WING ON TRAVEL (HOLDINGS) LIMITED · A letter of advice from Guangdong Securities, the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

Hong Kong Exchanges and Clearing Limited, The Stock Exchange of Hong Kong Limited and Hong Kong Securities Clearing Company Limited take no responsibility for the contents of this circular, make no representation as, to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this circular.

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

If you have sold or transferred all your securities in Wing On Travel (Holdings) Limited (the “Company”), you should at once hand this circular and the accompanying form of proxy to the purchaser or transferee or to the bank, licensed securities dealer registered institution in securities or other agent through whom the sale or transfer was effected for transmission to the purchaser or the transferee.

This circular is for information purpose only and does not constitute an invitation or offer to acquire, purchase or subscribe for securities of the Company.This circular is addressed to shareholders of the Company in connection with a special general meeting of the Company to be held on Monday, 1 February 2010.

WING ON TRAVEL (HOLDINGS) LIMITED(Incorporated in Bermuda with limited liability)

(Stock Code: 1189)(Warrant Code: 774)

(1) PROPOSED CAPITAL REORGANISATION;(2) CHANGE OF BOARD LOT SIZE;

(3) PROPOSED RIGHTS ISSUE ON THE BASIS OF FIVE RIGHTS SHARES

FOR EVERY SHARE HELD ON THE RECORD DATE;(4) PROPOSED PLACING OF CONVERTIBLE BONDS

UNDER SPECIFIC MANDATE;(5) PROPOSED REPURCHASE OF NOTES;

AND(6) POSSIBLE CONNECTED TRANSACTIONS

Financial adviser

Underwriter to the Rights Issue and Placing Agent to the placing of the Convertible Bonds

Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders

It should be noted that the Shares will be dealt in on an ex-rights basis from Wednesday, 3 February 2010. Dealings in the Rights Shares in the nil-paid form will take place from Friday, 12 February 2010 to Tuesday, 23 February 2010 (both dates inclusive). If the conditions of the Rights Issue are not fulfilled or waived (as applicable) or the Underwriting Agreement is terminated by the Underwriter, the Rights Issue will not proceed. Any dealing in the nil-paid Rights Shares during the period from Friday, 12 February 2010 to Tuesday, 23 February 2010 (both dates inclusive) will accordingly bear the risk that the Rights Issue may not become unconditional or may not proceed.

It should be noted that the Underwriting Agreement (as defined herein) in respect of the Rights Issue contains provisions entitling the Underwriter by notice in writing to the Company at any time prior to 4:00 p.m. on the Settlement Date to terminate the obligations of the Underwriter thereunder on the occurrence of certain events including force majeure.

The Underwriter may terminate the arrangements set out in the Underwriting Agreement by notice in writing to the Company at any time prior to 4:00 p.m. on the Settlement Date if there occurs:–

(a) an introduction of any new law or regulation or any change in existing law or regulation (or the judicial interpretation thereof) or the occurrence of any local, national or international event or change (whether or not forming part of series of events or changes occurring or continuing before, and/or after the date hereof) of a political, military, financial, economic or currency (including a change in the system under which the value of the Hong Kong currency is linked to the currency of the USA) or other nature (whether or not ejusdem generis with any of the foregoing) or of the nature of any local, national or international outbreak or escalation of hostilities or armed conflict, or affecting the local securities markets which may, in the reasonable opinion of the Underwriter materially and adversely affect the business or the financial or trading position or prospects of the Group as a whole; or

(b) this circular or the Prospectus when published contain information (either as to business prospects or the condition of the Group or as to its compliance with any laws or the Listing Rules or any applicable regulations) which has not prior to the date thereof been publicly announced or published by the Company and which may, in the reasonable opinion of the Underwriter, be material to the Group as a whole and is likely to affect the success of the Rights Issue or might cause a prudent investor not to accept the Rights Shares offered to it; or

(c) any event of force majeure including, without limiting the generality thereof, any act of God, war, riot, public disorder, civil commotion, fire, flood, explosion, epidemic, terrorism, strike or lock-out in Hong Kong which may in the reasonable opinion of the Underwriter materially and adversely affect the business or the financial or trading position of the Group as a whole.

If, at or prior to 4:00 p.m. on the Settlement Date, there occurs/the Company:

(a) any material breach of or omission to observe any of the obligations or undertakings expressed to be assumed by it under the Underwriting Agreement which breach or omission will have a material and adverse effect on the business, financial or trading position of the Company; or

(b) any such untrue representation or warranty thereunder represents or is likely to represent a material adverse change in the business, financial or trading position or prospects of the Group taken as a whole or is otherwise likely to have a materially prejudicial effect on the Rights Issue; or

(c) fails promptly to send out any announcement or circular (after the despatch of this circular or the Prospectus Documents), in such manner (and as appropriate with such contents) as the Underwriter may reasonably request for the purpose of preventing the creation of a false market in the securities of the Company,

the Underwriter shall be entitled (but not bound) by notice in writing to the Company to elect to treat such matter or event as releasing and discharging it from its obligations under Underwriting Agreement.

If the Underwriter terminates the Underwriting Agreement in accordance with the terms thereof, the Rights Issue will not proceed. In addition, the Rights Issue is conditional on all conditions set out on page 4 of this circular being fulfilled or waived (as applicable). In the event that the above conditions have not been satisfied and/or waived in whole or in part by the Underwriter on or before 4:00 p.m. on Wednesday, 3 March 2010 (or such later date as the Underwriter and the Company may agree), the Underwriting Agreement shall terminate and no party shall have any claim against the other party for costs, damages, compensation or otherwise and the Rights Issue will not proceed.

A letter of advice from Guangdong Securities, the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders is set out on pages 37 to 51 of this circular and a letter of recommendation from the Independent Board Committee to the Independent Shareholders is set out on page 36 of this circular.

A notice convening a special general meeting of the Company to be held at 10:00 a.m. on Monday, 1 February 2010 at Shop B27, Basement, Bank of America Tower, 12 Harcount Road, Central, Hong Kong is set out on pages 191 to 193 of this circular. Whether or not you are able to attend the meeting in person, you are requested to complete and return the accompanying form of proxy in accordance with the instructions printed thereon and return it to the branch share registrar of the Company in Hong Kong, Tricor Secretaries Limited at 26/F., Tesbury Centre, 28 Queen’s Road East, Wanchai, Hong Kong, as soon as possible and in any event no later than 48 hours before the time appointed for holding the meeting or any adjournment thereof. Completion and return of the form of proxy will not preclude you from attending and voting in person at the meeting or any adjournment thereof should you so wish.

8 January 2010

CONTENTS

– i –

Page

Expected timetable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

Termination of the Underwriting Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

Letter from the Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

Letter from the Independent Board Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36

Letter from Guangdong Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37

Appendix I – Financial information of the Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52

Appendix II – Unaudited Pro forma financial information of the Group . . . . . . . . . . . . . . . 165

Appendix III – General information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 169

Notice of SGM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 191

EXPECTED TIMETABLE

– 1 –

Event

Set out below is an indicative timetable for the implementation of the Capital Reorganisation and

the Rights Issue:

Latest time for exercise of subscription rights attaching

to the Warrants in order to be qualified for the Rights Issue . . . . . . . . . . . . . . . . . . 4:00 p.m. on Friday,

29 January 2010

Latest time for lodging proxy forms for the SGM . . . . . . . . . . . . . . . . . . . . . . . . . .10:00 a.m. on Saturday,

30 January 2010

Expected date of the SGM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10:00 a.m. on Monday,

1 February 2010

Announcement of the results of the SGM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Monday, 1 February 2010

Effective date of the Capital Reorganisation . . . . . . . . . . . . . . . . . . . . . . . . . . . . Tuesday, 2 February 2010

Commencement of dealings in the Adjusted Shares . . . . . . . . . . . . . . . . . . . . . . . . . 9:30 a.m. on Tuesday,

2 February 2010

Original counter for trading in the Existing Shares

in existing share certificates in board lots of

30,000 Existing Shares temporarily closes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9:30 a.m. on Tuesday,

2 February 2010

Temporary counter for trading in board lots of

1,500 Adjusted Shares (in the form of

existing share certificates) opens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9:30 a.m. on Tuesday,

2 February 2010

First day of free exchange of certificates

for the Existing Shares into new certificates

for the Adjusted Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Tuesday, 2 February 2010

Last day of dealings in the Adjusted Shares

on a cum-right basis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Tuesday, 2 February 2010

Commencement of dealings in the Adjusted Shares

on an ex-right basis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Wednesday, 3 February 2010

EXPECTED TIMETABLE

– 2 –

Latest time for lodging transfer of

the Adjusted Shares in order to be qualified

for the Rights Issue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4:30 p.m. on Thursday,

4 February 2010

Closure of register of members to determine

the eligibility of the Rights Issue

(both dates inclusive) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Friday, 5 February 2010 to

Tuesday, 9 February 2010

Record Date for the Rights Issue. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Tuesday, 9 February 2010

Despatch of the Prospectus Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Wednesday, 10 February 2010

Register of members re-opens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Wednesday, 10 February 2010

First day of dealings in nil-paid Rights Shares . . . . . . . . . . . . . . . . . . . . . . . . . . Friday, 12 February 2010

Original counter for trading in the Adjusted Shares

in board lots of 10,000 Adjusted Shares

(only new certificates for the Adjusted Shares can be

traded at this counter) re-opens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9:30 a.m. on Thursday,

18 February 2010

Parallel trading in the Adjusted Shares (in the form of

new and existing certificates) commences . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9:30 a.m. on Thursday,

18 February 2010

Designated broker starts to stand in the market

to provide matching services for the sale and

purchase of odd lots of the Adjusted Shares . . . . . . . . . . . . . . . . . . . . . . . . Thursday, 18 February 2010

Effective date of the change of board lot size . . . . . . . . . . . . . . . . . . . . . . . . . Thursday, 18 February 2010

Latest time for splitting in nil-paid Rights Shares . . . . . . . . . . . . . . . . . . . . . . . . . . 4:00 p.m. on Thursday,

18 February 2010

Last day of dealing in nil-paid Rights Shares . . . . . . . . . . . . . . . . . . . . . . . . . . Tuesday, 23 February 2010

Latest time for acceptance of, and payment for,

the Rights Shares and application for excess Rights Shares. . . . . . . . . . . . . . . . . . . 4:00 p.m. on Friday,

26 February 2010

Latest time for termination of

the Underwriting Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4:00 p.m. on Wednesday,

3 March 2010

Announcement of results of the Rights Issue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Friday, 5 March 2010

EXPECTED TIMETABLE

– 3 –

Refund cheques for wholly and partially unsuccessful

applications for excess Rights Shares expected

to be posted on or before . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Monday, 8 March 2010

Certificates for the Rights Shares expected

to be despatched on or before . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Monday, 8 March 2010

Dealings in full-paid Rights Shares and commence. . . . . . . . . . . . . . . . . . . . . .Wednesday, 10 March 2010

Temporary counter for trading in board lots of

1,500 Adjusted Shares (in the form of

existing share certificates) closes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4:00 p.m. on Wednesday,

10 March 2010

Parallel trading in the Adjusted Shares

(in the form of new and existing certificates) ends . . . . . . . . . . . . . . . . . . . . . .4:00 p.m. on Wednesday,

10 March 2010

Designated broker ceases to stand in the market

to provide matching services for the sale and

purchase of odd lots of the Adjusted Shares . . . . . . . . . . . . . . . . . . . . . . . . .Wednesday, 10 March 2010

Last day of free exchange of certificates

for the Existing Shares into new certificates

for the Adjusted Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Friday, 12 March 2010

Note: All references to time in this circular are references to Hong Kong time.

Effect of bad weather on the latest time for acceptance of and payment for the Rights Issue and for application and payment for excess Rights Shares

If there is:

• a tropical cyclone warning signal number 8 or above, or

• a “black” rainstorm warning

(i) in force in Hong Kong at any local time before 12:00 noon and no longer in force after

12:00 noon on Friday, 26 February 2010, the latest time of acceptance of and payment for

the Rights Shares will not take place at 4:00 p.m. on Friday, 26 February 2010, but will be

extended to 5:00 p.m. on the same day instead; and

(ii) in force in Hong Kong at any local time between 12:00 noon and 4:00 p.m. on Friday,

26 February 2010, the latest time of acceptance of and payment for the Rights Shares will

not take place on Friday, 26 February 2010, but will be rescheduled to 4:00 p.m. on the

following Business Day which does not have either of those warnings in force at any time

between 9:00 a.m. and 4:00 p.m.

If the latest time for acceptance of and payment for the Rights Shares does not take place on Friday,

26 February 2010, the dates mentioned in the section headed “Expected timetable” in this circular may be

affected. An announcement will be made by the Company in such event.

Dates or deadlines specified in this circular are indicative only and may be varied by agreement

between the Company and the Underwriter. Any consequential changes to the expected timetable will be

published or notified to the Shareholders as and when appropriate.

TERMINATION OF THE UNDERWRITING AGREEMENT

– 4 –

The Underwriter may terminate the arrangements set out in the Underwriting Agreement by notice

in writing to the Company at any time prior to 4:00 p.m. on the Settlement Date if there occurs:–

(a) an introduction of any new law or regulation or any change in existing law or regulation (or

the judicial interpretation thereof) or the occurrence of any local, national or international

event or change (whether or not forming part of series of events or changes occurring or

continuing before, and/or after the date hereof) of a political, military, financial, economic or

currency (including a change in the system under which the value of the Hong Kong currency

is linked to the currency of the USA) or other nature (whether or not ejusdem generis with

any of the foregoing) or of the nature of any local, national or international outbreak or

escalation of hostilities or armed conflict, or affecting the local securities markets which

may, in the reasonable opinion of the Underwriter materially and adversely affect the

business or the financial or trading position or prospects of the Group as a whole; or

(b) this circular or the Prospectus when published contain information (either as to business

prospects or the condition of the Group or as to its compliance with any laws or the Listing

Rules or any applicable regulations) which has not prior to the date thereof been publicly

announced or published by the Company and which may, in the reasonable opinion of the

Underwriter, be material to the Group as a whole and is likely to affect the success of the

Rights Issue or might cause a prudent investor not to accept the Rights Shares offered to it;

or

(c) any event of force majeure including, without limiting the generality thereof, any act of God,

war, riot, public disorder, civil commotion, fire, flood, explosion, epidemic, terrorism, strike

or lock-out in Hong Kong which may in the reasonable opinion of the Underwriter materially

and adversely affect the business or the financial or trading position of the Group as a whole.


