LANDUNE INTERNATIONAL LIMITED (Incorporated and existing under the laws of Hong Kong with limited liability) (Stock Code: 245)

Transcription

1 THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION 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. If you are in any doubt as to any aspect of this circular or as to the action you should take, 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 Landune International Limited, you should at once hand this circular to the purchaser or transferee or to the bank, licensed securities dealer, or other agent through whom the sale was effected for transmission to the purchaser or transferee. LANDUNE INTERNATIONAL LIMITED (Incorporated and existing under the laws of Hong Kong with limited liability) (Stock Code: 245) MAJOR TRANSACTION RELATING TO DISPOSAL OF PROPERTY 19th November, 2004

2 CONTENTS Page DEFINITIONS LETTER FROM THE BOARD 1. Introduction Provisional Sale and Purchase Agreement Reasons for the Disposal Use of proceeds Financial effects of the Disposal on the Group Information on the Group Approval by Shareholders Additional information APPENDIX I FINANCIAL INFORMATION OF THE GROUP APPENDIX II PROPERTY VALUATION APPENDIX III GENERAL INFORMATION

3 DEFINITIONS In this circular, the following terms and expressions have the following meanings, unless the context otherwise requires: Board the board of Directors Company Landune International Limited, a company incorporated and existing under the laws of Hong Kong, the Shares of which are listed on the main board of the Stock Exchange connected person(s) has the meaning ascribed thereto in the Listing Rules Director(s) the director(s) of the Company Disposal the disposal of the Property by the Vendor to the Purchaser Grant Sherman Grant Sherman Appraisal Limited, an independent professional property valuer Group the Company and its subsidiaries Group First Group First Limited, a company incorporated in the British Virgin Islands with limited liability, which is beneficially owned as to 60% by Mr. Ni Xinguang and as to 40% by Mr. Wang Zhiming Latest Practicable Date 17th November, 2004, being the latest practicable date prior to the printing of this circular for the purpose of ascertaining certain information for inclusion in this circular Listing Rules Rules Governing the Listing of Securities on the Stock Exchange PRC the People s Republic of China, excluding Hong Kong, Macau and Taiwan for the purpose of this circular Property the property held by the Vendor at Smiling Shaukeiwan Plaza in Hong Kong Provisional Sale and Purchase Agreement the provisional sale and purchase agreement dated 28th September, 2004 entered into between the Vendor and the Purchaser in relation to the sale and purchase of the Property Purchaser Lucky Wealthy Investment Limited SFO Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong) 1

4 DEFINITIONS Shares Shareholders Stock Exchange Vendor shares of HK$0.10 each in the capital of the Company holders of the Shares The Stock Exchange of Hong Kong Limited Day Success Company Limited, a wholly-owned subsidiary of the Company 2

5 LETTER FROM THE BOARD LANDUNE INTERNATIONAL LIMITED (Incorporated and existing under the laws of Hong Kong with limited liability) (Stock Code: 245) Executive Directors: Registered and principal office: Ni Xinguang (Chairman) Units Wang Zhiming ING Tower Ha Shu Tong 308 Des Voeux Road Central Ng Chun Chuen, David Sheung Wan Hong Kong Independent Non-Executive Directors: Chan Wai Sum Lee Kit Ming, Edmund Tang Chi Wing 19th November, 2004 To the Shareholders Dear Sir or Madam, MAJOR TRANSACTION RELATING TO DISPOSAL OF PROPERTY 1. INTRODUCTION On 7th October, 2004, the Board announced that the Vendor, a wholly-owned subsidiary of the Company, entered into the Provisional Sale and Purchase Agreement with the Purchaser in relation to the disposal of the Property on 28th September, 2004 for a consideration of HK$8,380,000. As the Purchaser did not accept the Company s requests of putting an additional condition in the formal agreement, requiring that the Disposal will be subject to Shareholders approval in compliance with the Listing Rules, no formal agreement has been signed up as at the Latest Practicable Date. However, the Disposal has actually been approved as at the date of the Provisional Sale and Purchase Agreement by way of the written certificate given by Group First, which was interested in approximately 53.7% of the issued share capital of the Company as at the date of the Provisional Sale and Purchase Agreement and the Latest Practicable Date. Besides, the Group s legal adviser opined that the Provisional Sale and Purchase Agreement, which contains all the material terms, remains binding on all parties to it notwithstanding the absence of a formal agreement. The Disposal constitutes a major transaction for the Company under the Listing Rules. The purpose of this circular is to provide the Shareholders with further details of the Disposal and other information in compliance with the requirements of the Listing Rules. 3

