi Fai Church Street Fan Man Seung, Vanessa Hamilton HM 11 Mok Fung Lin, Ivy Bermuda Independent Non-Executive Directors: Chan Sim Ling, Irene Lam San Keung Chan Wiling, Yvonne Principal office: 28th Floor Emperor Group Centre 288 Hennessy Road Wanchai Hong Kong 18th January, 2005 To the Shareholders Dear Sir or Madam, VERY SUBSTANTIAL ACQUISITION AND CONNECTED TRANSACTION, WHITEWASH WAIVER, SUBSCRIPTION OF NEW SHARES AND REFRESHMENT OF GENERAL MANDATES INTRODUCTION The Directors would like to refer to the Rights Issue Announcement and the Rights Issue Circular. The Placing was completed on 6th December, The Share Subdivision became effective on 3rd January On 29th November, 2004, the Directors announced that on 23rd November, 2004, the Vessel Purchaser, an indirectly wholly-owned subsidiary of the Company, has entered into the Vessel Sale and Purchase Agreement with the Vessel Vendor for the acquisition of the Vessel from the Vessel Vendor. The consideration for the Vessel is US$17 million which will be satisfied by the allotment and issue of 104,409,000 new Shares by the Company to the Vessel Vendor at a price of HK$1.27 per Share which is equivalent to the theoretical ex-rights price of the shares of the Company of HK$0.001 each, based on the closing price of HK$42.00 per share of the Company of HK$0.001 each (equivalent to HK$4.20 per * For identification purposes only 7

10 LETTER FROM THE BOARD Share) as quoted on the Stock Exchange on 22nd November, 2004, being the last trading day before the publication of the Vessel Announcement as the Vessel Consideration Shares are not entitled to the Rights Issue. On 6th January, 2005, as announced in the Subscription Announcement, the Company entered into the Subscription Agreement with the Subscriber pursuant to which the Company agreed to allot and issue and the Subscriber agreed to subscribe for 31,950,000 new Shares at a price of HK$2.88 per new Share. The purpose of this circular is to provide you with (i) information on the Vessel Acquisition, the Vessel Whitewash Waiver, the Subscription and the refreshment of the General Mandates; (ii) a letter from the Independent Board Committee setting out its advice to the Independent Shareholders in respect of the Vessel Acquisition, the Vessel Whitewash Waiver and the refreshment of the Issue Mandate; (iii) a joint letter from Menlo and Grand Vinco setting out its advice to an Independent Board Committee and the Independent Shareholders in respect of the Vessel Acquisition, the Vessel Whitewash Waiver and the refreshment of the Issue Mandate; and (iv) a notice of the Vessel SGM at which the necessary resolutions will be proposed to seek your approval for the above matters. THE VESSEL SALE AND PURCHASE AGREEMENT The Vessel Purchaser entered into the Vessel Sale and Purchase Agreement on 23rd November, 2004 with the Vessel Vendor pursuant to which, subject to the fulfillment of the conditions as set out in the subsection headed Conditions below, the Vessel Purchaser will acquire the Vessel from the Vessel Vendor. Parties Vessel Vendor : Pleasure Road Profits Limited, a company incorporated in the British Virgin Islands, which is principally engaged in holding the Vessel for bareboat charter and has no other business and indirectly owned by AY Trust and Mr. Albert Yeung respectively in the ratio of 21,742,615 to 1 Vessel Purchaser : Harbour Assets Limited, a company incorporated in the British Virgin Islands and a wholly-owned subsidiary of the Company The Vessel Vendor is therefore a connected person of the Company within the meaning of the Listing Rules. Assets to be acquired The assets to be acquired are the Vessel together with the Other Assets as set out in the Vessel Sale and Purchase Agreement, all of which are wholly-owned by the Vessel Vendor. The Vessel, named Golden Princess, was constructed in Finland in The Vessel has a gross tonnage of 12,704 tons and a passenger capacity of 570 guests and provides on board cruise activities, services and amenities (such as casino, night club, karaoke, restaurants, bars, video games, reading room, mahjong, duty free shop, massage facilities) to passengers. The primary area of operations of the Vessel is the high seas near 8