(a) any material breach of or omission to observe any of the obligations or undertakings

expressed to be assumed by it under the Underwriting Agreement which breach or omission

will have a material and adverse effect on the business, financial or trading position of the

Company; or

(b) any such untrue representation or warranty thereunder represents or is likely to represent

a material adverse change in the business, financial or trading position or prospects of the

Group taken as a whole or is otherwise likely to have a materially prejudicial effect on the

Rights Issue; or

(c) fails promptly to send out any announcement or circular (after the despatch of this circular

or the Prospectus Documents), in such manner (and as appropriate with such contents) as

the Underwriter may reasonably request for the purpose of preventing the creation of a false

market in the securities of the Company,

the Underwriter shall be entitled (but not bound) by notice in writing to the Company to elect

to treat such matter or event as releasing and discharging it from its obligations under the

Underwriting Agreement.

DEFINITIONS

– 5 –

In this circular, unless the context otherwise requires, the following terms shall have the following

meanings:

“AWL” Asia Will Limited, an indirect wholly-owned subsidiary of ITC

“Accumulated Losses” the accumulated losses of the Company on the date of the Capital

Reorganisation becoming effective

“Adjusted Shares” the ordinary share(s) of HK$0.01 each in the share capital of the

Company immediately upon the Capital Reorganisation becoming

effective

“Announcement” the joint announcement of the Company and ITC dated 8 December

2009 in relation to, among other things, the Capital Reorganisation,

the Rights Issue, the Placing and the Repurchase Offer

“associates” has the meaning ascribed thereto in the Listing Rules

“Board” the board of Directors

“Bondholder(s)” holder(s) of the Convertible Bonds

“Business Day” a day (other than a Saturday, Sunday, public holidays) on which

banks are open for general banking business in Hong Kong

“Bye-Laws” the bye-laws of the Company

“Capital Reduction” the proposal for the reduction of the par value of the issued

Consolidated Shares from HK$0.20 each to HK$0.01 each

by canceling HK$0.19 of the paid-up capital on each issued

Consolidated Share

“Capital Reorganisation” the Share Consolidation and the Capital Reduction

“CCASS” the Central Clearing and Settlement System established and operated

by HKSCC

“CEL” China Enterprises Limited, a company incorporated in Bermuda

with limited liability with its shares traded in the over-the-counter

securities market in the USA

“Company” Wing On Travel (Holdings) Limited (Stock Code: 1189) (Warrant

Code: 774), a company incorporated in Bermuda with limited liability

and the issued securities of which are listed on the Main Board of the

Stock Exchange

“Companies Act” The Companies Act 1981 of Bermuda

“Completion Date” a date falling on or before the third business day following the

conditions in the Placing Agreement being fulfilled or on such other

date as the Company and the Placing Agent shall agree

“connected persons” has the meaning ascribed thereto under the Listing Rules

DEFINITIONS

– 6 –

“Consolidated Share(s)” the ordinary share(s) of HK$0.20 each in the issued share capital of

the Company immediately after the Share Consolidation becoming

effective

“Conversion” conversion of the Convertible Bonds in accordance with its terms and

conditions

“Conversion Price” HK$0.18 per Conversion Share (subject to adjustments)

“Conversion Share(s)” means those Adjusted Shares to be issued by the Company upon

Conversion of the Convertible Bonds, namely, up to 1,666,666,666

Adjusted Shares falling to be issued at the Conversion Price in full

(subject to adjustments) and pursuant to the terms and conditions of

the Convertible Bonds

“Convertible Bonds” convertible bonds with aggregate principal amount of up to HK$300

million to be placed by the Placing Agent under the Placing

“Director(s)” director(s) of the Company

“Emperor” Emperor Securities Limited, a licensed corporation to carry out type

1 (dealing in securities) and 4 (advising on securities) regulated

activities as defined in Schedule 5 of the SFO

“Excess Application Form(s)”

or “EAF(s)”

the form of application for excess Rights Shares

“Excluded Overseas

Shareholders”

the Overseas Shareholder(s) whose address is/are in a place(s) outside

Hong Kong where, the Directors, based on legal opinions provided

by legal advisers of the Company, consider it necessary or expedient

on account either of the legal restrictions under the laws of the

relevant place or the requirements of the relevant regulatory body or

stock exchange in that place not to offer the Rights Shares to such

Shareholders

“Existing Share(s)” the ordinary share(s) of HK$0.01 each in the existing issued share

capital of the Company, before the Capital Reorganisation becoming

effective

“Group” the Company and its subsidiaries

“Guangdong Securities” or

“Independent Financial

Advisor”

Guangdong Securities Limited, a corporation licensed to carry out

type 1 (dealing in securities), type 2 (dealing in futures contracts),

type 4 (advising on securities), type 6 (advising on corporate finance)

and type 9 (asset management) regulated activities under the SFO

being the independent financial adviser to the Independent Board

Committee and the Independent Shareholders in relation to the Rights

Issue and the Repurchase Offer

“HKSCC” Hong Kong Securities Clearing Company Limited

“Hong Kong” the Hong Kong Special Administrative Region of the People’s

Republic of China

DEFINITIONS

– 7 –

“Independent Board

Committee”

the committee of the Board comprising all the independent non-

executive Directors, namely Mr. Kwok Ka Lap, Alva, Mr. Poon

Kwok Hing, Albert and Mr. Sin Chi Fai, established for the purpose

of giving a recommendation to the Independent Shareholders on the

Rights Issue and Repurchase Offer

“Independent Shareholders” Shareholders other than AWL and CEL and their respective associates

“Independent Third

Party(ies)”

independent third party(ies) who is (are) not connected person(s) of

the Company as defined in the Listing Rules and is(are) independent

of the Company and connected persons of the Company

“Irrevocable Undertaking(s)” an irrevocable undertaking dated 3 December 2009 under which

each of CEL, certain CEL’s subsidiaries and AWL has irrevocably

undertaken, among other things, to subscribe or procure the

subscription of the provisional allotment of its full entitlements

pursuant to the Rights Issue

“ITC” ITC Corporation Limited (Stock Code: 372), a company incorporated

in Bermuda with limited liability and the issued securities of which

are listed on the Main Board of the Stock Exchange

“Last Trading Day” 3 December 2009, being the last trading day for the Existing Shares

on the Stock Exchange before the release of the Announcement

“Last Practicable Date” 5 January 2010 being the latest practicable date for the purpose of

ascertaining certain information contained in this circular

“Listing Rules” The Rules Governing the Listing of Securities on the Stock Exchange

“Noteholder(s)” holder(s) of the Notes

“Notes” the 2% convertible exchangeable notes due 7 June 2011 issued by the

Company with an aggregate outstanding principal amount of HK$640

million as at the date of this circular

“Overseas Shareholders” Shareholders whose names appear on the register of members of

the Company as at the close of the business on the Record Date and

whose addresses as shown on such register are outside Hong Kong

“Placing Agent” Emperor

“Placing Agreement” the conditional placing agreement dated 3 December 2009 entered

into between the Company and the Placing Agent (as varied and

supplemented by the supplemental agreement dated 7 January 2010)

in relation to the Placing

“Placing” the best effort placing of up to an aggregate amount of HK$300

million Convertible Bonds convertible into Shares at the Conversion

Price under a specific mandate

DEFINITIONS

– 8 –

“Posting Date” Wednesday, 10 February 2010, being the date of despatch of the

Prospectus Documents to the Qualifying Shareholders and despatch

of the Prospectus to the Excluded Overseas Shareholders for

information only

“PRC” the People’s Republic of China

“Prospectus” the prospectus to be issued by the Company in relation to the Rights

Issue

“Prospectus Documents” the Prospectus, the PALs and the EAFs

“Provisional Allotment

Letter(s)” or “PAL(s)”

the provisional allotment letter(s) for the Rights Shares

“Qualifying Shareholders” Shareholders other than the Excluded Overseas Shareholders

“Record Date” Tuesday, 9 February 2010, the record date of which entitlements to

the Rights Issue will be determined

“Registrar” Tricor Secretaries Limited at 26/F., Tesbury Centre, 28 Queen’s Road

East, Wanchai, Hong Kong, the Company’s Hong Kong branch share

registrar

“Repurchase Code” the Hong Kong Code on Share Repurchases

“Repurchase Offer” an offer being made by the Company to repurchase the Notes at

a price payable in cash equal to 80% of the outstanding principal

amount of the Notes

“Rights Issue” the proposed issue by way of rights of Rights Shares at a price of

HK$0.15 per Rights Share on the basis of five Rights Shares for every

Adjusted Share then held on the Record Date

“Rights Share(s)” not less than 2,729,961,245 Adjusted Shares but not more than

3,657,929,510 Adjusted Shares proposed to be offered to the

Qualifying Shareholders for subscription on the basis of five Rights

Shares for every Adjusted Share held on the Record Date pursuant to

the Rights Issue

“Settlement Date” Wednesday, 3 March 2010, being the last date for termination of the

Underwriting Agreement

“SFC” the Securities and Futures Commission of Hong Kong

“SFO” Securities and Futures Ordinance (Cap. 571 of the Laws of Hong

Kong)

“SGM” the special general meeting of the Company for approving, inter alia,

the Capital Reorganisation, Rights Issue, Placing and Repurchase

Offer

DEFINITIONS

– 9 –

“Share(s)” the Existing Share(s), the Consolidated Share(s) and/or the Adjusted

Share(s), as the case may be

“Share Consolidation” the proposed consolidation of every twenty (20) Existing Shares of

HK$0.01 each into one (1) Consolidated Share of HK$0.20 each in

the issued share capital of the Company

“Shareholder(s)” the holder(s) of the Shares

“Stock Exchange” The Stock Exchange of Hong Kong Limited

“Subscriber(s)” an independent institutional, professional and/or individual investor

who is not party acting in concert (as defined under the Takeovers

Code) with ITC and/or CEL, and such investor and its ultimate

beneficial owners are not connected persons of the Company and are

third parties independent of the Company and connected persons of

the Company under the Placing

“Subscription Price” the subscription price for the Rights Shares, being HK$0.15 per

Rights Share

“Takeovers Code” the Hong Kong Code on Takeovers and Mergers

“Underwriter” Emperor

“Underwriting Agreement” the underwriting agreement dated 3 December 2009 (as varied

and supplemented by the first supplemental agreement dated 11

December 2009 and the second supplemental agreement dated 23

December 2009) in relation to the Rights Issue entered into between

the Company and the Underwriter

“Underwritten Shares” the total number of Rights Shares to which holders of Shares are

entitled pursuant to the Rights Issue less such number of Rights

Shares agreed to be taken up by each of CEL, certain CEL’s

subsidiaries and AWL pursuant to the Irrevocable Undertakings,

being not less than 2,047,129,110 Rights Shares but not more than

2,714,004,335 Rights Shares

“USA” United States of America

“Warrants” 1,823,967,497 warrants of the Company as at the Latest Practicable

Date, conferring the right in its registered form to the holders thereof

to subscribe for a total of 1,823,967,497 Existing Shares at an

exercise price of HK$0.091 per Existing Share

“HK$” Hong Kong dollars, the lawful currency of Hong Kong

“%” per cent.

LETTER FROM THE BOARD

– 10 –


(Stock Code: 1189)

(Warrant Code: 774)

Executive Directors:

Mr. Cheung Hon Kit (Chairman)

Ms. Chan Ling, Eva (Managing Director)

Dr. Yap, Allan

Mr. Chan Pak Cheung, Natalis

Independent Non-Executive Directors:

Mr. Kwok Ka Lap, Alva

Mr. Poon Kwok Hing, Albert

Mr. Sin Chi Fai

Registered office:

Clarendon House

2 Church Street

Hamilton HM 11

Bermuda

Head office and principal place of business:

7th Floor

Paul Y. Centre

51 Hung To Road

Kwun Tong

Kowloon

Hong Kong

8 January 2010

To the Shareholders and, for information only,

to the Noteholders and holders of the Warrants

Dear Sir or Madam,

(1) PROPOSED CAPITAL REORGANISATION;(2) CHANGE OF BOARD LOT SIZE;

(3) PROPOSED RIGHTS ISSUE ON THE BASIS OF FIVE RIGHTS SHARES

FOR EVERY SHARE HELD ON THE RECORD DATE;(4) PROPOSED PLACING OF CONVERTIBLE BONDS

UNDER SPECIFIC MANDATE;(5) PROPOSED REPURCHASE OF NOTES;


INTRODUCTION

On 8 December 2009, the Board announced that the Company proposed to raise not less than

approximately HK$409 million but not more than approximately HK$549 million, before expenses,

by way of the Rights Issue of not less than 2,729,961,230 Rights Shares (as at the Latest Practicable

Date: 2,729,961,245 Shares) but not more than 3,657,929,510 Rights Shares at the Subscription Price of

HK$0.15 per Rights Share on the basis of five (5) Rights Shares for every one (1) Adjusted Share held on

the Record Date and payable in full on acceptance.


– 11 –

As the Rights Issue will increase the issued share capital of the Company by more than

50%, pursuant to Rule 7.19(6)(a) of the Listing Rules, the Rights Issue is subject to approval of the

Shareholders at the SGM in which any controlling Shareholders and their associates or, where there

are no controlling Shareholders, Directors (excluding independent non-executive Directors) and the

chief executive of the Company and their respective associates, shall abstain from voting in favour. As

at the Latest Practicable Date, the Company has no controlling Shareholders and none of the Directors

(excluding independent non-executive Directors) and the chief executive of the Company and their

respective associates holds any Share.

The Company also intended to put forward a proposal to the Shareholders to effect the Capital

Reorganisation which involves: (i) Share Consolidation: the consolidation of every 20 issued Existing

Shares of HK$0.01 each into 1 issued Consolidated Share of HK$0.20 each, and (ii) Capital Reduction:

the reduction of the nominal value of each Share in issue from HK$0.20 to HK$0.01 by cancelling paid-up

capital to the extent of HK$0.19 on each issued Share of the Company on the date which the Capital

Reorganisation becomes effective.

The Shares are currently traded in board lots of 30,000 Shares each. In order to raise the board

lot value, the Company also announced that the board lot size of the Adjusted Shares for trading on the

Stock Exchange will be changed from 30,000 Existing Shares to 10,000 Adjusted Shares upon the Capital

Reorganisation becoming effective.