6 LETTER FROM THE BOARD 2. PROVISIONAL SALE AND PURCHASE AGREEMENT Date: 28th September, 2004 Parties: (a) Lucky Wealthy Investment Limited as the Purchaser. As the Property is sold through a property agent, the Company is not in a position to ascertain the principal activities of the Purchaser. However, to the best of the Directors knowledge, information and belief having made all reasonable enquiries, the Purchaser and its ultimate beneficial owner are third parties independent of the Company and its connected persons. (b) Day Success Company Limited as the Vendor. The Vendor is a wholly-owned subsidiary of the Company and is principally engaged in property investment. Subject matter of sale and purchase: Pursuant to the Provisional Sale and Purchase Agreement, the Vendor will sell and the Purchaser will purchase the Property upon the terms contained therein. The Property consists of all those portions of the entertainment and related areas and the remaining portions of the reserved areas on 2/F, Smiling Shaukeiwan Plaza, No. 17 Nam Hong Street, Shaukeiwan, Hong Kong with a total saleable floor area of approximately 4,770 square feet. The Property was substantially leased out for rental income as at the Latest Practicable Date, the lessee of which was a third party independent of the Company and its connected persons. The Property will be sold together with the underlying lease. Consideration: The consideration for the Disposal is HK$8,380,000 which has been or will be paid by the Purchaser in cash in the following manner: (a) (b) (c) (d) HK$400,000, representing approximately 4.77% of the consideration, has been paid as an initial deposit upon the signing of the Provisional Sale and Purchase Agreement; HK$438,000, representing approximately 5.23% of the consideration, will be paid as a further deposit upon the signing of the formal agreement, if there is any, or otherwise it will be paid upon completion of the Disposal; HK$420,000, representing approximately 5.01% of the consideration, will be paid on or before 10th December, 2004; and the balance of HK$7,122,000 will be paid upon completion of the Disposal. The terms of the Disposal (including the consideration), which were on normal commercial terms, were determined between the parties after arm s length negotiations and with reference to other offers previously received on the Property and the market transactions of similar properties situated in the same area conducted from January 2003 to September

7 LETTER FROM THE BOARD Completion: It is expected that completion of the Disposal will take place on or before 18th February, Completion of the Disposal is subject to the proof of good title to the Property. In the event that the Purchaser fails to complete the purchase in the manner as described in the Provisional Sale and Purchase Agreement or the formal agreement if there would be one, the deposit shall be forfeited by the Vendor. If the Vendor fails to complete the Disposal according to the Provisional Sale and Purchase Agreement or the formal agreement if there would be one, the Vendor shall immediately compensate the Purchaser with a sum equivalent to the amount of the deposit as liquidated damages together with the refund of the deposit without interest. 3. REASONS FOR THE DISPOSAL The property market in Hong Kong has experienced a significant downturn since Although the property market sentiment has improved since the beginning of 2004, the improved market conditions apply, to a large extent, to newly constructed residential projects. Commercial-residential buildings in the non-prime area such as the Property have not benefited from the improved market sentiment and there has been a general lack of interested buyers in the market for these buildings. As the Property is already over 12 years old, the Board expects that the maintenance and refurbishment costs on the Property would be substantial in the near future. The Property was also subject to a mortgage loan with outstanding principal of approximately HK$4.6 million as at the Latest Practicable Date which bore interest of prime rate per annum. Notwithstanding that the Property generates rental revenue for the Group, the Property has been loss making since it was acquired by the Group in 2000 taking into account the mortgage interest, the impairment loss and other direct costs and related administrative expenses. Based on the above, the Directors believe it is in the interest of the Company to take advantage of the opportunity to dispose of the Property so that resources of the Group could be better applied in other investment opportunities that offer a more attractive return. The Directors consider that the Disposal is to the benefits of the Company and the Shareholders as a whole. 4. USE OF PROCEEDS The net proceeds from the Disposal are estimated to be approximately HK$7.8 million. After settling the outstanding mortgage loan on the Property of approximately HK$4.6 million, the Company intends to apply the remaining balance of the net proceeds of approximately HK$3.2 million as the Group s general working capital. 5. FINANCIAL EFFECTS OF THE DISPOSAL ON THE GROUP The annual rental income of the Property was approximately HK$1,145,000 and HK$1,110,000 for each of the two years ended 31st December, 2002 and 31st December, 2003 respectively, representing 0.7% and 11.5% of the turnover of the Group for the corresponding year. After netting off all the property related costs, administrative and operating expenses, finance costs and the impairment loss on the Property against the rental income, the Property generated a net loss of approximately HK$3,109,000 and HK$127,000 for each of the two years ended 31st December, 2002 and 2003 respectively. 5