11 LETTER FROM THE BOARD but outside Hong Kong. The Vessel and its on-board facilities are currently leased out to a fellow subsidiary of the Vessel Vendor at a monthly rental of HK$1.2 million under a bareboat charter ( Bareboat Charter ). The Vessel s monthly average operating expenses borne by the Vessel Vendor s fellow subsidiary for the period from 1st October, 2003 to 30th September, 2004 was approximately HK$7 million. Upon completion of the Vessel Acquisition, the Vessel and all its on-board facilities except the casino will be operated by the Group itself which will bear the Vessel s operating expenses and will not be leased out. The Vessel Vendor undertakes to procure the casino to be leased out to a casino operator for one year at a monthly rental of HK$9 million plus 30% of the net profit after tax of the casino operation. The rental is determined with reference to the aforesaid monthly average operating expenses of the Vessel borne by the Vessel Vendor s fellow subsidiary of approximately HK$7 million. The Directors consider that the rental for the casino is a fair market rate. The casino operator will be a syndicate, the composition of which has not yet been determined. The Company will comply with all relevant requirements of the Listing Rules as and when appropriate upon conclusion of the agreement with the casino operator. The Vessel was purchased by the Vessel Vendor in November 2000 at a consideration of US$13.6 million. The unaudited net carrying value of the Vessel as at 30th September, 2004 as shown in the management accounts of the Vessel Vendor is HK$64,660,860. The current valuation of the Vessel (excluding the Other Assets) is US$17 million which is based on a valuation report dated 23rd November, 2004 prepared by an independent valuer, a copy of which is set out in Appendix IV to this circular. The Vessel Vendor was established solely for holding the Vessel. According to the management accounts of the Vessel Vendor, the unaudited net profit both before and after tax of the Vessel Vendor for the years ended 31st December, 2002 and 31st December, 2003 is HK$13,347,527 and HK$3,770,817 respectively based on the charter hire agreed in the Bareboat Charter with the Vessel Vendor s fellow subsidiary as the lessee. The drop of the unaudited net profit both before and after tax of the Vessel Vendor from the year ended 31st December, 2002 to the year ended 31st December, 2003 is mainly attributable to the reduction in the monthly charter hire from HK$2 million to HK$1.2 million charged by the Vessel Vendor to the lessee as agreed by the parties to the Bareboat Charter. Consideration The consideration for the Vessel is US$17 million which is based on a valuation report dated 23rd November, 2004 prepared by Carmichael & Clarke Co., Ltd., an independent valuer. The Directors consider it fair and reasonable to determine the consideration for the Vessel on the basis of the current valuation of the Vessel. No consideration needs to be paid by the Vessel Purchaser to the Vessel Vendor for the Other Assets. The consideration for the Vessel will be satisfied by the allotment and issue of the Vessel Consideration Shares, being 104,409,000 new Shares by the Company to the Vessel Vendor at a price of HK$1.27 per Share which is equivalent to the theoretical ex-rights price of the shares of the Company of HK$0.001 each, based on the closing price of HK$42.00 per share of the Company of HK$0.001 each (equivalent to HK$4.20 per Share) as quoted on the Stock Exchange on 22nd November, 2004, being the last trading day before the publication of the Vessel Announcement, as the Vessel Consideration Shares are not entitled to the Rights Issue. The issue price represents: (a) a discount of about 69.76% to the closing price of HK$42.00 per share of the Company of HK$0.001 each (equivalent to HK$4.20 per Share) as quoted on the Stock Exchange on 22nd November, 2004, being the last trading day before the publication of the Vessel Announcement, (b) a discount of about 0.16% to the average of the closing price of approximately HK$12.72 per share of the Company of HK$0.001 each (equivalent to HK$1.272 per Share) as quoted on the Stock Exchange for the ten trading days up to the including 22nd 9