On 3 December 2009, the Company and the Placing Agent entered into the Placing Agreement

pursuant to which the Placing Agent agreed to place, on a best effort basis over a period from (and

excluding) the date of the satisfaction of the conditions precedent to the Placing Agreement to (and

including) the date falling on the 120th trading day thereafter, the Convertible Bonds up to an aggregate

principal amount of HK$300 million upon the Capital Reorganisation becoming effective.

On 8 December 2009, the Company further announced that it proposed to make the Repurchase

Offer (subject to fulfillment of certain conditions precedent) to repurchase the Notes at a price payable

in cash equal to 80% of the outstanding principal amount of the Notes tendered on acceptance of the

Repurchase Offer.

On 23 December 2009, due to the exercise of 50 Warrants by a Warrant holder to subscribe for

50 Shares, the issued share capital of the Company was increased from HK$109,198,449.35 divided into

10,919,844,935 Shares to HK$109,198,449.85 divided into 10,919,844,985 Shares.

The purpose of this circular is to provide you with, amongst other matters, (i) further information

regarding the details of the Capital Reorganisation, the Rights Issue, the Placing and the Repurchase

Offer; (ii) a letter of advice from Guangdong Securities to the Independent Board Committee and the

Independent Shareholders in relation to the Rights Issue and the Repurchase Offer; (iii) a letter of

recommendation from the Independent Board Committee to the Independent Shareholders in relation to

the Rights Issue and the Repurchase Offer; and (iv) a notice convening the SGM.

PROPOSED CAPITAL REORGANISATION

The Company intends to put forward a proposal to the Shareholders to effect the Capital

Reorganisation which involves:

(i) the consolidation of every 20 issued Existing Shares of HK$0.01 each into 1 issued

Consolidated Share of HK$0.20 each;

(ii) the reduction of issued share capital whereby the par value of each issued Consolidated Share

will be reduced from HK$0.20 to HK$0.01 by canceling HK$0.19 of the paid-up capital on

each issued Consolidated Share;


– 12 –

(iii) the transfer of the credit arising from the Capital Reduction to the contributed surplus

account of the Company; and

(iv) the application of the contributed surplus account of the Company to offset part of the

amount of the Accumulated Losses as permitted by the laws of Bermuda and the Bye-Laws.

Effects of the Capital Reorganisation

As at the Latest Practicable Date, the authorised share capital of the Existing Shares of the

Company is HK$1,500,000,000 divided into 150,000,000,000 Existing Shares of HK$0.01 each, of which

10,919,844,985 Existing Shares have been issued and are fully paid. Assuming that no further Shares are

issued or repurchased between the Latest Practicable Date and the date of the SGM, immediately upon

the Capital Reorganisation becoming effective, the authorised share capital of the Adjusted Shares of

the Company will become HK$1,500,000,000 divided into 150,000,000,000 Shares of HK$0.01 each, of

which 545,992,249 Adjusted Shares will be in issue.

Based on 10,919,844,985 Existing Shares in issue as at the Latest Practicable Date, a credit of

approximately HK$103,738,527 will arise as a result of the Capital Reduction and will be transferred to

the contributed surplus account of the Company and applied to offset against part of the amount of the

Accumulated Losses as permitted by the laws of Bermuda and the Bye-Laws.

For reference, as set out in the audited financial statements of the Company for the year ended

31 December 2008, the amount of the issued share capital of the Company, accumulated losses of the

Company and contributed surplus account of the Company were approximately HK$91,198,000 (after the

placing of new Shares as at 4 August 2009: HK$109,198,000), HK$347,053,000 and HK$780,549,000

respectively. For illustration purposes, the effects of the Capital Reduction on the issued capital,

contributed surplus and accumulated losses of the Company are summarised in the following table:

Issued share capital

(as at the Latest

Practicable Date)

Contributed surplus

(as at 31 December

2008)

Accumulated Losses

(as at 31 December

2008)HK$’000 HK$’000 HK$’000

Before Capital Reduction 109,198 780,549 (347,053)

Capital Reduction (103,738) 103,738 –

Offset Accumulated Losses – (103,738) 103,738

After Capital Reduction 5,460 780,549 (243,315)

Other than the relevant expenses incurred, the implementation of the Capital Reorganisation

will have no effect on the consolidated net asset value of the Group, nor will it alter the underlying

assets, business, operations, management or financial position of the Company or the interests of the

Shareholders as a whole.

The Capital Reorganisation will not involve any diminution of any liability in respect of any unpaid

capital of the Company or the repayment to the Shareholders of any unpaid capital of the Company nor

will it result in any change in the relative rights of the Shareholders.


– 13 –

Reasons for the Capital Reorganisation

The Board considers that (i) the Capital Reorganisation will give greater flexibility to the Company

to raise funds through the issue of new Adjusted Shares in the future since the Company is not permitted

to issue new Shares below their nominal value under the laws of Bermuda and its Bye-Laws; (ii) the

Share Consolidation will reduce the transaction costs for dealing in the Shares, including those fees

which are charged with reference to the number of board lots; and (iii) the elimination of the Company’s

Accumulated Losses will allow greater flexibility for the Company to pay dividends in the future.

As such, the Board is of the view that the Capital Reorganisation is in the interests of the Company

and the Shareholders as a whole.

Conditions of the Capital Reorganisation

The Capital Reorganisation (which will be effected in accordance with the Bye-Laws and the

Companies Act) is conditional upon:

(i) the passing of the necessary special resolution(s) on a vote taken by way of poll at the SGM

to approve the Capital Reorganisation by the Shareholders;

(ii) the Listing Committee of the Stock Exchange granting the listing of, and permission to deal

in, the Adjusted Shares in issue arising from the Capital Reorganisation; and

(iii) the compliance with the relevant procedures and requirements under the Listing Rules and

the requirements of section 46(2) of the Companies Act to effect the Capital Reorganisation,

including (i) publication of a notice in relation to the Capital Reorganisation in an appointed

newspaper in Bermuda on a date not more than thirty days and not less than fifteen days

before the date on which the Capital Reorganisation is to take effect; and (ii) that on the date

of the Capital Reorganisation is to be effected, there are no reasonable grounds for believing

that the Company is, or after the Capital Reorganisation, would be unable to pay its liabilities

as they become due.

Subject to the fulfillment of the conditions of the Capital Reorganisation, the effective date of the

Capital Reorganisation is expected to be on Tuesday, 2 February 2010.

Listing and dealings

Application will be made to the Listing Committee of the Stock Exchange for the granting of the

listing of, and permission to deal in, the Adjusted Shares arising from the Capital Reorganisation.

The Adjusted Shares will be identical in all respects and rank pari passu in all respects with each

other as to all future dividends and distributions which are declared, made or paid. Subject to the granting

of the listing of, and permission to deal in, the Adjusted Shares on the Stock Exchange, the Adjusted

Shares will be accepted as eligible securities by HKSCC for deposit, clearance and settlement in CCASS

with effect from the commencement date of dealings in the Adjusted Shares on the Stock Exchange or

such other date as determined by HKSCC. Settlement of transactions between participants of the Stock

Exchange on any trading day is required to take place in CCASS on the second trading day thereafter. All

activities under CCASS are subject to the General Rules of CCASS and CCASS Operational Procedures in

effect from time to time.


– 14 –

Fractional shares and odd lot trading arrangements

Fractional Adjusted Shares will not be issued by the Company to the Shareholders. Any fractional

entitlements of the Adjusted Shares will be aggregated and sold for the benefit of the Company.

In order to facilitate the trading of odd lots (if any) of the Adjusted Shares arising from the Capital

Reorganisation, the Company has procured Emperor to stand in the market to provide matching service

for the odd lots of the Adjusted Shares at the relevant market price per Adjusted Share for the period from

Thursday, 18 February 2010 to Wednesday, 10 March 2010 (both dates inclusive). Holders of odd lots

of the Adjusted Shares should note that successful matching of the sale and purchase of odd lots of the

Adjusted Shares is not guaranteed. The Shareholders who wish to take advantage of this matching service

either to dispose of their odd lots Shares or to top up to board lots of 10,000 Adjusted Shares, may contact

Mr. Liu Shing Hoi of Emperor on 23rd to 24th Floors, Emperor Group Centre, 288 Hennessy Road, Hong

Kong at telephone number (852) 2836 2530. Any Shareholder, who is in any doubt about the odd lot

arrangement, is recommended to consult his/her/its own professional advisers.

Trading arrangement for the Adjusted Shares in new board lots

Subject to the Capital Reorganisation becoming effective, the arrangements proposed for dealings

in the Adjusted Shares are expected to be as follows:

(i) from Tuesday, 2 February 2010, the original counter for trading in the Existing Shares in

board lots of 30,000 Existing Shares will be temporarily closed and a temporary counter

for trading in the Adjusted Shares in board lots of 1,500 Adjusted Shares will be set up and

opened;

(ii) with effect from Thursday, 18 February 2010, the original counter for trading in the Adjusted

Shares will be re-opened for trading the Adjusted Shares in board lots of 10,000 Adjusted

Shares;

(iii) during the period from Thursday, 18 February 2010 to Wednesday, 10 March 2010 (both

dates inclusive), there will be parallel trading at the above two counters; and

(iv) the temporary counter for trading in the Adjusted Shares in board lots of 1,500 Adjusted

Shares will be removed after the close of trading at 4:00 p.m. on Wednesday, 10 March

2010. Thereafter, trading will only be in board lots of 10,000 Adjusted Shares with new

share certificates and the existing share certificates for the Existing Shares will cease to be

marketable and will not be acceptable for dealing and settlement purposes. However, such

certificates will remain effective as documents of title on the basis of 20 Existing Shares for

1 Adjusted Share.

Free exchange of Share certificates

Subject to the Capital Reorganisation becoming effective, the Shareholders may submit existing

certificates for the Existing Shares in board lot of 30,000 Existing Shares, to the Registrar for exchange

from Tuesday, 2 February 2010 to Friday, 12 March 2010 (both dates inclusive), at the expense of the

Company for certificates of the Adjusted Shares in board lot of 10,000 Adjusted Shares. Thereafter,

certificates for the Existing Shares will be accepted for exchange only on payment of a fee of HK$2.50 (or

such higher amount as may from time to time be allowed by the Stock Exchange) for each share certificate

of the Existing Shares cancelled or each new share certificate issued for the Adjusted Shares, whichever

number of certificates cancelled/issued is higher. The existing certificates will be valid for trading and


– 15 –

settlement up to 4:00 p.m. on Wednesday, 10 March 2010, being the latest time for trading in board lot

of 1,500 Adjusted Shares in the form of existing certificates (or such other date which may be announced

by the Company) and will continue to be good evidence of legal title after the Capital Reorganisation has

become effective and may be exchanged for certificates of the Adjusted Shares at any time in accordance

with the foregoing.

CHANGE OF BOARD LOT SIZE

At present, the Existing Shares are traded in board lots of 30,000. The Board proposes to change

the board lot size for trading of the Adjusted Shares to 10,000 upon the Capital Reorganisation becoming

effective.

Based on the closing price of the Existing Shares of HK$0.042 as at the Last Trading Day and the

existing board lot size of 30,000 Existing Shares, the prevailing board lot value is HK$1,260 (equivalent

to HK$25,200 upon the Capital Reorganisation becoming effective). On the basis of the aforesaid closing

price and the new board lot size of 10,000 Adjusted Shares, the new board lot value would be HK$8,400.

The change in board lot size will result in the Adjusted Shares being traded in a more reasonable board lot

size and value.

PROPOSED RIGHTS ISSUE

The Rights Issue is proposed to take place upon the Capital Reorganisation and change of board lot

size becoming effective.

Issue statistics

Basis of the Rights Issue : Five (5) Rights Shares for every Adjusted Share held on the

Record Date

Subscription Price : HK$0.15 per Rights Share

Number of the Existing Shares

in issue as at the Latest

Practicable Date

: 10,919,844,985 Existing Shares

Number of the Adjusted Shares

in issue upon the Capital

Reorganisation becoming

effective

: Not less than 545,992,249 Adjusted Shares (assuming

that no further Shares are issued or repurchased between

the Latest Practicable Date and the Record Date) and not

more than 731,585,902 Adjusted Shares (assuming all

rights attaching to the outstanding Warrants and Notes are

exercised on or before the Record Date)

Number of the Rights Shares : Not less than 2,729,961,245 Rights Shares and not more

than 3,657,929,510 Rights Shares

As at the Latest Practicable Date, there are outstanding Notes with principal amount of

HK$640 million convertible into 1,887,905,604 Shares upon exercise in full at the conversion price of

HK$0.339 per Share and outstanding Warrants granted which entitle the holders thereof to subscribe for

1,823,967,497 Shares in full at the subscription price of HK$0.091 per Share.

Save for the outstanding Notes and Warrants, the Company has no derivatives, options, warrants and

conversion rights or other similar rights which are convertible or exchangeable into Shares as at the Latest

Practicable Date.


– 16 –

Qualifying Shareholders

The Company will offer the Rights Shares for subscription to the Qualifying Shareholders only.

The Prospectus will be sent to the Excluded Overseas Shareholders for information only.

A Qualifying Shareholder must at the close of business on the Record Date:

1. be registered as a member of the Company; and

2. not be an Excluded Overseas Shareholder.

In order to be registered as members of the Company on the Record Date and to qualify for the

Rights Issue, the Shareholders must lodge any transfer of the Shares (together with the relevant share

certificates) with the Company’s branch share registrar in Hong Kong by 4:30 p.m. on Thursday, 4

February 2010.

The branch share registrar of the Company in Hong Kong is:

Tricor Secretaries Limited

26/F., Tesbury Centre

28 Queen’s Road East

Wanchai, Hong Kong

Closure of register of members

The register of members of the Company will be closed from Friday, 5 February 2010 to Tuesday, 9

February 2010 (both dates inclusive). No transfer of Shares will be registered during this period.

Subscription Price

HK$0.15 per Rights Share payable in full by a Qualifying Shareholder upon acceptance of the

provisional allotment of the Rights Shares under the Rights Issue or application for excess Rights Shares

or when a renouncee of any provisional allotment of the Rights Shares or a transferee of nil-paid Rights

Shares applies for the Rights Shares.