8 LETTER FROM THE BOARD The book value of the Property contained in the Company s latest audited consolidated accounts for the year ended 31st December, 2003 was HK$12,000,000, representing approximately 29.78% of the total assets of the Group as at that date. The consideration represents a discount of approximately 30.17% to the book value of the Property. The Group will record a loss of approximately HK$4,200,000 in respect of the Disposal, which is calculated on the basis of the difference between the book value of the Property and the consideration for the Disposal after deduction of expenses. The net assets of the Group will also be decreased by the same amount. Grant Sherman has prepared the valuation report on the Property as at 30th September, 2004 which is set out in appendix II to this circular and gave the Property an open market value of HK$12,000,000. Despite the Property was given a valuation of HK$12,000,000, the Directors believe that market interest in large-sized shops, like the Property of a total saleable floor area of approximately 4,770 square feet, in the commercial-residential building is relatively low. Most of the shop units in the Smiling Plaza in Shaukeiwan are of smaller saleable floor area. There was no transaction record for shop units situated in the same area with size comparable to that of the Property during the period from January 2003 to September The Directors are of the view that the consideration for the Disposal is fair and reasonable. 6. INFORMATION ON THE GROUP The principal activities of the Group were property investment, development and re-development and investment holding in Hong Kong and the PRC. The Group had also participated in two joint ventures in Hong Kong in March 2004 as disclosed in the 2004 interim report of the Company. One of the joint ventures has set up a wholly-owned subsidiary in Fuzhou, the PRC and commenced the packaging and distribution of health food products in the PRC in July It is intended that the other joint venture will establish a marketing and distribution entity in Shanghai, the PRC for the distribution of consumer products. This joint venture has not commenced any operations as at the Latest Practicable Date. The Company holds 70% interest in each of these two joint ventures, while the remaining 30% interests in each of the two joint ventures are held by third parties independent of the Company and its connected persons. The Board is optimistic about the development of the joint ventures as there is a huge consumption capability with high growth rate in the PRC. Following completion of the Disposal, it is expected that the Group will continue to engage in property investment, development and re-development and investments in the aforesaid joint ventures. The property portfolio of the Group will comprise two shop units at Smiling Plaza in Sham Shui Po and the development rights of a parcel of land situated at Ma Yau Tong Village at Sai Kung. The land clearance and architectural design of the Ma Yau Tong Village project have been completed, and the project is pending government s approval of the architectural design. The Directors plan to redevelop the site into 28 saleable village house units with an expected aggregate saleable floor area of approximately 58,800 square feet and believe half of them would be available for sale by late 2005 and the remaining half would be ready by mid The Board is constantly reviewing potential investment opportunities that would offer high returns, including but not limited to property investment. As at the Latest Practicable Date, the Company has not yet identified any concrete investment target or entered into any binding agreement to this effect. Should the Company enter into any investment projects in the future, the Company will make announcement in accordance with the requirements of the Listing Rules. 6

9 LETTER FROM THE BOARD 7. APPROVAL BY SHAREHOLDERS The Disposal constitutes a major transaction for the Company under the Listing Rules and is subject to the approval of the Shareholders at an extraordinary general meeting. To the best of the Directors knowledge, information and belief having made all reasonable enquiries, no Shareholder has a material interest in the Disposal. Group First, which was interested in approximately 53.7% of the issued share capital of the Company as at the date of the Provisional Sale and Purchase Agreement and the Latest Practicable Date, has confirmed to the Company that it does not have any interest in the Disposal and gave a written certificate on 28th September, 2004 approving the Disposal. The beneficial owners of Group First are Messrs. Ni Xinguang and Wang Zhiming, each has personal interest in the Company of approximately 0.40%. To the best of the Directors knowledge, information and belief having made all reasonable enquiries, the Purchaser and its ultimate beneficial owner are third parties independent of the Company and its connected persons. Accordingly, no Shareholder is required to abstain from voting on the Disposal in the extraordinary general meeting of the Company. The Disposal has been approved by way of the written certificate given by Group First on 28th September, 2004 in lieu of a resolution to be passed at the extraordinary general meeting pursuant to Rule of the Listing Rules. The interest of Group First as the controlling Shareholder in the Disposal is no different from that of all other remaining Shareholders. 8. ADDITIONAL INFORMATION Your attention is also drawn to the additional information set out in the appendices to this circular. Yours faithfully For and on behalf of the Board Landune International Limited Ni Xinguang Chairman 7

10 APPENDIX I FINANCIAL INFORMATION OF THE GROUP 1. SUMMARY OF FINANCIAL STATEMENTS 1.1 Audited financial statements The following is a summary of the audited consolidated income statement of the Group for each of the two years ended 31st December, 2003 and the audited consolidated balance sheet of the Group as at 31st December, 2002 and 2003, as extracted from the Company s annual report for the year ended 31st December, Audited Consolidated Income Statement HK$ 000 HK$ 000 Turnover 9, ,790 Other revenue 251 Property and related costs (13,218) (220,369) Net loss on disposal/written off of fixed assets (101) (1,702) Staff costs (3,592) (4,545) Depreciation (251) (633) Other operating expenses (3,049) (11,281) Operating loss before provisions and other losses and gains (10,554) (85,489) Gain on deconsolidation of subsidiaries 16,551 Gain on disposal of subsidiaries 3,100 Investment securities written off (110,000) Impairment loss on goodwill (367) Provision for bad and doubtful debts (17,006) Write back of other payables 3,074 Write down of properties under development for resale (6,500) Write down of properties held for resale (21,500) Loss from operations (8,302) (220,389) Finance costs (28,420) (41,598) Loss before taxation (36,722) (261,987) Taxation Loss attributable to shareholders (36,162) (261,984) Loss per share Basic (11) cents (88) cents 8