12 LETTER FROM THE BOARD November, 2004; (c) a premium of approximately 62.82% to the closing price of HK$7.80 per share of the Company of HK$0.001 each (equivalent to HK$0.78 per Share) as quoted on the Stock Exchange on 3rd November, 2004, being the last trading day before the publication of the Rights Issue Announcement; and (d) a discount of about 34.87% to the closing price of HK$1.950 per Share as quoted on the Stock Exchange on the Latest Practicable Date. The issue price of the Vessel Consideration Shares is arrived at after negotiations. The Vessel Vendor undertakes to the Company that it will not dispose of the Vessel Consideration Shares within 6 months after their issue. The Director are of the view that the terms of the Vessel Sale and Purchase Agreement including the consideration are fair and reasonable so far as the Shareholders are concerned and are in the interests of the Company and the Shareholders as a whole. The Vessel Consideration Shares represents approximately 79.06% of the existing issued share capital of the Company. The shareholding structures before and after the Vessel Acquisition are set out below. After the After the Rights Issue Rights Issue After the Rights (assuming all (assuming all Issue (assuming Shareholders have fully Shareholders have fully all Shareholders have subscribed for their subscribed for their fully subscribed for Existing (i.e. entitlements under the entitlements under the their entitlements under before the Rights Rights Issue) but before Rights Issue) and the the Rights Issue), Issue and the the Subscription and Subscription but before the Subscription and Vessel Acquisition) the Vessel Acquisition the Vessel Acquisition the Vessel Acquisition No. of Shares % No. of Shares % No. of Shares % No. of Shares % Worthly Strong 34,113, ,678, ,678, ,678, Vessel Vendor 104,409, Subtotal 34,113, ,678, * 204,678, ,087, # Subscriber 31,950, ,950, Public 97,955, ,734, ,734, ,734, Total 132,068, ,412, ,362, ,771, * If none of the Shareholders (except Worthly Strong) has subscribed for its entitlements under the Rights Issue and Emperor Securities is required to fully take up its underwriting commitment under the Underwriting Agreement, the aggregate shareholding in the Company to be held by Worthly Strong and Emperor Securities will be If none of the Shareholders (except Worthly Strong) has subscribed for its entitlements under the Rights Issue and Emperor Securities is required to fully take up its underwriting commitment under the Underwriting Agreement, the aggregate shareholding in the Company to be held by Worthly Strong and Emperor Securities will be 62.41%. # If none of the Shareholders (except Worthly Strong) has subscribed for its entitlements under the Rights Issue and Emperor Securities is required to fully take up its underwriting commitment under the Underwriting Agreement, the aggregate shareholding in the Company to be held by Worthly Strong, the Vessel Vendor and Emperor Securities will be 66.63%. 10

13 LETTER FROM THE BOARD As at the Latest Practicable Date, the authorised share capital of the Company was HK$200,000,000 divided into 2,000,000,000,000 Shares among which 132,068,830 Shares (comprising 110,068,830 Shares issued as at 31st March, 2004, being the last financial year end date and 22,000,000 Shares issued as a result of the Placing) have been issued and are fully paid or credited as fully paid. Upon completion of the Rights Issue (which is expected to be on 21st January, 2005), the total issued share capital of the Company will be 792,412,980 Shares. As at the Latest Practicable Date, save for the Rights Issue, the Company had no share options, warrants or other convertible securities outstanding. The Vessel Consideration Shares, when issued and fully paid, will rank pari passu in all respects (including as to dividends, voting rights and return of capital) among themselves and with the shares of the Company in issue at the time of issue and allotment of the Vessel Consideration Shares. The Vessel Consideration Shares are to be issued cum dividend and other distribution which will be declared, made or paid on or after the date of its allotment and issue. The Company has applied to the Listing Committee of the Stock Exchange for the listing of and permission to deal in the Vessel Consideration Shares. Conditions The Vessel Acquisition is conditional upon, amongst others: (a) (b) (c) (d) the Vessel Purchaser having obtained a vessel valuation report from a firm of independent valuers as nominated and appointed by the Vessel Purchaser confirming that the value of the Vessel was not less than US$17 million as at 23rd November, 2004; the passing by the Independent Shareholders of resolution(s) at the Vessel SGM approving the Vessel Sale and Purchase Agreement and the transactions contemplated thereunder as well as the allotment and issue of the Vessel Consideration Shares to the Vessel Vendor pursuant to the Vessel Sale and Purchase Agreement; the Stock Exchange having granted the listing of, and permission to deal in, the Vessel Consideration Shares; and the Executive having granted the Vessel Whitewash Waiver. If the conditions are not fulfilled (conditions (a) to (d) as set out above cannot be waived) by 31st March, 2005 or such other date as may be agreed between the parties to the Vessel Sale and Purchase Agreement, the Vessel Sale and Purchase Agreement will cease to be of any effect save for any antecedent breach. As at the Latest Practicable Date, condition (a) has been fulfilled. Completion Completion of the Vessel Acquisition will take place within two months after the satisfaction of the above conditions or the waiver thereof (as applicable). 11