The Subscription Price represents:

1. a discount of approximately 82.14% to the adjusted closing price of HK$0.84 per Adjusted

Share based on the closing price of HK$0.042 per Existing Share as quoted on the Stock

Exchange on the Last Trading Day;

2. a discount of approximately 82.06% to the adjusted average closing price of approximately

HK$0.836 per Adjusted Share for the last five trading days up to and including the Last

Trading Day;

3. a discount of approximately 43.40% to the theoretical ex-rights price of HK$0.265 per

Adjusted Share based on the closing price as quoted on the Stock Exchange on the Last

Trading Day; and



Exchange on the Latest Practicable Date.


– 17 –

The Subscription Price was arrived at after arm’s length negotiation between the Company and

the Underwriter with reference to the market price of the Shares under the prevailing market conditions.

The Directors (excluding the independent non-executive Directors who will give their views on the

Rights Issue after taking into account the advice of the independent financial adviser) consider that the

discount of the Subscription Price would encourage the Shareholders to participate in the Rights Issue and

accordingly to maintain their shareholdings in the Company and participate in the future growth of the

Group and the terms of the Rights Issue (including the terms of the Underwriting Agreement) are fair and

reasonable and in the best interest of the Group and the Shareholders as a whole.

Basis of provisional allotments

Five (5) Rights Shares (in nil-paid form) for every Adjusted Share held by the Qualifying

Shareholders as at the close of business on the Record Date. The Rights Shares (in nil-paid form) will be

traded in board lots of 10,000.

Status of the Rights Shares

The Rights Shares will rank pari passu in all respects with the Adjusted Shares in issue on the date

of allotment and issue of the fully-paid Rights Shares. Holders of the fully-paid Rights Shares (when

allotted, issued and fully paid) will be entitled to receive all future dividends and distributions which are

declared, made or paid on or after the date of allotment and issue of the Rights Shares. Dealings in the

Rights Shares will be subject to payment of stamp duty in Hong Kong.

Certificates of the Rights Shares

Subject to the conditions of the Rights Issue being fulfilled, certificates for all fully-paid Rights

Shares are expected to be posted by Monday, 8 March 2010 to those Shareholders who have validly

applied and paid for Rights Shares.

Rights of Overseas Shareholders

The Prospectus Documents are not intended to be registered under the applicable securities

legislation of any jurisdiction other than Hong Kong and Bermuda.

According to the register of members of the Company as at the Latest Practicable Date, there

were 6 Overseas Shareholders with registered addresses which were outside Hong Kong and being in the

British Virgin Islands, Macau, Singapore and the PRC. As such, the Directors have, in compliance with

Rule 13.36(2)(a) of the Listing Rules, made enquiries regarding the legal restrictions under the laws of the

relevant place and the requirements of the relevant regulatory body or stock exchange.

Based on the results of the enquiries made with qualified lawyers of these jurisdictions, the

Directors have been advised that it would be lawful for the Company to offer the Rights Shares to the

Shareholders whose registered addresses are in the British Virgin Islands, Macau, Singapore and the PRC

even though the Prospectus Documents will not be registered in these jurisdictions. Therefore, subject

to the Rights Issue having been approved by the Independent Shareholders at the SGM, a copy of the

Prospectus Documents containing details of the Rights Issue will be sent to such Overseas Shareholders.

It is the responsibility of any person (including but without limitation to nominee, agent and

trustee) receiving a copy of the Prospectus Documents outside Hong Kong and wishing to take up the

Rights Shares under the Rights Issue to satisfy himself as to the full observance of the laws of the relevant

territory including the obtaining of any governmental or other consents for observing any other formalities

which may be required in such territory or jurisdiction, and to pay any taxes, duties and other amounts

required to be paid in such territory or jurisdiction in connection therewith. Any acceptance by any person

will be deemed to constitute a representation and warranty from such person to the Company that these

local laws and requirements have been complied with. Shareholders should consult their professional

advisers if in any doubt.


– 18 –

Fractions of the Rights Shares

The Company will not provisionally allot fractions of the Rights Shares in nil-paid form. All

fractions of the Rights Shares will be aggregated and all nil-paid Rights Shares arising from such

aggregation will be sold in the market and, if a premium (net of expenses) can be achieved, the Company

will keep the net proceeds for its own benefit. Any unsold fractions of the Rights Shares will be made

available for excess application.

Application for excess Rights Shares

The Qualifying Shareholders may apply by using forms of application for excess Rights Shares

for any entitlement of the Excluded Overseas Shareholders and any Rights Shares not taken up by the

Qualifying Shareholders.

The Company will allocate excess Rights Shares to the Qualifying Shareholders based on a sliding

scale with reference to the number of the excess Rights Shares applied by them (i.e. the Qualifying

Shareholders applying for smaller number of the Rights Shares are allocated with a higher percentage of

successful application but will receive less number of Rights Shares; whereas the Qualifying Shareholders

applying for larger number of the Rights Shares are allocated with a smaller percentage of successful

application but will receive higher number of the Rights Shares). However, no preference will be given to

topping up odd lots to whole board lots.

The Qualifying Shareholders whose Shares are held by a nominee company should note that for

the purposes of the principles above, the Board will regard the nominee company as a single Shareholder

according to the register of members of the Company. Accordingly, the Qualifying Shareholders whose

Shares are registered in the name of the nominee companies should note that the aforesaid arrangement

in relation to the allocation of the excess Rights Shares based on a sliding scale will not be extended to

beneficial owners individually.

Investors whose Shares are held by their nominee(s) and who would like to have their names

registered on the register of members of the Company, must lodge all necessary documents with the

Registrar for completion of the relevant registration by 4:30 p.m. on Thursday, 4 February 2010.

Share certificates for the Rights Shares and refund cheques

Subject to the fulfillment of the conditions of the Rights Issue, share certificates for all Rights

Shares are expected to be posted to the Qualifying Shareholders who have accepted and applied for (where

appropriate), and paid for the Rights Shares on or before Monday, 8 March 2010 by ordinary post at their

own risk. Refund cheques in respect of wholly or partially unsuccessful applications for excess Rights

Shares are also expected to be posted on Monday, 8 March 2010 by ordinary post at their own risk.

The first day of dealings in the Rights Shares in their fully-paid form is expected to commence on

Wednesday, 10 March 2010.

Application for listing

The Company will apply to the Listing Committee of the Stock Exchange for the listing of, and

permission to deal in, the Rights Shares in both nil-paid and fully-paid forms to be allotted and issued

pursuant to the Rights Issue. No part of the securities of the Company is listed or dealt in or on which

listing or permission to deal is being or is proposed to be sought on any other stock exchange.


– 19 –

Subject to the granting of the listing of, and permission to deal in, the Rights Shares in both nil-

paid and fully-paid forms on the Stock Exchange, the Rights Shares in both nil-paid and fully-paid forms

will be accepted as eligible securities by HKSCC for deposit, clearance and settlement in CCASS with

effect from the commencement date of dealings in the Rights Shares in both nil-paid and fully-paid forms

on the Stock Exchange or such other date as determined by HKSCC. Settlement of transactions between

participants of the Stock Exchange on any trading day is required to take place in CCASS on the second

trading day thereafter. All activities under CCASS are subject to the General Rules of CCASS and CCASS

Operational Procedures in effect from time to time.

Dealings in the Rights Shares in both nil-paid and fully-paid forms which are registered in the

branch register of members of the Company in Hong Kong will be subject to the payment of stamp duty,

Stock Exchange trading fee, transaction levy, investor compensation levy or any other applicable fees and

charges in Hong Kong.

Irrevocable Undertakings

As at the Latest Practicable Date, (i) CEL and certain CEL’s subsidiaries, hold an aggregate of

1,170,208,488 Shares, representing approximately 10.72% of the issued share capital of the Company, a

principal amount of HK$63 million of the Notes convertible into 185,840,707 Shares upon exercise in full

at the conversion price of HK$0.339 per Share, and 233,511,481 Warrants of the Company, conferring the

right to subscribe for 233,511,481 Shares at an exercise price of HK$0.091 per Share; and (ii) AWL holds

1,561,120,000 Shares, representing approximately 14.30% of the issued share capital of the Company, a

principal amount of HK$114.2 million of the Notes convertible into 336,873,156 Shares upon exercise in

full at the conversion price of HK$0.339 per Share, and 305,846,000 Warrants of the Company, conferring

the right to subscribe for 305,846,000 Shares at an exercise price of HK$0.091 per Share.

On 3 December 2009, each of CEL, certain CEL’s subsidiaries and AWL has irrevocably

undertaken to the Company and the Underwriter to procure that the Shares beneficially owned by it will

remain registered in its name or its nominee’s name at the close of business on the Record Date as they

were on 3 December 2009 and that it will subscribe or procure subscription in full for all the Rights

Shares which will constitute the provisional allotment of the Rights Shares in respect of the Adjusted

Shares beneficially owned by it as at the close of business on the Record Date on and subject to the terms

and conditions of the Rights Issue, representing (a) in the case of CEL and certain CEL’s subsidiaries,

in aggregate, not less than 292,552,120 Rights Shares and not more than 397,390,165 Rights Shares; and

(b) in the case of AWL, not less than 390,280,000 Rights Shares and not more than 550,959,785 Rights

Shares.

UNDERWRITING AGREEMENT

Date : 3 December 2009 (as varied and supplemented by the first

supplemental agreement dated 11 December 2009 and the

second supplemental agreement dated 23 December 2009)

Underwriter : Emperor

Emperor is an Independent Third Party and is not a

connected person (as defined in the Listing Rules) of the

Company. Emperor does not have any beneficial interests in

the Existing Shares.


– 20 –

Number of the Rights Shares

underwritten

: The Underwriter has agreed to fully underwrite not

less than 2,047,129,110 Rights Shares and not more

than 2,714,004,335 Rights Shares not taken up by the

Shareholders pursuant to the Underwriting Agreement.

Commission : 2% of the aggregate Subscription Price of the maximum

number of the Rights Shares underwri t ten by the

Underwriter

The Rights Issue is fully underwritten. The executive Directors are of the opinion that the terms of

the Underwriting Agreement and the amount of commission given to the Underwriter are fair as compared

to the market practice and commercially reasonable as agreed between the parties of the Underwriting

Agreement.

Termination of the Underwriting Agreement

The Underwriter may terminate the arrangements set out in the Underwriting Agreement by notice

in writing to the Company at any time prior to 4:00 p.m. on the Settlement Date if there occurs:–

(a) an introduction of any new law or regulation or any change in existing law or regulation (or

the judicial interpretation thereof) or the occurrence of any local, national or international

event or change (whether or not forming part of series of events or changes occurring or

continuing before, and/or after the date hereof) of a political, military, financial, economic or

currency (including a change in the system under which the value of the Hong Kong currency

is linked to the currency of the USA) or other nature (whether or not ejusdem generis with

any of the foregoing) or of the nature of any local, national or international outbreak or

escalation of hostilities or armed conflict, or affecting the local securities markets which

may, in the reasonable opinion of the Underwriter materially and adversely affect the

business or the financial or trading position or prospects of the Group as a whole; or

(b) this circular or the Prospectus when published contain information (either as to business

prospects or the condition of the Group or as to its compliance with any laws or the Listing

Rules or any applicable regulations) which has not prior to the date thereof been publicly

announced or published by the Company and which may, in the reasonable opinion of the

Underwriter, be material to the Group as a whole and is likely to affect the success of the

Rights Issue or might cause a prudent investor not to accept the Rights Shares offered to it;

or

(c) any event of force majeure including, without limiting the generality thereof, any act of God,

war, riot, public disorder, civil commotion, fire, flood, explosion, epidemic, terrorism, strike

or lock-out in Hong Kong which may in the reasonable opinion of the Underwriter materially

and adversely affect the business or the financial or trading position of the Group as a whole.


(a) any material breach of or omission to observe any of the obligations or undertakings

expressed to be assumed by it under the Underwriting Agreement which breach or omission

will have a material and adverse effect on the business, financial or trading position of the

Company; or


– 21 –

(b) any such untrue representation or warranty thereunder represents or is likely to represent

a material adverse change in the business, financial or trading position or prospects of the

Group taken as a whole or is otherwise likely to have a materially prejudicial effect on the

Rights Issue; or

(c) fails promptly to send out any announcement or circular (after the despatch of this circular

or the Prospectus Documents), in such manner (and as appropriate with such contents) as

the Underwriter may reasonably request for the purpose of preventing the creation of a false

market in the securities of the Company,

the Underwriter shall be entitled (but not bound) by notice in writing to the Company to elect

to treat such matter or event as releasing and discharging it from its obligations under the


Conditions of the Rights Issue

The Rights Issue is conditional upon, among other things, the following conditions being fulfilled:

(i) the passing of the necessary resolution(s) on a vote taken by way of poll at the SGM to

approve (i) the Capital Reorganisation by the Shareholders; and (ii) the Rights Issue by the

Independent Shareholders;

(ii) the signing by or on behalf of all of the Directors on or before the Posting Date of two duly

certified copies of each of the Prospectus Documents;

(iii) the delivery to the Stock Exchange, filing and registration with the Registrars of Companies

in Hong Kong on or prior to the Posting Date one duly certified copy of each of the

Prospectus Documents in compliance with the Companies Ordinance (Chapter 32 of the

Laws of Hong Kong) and filing of each of the Prospectus Documents with the Registrar of

Companies in Bermuda on, prior to or as soon as reasonably practicable after, the Posting

Date in accordance with the Companies Act and otherwise complying with the Listing Rules;

(iv) the posting of the Prospectus Documents to the Qualifying Shareholders on or before the

Posting Date;

(v) the Listing Committee of the Stock Exchange granting the listing of, and permission to deal

in the Rights Shares (in their nil-paid and fully-paid forms);

(vi) the delivery by the Company to the Underwriter all the Irrevocable Undertakings;

(vii) the delivery on or before the Posting Date of one duly certified copy of each of the

Prospectus Documents to the Underwriter;

(viii) the Capital Reorganisation having become effective; and

(ix) compliance by the Company with all the obligations under relevant provisions in the

Underwriting Agreement,

on or before the Settlement Date. If the above conditions have not been fulfilled on or before the

Settlement Date, the Rights Issue will not proceed and none of the parties of the Underwriting

Agreement shall have any claims against the other party, save for any antecedent breaches of the



– 22 –

POSSIBLE ADJUSTMENTS TO THE NOTES AND THE WARRANTS

The completion of the Capital Reorganisation and the Rights Issue may lead to adjustments to the

exercise price and/or the number of Shares or Adjusted Shares (as the case may be) to be issued upon

conversion of the Notes and exercise of the Warrants. The Company will notify by way of announcement

the Noteholders and the holders of the Warrants regarding adjustments to be made (if any) pursuant to the

terms of the Notes and the Warrants and such adjustments will be certified by an approved merchant bank

(as and when appropriate).