11 APPENDIX I FINANCIAL INFORMATION OF THE GROUP Audited Consolidated Balance Sheet HK$ 000 HK$ 000 Non-current assets Fixed assets 5, Investment securities ,700 1,986 Current assets Properties under development for resale 11,000 Properties held for resale 31,100 32,500 Trade and other receivables ,687 Bank and cash balances 1, ,589 64, Current liabilities Trade and other payables 14,089 19,952 Short term borrowings 175, ,561 Current portion of long term borrowings 55,027 68,590 Debentures payable 2, , , Net current liabilities (210,991) (175,474) Total assets less current liabilities (204,291) (173,488) Non-current liabilities Long term borrowings (329) Net liabilities (204,291) (173,817) Capital and reserves Share capital 36,279 30,279 Reserves (240,570) (204,096) (204,291) (173,817) 9

12 APPENDIX I FINANCIAL INFORMATION OF THE GROUP 1.2 Unaudited interim financial statements The following are the unaudited condensed consolidated financial statements and the Management discussion and analysis section extracted from the Company s unaudited interim report for the six months ended 30th June, Unaudited Condensed Consolidated Income Statement Six months ended 30th June, HK$ 000 HK$ 000 Turnover 11, Property related cost (11,277) (267) Net loss on disposal of fixed assets (192) Staff costs (1,705) (1,883) Depreciation (26) (153) Other operating expenses (1,649) (1,645) Loss from operations (3,322) (3,782) Gain on deconsolidation of a subsidiary 42 Gain arising from the debt restructuring arrangements 144,877 Finance cost (3,301) (10,971) Profit/(loss) before taxation 138,296 (14,753) Taxation Net profit/(loss) for the period 138,296 (14,753) Profit/(Loss) per share Basic 5.7 cents (4.8) cents Diluted N/A N/A 10

13 APPENDIX I FINANCIAL INFORMATION OF THE GROUP Condensed Consolidated Balance Sheet Unaudited Audited 30th June, 31st December, HK$ 000 HK$ 000 Non-current assets Fixed assets Properties under development 5,751 5,556 Investment securities ,881 6,700 Current assets Properties held for resale 20,500 31,100 Trade and other receivables 3, Bank and cash balances 5,419 1,643 29,270 33,589 Current liabilities Trade and other payables 9,153 14,089 Short term borrowings 6, ,464 Current portion of long term borrowings ,027 15, ,580 Net current assets/(liabilities) 13,429 (210,991) Total assets less current liabilities 20,310 (204,291) Non-current liabilities Long term borrowings (4,177) Net assets/(liabilities) 16,133 (204,291) Capital and reserves Share capital 372,279 36,279 Reserves (356,146) (240,570) 16,133 (204,291) 11

14 APPENDIX I FINANCIAL INFORMATION OF THE GROUP MANAGEMENT DISCUSSION AND ANALYSIS Interim Results The Board of Directors (the Board ) of Landune International Limited (formerly know as Singapore Hong Kong Properties Investment Limited) (the Company ) is pleased to announce the unaudited interim financial results of the Company and its subsidiaries (the Group ) for the six months ended 30 June Change of Company s name Pursuant to a special resolution passed in the annual general meeting of the Company on 28 May 2004, the shareholders had approved the change of the Company s name from Singapore Hong Kong Properties Investment Limited to Landune International Limited. The new name was then approved by the Registrar of Companies in Hong Kong and the Certificate of incorporation on change of name was issued to the Company on 16 June 2004 whereupon the new name became effective immediately. Corporate Results The Group recorded a turnover of HK$11,335,000 in the current period which comprised the proceeds on the disposal of properties of HK$10,600,000 and rental income of HK$735,000. The rental income represented a substantial increment of 105% to the turnover of HK$358,000 (all represented rental income) in the corresponding period of The increase fairly reflected the general recovery of the local properties market in particularly from the darkest stage in the early part of 2003 caused by the outbreak of SARS. Result attributable to shareholders turnaround from a loss of HK$14,753,000 in last period to a profit of HK$138,296,000 in the current period as a result of approximately HK$145 million gain resulted from the waiver of certain loan principals and interests accrued thereto arising from the debt restructuring arrangements completed in March Financial Resources and Liquidity Issue of shares As reported and announced earlier, the Group had successfully undergone a series of capital transactions that involved the issuance of new shares through private placement and loan capitalisation as detailed below: In January 2004, the Company executed a subscription agreement with Group First Limited ( GFL ) and pursuant to which GFL agreed to conditionally subscribed for 500,000,000 shares of the Company at HK$0.10 each. The subscription shares would be issued together with 1,500,000,000 bonus shares on the basis of three bonus shares for each share subscribed by GFL. The subscription was completed on 12 March 2004 and the Company received HK$50 million gross proceeds thereof which had been utilised to a large extend for the repayment to bank creditors pursuant to the debt restructuring arrangements. In early January of 2004, the Company also entered into four loan capitalisation agreements with four of its loan creditors in respect of a total outstanding loan amount of HK$34,000,000. Pursuant to the 12