14 LETTER FROM THE BOARD Connected Transaction As the Vessel Vendor is a connected person of the Company within the meaning of the Listing Rules, the Vessel Acquisition constitutes a connected transaction and a very substantial acquisition for the Company based on the percentage ratios calculations under the Listing Rules and after aggregating the acquisition of 90% interest in Great Assets Holdings Limited by the Group as set out in the Rights Issue Announcement and the Rights Issue Circular. As the consideration for the Vessel Acquisition is more than HK$10,000,000 and the relevant percentage ratios are greater than 2.5%, the Vessel Acquisition is subject to the reporting and announcement requirements set out in Rules 14A.45 to 14A.47 of the Listing Rules and the approval of the Independent Shareholders in accordance with Rule 14A.48 of the Listing Rules. Reasons for and benefits of the Vessel Acquisition The principal activity of the Company is investment holding. The Group is principally engaged in property investment and development. As set out in the Rights Issue Announcement and the Rights Issue Circular, the Company will acquire indirectly 45% in the Property and will convert the same into a hotel with about 300 rooms and casino operation, which allows the Group to participate in the tourist and entertainment business. The acquisition and operation of the Vessel allows the Group to expand its scope of business in the tourist and entertainment sector as well as creating a synergy effect with the operation of the Property. Upon completion of Vessel Acquisition, it is expected that the Group s revenue base will be increased by the revenue generated by the operation of the Vessel s facilities as well as the rental income from the casino operation of the Vessel. Financial effect of the Vessel Acquisition on the Group As a result of the Vessel Acquisition, the net assets of the Group will increase by approximately HK$132.6 million and the share capital and the share premium of the Company will increase by approximately HK$0.01 million and HK$ million respectively according to the proforma financial information of the enlarged Group as contained in Appendix III to this circular and the Group s future turnover are expected to be improved by at least HK$108 million in the 12 months after completion of the Vessel Acquisition. Implications of the Laws of Hong Kong and the Listing Rules in respect of the casino activities The casino activities offered on the Vessel are not carried out in Hong Kong, but in the high seas in which Hong Kong law does not apply. Likewise, the casino operation under the Property as mentioned in the Rights Issue Announcement and the Rights Issue Circular will not be carried out in Hong Kong but in Macau in accordance with the relevant laws and regulations thereof. Accordingly, the Directors consider that the casino operations carried out on the Vessel and in the Property do not constitute unlawful activities under the laws of Hong Kong, including the Gambling Ordinance (Chapter 148 of the Laws of Hong Kong). 12

15 LETTER FROM THE BOARD The Company will use its best endeavours (insofar as it is able in its capacity as a shareholder and the lessor, as the case may be) to ensure that, for as long as the Company has a direct or indirect interest in the Vessel and/or the Property, the casino activities ( Casino Activities ) carried out therein will comply with (i) the applicable laws in the areas where such activities operate; and/or (ii) not contravene the Gambling Ordinance of Hong Kong insofar as it is applicable. Shareholders should be aware that under the guidelines issued by the Stock Exchange in relation to Gambling Activities Undertaken by Listing Applicants and/or Listed Issuers, should the Casino Activities (i) fail to comply with the applicable laws in the areas where such activities operate; and/or (ii) contravene the Gambling Ordinance of Hong Kong, the Company or its business may be considered unsuitable for listing under Rule 8.04 of the Listing Rules. Depending on the circumstances of the case, the Stock Exchange may direct the Company to take remedial action, and/or may suspend dealings in, or may cancel the listing of, the Company s securities on the Stock Exchange pursuant to Rule 6.01 of the Listing Rules. Intentions of Worthly Strong, its associates and their respective concert parties Worthly Strong, its associates and their respective concert parties intends to continue the existing business of the Group of property investment and development. As set out in the subsection headed Reasons for and Benefits of the Vessel Acquisition above, Worthly Strong, its associates and their respective concert parties and the future Group intend to develop the Property into hotel and casino(s) and expand the Group s business in the tourist and entertainment sector through the acquisition and operation of the Vessel. Looking forward, Worthly Strong, its associates and their concert parties and the future Group will continue to build on the strength and expertise of its businesses and proactively identify new potential markets and other suitable investment opportunities and/or attractive business opportunities with aims to further develop the Group s business, strengthen its income base and asset base and maximise shareholders return. Save as aforesaid in the above paragraph, there is no intention to introduce major changes to the Group s business including any redeployment of the fixed assets of the Group and/or to lay off any employee of the Group as a result of the Vessel Acquisition. VESSEL WHITEWASH WAIVER Worthly Strong, the Vessel Vendor, their respective associates and their respective concert parties (including their respective directors) are beneficially interested in 34,113,100 Shares, representing (i) approximately 25.83% of the issued capital of the Company as at the Latest Practicable Date; (ii) approximately 25.83% of the enlarged issued share capital of the Company upon completion of the Rights Issue (assuming all Shareholders have fully subscribed for their entitlements under the Rights Issue) but before the Vessel Acquisition; and (iii) approximately 34.46% of the issued share capital of the Company upon completion of the Rights Issue (assuming all Shareholders have fully subscribed for their entitlements under the Rights Issue) and the Vessel Acquisition. Accordingly, Worthly Strong, the Vessel Vendor, their respective associates and their respective concert parties would be required to make a mandatory offer for the Shares not owned by them under Rule 26 of the Takeovers Code as a result of the allotment and issue of the Vessel Consideration Shares. 13

16 LETTER FROM THE BOARD Application has been made by Worthly Strong, Vessel Vendor, their respective associates and their respective concert parties to the Executive for the Vessel Whitewash Waiver pursuant to Note 1 on Dispensations from Rule 26 of the Takeovers Code. The Vessel Whitewash Waiver, if granted by the Executive, would be subject to, among other things, the approval of the Independent Shareholders at the Vessel SGM by way of poll. The Executive has indicated it will agree, subject to the approval by the Independent Shareholders on a vote taken by way of a poll, to waive Worthly Strong, the Vessel Vendor, their associates and their respective concert parties from any obligation to make a general offer which might result from the allotment and issue of the Vessel Consideration Shares. Upon completion of the Placing, the beneficial shareholding of Worthly Strong, the Vessel Vendor, their respective associates and their concert parties decreased to approximately 25.83% of the issued share capital of the Company, such decrease in shareholding is deemed to be a disposal of voting rights ( 1st Deemed Disposal ) under Paragraph 3(b) of Schedule VI to the Takeovers Code and a consent has been obtained from the Executive of the 1st Deemed Disposal for the purpose of the Rights Issue Whitewash Waiver and Vessel Whitewash Waiver applications. Upon completion of the Subscription and the Rights Issue but before the Vessel Acquisition, the beneficial shareholding of Worthly Strong, its respective associates and their concert parties further decreased to approximately 24.83% of the issued share capital of the Company, such decrease in shareholding is deemed to be a disposal of voting