PROPOSED PLACING OF CONVERTIBLE BONDS UNDER SPECIFIC MANDATE

On 3 December 2009, the Company and the Placing Agent entered into the Placing Agreement

pursuant to which the Placing Agent agreed to place, on a best effort basis, the Convertible Bonds up to an

aggregate principal amount of HK$300 million upon the Capital Reorganisation becoming effective.

THE PLACING AGREEMENT

Date

3 December 2009 (as varied and supplemented by the supplemental agreement dated 7 January

2010)

Issuer

The Company

Placing Agent

Emperor

To the best of the Directors’ knowledge, information and belief having made all reasonable

enquiries, the Placing Agent and its holding company, Emperor Capital Group Limited (Stock Code: 717)

are third parties independent of and not connected with the Company and its connected persons.

Placees

The Convertible Bonds shall be offered to not less than six Subscribers which are independent

institutional or private investors procured by the Placing Agent. The Subscribers and whose ultimate

beneficial owners shall be independent of, and not connected with, the Company and its connected

persons.

Convertible Bonds to be placed

The Placing with principal amount of up to HK$300 million, which will be placed by the Placing

Agent in up to 6 separate tranches with principal amount of HK$50 million each or an integral multiple

thereof.


– 23 –

Placing Commission

2% of the aggregate principal amount of the Placing issued to the Subscribers under each tranche of

the Placing.

Conditions of the Placing

Completion of the Placing Agreement is conditional upon:


approve the issue of the Convertible Bonds and the Conversion Shares, and the Capital

Reorganisation by the Shareholders; and

(ii) the Capital Reorganisation becoming effective.

If the conditions precedent above are not fulfilled on or before 28 February 2010 (or such later

date as may be agreed between the Company and the Placing Agent), the Placing Agreement shall

lapse and become null and void and the parties thereto will be released from all obligations under the

Placing Agreement, save for liabilities arising out of any antecedent breaches of the terms of the Placing

Agreement.

In addition to the fulfillment of the conditions precedent to the Placing Agreement, completion of

each tranche of the Placing shall be conditional upon:

(i) the Listing Committee of the Stock Exchange having granted (either unconditionally or

subject only to conditions to which the Company does not reasonably object) the listing of,

and permission to deal in, the Conversion Shares in respect of such tranche of the Placing;

(ii) the Company not having received any objection from the Stock Exchange to the issue of such

tranche of the Placing; and

(iii) (except for the last tranche of the Placing) the aggregate principal amount of the Placing to

be issued pursuant to such tranche is HK$50 million or an integral multiple thereof.

If the conditions for each relevant tranche of the Placing above are not fulfilled within 14 days from

the date of the notice to be given by the Company to the Placing Agent confirming that it has no objection

to the issue of all or any part of that tranche to the Subscribers, then the obligations of respective parties in

respect of the issue of that tranche of the Placing shall lapse.

Completion

Completion of the Placing will take place on the third Business Day following the day on which the

conditions for such tranche of the Placing set out in the Placing Agreement are satisfied or such later date

as may be agreed between the Company and the Placing Agent.

Completion of the Placing is subject to the satisfaction of the conditions precedent in the Placing Agreement. As the Placing may or may not proceed, Shareholders and potential investors are advised to exercise caution when dealing in the Shares.


– 24 –

PRINCIPAL TERMS OF THE CONVERTIBLE BONDS

The principal terms of the Convertible Bonds are summarised as below:

Principal amount : Up to an aggregate amount of HK$300 million

Denomination : HK$50 million each

Maturity date : The fifth anniversary from the date of issue of the

Convertible Bonds

Interest : The Convertible Bonds will bear interest on the outstanding

principal amount thereof from the date of issue at a rate

equal to 2% per annum.

Conversion rights : The Bondholders will have the right, at any time during

the period commencing on and excluding the date of first

issue of the Convertible Bonds up to and including the date

which is seven days prior to the maturity date, to convert

the whole or any part of the principal amount outstanding

of the Convertible Bonds (in amounts of not less than

a whole multiple of HK$1 million on each conversion

or integral multiples thereof unless the amount of the

outstanding Convertible Bonds is less than HK$1 million

in which case the whole (but not part only) of that amount

shall be convertible) into the Conversion Shares at the

Conversion Price (subject to the adjustments).

The Bondholders intending to convert are required to

provide written confirmation to the Company, among other

things, (i) that it will comply with the Takeovers Code in

respect of any acquisition of voting rights in the Company

upon the issue to it of the Conversion Shares; and (ii) on

the total number of the Shares the relevant Bondholders and

its associate(s) will beneficially hold immediately after the

issue of the Conversion Shares. The Company shall not be

obligated to issue any Conversion Shares if such conversion

shall render the Shares held in public hands being less than

the minimum public float required under the Listing Rules.

Conversion Price :The initial Conversion Price will be HK$0.18 per Conversion

Share, subject to customary adjustment provisions in

accordance with the terms of the Convertible Bonds for such

events as the subdivision or consolidation of Shares, bonus

issues, rights issues, dividend payments and distributions and

other usual dilutive events.

Voting :The Bondholders will not be entitled to attend or vote at

any meetings of the Company by reason only of them being

the Bondholders.


– 25 –

Transferability :The Convertible Bonds may be transferred by the

Bondholders to any person except that prior written consent

of the Company is required for any assignment or transfer

to a connected person of the Company. Any transfer of

the Convertible Bonds may be in respect of the whole or

any part of the principal amount of the Convertible Bonds

(which should be in at least HK$1 million or in the integral

multiples thereof). The Company or any of its subsidiaries

may at any time and from time to time repurchase

the Convertible Bonds at any prices as may be agreed

between the Company or its subsidiaries and the relevant

Bondholders.

Repurchase : The Company or any of its subsidiaries may at any time

and from time to time repurchase the Convertible Bonds at

any prices as may be agreed between the Company or such

subsidiary and the relevant Bondholders.

Redemption : Upon presentation of the original of the Convertible Bonds

during normal business hours, the Company shall, unless

previously converted or purchased or redeemed, redeem at

the redemption amount which is 100% of the outstanding

principal amount of the Convertible Bonds then outstanding

on the maturity date.

Listing : No application will be made for the listing of the

Convertible Bonds on the Stock Exchange or any other

exchange. The Company will apply to the Stock Exchange

for the listing of and permission to deal in the Conversion

Shares.

The Conversion Price of HK$0.18 per Conversion Share represents:



Exchange on the Last Trading Day;

2. a discount of approximately 78.47% to the adjusted average closing price of approximately

HK$0.836 per Adjusted Share for the last five trading days up to and including the Last

Trading Day;

3. a discount of approximately 32.08% to the theoretical ex-rights price of HK$0.265 per

Adjusted Share based on the closing price as quoted on the Stock Exchange on the Last

Trading Day; and



Exchange on the Latest Practicable Date.


– 26 –

The Conversion Price was determined with reference to the prevailing market price of the Shares

and was negotiated on an arm’s length basis between the Company and the Placing Agent. The Company

and the Placing Agent took into account (i) the Group’s business had been operating at a loss for the

financial year of 2008; (ii) the need of new capital for the Group’s business development; and (iii) after

taking into account the effects of the Rights Issue, the relative discount to market price will be lower

(at about 30% instead of around 78.5%) and therefore the Company and the Placing Agent came to the

view that the Conversion Price is set at a level necessary to attract the interest of the Subscribers. The

Directors (including the independent non-executive Directors) consider that the Conversion Price is fair

and reasonable based on the current market conditions and in the best interest of the Company and the


The Convertible Bonds carry the right to convert into the Conversion Shares at the Conversion Price

of HK$0.18 per Conversion Share (subject to adjustments). Assuming the conversion rights attaching

to the Convertible Bonds are exercised in full at the Conversion Price, up to 1,666,666,666 Conversion

Shares will fall to be issued to the Bondholders, representing approximately 15.26% of the issued capital

of the Company as at the Latest Practicable Date and approximately 27.52% of the adjusted issued share

capital of the Company as enlarged by the issue of the Conversion Shares and the Rights Shares after the

Capital Reorganisation.

The Conversion Shares will be issued under the specific mandate proposed to be sought from the

Shareholders by way of poll at the SGM. The Conversion Shares will rank pari passu in all respects with

the Shares in issue as at the date of conversion.

REASONS FOR THE RIGHTS ISSUE AND THE PLACING AND USE OF PROCEEDS

The Board considers that the Rights Issue will enable the Group to strengthen its capital base and to

enhance its financial position for future strategic investments as and when opportunities arise. The Board

is of the view that the Rights Issue will allow the Qualifying Shareholders to maintain their shareholding

in the Company and considers that fund raising through the Rights Issue is in the best interest of the

Company and the Shareholders as a whole. The Board has considered alternative fund raising methods

including bank financings. Given the banks’ current stringent lending policy, there was a lack of positive

response from financial institutions. The placing of the Convertible Bonds, which provides the lowest

cost of funding and certainty of repayment schedule, is the best alternative to the Company in the current

capital market situation and the terms of the Convertible Bonds are fair and reasonable and are in the

interests of the Company and the Shareholders as a whole.

The maximum estimated net proceeds from the Rights Issue will be approximately HK$535

million, which is intended to be used as to approximately (i) HK$350 million for repurchase of Notes;

(ii) HK$100 million towards funding the construction costs of the Tangula luxury trains and the Group’s

existing hotel development projects located in Hong Kong and the PRC; (iii) HK$50 million for further

acquisitions of 4-star rated business hotels and budget hotels in the PRC (as and when appropriate targets

for acquisition are identified in the future); and (iv) remaining amount for general working capital of the

Group for its travel and hotel operations. The minimum estimated net proceeds from the Rights Issue

will be approximately HK$399 million, which is intended to be used as to approximately (i) HK$350

million for repurchase of Notes (The Company will use its internal resources to fund the outstanding

amount for the repurchase of Notes. For reference, as per the unaudited management accounts of the

Group as at 31 December 2009, the cash and bank balances of the Group were approximately HK$330

million.); and (ii) remaining amount for general working capital of the Group for its travel and hotel

operations. The maximum estimated net proceeds from the Placing will be approximately HK$289

million, which is intended to be used as to approximately (i) HK$100 million for further acquisitions of

4-star rated business hotels and budget hotels in the PRC (as and when appropriate targets for acquisition

are identified in the future); (ii) HK$150 million towards funding the construction costs of the Tangula

luxury trains and the Group’s existing hotel development projects located in Hong Kong and the PRC; and

(iii) remaining amount for general working capital of the Group for its travel and hotel operations. The

proceeds from the Placing will not be used for the repurchase of Notes.

The net proceeds per Rights Share is expected to be approximately HK$0.146.


– 27 –

SHAREHOLDING STRUCTURE OF THE COMPANY

The shareholding structure of the Company before and after the Rights Issue and the Placing

(assuming no changes to the share capital of the Company or its shareholding structure in the interim

period specified) is as follows:

(i) assuming no exercise of the outstanding Warrants and Notes before the Record Date.

As at the Latest Practicable Date

Immediately after Capital Reorganisation

Immediately after the completion of

the Rights Issue (assuming all Shareholders have fully

subscribed for their entitlements under

the Rights Issue)


the Rights Issue (assuming no Shareholders subscribed for their entitlements under the Rights Issue except those

undertaken by AWL, CEL and certain CEL’s subsidiaries pursuant to

the Irrevocable Undertakings)


the Rights Issue and full Conversion of

the Convertible Bonds (assuming no Shareholders

subscribed for their entitlements under the

Rights Issue except those undertaken

by AWL, CEL and certain CEL’s

subsidiaries pursuant to the Irrevocable

Undertakings) (Note 5)

Number of

Existing Shares

% Number of

Adjusted Shares

% Number of

Adjusted Shares

% Number of

Adjusted Shares

% Number of

Adjusted Shares

%

AWL (Note 1) 1,561,120,000 14.30% 78,056,000 14.30% 468,336,000 14.30% 468,336,000 14.30% 468,336,000 9.48%

CEL and certain of its

subsidiaries (Note 2) 1,170,208,488 10.72% 58,510,424 10.72% 351,062,544 10.72% 351,062,544 10.72% 351,062,544 7.10%


(Note 3) 150,000 – 7,500 – 45,000 – 7,500 – 7,500 –

Underwriter (Note 4) – – – – – – 2,047,129,125 62.49% 2,047,129,125 41.42%

Public:

Bondholders – – – – – – – – 1,666,666,666 33.72%

Other Notes holders

(excluding those held by

AWL, CEL and certain

CEL’s subsidiaries) – – – – – – – – – –

Other Warrants holders



CEL’s subsidiaries) – – – – – – – – – –

Public Shareholders (Note 4) 8,188,366,497 74.98% 409,418,325 74.98% 2,456,509,950 74.98% 409,418,325 12.49% 409,418,325 8.28%

Total 10,919,844,985 100.00% 545,992,249 100.00% 3,275,953,494 100.00% 3,275,953,494 100.00% 4,942,620,160 100.00%

Notes:

1. As at the Latest Practicable Date, AWL holds 1,561,120,000 Existing Shares and is also interested in the

Warrants conferring rights for it to subscribe for 305,846,000 Existing Shares and subscribed the Notes in

the principal amount of HK$114.2 million convertible into a maximum of 336,873,156 Existing Shares.

AWL is indirectly wholly owned by ITC.

2. As at the Latest Practicable Date, Million Good Limited, Cosmos Regent Ltd. and Cyber Generation

Limited hold 106,697,405 Shares, 866,511,083 Shares and 192,000,000 Shares respectively and are wholly-

owned subsidiaries of CEL which also holds 5,000,000 Shares. CEL and certain CEL’s subsidiaries are

also interested in the Warrants conferring rights for them to subscribe for 233,511,481 Existing Shares and

subscribed the Notes in the principal amount of HK$63 million convertible into a maximum of 185,840,707

Existing Shares.


– 28 –

3. Mr. Kwok Ka Lap, Alva is an independent non-executive Director.

4. The Underwriter has informed the Company that it has sub-underwritten its underwriting obligations under

the Underwriting Agreement to sub-underwriters such that each of the Underwriter and the sub-underwriters

together with their respective parties acting in concert (as defined in the Takeovers Code) with any of them

will not own 30% or more voting rights in the Company immediately after completion of the Rights Issue.