15 APPENDIX I FINANCIAL INFORMATION OF THE GROUP four loan capitalisation agreements, the Company agreed to issue and allot an aggregate of 340,000,000 shares of the Company at HK$0.10 each credited as fully paid up by way of capitalising the outstanding loans of HK$34,000,000. The capitalisation shares would be issued together with 1,020,000,000 bonus shares on the basis of three bonus shares for each share subscribed by the lenders. Completion of the four loan capitalisation agreements took place simultaneously with the subscription agreement of GFL on 12 March Borrowings The Group s total borrowings (excluding trade and other payables) amounted to HK$10,865,000 as at 30 June 2004 which represented a sharp decrease of 95% from the total borrowings of HK$230,491,000 as at 31 December The reduction was resulted from the loan capitalisation and the debt restructuring arrangements with the creditors as stated above. During the period, the Group had paid off all the indebtedness due to the past financial creditors through the proceeds obtained from the issuance of shares and that of a new installment loan of HK$5 million from a financial institution. As at 30 June 2004, the properties portfolio with carrying value of HK$20,500,000 (31 December 2003: HK$31,100,000) had been pledged to the financial creditors as security for the indebtedness of around HK$6.3 million. Current Ratio The current ratio is now 1.85 which showed a substantial improvement from 31 December 2003 of Taking into consideration the improved financial position of the Group and the substantial reduction of borrowings, the Directors are of the opinion that sufficient working capital are available to fulfill the financial obligations when they fall due and to meet the future funding requirement of the Group. Interim Dividend The Board has resolved not to declare an interim dividend in respect of the six months ended 30 June 2004 (six months ended 30 June 2003: Nil). Review of Operations, Outlook and Strategy Business Review, corporate Strategy and Outlook During the first six months of 2004, the property market in Hong Kong in particular the retail segment improved continuously. The Group has thereby recorded a higher rental income than the corresponding period in last year. The Board expected that the retail leasing market may improve further in the coming periods and the Group will benefit positively both in terms of leasing income as well as the value of the portfolio. On the residential segment, the market appears to be slightly overheated due to the speculation activities in the first hand market, however, the real demand remains on the strong side. The Board will review its property development project in near future against the latest market environment so as to formulate the best strategy for the project. The Group had participated in two joint ventures in March One of which is intended to engage in the printing and packaging activities with the production base to be located in Fuzhou of People s Republic of China ( PRC ). The total investment in the joint venture is HK$3 million in which 13

16 APPENDIX I FINANCIAL INFORMATION OF THE GROUP the Group shares 70%. The packaging activity is scheduled to commence in July The other joint venture is intended to establish a marketing and distribution entity in Shanghai of PRC and the set up would be focusing on the establishment of a marketing network in China within two to three years. The total investment in the joint venture is HK$1 million in which the Group shares 70%. These investments are at their initial set up phase and did not have any contribution to the Group s turnover or net profit in the current period. However, the Board is optimistic that their development in future will be very significant as China market has such a large scale of consumption capability and a fastest growth rate in general. The Board will be continuously exploring other investment opportunities in both the local and PRC market in order to enlarge the business and turnover base of the Group and to strengthen its profitability. Exchange rate exposure As most of the assets and liabilities of the Group are denominated in Hong Kong dollar, the Board considered the Group is not subject to any material exchange rate exposure. Staff and Remuneration Policy The number of employees (including Directors) as at 30 June 2004 was slightly increased to 11 persons. Employees are remunerated according to nature of the job and market conditions. The Board owes a lot of gratitude to the Group s bankers, creditors, management and staff for their continuing support in the past. On behalf of the Board Ni Xinguang Chairman Hong Kong SAR, 24 September

17 APPENDIX I FINANCIAL INFORMATION OF THE GROUP 2. STATEMENT OF INDEBTEDNESS As at the close of business on 30th September, 2004, being the latest practicable date for the purpose of ascertaining information contained in this indebtedness statement prior to the printing of this circular, the Group had an aggregate outstanding borrowings (included the respective accrued interest thereto) of approximately HK$11,307,000 comprising secured bank loans of approximately HK$4,647,000, advance from a director of approximately HK$519,000 and other unsecured loan of approximately HK$6,141,000. Other unsecured loan is the loan from a third party which is unsecured, non-interest bearing and repayable on or before 31st October, Save as aforesaid, and apart from intra-group liabilities and normal or trade related payables, the Group did not have mortgages, charges, debentures, loan capital, bank loans and overdrafts, debt securities or other similar indebtedness, finance leases or hire purchase commitments, liabilities under acceptances or acceptance credits or any guarantees or other material contingent liabilities outstanding at the close of business on 30th September, MATERIAL CHANGES Save as those reflected or disclosed in the Company s interim report for the six months ended 30th June, 2004, an extract of which is set out on pages 10 to 14 under the paragraph headed Unaudited interim financial statements above, the Directors are not aware of any material adverse changes in the financial or trading position of the Group since 31st December, 2003 (being the date to which the latest published audited financial statements of the Group were made up). 4. FINANCIAL AND TRADING PROSPECTS The Group has continued to carry on its existing business of property investment, development and re-development and investment holding in Hong Kong and the PRC during the current financial year. In view of the sharp recovery in the local property market, the Directors intend to reform its properties portfolio and to reapply its resources so as to achieve a much better return. More properties dealing transactions involving the disposal of existing properties portfolio and the acquisition of new properties may be resulted. The Directors are constantly reviewing the trading prospects of the development rights of a parcel of land situated at Ma Yau Tong Village at Sai Kung as a result of the market movement and development. At present, the Group intends to develop the site into 28 saleable village house units with an expected aggregate saleable floor area of approximately 58,800 square feet and believe half of them would be available for sale by late 2005 and the remaining half would be ready by mid As disclosed in the 2004 interim report, the Group had participated in two 70%-owned joint ventures in Hong Kong with each intending to start up a new business venture in the PRC. One of such formation had been crystallised and a wholly-owned subsidiary was formed in Fuzhou, the PRC by a joint venture referred above. The PRC subsidiary already commenced the operation of packaging and distribution of health food products in July The Directors are optimistic about the development of this new operation as the consumption power in the PRC is so substantial and continuously enjoying a remarkable growth from year by year. The Directors believe that more resources may be allocated to this new business segment in the coming future. 15