rights ( 2nd Deemed Disposal ) under Paragraph 3(b) of Schedule VI to the Takeovers Code and a consent has to be obtained from the Executive of the 2nd Deemed Disposal for the purpose of the Vessel Whitewash Waiver application. Application has been made by Worthly Strong, its associates and their concert parties to obtain the Executive s consent on the 2nd Deemed Disposal. Save for the 1st Deemed Disposal and the 2nd Deemed Disposal as disclosed above, none of Worthly Strong, Emperor International, the Vessel Vendor, their respective associates and their respective concert parties (including their directors) has any dealings in the any securities of the Company during the six months period prior to the date of the Vessel Announcement until the Latest Practicable Date. Ms. Luk Siu Man, Semon, an executive Director and the Chairperson of the Company is indirectly interested in the 34,113,100 Shares held by Worthly Strong by virtue of the 65.04% interest of the AY Trust in Emperor International which is an indirect holding company of Worthly Strong. Save as aforesaid, none of the Directors and their associates has any shareholding interest in the Company and has any dealings in the Shares during the six months period prior to the date of the Vessel Announcement until the Latest Practicable Date. Worthly Strong, its associates and their respective concert parties (including the Vessel Vendor) may hold in excess of 50% of the voting rights of the Company immediately following completion of the Vessel Acquisition and the Rights Issue in the event that Emperor Securities is required pursuant to the Underwriting Agreement to take up the Rights Shares. In such case, the creeper provisions of the Takeovers Code will not be applicable and they will be free to acquire further voting rights in the Company without triggering a general offer obligation pursuant to paragraph 4(c) of Schedule VI of the Takeovers Code. 14

17 LETTER FROM THE BOARD SUBSCRIPTION AGREEMENT Parties Issuer : The Company Subscriber : Honour State International Limited, a wholly-owned subsidiary of SJM As set out in the Rights Issue Announcement and the Rights Issue Circular, the Subscriber, one of the Independent Third Parties which entered into the Shareholders Agreement for the purpose of the acquisition of shares in Luck United which will acquire the Property through the acquisition of the Macau Company ( Property Acquisition ). As at the Latest Practicable Date, the Subscriber holds 19.99% interest in Luck United. Subscription Price HK$2.88 per Subscription Share. The expenses to be incurred by the Company in relation to the issue of the Subscription Shares is expected to be approximately HK$100,000 and accordingly the subscription price for the Subscription Shares net of expenses will be approximately HK$2.88 per Subscription Share. The subscription price is arrived at after arm s length negotiation and: (i) (ii) (iii) (iv) (v) is equivalent to the closing price of HK$2.88 per Share as quoted on the Stock Exchange on 3rd January, 2005, being the last trading day of the Shares before the publication of the Company s announcement dated 3rd January, 2005 which discloses that the Company is in negotiation with the Subscriber for a possible subscription of new Shares; represents a discount of approximately 12.06% to the closing price of HK$3.275 per Share as quoted on the Stock Exchange on 4th January, 2005, being the last trading day of the Shares before the publication of the Subscription Announcement; represents a premium of approximately 22.50% to the average of the closing price of the Shares of HK$2.351 per Share quoted on the Stock Exchange for the five trading days up to and including 4th January, 2005; represents a premium of approximately % to the subscription price of the Rights Issue of HK$0.68 per Share; and represents a premium of approximately % to the issue price of HK$1.27 per Share of the Shares to be issued by the Company to the Vessel Vendor pursuant to the Vessel Sale and Purchase Agreement. The Directors consider that the subscription price of the Subscription Shares and the terms and conditions of the Subscription Agreement are fair and reasonable and in the best interests of the Company and the Shareholders as a whole. 15