The Underwriter has further confirmed to the Company that none of the Underwriter or the sub-underwriters

and their respective ultimate beneficial owners is a connected person of the Company. The Underwriter

shall and shall cause the sub-underwriters to procure independent placees to take up such number of the

Rights Shares as necessary to ensure that the public float requirements under Rule 8.08 of the Listing Rules

are complied with. The Directors confirm that the Company will ensure compliance with the public float

requirement under Rule 8.08 of the Listing Rules upon completion of the Rights Issue.

5. All the Convertible Bonds are assumed to convert at the conversion price of HK$0.18 per Adjusted Share.

6. The shareholding structure of the Company as at the Latest Practicable Date is based on the SFO register

maintained by the Company.

(ii) assuming the exercise of the outstanding Warrants and Notes in full before the Record Date.

As at the Latest Practicable Date

Immediately after Capital Reorganisation

(assuming the exercise of the outstanding Warrants and Notes in full before

the Record Date)


the Rights Issue (assuming all Shareholders have fully

subscribed for their entitlements under

the Rights Issue)


the Rights Issue (assuming no Shareholders subscribed for their entitlements under the Rights Issue except those

undertaken by AWL, CEL and certain CEL’s subsidiaries pursuant to

the Irrevocable Undertakings)


the Rights Issue and full Conversion of

the Convertible Bonds (assuming no Shareholders

subscribed for their entitlements under the

Rights Issue except those undertaken

by AWL, CEL and certain CEL’s

subsidiaries pursuant to the Irrevocable

Undertakings) (Note 7)

Number of

Existing Shares

% Number of

Adjusted Shares

% Number of

Adjusted Shares

% Number of

Adjusted Shares

% Number of

Adjusted Shares

%

AWL (Note 1) 1,561,120,000 14.30% 110,191,957 15.06% 661,151,742 15.06% 661,151,742 15.06% 661,151,742 10.92%


subsidiaries (Note 2) 1,170,208,488 10.72% 79,478,033 10.86% 476,868,198 10.86% 476,868,198 10.86% 476,868,198 7.87%


(Note 3) 150,000 – 7,500 – 45,000 – 7,500 – 7,500 –

Underwriter (Note 4) – – – – – – 2,709,579,560 61.73% 2,709,579,560 44.74%

Public:

Bondholders – – – – – – – – 1,666,666,666 27.52%

Other Notes holders



CEL’s subsidiaries)

(Note 5) – – 68,259,587 9.33% 409,557,522 9.33% 68,259,587 1.56% 68,259,587 1.13%

Other Warrants holders



CEL’s subsidiaries)

(Note 6) – – 64,230,500 8.78% 385,383,000 8.78% 64,230,500 1.46% 64,230,500 1.06%

Public Shareholders (Note 4) 8,188,366,497 74.98% 409,418,325 55.97% 2,456,509,950 55.97% 409,418,325 9.33% 409,418,325 6.76%

Total 10,919,844,985 100.00% 731,585,902 100.00% 4,389,515,412 100.00% 4,389,515,412 100.00% 6,056,182,078 100.00%


– 29 –

Notes:

1. As at the Latest Practicable Date, AWL holds 1,561,120,000 Existing Shares and is also interested in the

Warrants conferring rights for it to subscribe for 305,846,000 Existing Shares and subscribed the Notes in

the principal amount of HK$114.2 million convertible into a maximum of 336,873,156 Existing Shares.

AWL is indirectly wholly owned by ITC.


Limited hold 106,697,405 Shares, 866,511,083 Shares and 192,000,000 Shares respectively and are wholly-

owned subsidiaries of CEL which also holds 5,000,000 Shares. CEL and certain CEL’s subsidiaries are

also interested in the Warrants conferring rights for them to subscribe for 233,511,481 Existing Shares and

subscribed the Notes in the principal amount of HK$63 million convertible into a maximum of 185,840,707

Existing Shares.




together with their respective parties acting in concert (as defined in the Takeovers Code) will not own 30%

or more voting rights in the Company immediately after completion of the Rights Issue. The Underwriter

has further confirmed to the Company that none of the Underwriter or the sub-underwriters and their

respective ultimate beneficial owners is a connected person of the Company. The Underwriter shall and shall

cause the sub-underwriters to procure independent placees to take up such number of the Rights Shares as

necessary to ensure that the public float requirements under Rule 8.08 of the Listing Rules are complied

with. The Directors confirm that the Company will ensure compliance with the public float requirement

under Rule 8.08 of the Listing Rules upon completion of the Rights Issue.

5. As at the Latest Practicable Date, other Noteholders which are Independent Third Parties subscribed the

Notes in the principal amount of HK$462.8 million convertible into a maximum of 1,365,191,741 Existing

Shares.

6. As at the Latest Practicable Date, other Warrant holders which are Independent Third Parties are interested

in Warrants conferring rights for them to subscribe for 1,284,610,016 Existing Shares.

7. All the Convertible Bonds are assumed to convert at the conversion price of HK$0.18 per Adjusted Share.



EQUITY FUND RAISING ACTIVITIES IN THE PAST TWELVE MONTHS

Save as disclosed below, the Company has not conducted any fund raising activities in the past

twelve months before the Latest Practicable Date:

Date of announcement Event Net proceeds Intended use of proceeds

Actual use of proceeds up to the Latest Practicable Date

17 July 2009 Placing of

1,800,000,000 Shares

approximately

HK$61 million

to be used as general working

capital of the Group for its

travel and hotel operations

Used as intended


– 30 –

PROPOSED REPURCHASE OF NOTES

On 8 December 2009, the Company announced that it proposed to make a Repurchase Offer

(subject to certain conditions precedent) to repurchase the Notes at a price payable in cash equal to 80% of

the outstanding principal amount of the Notes. Certain details of the Repurchase Offer are set out below.

The Notes

On 27 March 2006, the Company announced that it had entered into eight conditional subscription

agreements in relation to the issue by the Company of the Notes. The Notes bear interest at 2% per annum,

convertible into new Shares at the initial conversion price of HK$0.79 per Share (subject to adjustments),

and mature on the fifth anniversary from the date of the issue of the Notes. Unless previously converted

or lapsed or redeemed by the Company, the Company must redeem the Notes on the maturity date at

the redemption amount which is 110% of the principal amount of the Notes outstanding. The Notes are

also, subject to certain restrictions, exchangeable into new shares of any company which is an affiliated

company or subsidiary of the Company that is to be listed on a stock exchange through an initial public

offering. The subscription was completed on 8 June 2006 and the Notes in a total principal amount of

HK$1,000 million were issued. Details of the Notes are set out in the Company’s announcement and

circular dated 27 March 2006 and 21 April 2006 respectively.

On 24 July 2009, the Company made a repurchase offer to the Notes at their face value by the issue

of the Shares at HK$0.035 per Share. On 16 November 2009, the Company announced that the repurchase

offer was lapsed since certain conditions precedent to the repurchase offer had not been fulfilled.

As at the Latest Practicable Date, the outstanding principal amount of the Notes is HK$640 million

in aggregate and the Notes will mature on 7 June 2011. Pursuant to the terms of the Notes, 1,887,905,604

new Shares will fall to be issued upon full conversion of the Notes at the prevailing conversion price of

HK$0.339 per Share (subject to adjustments). Subject to completion of the Rights Issue, adjustments to

the conversion price of the Notes may be required. Further announcement(s) will be made by the Company

in this regard.

Based on the register of the Noteholders as at the Latest Practicable Date, AWL, a wholly-owned

subsidiary of ITC, holds the Notes in principal amount of HK$114.2 million. AWL is also interested in

1,561,120,000 Existing Shares, representing approximately 14.30% of the existing issued share capital

of the Company as at the Latest Practicable Date. CEL holds the Notes in principal amount of HK$63

million. CEL and its wholly-owned subsidiaries together hold 1,170,208,488 Existing Shares, representing

approximately 10.72% of the existing issued share capital of the Company as at the Latest Practicable

Date.

As at the Latest Practicable Date, AWL, CEL and other six Noteholders have accepted in aggregate

HK$404.2 million outstanding principal amount of the Notes (representing 63.16% of the aggregate

principal amount of the Notes outstanding as at the Latest Practicable Date). For details of the Repurchase

Offer, please refer to the section headed “Material Contracts” in Appendix III to this circular.

The Noteholders who have accepted the Repurchase Offer have undertaken to the Company that

they will not, and will procure their respective associates not to exercise the voting rights in respect of

the Shares held by them as at the date of the SGM. As at the Latest Practicable Date, AWL and CEL and

their respective associates and one of the Noteholders’ beneficial owners who also hold Shares held in

aggregate 2,782,838,488 Existing Shares, accounting for approximately 25.48% of the total voting rights

exercisable will abstain from voting at the SGM. Save as disclosed above, to the best of the Directors’

knowledge, the other Noteholders who have accepted the Repurchase Offer and their respective associates

were third parties independent of the Company and its connected persons and did not hold any Share as at

the Latest Practicable Date.


– 31 –

Terms of the Repurchase Offer

The Company has made the Repurchase Offer (subject to the fulfillment of certain conditions

precedent described below) to repurchase the Notes at a price payable in cash equal to 80% of the

outstanding principal amount of the Notes which is HK$512 million in aggregate. Partial acceptance of the

Repurchase Offer (in HK$1 million or integral multiples thereof) by a Noteholder will be permitted. The

outstanding principal amount, the conversion Shares to be entitled and the amount of cash payable to the

major Noteholders are as follows:

Major Noteholders

Principal Amount

Outstanding

As at the Latest

Practicable Date, the total

number of conversion

Shares to be entitled

The amount ofcash payable to the Noteholders

under the Repurchase

Offer(HK$) (HK$)

Major Noteholder 1 200,000,000 589,970,501 160,000,000

AWL (Note) 114,200,000 336,873,156 91,360,000



CEL 63,000,000 185,840,707 50,400,000

Other 7 Noteholders 129,800,000 382,890,858 103,840,000

Total 640,000,000 1,887,905,604 512,000,000

Note: A Noteholder transferred a Note in the principal amount of HK$6 million to AWL on 15 December 2009.

The Company had sent offer letters in relation to the Repurchase Offer to the Noteholders on 10

December 2009, 15 December 2009 and 22 December 2009 respectively (as varied and supplemented

by side letters dated 23 December 2009 between the Company and each of the Noteholders who have

accepted the Repurchase Offer) and the acceptance period under the Repurchase Offer was ended at 4:00

p.m. on 23 December 2009. Further announcement was made by the Company dated 23 December 2009

in relation to the level of acceptance of the Repurchase Offer. The Company will send written notification

to the Noteholders within five Business Days after the fulfillment of the conditions precedent referred to

below. On the condition that the Registrar receives no later than 4:00 p.m. on the second Business Day

immediately preceding the tenth Business Day after the date of such notification the original Notes for

cancellation, the Company shall make payment equal to 80% of the principal amount of the Notes which is

the subject at acceptance of the Notes to such Noteholders.

The Notes tendered for acceptance under the Repurchase Offer will be cancelled.







the Shares held by them as at the date of the SGM. As at the Latest Practicable Date, AWL and CEL, and








– 32 –

Overseas Noteholders

The making of the Repurchase Offer to the Noteholders not resident in Hong Kong may be

affected by the laws of the relevant jurisdictions. The Noteholders not resident in Hong Kong must inform

themselves about and observe any applicable legal requirements. It is the responsibility of a Noteholder

outside Hong Kong wishing to accept the Repurchase Offer to satisfy himself as to the full observance of

the laws for the relevant territory in connection therewith, including the obtaining of any governmental or

other consent which may be required or the compliance with necessary formalities.

Taxation

The Noteholders should consult their own professional advisers if they are in any doubt as to

the taxation implications of their acceptances of the Repurchase Offer. It is emphasized that none of

the Company or any of the Directors or any other person involved in the Repurchase Offer accepts any

responsibility for any tax effects on, or liabilities of, any Noteholders as a result of their acceptances of

the Repurchase Offer.

Conditions precedent to the Repurchase Offer

The Repurchase Offer will be conditional upon:


approve the Repurchase Offer by the Independent Shareholders; and

(ii) the completion of the Rights Issue.

If the conditions precedent above are not satisfied on or before 31 March 2010, the Repurchase

Offer will lapse.

Reasons for the Repurchase Offer

The Group recorded an audited net profit of approximately HK$4.5 million for the year ended

31 December 2007 and an audited loss of approximately HK$832.9 million for the year ended 31

December 2008. As at 31 December 2008, the audited net assets of the Group amounted to approximately

HK$2,251.5 million, and the gearing ratio as at 31 December 2008, expressed as a percentage of total

borrowings to equity attributable to the Shareholders, was 72.2%.

In view of the deteriorating financial results of the Group as a result of the global financial crisis

since late 2008 and the impact of the outbreak of swine flu on the travel industry, the Company has been

actively seeking ways to enhance the financial position and prospects of the Group, including acquiring

hotel and travel related assets and businesses with a view to improving the investment return to the Group

as well as conducting fund raising exercises to raise additional capital for the Group’s working capital

and future investment opportunities. As the coupon interest and imputed interest associated with the Notes

amounts to tens of million in aggregate per annum (approximately HK$51.8 million for the year ended 31

December 2008), the Repurchase Offer, if completed, would lower the Group’s gearing ratio and reduce

substantially the finance cost of the Group upon cancellation of the Notes. In addition, the Notes have

been “out-of-the-money” for most of the period since their issue. Taking into account the size of the Notes

and that the Notes are redeemable at 110% of their face value at maturity, the impact on the Group’s

cashflow would be substantial if the Company were to repay all the outstanding Notes at maturity. The

Directors consider the Repurchase Offer is a means to alleviate the pressure posed by the redemption of

the Notes on the future cashflow of the Group and at the same time improve the financial position of the

Group.


– 33 –

Taking into account the above, the Directors (excluding the independent non-executive Directors

who will form their view after considering the advice of the independent financial adviser) consider that

the terms of the Repurchase Offer are fair and reasonable and the Repurchase Offer is in the interest of the

Company and the Shareholders as a whole.

Repurchase Code

The Repurchase Offer is made in accordance with the terms and conditions of the instrument

constituting the Notes and constitutes an exempt share repurchase by the Company under the Repurchase

Code.

LISTING RULES REQUIREMENTS

Capital Reorganisation

The Capital Reorganisation will be subject to the Shareholders’ approval by way of poll.