18 APPENDIX I FINANCIAL INFORMATION OF THE GROUP At 30th June, 2004, being the date to which the Group s latest published unaudited condensed consolidated financial statements were made up, the Group had total assets of approximately HK$36 million and a net assets value of HK$16 million. The Group reflected a current ratio of approximately 1.85 and a gearing ratio of approximately 67% to net assets value or approximately 30% to the total assets value. The Group had a net cash surplus of approximately HK$5.4 million, which is mainly denominated in Hong Kong dollars as at 30th June, The Directors expect that the Group will continue to maintain a healthy financial position with a relatively low level of debts and a high liquidity during the current financial year to support its business operations. 5. WORKING CAPITAL The Directors are of the opinion that, after taking into account the present available or intended banking facilities, internal resources of the Group and with the proceeds from the Disposal, the Group has sufficient working capital for its present requirements (i.e. for at least the next twelve months from the date of this circular) in the absence of unforeseen circumstances. 16

19 APPENDIX II PROPERTY VALUATION The following is the text of the letter and valuation certificate received from the Grant Sherman, which is situated at Room 904, 9/F, Harbour Centre, 25 Harbour Road, Wanchai, Hong Kong, addressed to the Company in connection with its valuation of the Property as at 30th September, 2004: 19th November, 2004 The Directors Landune International Limited Unit 2201, 22nd Floor ING Tower 308 Des Voeux Road Central Sheung Wan Hong Kong Dear Sirs, In accordance with your instructions for us to value the property interests held by Landune International Limited (the Company ) or its subsidiaries (hereinafter together referred to as the Group ), we confirm that we have carried out inspections, made relevant enquiries and obtained such further information as we consider necessary for the purpose of providing our opinion of the open market values of the properties as at 30th September, 2004 (the valuation date ). Our valuation is our opinion of the Open Market Value which we would define as intended to mean the best price at which the sale of an interest in a property might reasonably be expected to have been completed unconditionally for cash consideration on the date of valuation assuming: (i) (ii) (iii) (iv) (v) a willing seller; that, prior to the date of valuation, there had been a reasonable period (having regard to the nature of the property and the state of the market) for the proper marketing of the interest, for the agreement of price and terms and for the completion of the sale; that the state of the market, level of values and other circumstances were, on any earlier assumed date of exchange of contracts, the same as on the date of valuation; that no account is taken of any additional bid by a purchaser with a special interest; and that both parties to the transaction had acted knowledgeably, prudently and without compulsion. We have valued the properties by the Comparison Approach assuming sale in their existing state by making reference to comparable sales evidences as available in the relevant market. Our valuations have been made on the assumption that the owner sells the properties on the open market without the benefit of a deferred terms contract, leaseback, joint venture, management agreement or any similar arrangement which would serve to affect the property value. In addition, no forced sale situation in any manner is assumed in our valuations. 17

20 APPENDIX II PROPERTY VALUATION We have caused searches to be made at the Land Registry. However, we have not examined the original documents to verify ownership or to ascertain the existence of any amendments. We have relied on a considerable extent on information provided by the Company on such matters as statutory notices, easements, tenure, particulars of occupancy, identification of the properties, floor areas and all other relevant matters. All documents and leases have been used as reference only. All dimensions, measurements and areas are approximations. We have not carried out on-site measurements to verify the floor areas of the properties and we have assumed that the floor areas shown on the copies of the documents handed to us are correct. We have had no reason to doubt the truth and accuracy of the information provided to us by the Company which is material to the valuations. We were also advised by the Company that no material facts have been omitted from the information supplied. We have inspected the exteriors and where possible, the interiors of the properties. However, no structural survey has been carried out and it was not possible to inspect the wood work and other parts of the structure which were covered, unexposed or inaccessible. We are therefore, unable to report that the properties are free of rot, infestation or any structural defects. No tests have been carried out on any of the building services. No allowance has been made in our report for any charges, mortgages or amounts owing on the properties nor for any expenses or taxation which may be incurred in effecting a sale. Unless otherwise stated, it is assumed that the properties are free from encumbrances, restrictions and outgoings of an onerous nature which could affect their values. We enclose herewith the valuation certificate. Yours faithfully, For and on behalf of GRANT SHERMAN APPRAISAL LIMITED Peggy Y.Y. Lai MRICS MHKIS RPS Associate Director Real Estate Group Note: Ms. Peggy Y.Y. Lai is a member of the Royal Institution of Surveyors, a member of the Hong Kong Institute of Surveyors and Register Professional Surveyors in the General Practice Section, who has over 5 years property valuation experience in Hong Kong. 18