18 LETTER FROM THE BOARD Subscription Shares 31,950,000 new Shares to be subscribed by the Subscriber pursuant to the Subscription Agreement, representing 24.19% of the existing issued share capital of the Company of 132,068,830 Shares, approximately 3.88% of the issued share capital of the Company of 824,362,980 Shares as enlarged by the Subscription and the Rights Issue and approximately 3.44% of the issued share capital of the Company of 928,771,980 Shares as enlarged by the Subscription, the Rights Issue and the Vessel Acquisition. Ranking of the Subscription Shares The Subscription Shares, when issued and fully paid, will rank pari passu among themselves and with the Shares in issue at the time of issue and allotment of the Subscription Shares. Completion of the Subscription The Subscription is conditional on, inter alia (a) (b) (c) (d) the completion of the Rights Issue; the granting of a listing of and permission to deal in the Subscription Shares by the Listing Committee of the Stock Exchange; the Shareholders approving the transactions contemplated under the Subscription Agreement in a shareholders meeting of the Company in accordance with the requirements of the Listing Rules, including but not limited to, and the allotment and issue of the Subscription Shares; and if required, the granting of the consent of the Subscription by the Executive for the purposes of the waiver application made by Worthly Strong in relation to its obligation to make a general offer to acquire all the issued share capital of the Company (other than the Shares which are owned by the Worthly Strong and parties acting in concert with it) under Rule 26 of the Takeovers Code pursuant to the transactions contemplated under the Vessel Sale and Purchase Agreement. Completion of the Subscription Agreement shall take place within two business days after (i) the fulfillment of the conditions precedent to the Subscription Agreement or (ii) the date of the Vessel SGM, whichever is later (or such later date to be agreed between the parties to the Subscription Agreement). In the event that the aforesaid conditions are not satisfied or waived (with respect to conditions (a) to (d) as set out above, conditions (b) and (c) are not waivable) or the Vessel SGM is not held by 28th February, 2005 or such a date that the parties to the Subscription Agreement will mutually agree, the Subscription will not proceed. An application will be made by the Company to the Stock Exchange for the listing of, and permission to deal in, the Subscription Shares to be issued pursuant to the Subscription Agreement. The current intention of the Subscriber, which owns a 19.99% interest in Luck United, is that it is only willing to invest in the Company if the Property Acquisition proceeds. Since the Property Acquisition is conditional on the Rights Issue which provides the funding for the Property Acquisition, the Subscription is conditional on completion of the Rights Issue, unless this condition is waived by the Subscriber. 16

19 LETTER FROM THE BOARD Effect on shareholding After the After the Rights Issue Rights Issue After the Rights (assuming all (assuming all Issue (assuming Shareholders have fully Shareholders have fully all Shareholders have subscribed for their subscribed for their fully subscribed for Existing (i.e. entitlements under the entitlements under the their entitlements under before the Rights Rights Issue) but before Rights Issue) and the the Rights Issue), Issue and the the Subscription and Subscription but before the Subscription and Vessel Acquisition) the Vessel Acquisition the Vessel Acquisition the Vessel Acquisition No. of Shares % No. of Shares % No. of Shares % No. of Shares % Worthly Strong 34,113, ,678, ,678, ,678, Vessel Vendor 104,409, Subtotal 34,113, ,678, * 204,678, ,087, # Subscriber 31,950, ,950, Public 97,955, ,734, ,734, ,734, Total 132,068, ,412, ,362, ,771, * If none of the Shareholders (except Worthly Strong) has subscribed for its entitlements under the Rights Issue and Emperor Securities is required to fully take up its underwriting commitment under the Underwriting Agreement, the aggregate shareholding in the Company to be held by Worthly Strong and Emperor Securities will be If none of the Shareholders (except Worthly Strong) has subscribed for its entitlements under the Rights Issue and Emperor Securities is required to fully take up its underwriting commitment under the Underwriting Agreement, the aggregate shareholding in the Company to be held by Worthly Strong and Emperor Securities will be 62.41%. # If none of the Shareholders (except Worthly Strong) has subscribed for its entitlements under the Rights Issue and Emperor Securities is required to fully take up its underwriting commitment under