Rights Issue

In accordance with Rule 7.19(6) of the Listing Rules, the Rights Issue must be made conditional on

approval by the Shareholders in general meeting by a resolution on which any controlling Shareholders

and their associates or, where there are no controlling Shareholders, Directors (excluding independent

non-executive Directors) and the chief executive of the Company and their respective associates shall

abstain from voting in favour of the Rights Issue. As at the Latest Practicable Date, the Company has

no controlling Shareholder and none of the Directors (excluding independent non-executive Directors)

and the chief executive of the Company and their respective associates holds any Share. The vote of

Shareholders taken at the SGM to be convened for approving the Rights Issue will be taken on a poll.

As completion of the Rights Issue is one of the conditions precedent to the Repurchase Offer,

each of AWL, CEL and certain CEL’s subsidiaries, being one of the Noteholders, is regarded as having

a material interest in the Rights Issue and therefore AWL, CEL and certain CEL’s subsidiaries and their

respective associates will be required to abstain from voting at the SGM in relation to the Rights Issue. As

at the Latest Practicable Date, AWL, CEL and other six Noteholders have accepted in aggregate HK$404.2

million outstanding principal amount of the Notes (representing 63.16% of the aggregate principal amount

of the Notes outstanding as at the Latest Practicable Date). For details of the Repurchase Offer, please

refer to the section headed “Material Contracts” in Appendix III to this circular.










Placing of Convertible Bonds

The Placing will be subject to the Shareholders’ approval by way of poll.


– 34 –

Repurchase of Notes

As at the Latest Practicable Date, AWL, a wholly-owned subsidiary of ITC, currently holds Notes

in principal amount of HK$114.2 million. Mr. Cheung Hon Kit, an executive Director, is also an executive

director of ITC. CEL currently holds Notes in principal amount of HK$63 million. Dr. Yap, Allan and Ms.

Chan Ling, Eva, executive Directors, are also directors of CEL. As at the Latest Practicable Date, AWL

and CEL are interested in approximately 14.30% and 10.72% of the issued share capital of the Company

respectively. Save as disclosed above, to the best of the Directors’ knowledge, AWL, CEL and certain

CEL’s subsidiaries and their respective associates do not have any other relationship with the Company.

The purchase of the Notes by the Company from either or both of AWL and CEL will (and assuming that

all Notes held by them are tendered) constitute a possible connected transaction of the Company under

Chapter 14A of the Listing Rules and, is subject to the Independent Shareholders’ approval. AWL, CEL

and their respective associates will abstain from voting at the SGM.














WARNING OF THE RISKS OF DEALING IN THE SHARES, THE ADJUSTED SHARES, THE WARRANTS AND THE NIL-PAID RIGHTS SHARES

The Adjusted Shares will be dealt in on ex-rights basis from Wednesday, 3 February 2010. Dealings

in the Rights Shares in the nil-paid form will take place from Friday, 12 February 2010 to Tuesday, 23

February 2010 (both dates inclusive).

Any Shareholders or other persons contemplating selling or purchasing the Rights Shares in their

nil-paid form during the period from Friday, 12 February 2010 to Tuesday, 23 February 2010 (both

dates inclusive) who are in any doubt about their position are recommended to consult their professional

advisers. Any Shareholders or other persons dealing in the Shares or the Adjusted Shares (as the case may

be) up to the date on which all the conditions to which the Rights Issue is subject are fulfilled (which is

expected to be Wednesday, 3 March 2010) and any persons dealing in the nil-paid Rights Shares during

the above period will accordingly bear the risk that the Rights Issue may not become unconditional or may

not proceed.

The Shareholders, holders of the Warrants and potential investors of the Company should note that

(i) the Rights Issue is conditional upon the Underwriting Agreement having become unconditional and

the Underwriter not having terminated the Underwriting Agreement in accordance with the terms thereof

(a summary of which is set out in the sub-section headed “Termination of the Underwriting Agreement”

above); (ii) the Placing is on a “best effort” basis and therefore there is no assurance that any Convertible

Bond issued will be placed if at all; and (iii) the completion of the Repurchase Offer is subject to the

fulfillment of certain conditions (a summary of which is set out in the sub-section headed “Conditions

precedent to the Repurchase Offer” above). Accordingly, the Rights Issue, the Placing and the Repurchase

Offer may or may not proceed.


– 35 –

The Shareholders, holders of the Warrants and potential investors of the Company should therefore

exercise extreme caution when dealing in the Shares, the Adjusted Shares, the Warrants or the Rights

Shares in their nil-paid form, and if they are in any doubt about their position, they should consult their

professional advisers.

SGM

The notice convening the SGM is set out on pages 191 to 193 of this circular. The SGM will be held

at Shop B27, Basement, Bank of America Tower, 12 Harcourt Road, Central, Hong Kong at 10:00 a.m.

on Monday, 1 February 2010 for the purpose of, considering and, if thought fit, to approve the Capital

Reorganisation, the Rights Issue, the Placing and the Repurchase Offer.

An Independent Board Committee of the Company comprising the independent non-executive

Directors has been established to make recommendations to the Independent Shareholders in respect of the

Rights Issue. Guangdong Securities has been appointed as the Independent Financial Adviser to advise the

Independent Board Committee and the Independent Shareholders in this regard.

A form of proxy for use at the SGM is enclosed. Whether or not you are able to attend the meeting

in person, please complete the accompanying form of proxy in accordance with the instructions printed

thereon and return the same to the branch share registrar of the Company in Hong Kong, Tricor Secretaries

Limited at 26/F., Tesbury Centre, 28 Queen’s Road East, Wanchai, Hong Kong as soon as possible and in

any event not less than 48 hours before the time appointed for the holding of the SGM or any adjournment

thereof. Completion and return of a form of proxy will not preclude you from attending and voting in

person at the meeting or any adjournment thereof should you so wish and in such event the proxy shall be

deemed to be revoked.

RECOMMENDATION

In relation to the Rights Issue and the Repurchase Offer, your attention is drawn to the letter from

the Independent Board Committee on page 36 and the letter from Guangdong Securities set out on pages

37 to 51 of this circular. The Directors believe that the proposed resolutions in relation to the Capital

Reorganisation, the Rights Issue, the Placing and the Repurchase Offer are in the best interest of the

Company and the Shareholders as a whole and, accordingly, the Directors recommend the Shareholders to

vote in favour of the aforesaid resolutions to be proposed at the SGM.

ADDITIONAL INFORMATION

Your attention is drawn to the additional information set out in Appendices I to III to this circular.

Yours faithfully,

For and on behalf of

Wing On Travel (Holdings) LimitedChan Ling, Eva

Managing Director

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

– 36 –

The following is the text of the letter of recommendation, prepared for the purpose of incorporation

in this circular, from the Independent Board Committee to the Independent Shareholders regarding the

Rights Issue and the Repurchase Offer:


(Stock Code: 1189)

(Warrant Code: 774)

8 January 2010

To the Independent Shareholders

Dear Sir or Madam,

(1) PROPOSED RIGHTS ISSUE ON THE BASIS OFFIVE RIGHTS SHARES

FOR EVERY SHARE HELD ON THE RECORD DATE;(2) PROPOSED REPURCHASE OF NOTES;


We refer to the circular of the Company dated 8 January 2010 (the “Circular”) of which this letter

forms part. Unless the context specifies otherwise, capitalized terms used herein have the same meanings

as defined in the Circular.

We have been appointed by the Board to advise the Independent Shareholders as to whether the

terms of the Rights Issue and the Repurchase Offer are fair and reasonable insofar as the Independent

Shareholders are concerned. Guangdong Securities has been appointed as the Independent Financial

Adviser to advise you and us in this respect.

Having taken into account the principal reasons and factors considered by, and the advice of,

Guangdong Securities as set out in its letter of advice to you and us on pages 37 to 51 of the Circular,

we are of the opinion that the Rights Issue and the Repurchase Offer are in the interests of the Company

and the Shareholders as a whole and the terms of which are fair and reasonable so far as the Independent

Shareholders are concerned. Accordingly, we recommend the Independent Shareholders to vote in favour

of the ordinary resolutions to be proposed at the SGM to approve the Rights Issue and the Repurchase

Offer .

Yours faithfully,


Independent Board Committee

Kwok Ka Lap, Alva Poon Kwok Hing, Albert Sin Chi Fai

Independent non-executive Directors

LETTER FROM GUANGDONG SECURITIES

– 37 –

Set out below is the text of a letter received from Guangdong Securities, the Independent Financial

Adviser to the Independent Board Committee and the Independent Shareholders regarding the Rights Issue

and the Repurchase Offer for the purpose of inclusion in this circular.

Units 2505-06, 25/F.

Low Block of Grand Millennium Plaza

181 Queen’s Road Central

Hong Kong

8 January 2010

To: The independent board committee and the independent shareholders

of Wing On Travel (Holdings) Limited

Dear Sirs,

(I) PROPOSED RIGHTS ISSUE ON THE BASIS OF FIVE RIGHTS SHARESFOR EVERY SHARE HELD ON THE RECORD DATE

AND(II) PROPOSED REPURCHASE OF NOTES AND

POSSIBLE CONNECTED TRANSACTIONS

INTRODUCTION

We refer to our appointment as the Independent Financial Adviser to advise the Independent Board

Committee and the Independent Shareholders in relation to the Rights Issue and the Repurchase Offer,

details of which are set out in the letter from the Board (the “Board Letter”) contained in the circular

dated 8 January 2010 issued by the Company to the Shareholders (the “Circular”), of which this letter

forms part. Terms used in this letter shall have the same meanings as defined in the Circular unless the

context requires otherwise.

The Rights Issue

The Board announced on 8 December 2009 that, conditional upon the Capital Reorganisation

becoming effective, the Company proposes to raise not less than approximately HK$409 million but not

more than approximately HK$549 million, before expenses, by way of the Rights Issue of not less than

2,729,961,230 Rights Shares (as at the Latest Practicable Date: 2,729,961,245 Rights Shares) and not

more than 3,657,929,510 Rights Shares at the Subscription Price of HK$0.15 per Rights Share on the

basis of five Rights Shares for every one Adjusted Share held on the Record Date and payable in full on

acceptance.

The Rights Issue is fully underwritten by the Underwriter. The Directors confirmed that the terms of

the Rights Issue were agreed after arm’s length negotiation between the Company and the Underwriter.

In accordance with Rule 7.19(6)(a) of the Listing Rules, the Rights Issue must be made conditional

upon the approval of the Shareholders in general meeting by a resolution on which any controlling

shareholders of the Company (as defined in the Listing Rules) and their associates or, where there is no

controlling shareholder, the Directors (excluding the independent non-executive Directors) and the chief

executive of the Company, and their respective associates shall abstain from voting. As at the Latest

Practicable Date, the Company had no controlling shareholder, and none of the Directors (excluding

the independent non-executive Directors) and the chief executive of the Company, and their respective

associates held any Share.


– 38 –

As completion of the Rights Issue is one of the conditions precedent to the Repurchase Offer, each

of AWL, CEL and certain CEL’s subsidiaries, being member of the Noteholders, is regarded as having

a material interest in the Rights Issue. Therefore, AWL, CEL and certain CEL’s subsidiaries, and their

respective associates will be required to abstain from voting at the SGM in relation to the Rights Issue.

The Repurchase Offer

The Board also announced on 8 December 2009 that it has resolved that the Company will make the

Repurchase Offer to repurchase (subject to the fulfillment of certain conditions precedent) the Notes at a

price payable in cash being equivalent to 80% of the outstanding principal amount of the Notes tendered

on acceptance of the Repurchase Offer.

The Repurchase Offer constitutes an exempt share repurchase under the Repurchase Code. As AWL

and CEL are Noteholders and are substantial shareholders of the Company (as defined in the Listing

Rules), the repurchase of the Notes by the Company from either or both of AWL and CEL will (assuming

that all Notes held by them are tendered) constitutes a possible connected transaction for the Company

under Chapter 14A of the Listing Rules. Accordingly, the Repurchase Offer is subject to the approval of

the Independent Shareholders at the SGM. AWL, CEL and their respective associates shall abstain from

voting for the Repurchase Offer at the SGM.


HK$404.2 million outstanding principal amount of the Notes (representing approximately 63.16% of the

aggregate principal amount of the Notes outstanding as at the Latest Practicable Date).










An Independent Board Committee comprising Mr. Kwok Ka Lap, Alva, Mr. Poon Kwok Hing,

Albert and Mr. Sin Chi Fai, all being independent non-executive Directors, has been formed to advise

the Independent Shareholders on (i) whether the terms of each of the Rights Issue, the Underwriting

Agreement and the Repurchase Offer are on normal commercial terms and are fair and reasonable so far as

the Independent Shareholders are concerned; (ii) whether the Rights Issue and the Repurchase Offer are in

the interests of the Company and the Shareholders as a whole; and (iii) how the Independent Shareholders

should vote on the relevant resolutions to approve the Rights Issue and the Underwriting Agreement, the

Repurchase Offer and the respective transactions contemplated thereunder at the SGM. We, Guangdong

Securities Limited, have been appointed as the Independent Financial Adviser to advise the Independent

Board Committee and the Independent Shareholders in all these respects.

BASIS OF OUR OPINION

In formulating our opinion to the Independent Board Committee and the Independent Shareholders,

we have relied on the statements, information, opinions and representations contained or referred to in the

Circular and the information and representations as provided to us by the Company and/or the Directors.

We have assumed that all information and representations that have been provided by the Company and/

or the Directors, for which they are solely and wholly responsible, are true and accurate at the time

when they were made and continue to be so as at the Latest Practicable Date. We have also assumed that

all statements of belief, opinion, expectation and intention made by the Directors in the Circular were

reasonably made after due enquiry and careful consideration. We have no reason to suspect that any

material facts or information have been withheld or to doubt the truth, accuracy and completeness of the

information and facts contained in the Circular, or the reasonableness of the opinions expressed by the

Company, its advisers and/or the Directors, which have been provided to us. We consider that we have

taken sufficient and necessary steps on which to form a reasonable basis and an informed view for our

opinion in compliance with Rule 13.80 of the Listing Rules.


– 39 –

The Directors have collectively and individually accepted full responsibility for the accuracy of the

information contained in the Circular and have confirmed, having made all reasonable enquiries, which

to the best of their knowledge and belief, there are no other facts the omission of which would make any

statement in the Circular misleading.