21 APPENDIX II PROPERTY VALUATION VALUATION CERTIFICATE Property Description and Tenure Particulars of Occupancy Capital value in existing state as at 30th September, 2004 All those Portions (collectively known as Portion A) of the Entertainment and Related Areas and the Remaining Portions of the Reserved Areas on Second Floor, Smiling Shaukeiwan Plaza, No. 17 Nam Hong Street, Shau Kei Wan, Hong Kong. 4,366/29,100th of 2,910/ 17,611th shares of and in the Remaining Portion of Shau Kei Wan Inland Lot No. 648 Shaukeiwan Plaza comprises three 21-storey residential towers built on a 6-level commercial/ carport podium completed in The subject property comprises a portion of the commercial space on the second floor of the shopping podium. The total saleable floor area of the property is approximately 4,770 sq.ft. or thereabouts. The property is held under a government lease for a term of 75 years from 12th June, 1925 renewable for a further term of 75 years. The Government Rent payable for the property is $35,640 per annum. As at the valuation date, a portion of the property known as 2003A was vacant and the remaining portion was subject to tenancy as an indoor amusement outlet. The remaining portion of the property was subject to a tenancy for a term of three years commencing on 23rd September, 2002 at a monthly rent of HK$120,000 inclusive of a monthly management fee of HK$55,219 with an option to renew for a further term of three years at market rent. HK$12,000,000 (HONG KONG DOLLARS TWELVE MILLION) Notes: i) The registered owner of the subject property is Day Success Company Limited vide Memorial No dated 30th June, ii) iii) The property is subject to a mortgage to secure General Banking Facilities in favour of Liu Chong Hing Bank Limited vide Memorial No dated 28th February, As advised by the Company, Day Success Company Limited is a wholly-owned subsidiary of the Company. 19

22 APPENDIX III GENERAL INFORMATION 1. RESPONSIBILITY STATEMENT This circular includes particulars given in compliance with the Listing Rules for the purpose of giving information with regard to the Group. The Directors collectively and individually accept full responsibility for the accuracy of the information contained in this circular and confirm, having made all reasonable enquiries, that to the best of their knowledge, 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 herein misleading. 2. DIRECTORS INTERESTS AND SHORT POSITIONS As at the Latest Practicable Date, the Directors and their respective associated corporations had interests in the Shares as recorded in the register maintained by the Company pursuant to Section 352 of the SFO as follows: Approximate percentage interest in the Number of Shares Company s Personal Corporate issued share Name of Director interests interests Total capital Ni Xinguang 15,050,000 2,000,000,000 2,015,050, % (note) Wang Zhiming 15,010,000 2,000,000,000 2,015,010, % (note) Ha Shu Tong 85,000,000 85,000, % Ng Chun Chuen, 30,000,000 30,000, % David Note: 2,000,000,000 Shares were owned by Group First, a private company beneficially owned by Mr. Ni Xinguang as to 60% and Mr. Wang Zhiming as to 40%, representing approximately 53.72% of the issued share capital of the Company. Other than the holdings disclosed above, no interests and short positions were held or deemed or taken to be held under Part XV of the SFO by any Director or his associates of the Company or their respective associated corporations (within the meaning of Part XV of the SFO) which were required to be notified to the Company and the Stock Exchange pursuant to Part XV of the SFO or pursuant to the Model Code for Securities Transactions by Directors of Listed Companies or which are required pursuant to Section 352 of the SFO to be entered in the register referred to therein. Nor any of the Directors (including their spouses and children under the age of 18) had, as at the Latest Practicable Date, any interest in, or had been granted any right to subscribe for the securities and options of the Company and its associated corporations within the meaning of the SFO, or had exercised any such rights. 20

23 APPENDIX III GENERAL INFORMATION 3. SUBSTANTIAL SHAREHOLDERS INTERESTS AND SHORT POSITIONS As at the Latest Practicable Date, the following persons had interest in the issued share capital of the Company as recorded in the register required to be kept by the Stock Exchange under Section 336 of the SFO. Approximate percentage of the issued share capital Number of shares of the Name of Shareholder Nature of interest Long position Company Group First 2,000,000, % Ni Xinguang Personal and corporate 2,015,050, % Wang Zhiming Personal and corporate 2,015,010, % Wong Chung Pak Personal 333,200, % Able Dynamic Limited 200,000, % Cheng Wai Mo Corporate 200,000, % Best Radiant Limited 200,000, % Mung Yat Lit Corporate 200,000, % Apart from the aforesaid, no other party has an interest or a short position in the issued share capital of the Company, as recorded in the register required to be kept by the Stock Exchange under Section 336 of the SFO. 4.. COMPETING INTERESTS As at the Latest Practicable Date, none of the Directors and his associates are considered by the Company to have interests in business which compete with, or might compete with, either directly or indirectly, with the business of the Group, other than those businesses where such Directors have been appointed to represent the interests of the Company and/or other members of the Group. 5. OTHER INTERESTS As at the Latest Practicable Date: (a) (b) none of the Directors and Grant Sherman had any direct or indirect interest in any assets which have been, since the date to which the latest published audited accounts of the Group were made up, acquired or disposed of by, or leased to any member of the Group, or are proposed to be acquired or disposed of by, or leased to, any member of the Group; and none of the Directors was materially interested in any contract or arrangement entered into by any member of the Group which contract or arrangement is subsisting as at the date of this circular and which is significant in relation to the business of the Group. 21