the Underwriting Agreement, the aggregate shareholding in the Company to be held by Worthly Strong, the Vessel Vendor and Emperor Securities will be 66.63%. Use of proceeds from the Subscription After deducting the estimated expenses in relation to the Subscription of approximately HK$100,000, the net proceeds from the Subscription will be approximately HK$92 million. The Company intends to apply the net proceeds from Subscription for general working capital and future business development of the Group. The Company is looking for investment in hotel-casino projects in Russia. The Company is still conducting its feasibility study on the investment potentials. Reason for the Subscription The Directors believe that the Subscription is a good opportunity for the Company to broaden its shareholders base and will provide working capital for its future business opportunities. 17

20 LETTER FROM THE BOARD FUND RAISING ACTIVITIES CONDUCTED AND/OR ANNOUNCED IN THE PAST 12 MONTHS As set out in the Rights Issue Announcement, pursuant to a placing agreement dated 16th November, 2004, China Everbright Securities (HK) Limited agreed to place 2,200,000 shares of HK$0.001 each of the Company before the Share Subdivision at a placing price of HK$10.00 per share of HK$0.001 each of the Company (equivalent to HK$1.00 per Share). On completion of such placing on 6th December, 2004, the net proceeds derived from such placing amounted to approximately HK$21.3 million. As at the Latest Practicable Date, approximately HK$12.9 million of the net proceeds were used for general working capital of the Group as previously stated in the Rights Issue Announcement and the remaining balance of approximately HK$8.4 million has not yet been used. As set out in the Rights Issue Announcement and the Rights Issue Circular, the Company proposed to raise approximately HK$443.5 million after expenses by way of rights issue of 660,344,150 Shares at a price of HK$0.68 per Share on the basis of five Rights Shares for every Share held on the record date for the Rights Issue, which is 3rd January, The Rights Issue is expected to be completed on 21st January, The Directors intend to use the net proceeds from the Rights Issue of approximately HK$443.5 million as to HK$405 million for the Property Acquisition and the future possible development of the Property and as to the balance of approximately HK$38.5 million for the Group s general working capital. REFRESHMENT OF GENERAL MANDATES As announced by the Company in the Rights Issue Announcement, the Company has entered into the Placing Agreement in respect of the placing of 2,200,000 new shares of the Company of HK$0.001 each. The Placing was completed on 6th December, 2004 and the issue of these placing shares utilized most of the Issue Mandate granted to the Directors at the annual general meeting held on 26th August, Accordingly, the Directors propose to seek the respective approval of the Independent Shareholders and Shareholders at the Vessel SGM for the refreshment of the Issue Mandate and the Repurchase Mandate to issue further securities and to repurchase securities not exceeding 20% and 10% respectively of the issued share capital of the Company as at the date of passing the relevant resolutions. SPECIAL GENERAL MEETING The Vessel SGM will be held at 28th Floor, Emperor Group Centre, 288 Hennessy Road, Wanchai, Hong Kong at 10:30 a.m. on Thursday, 3rd February, A notice convening the Vessel SGM is set out on pages 117 to 119 of this circular. Resolutions will be proposed at the Vessel SGM for (i) the Independent Shareholders to approve the Vessel Acquisition, the Vessel Whitewash Waiver and the Issue Mandate by way of poll and (ii) the Shareholders to approve the Subscription and the Repurchase Mandate. The results of the Vessel SGM will be published after the Vessel SGM. Enclosed is a form of proxy for use at the Vessel SGM. Whether or not you intend to attend and vote at the Vessel SGM in person, you are requested to complete and return the enclosed form of proxy in accordance with the instructions printed thereon and return it to the principal office of the Company at 28th Floor, Emperor Group Centre, 288 Hennessy Road, Wanchai, Hong Kong as soon as possible, but in any event not less than 48 hours before the time appointed for holding such meeting or any adjourned meeting. Completion and return of the form of proxy will not preclude you from attending and voting in person at the Vessel SGM or any adjourned meeting should you so wish. 18