24 APPENDIX III GENERAL INFORMATION 6. DIRECTORS INTEREST IN SERVICE CONTRACTS Each of Ni Xinguang, Wang Zhiming, Ha Shu Tong and Ng Chun Chuen, David has entered into a service contract with the Company for an initial period of one year commencing 12th March, 2004 (for Mr. Ni Xinguang and Mr. Wang Zhiming) and 1st April, 2004 (for Mr. Ha Shu Tong and Mr. Ng Chun Chuen, David), respectively, which will continue thereafter until terminated by either party by one month s prior written notice. Their respective annual salaries under the service contracts are as follows: Name of Director Salaries per annum HK$ Ni Xinguang 360,000 Wang Zhiming 360,000 Ha Shu Tong 960,000 Ng Chun Chuen, David 720,000 Under the service contract of each of the above Directors, the relevant Director is also entitled to receive a discretionary year-end bonus of an amount to be determined by the Board and stock option right as approved by the Board from time to time. Save as disclosed above, none of the Directors had service contract with any member of the Group as at the Latest Practicable Date which is not expiring or determinable within one year without payment of compensation (other than statutory compensation). 7. LITIGATION So far as the Directors are aware, as at the Latest Practicable Date, the Group is involved in a District Court civil jurisdiction action (the 1st Action ), and a High Court action (the 2nd Action ). In the 1st Action, the plaintiff claims against a subsidiary of the Company a payment of allegedly outstanding management fees of approximately HK$219,000 together with further management fees. The total allegedly outstanding management fees accrued up to the Latest Practicable Date amounted to approximately HK$1,661,000. The Group has duly filed a defence and counterclaim and the parties are currently attending to interlocutory matters. The Group has fully provided for the management fees in its accounts as at the Latest Practicable Date and the Directors (including the independent non-executive Directors) believe the 1st Action would not have material adverse impact on the Group. In the 2nd Action, the plaintiff claims against the Company a payment of approximately HK$2,483,000, allegedly being fees and emoluments receivable by a former Director who has purportedly assigned the same to the plaintiff. The Company is currently seeking legal advice on this claim. The Directors (including the independent non-executive Directors) believe that the Company has a valid defence in the 2nd Action and it would not have material adverse impact on the Group. The Company received a winding-up petition on 16th November, 2004 served by a former Director demanding payment of a sum of approximately HK$1,175,000 allegedly being the balance of arrears of wages, end of year payment, director s fees and disbursements. The Company is currently seeking legal advice on the merit of the winding-up proceedings. The Directors (including the independent non-executive 22

25 APPENDIX III GENERAL INFORMATION Directors) believe that the Company has a valid defence in this matter and is of the view that the said winding-up proceeding would not have material adverse impact on the Group. Save as disclosed above, neither the Company nor any subsidiaries was engaged in any litigation or arbitration of material importance and no litigation or claim of material importance was pending or threatened against the Company or any of its subsidiaries. 8. EXPERT AND CONSENT The following is the qualification of the expert who has given opinion or advice which is contained in this circular: Name Grant Sherman Qualification Professional surveyors As at the Latest Practicable Date, Grant Sherman is not beneficially interested in the share capital of any member of the Group nor has any right, whether legally enforceable or not, to subscribe for or to nominate persons to subscribe for securities in any member of the Group. Grant Sherman has given and has not withdrawn its written consent to the issue of this circular with the inclusion of its letter, report and references to its name in the form and context in which they respectively appear. 9. MATERIAL CONTRACTS The following contracts are all the material contracts (not being contracts entered into in the ordinary course of business), entered into by members of the Group, within the two years preceding 7th October, 2004 (being the date of the Announcement) and up to and including the Latest Practicable Date: (a) (b) (c) (d) Provisional Sale and Purchase Agreement; Subscription agreement dated 19th March, 2004 entered into between the Company, World Sea Limited and Cheong Wa Limited for the subscription of shares of Cheong Wa Limited by the Company and World Sea Limited in the proportion of 70% and 30%, respectively. Subscription agreement dated 12th January, 2004 entered into between the Company, Group First (the Subscriber ) and Mr. Ha Shu Tong in relation to the subscription as described in the circular of the Company dated 16th February, 2004 (the Subscription Agreement ); Four loan capitalisation agreements, two of which dated 10th January, 2004 between the Company and each of Gain State Limited and Mr. Ha Shu Tong; and the remaining two dated 13th January, 2004 between the Company and each of Best Radiant Limited and Able Dynamic Limited in relation to the loan capitalisation as described in the circular of the Company dated 16th February, 2004; 23