We consider that we have been provided with sufficient information to reach an informed view

and to provide a reasonable basis for our opinion. We have not, however, conducted any independent in-

depth investigation into the business and affairs of the Company, AWL, CEL, the Underwriter or their

respective subsidiaries or associates, nor have we considered the taxation implications on the Group or the

Shareholders as a result of the Rights Issue and the Repurchase Offer. In addition, we have no obligation

to update this opinion to take into account events occurring after the issue of this letter. Nothing contained

in this letter should be construed as a recommendation to hold, sell or buy any Shares or any other

securities of the Company.

Lastly, where information in this letter has been extracted from published or otherwise publicly

available sources, the sole responsibility of Guangdong Securities is to ensure that such information has

been correctly and fairly presented and reproduced from the relevant sources.

PRINCIPAL FACTORS AND REASONS CONSIDERED

(I) THE RIGHTS ISSUE

In arriving at our opinion in respect of the Rights Issue, we have taken into consideration the

following principal factors and reasons:

(1) Background of and reasons for the Rights Issue

Business overview of the Group

The Company is an investment holding company and its subsidiaries are principally

engaged in the business of providing package tours, travel and other related services, hotel

operation in Hong Kong and the PRC and trading of securities. As referred to the interim

report of the Company for the six months ended 30 June 2009 and as further advised by the

Directors, it is the Group’s strategy to focus on its existing business and continue to look for

quality investment opportunities to enhance the Shareholders’ wealth.

Reasons for the Rights Issue

With reference to the Board Letter, the Rights Issue will enable the Group to

strengthen its capital base and to enhance its financial position for future strategic

investments as and when opportunities arise. The Board is of the view that the Rights Issue

will allow the Qualifying Shareholders to maintain their shareholding in the Company and

the Board also considers that fund raising through the Rights Issue is in the best interests of

the Company and the Shareholders as a whole.


– 40 –

As extracted from the Board Letter, the maximum estimated net proceeds from the

Rights Issue will be of approximately HK$535 million, which is intended to be used as to

approximately (i) HK$350 million for repurchase of the Notes; (ii) HK$100 million towards

funding the construction cost of the Group’s existing hotel development projects located

in Hong Kong and the PRC as well as the Tangula luxury trains; (iii) HK$50 million for

further acquisitions of 4-star rated business hotels and budget hotels in the PRC (as and when

suitable targets for acquisition are identified in the future); and (iv) the remaining amount for

general working capital of the Group for its travel and hotel operations. As further extracted

from the Board Letter, the minimum estimated net proceeds from the Rights Issue will be of

approximately HK$399 million, which is intended to be used as to approximately (i) HK$350

million for repurchase of the Notes; and (ii) the remaining amount for general working

capital of the Group for its travel and hotel operations.

In view of that (i) the intended use of the proceeds from the Rights Issue as

listed above are in line with the Group’s strategy and would finance the future business

development of the Group such that the Group’s recent loss making position may be

improved; and (ii) the Rights Issue would finance the Repurchase Offer which the Board

considers to be in the interests of the Company and the Shareholders as a whole, we are of

the opinion that (i) the reasons for the Rights Issue are justifiable and the use of proceeds

from the Rights Issue is fair and reasonable; and (ii) the Rights Issue is in the interests of the

Company and the Shareholders as a whole.

Financing alternatives available to the Group

According to the Board Letter, save as and except for (i) the placing of 1,800,000,000

Shares which was announced by the Company on 17 July 2009, the Group had not carried

out other equity fund raising activities during the past 12 months immediately prior to the

Latest Practicable Date.

We have enquired into the Directors and were informed by the Directors that the

Group has considered various methods, namely debt financing and equity financing, for fund

raising. Nevertheless, given the banks’ current stringent lending policy, there was a lack of

positive response from financial institutions. For this reason, the Directors consider debt

financing to be impracticable to the Group.

With regard to equity financing, the Directors advised us that the Board is confident in

the future business development of the Company following the recovery of the recent global

financial crisis and would like to provide a chance for all Shareholders to share the potential

prospects of the Company. As mentioned under the foregoing section, the Board considers

that the Rights Issue will enable the Group to strengthen its capital base and to enhance its

financial position for future strategic investments as and when opportunities arise. Moreover,

upon our enquiry, the Directors further advised us that although both an open offer and a

rights issue would allow all Shareholders to participate in the enlargement of the capital base

of the Company and to maintain their proportionate shareholding interests in the Company, a

rights issue would also allow those Shareholders who do not wish to participate in the fund

raising of the Company to dispose of their Rights Shares entitlements in the market in a nil-

paid form. As a result, the Directors are of the view that it is in the interests of the Company

and the Shareholders as a whole to raise fund through the Rights Issue.

Having taken into consideration the aforementioned shortcomings of the other

financing alternatives and the possible benefits of the Rights Issue, we concur with the

Directors that the Rights Issue is an acceptable and feasible financing method currently

available to the Company.


– 41 –

(2) Principal terms of the Rights Issue

The table below summarises the major terms of the Rights Issue:

Basis of the Rights Issue: Five Rights Shares for every Adjusted Share held on

the Record Date

Subscription Price: HK$0.15 per Rights Share

Number of Shares in issue

as at the Latest Practicable Date:

10,919,844,985 Shares

Number of Adjusted Shares in issue

upon the Capital Reorganisation

becoming effective:

Not l ess than 545,992,249 Adjus ted Shares

(assuming that no further Shares are issued or

repurchased between the Latest Practicable Date and

the Record Date) and not more than 731,585,902

Adjusted Shares (assuming all rights attaching to the

outstanding Warrants and Notes are exercised on or

before the Record Date)

Number of Rights Shares as at

the Latest Practicable Date:

Not less than 2,729,961,245 Rights Shares and not

more than 3,657,929,510 Rights Shares

The Subscription Price of HK$0.15 per Rights Share represents:

(i) a discount of approximately 77.94% to the adjusted closing price of HK$0.68 per

Adjusted Share (assuming the Capital Reorganisation becoming effective) as quoted

on the Stock Exchange on the Latest Practicable Date;

(ii) a discount of approximately 82.14% to the adjusted closing price of HK$0.84 per

Adjusted Share (assuming the Capital Reorganisation becoming effective) as quoted

on the Stock Exchange on the Last Trading Day;

(iii) a discount of approximately 43.40% to the theoretical ex-rights price of HK$0.265 per

Adjusted Share (assuming the Capital Reorganisation becoming effective) based on

the closing price of HK$0.042 per Share as quoted on the Stock Exchange on the Last

Trading Day (the “Theoretical Ex-rights Price”); and

(iv) a discount of approximately 82.06% to the adjusted average closing price of

approximately HK$0.836 per Adjusted Share (assuming the Capital Reorganisation

becoming effective) as quoted on the Stock Exchange for the last five trading days up

to and including the Last Trading Day.


– 42 –

The Directors confirmed that the Subscription Price was arrived at after arm’s length

negotiation between the Company and the Underwriter with reference to the market price of the

Shares under the prevailing market conditions. In this regard, the Directors also consider that the

substantial discount of the Subscription Price would encourage Shareholders to participate in the

Rights Issue and accordingly maintain their respective shareholding interests in the Company and

participate in the future growth of the Group.

Analyses on the Subscription Price

In order to assess the fairness and reasonableness of the Subscription Price, we set out

the following informative analyses for illustrative purpose:

(i) Review on Share prices

The highest and lowest closing prices and the average daily closing price of the

Shares as quoted on the Stock Exchange in each of the 12 months during the period

commencing from 1 December 2008 up to and including the Last Trading Day (the

“Review Period”) are shown as follows:

MonthHighest

closing priceLowest

closing priceAverage daily closing price

No. of trading days

in each month(HK$) (HK$) (HK$)

2008December 0.032 0.015 0.022 21

2009January 0.032 0.023 0.027 18

February 0.027 0.023 0.025 20

March 0.026 0.021 0.023 22

April 0.034 0.025 0.029 20

May 0.057 0.028 0.045 19

June 0.051 0.034 0.041 22

July (Note 1) 0.044 0.033 0.039 14

August (Note 2) 0.047 0.041 0.043 18

September 0.046 0.041 0.043 22

October 0.043 0.039 0.041 20

November 0.048 0.039 0.041 21

December (up to and

including the Last

Trading Day) 0.043 0.041 0.042 3

Source: the Stock Exchange web-site (www.hkex.com.hk)

Notes:

1. Trading in the Shares was suspended from 15 July 2009 to 24 July 2009 (both days

inclusive).

2. Trading in the Shares was suspended from 3 August 2009 to 5 August 2009 (both days

inclusive).

.


– 43 –

During the Review Period, the average daily closing price of the Shares ranged

from HK$0.022 to HK$0.045 per Share in each month. The Share price peaked at

HK$0.057 per Share on 19 May 2009 and dropped to below HK$0.045 in average in

each month from June to December 2009 up to the Last Trading Day.

(ii) Review on trading liquidity of the Shares

The average daily number of the Shares traded per month, and the respective

percentages of the Shares’ monthly trading volume as compared to (i) the total number

of issued Shares held by the public on the Last Trading Day; and (ii) the total number

of issued Shares on the Last Trading Day during the Review Period are tabulated as

follows:

Month

No. of trading days

in each month

Average daily

trading volume (the

“Average Volume”)

% of the Average

Volume to total

number of issued Shares

held by the public

on the Last Trading Day

(Note 3)

% of the Average

Volume to total

number of issued Shares

on the Last Trading Day

(Note 4)

Shares % %

2008December 21 24,391,328 0.30 0.22

2009January 18 15,313,514 0.19 0.14

February 20 9,542,259 0.12 0.09

March 22 7,132,237 0.09 0.07

April 20 30,886,933 0.38 0.28

May 19 142,556,294 1.74 1.31

June 22 206,415,582 2.52 1.89

July (Note 1) 14 149,556,679 1.83 1.37

August (Note 2) 18 66,910,230 0.82 0.61

September 22 24,943,086 0.30 0.23

October 20 30,771,454 0.38 0.28

November 21 80,415,331 0.98 0.74

December (up to and

including the Last

Trading Day) 3 57,268,142 0.70 0.52

Source: the Stock Exchange web-site (www.hkex.com.hk)

Notes:

1. Trading in the Shares was suspended from 15 July 2009 to 24 July 2009 (both days

inclusive).

2. Trading in the Shares was suspended from 3 August 2009 to 5 August 2009 (both days

inclusive).

3. Based on 8,188,366,447 Shares held in public hands on the Last Trading Day.

4. Based on 10,919,844,935 Shares in issue on the Last Trading Day.


– 44 –

The above table illustrates that the average daily trading volume of the Shares

per month was thin during the Review Period, with ranges of approximately 0.09%

to 2.52% and approximately 0.07% to 1.89% of the total number of issued Shares

held by the public on the Last Trading Day and the total number of issued Shares

on the Last Trading Day respectively. We noted that trading in the Shares had been

historically inactive and the Shares were hence rather illiquid. Due to this reason,

we concur with the Directors that it would be difficult to attract the Qualifying

Shareholders to reinvest in the Company through the Rights Issue if the Subscription

Price was not set at relatively substantial discount to the historical closing prices of

the Shares. Thus, we are of the view that the substantial discount of the Subscription

Price is justifiable.

(iii) Comparison with other rights issue transactions

As part of our analyses, we have identified rights issue transactions

(the “Comparables”) from 3 September 2009 up to the Last Trading Day (the “Comparables Review Period”), being three months prior to and including the

Last Trading Day, by companies listed on the Stock Exchange. To the best of our

knowledge, we found seven companies, which are exhaustive as far as we are aware

of, which met the said criteria. We are of the view that the Comparables Review

Period being three months prior to and including the Last Trading Day would provide

us with the most recent relevant market information. However, Shareholders should

note that the businesses, operations and prospects of the Company are not the same

as the Comparables and thus the Comparables are only used to provide a general

reference for the common market practice in rights issue transactions of companies

listed in Hong Kong. Summarised below is our relevant finding:

Company nameStock code

Date of announcement

Premium/(Discount) of the subscription

price over/(to) closing price per

share on the last trading day

prior to announcement

in relation to the respective

rights issue

Premium/(Discount) of the subscription

price over/(to) the theoretical

ex-rights price per share based

on the closing price per share on the last trading day

prior to announcement

in relation to the respective

rights issueUnderwriting

commission% % %

Winfoong International

Limited

63 16 November 2009 (66.70) (64.50) 2.50

USI Holdings Limited 369 09 November 2009 (37.00) (30.60) 3.00

TCL Communication

Technology Holdings

Limited

2618 03 November 2009 (17.36) (12.28) 0.00

First Pacific Company

Limited

142 15 October 2009 (35.80) (31.70) Information not

available

21 Holdings Limited 1003 12 October 2009 (71.01) (32.89) 2.00

New World China Land

Limited

917 09 October 2009 (38.11) (29.17) 2.25

Goldin Financial

Holdings Limited

530 23 September 2009 (14.40) (4.55) 2.50

Minimum (71.01) (64.50) NilMaximum (14.40) (4.55) 3.00Average (40.05) (29.38) 2.04

The Company 1189 3 December 2009 (82.14) (43.40) 2.00

Source: the relevant announcements posted on the Stock Exchange web-site (www.hkex.com.hk)


– 45 –

As shown by the above table, the subscription prices of the Comparables

ranged from discounts of approximately 14.40% to 71.01% to the respective closing

prices of their shares on the last trading days prior to the release of the rights issue

announcements (the “LTD Market Range”). The discount of approximately 82.14%

to the closing price of the Shares on the Last Trading Day as represented by the

Subscription Price (the “LTD Discount”) is higher than the maximum of the LTD

Market Range. In this relation, we have enquired into the Directors and the Directors

advised us that the discount of the Subscription Price would encourage Shareholders

to participate in the Rights Issue and accordingly maintain their respective

shareholding interests in the Company and participate in the future growth of the

Group.

On the other hand, the subscription prices of the Comparables ranged from

discounts of approximately 4.55% to 64.50% to the respective theoretical ex-rights

prices of their shares on the last trading days prior to the release of the rights issue

announcements (the “TERP Market Range”). The discount of approximately

43.40% to the Theoretical Ex-rights Price as represented by the Subscription Price

(the “TERP Discount”) is deeper than the average and falls within the TERP Market

Range.

Although the LTD Discount is higher than the maximum of the LTD Market

Range, in view of that (i) the TERP Discount falls within the TERP Market Range;

and (ii) the discount of the Subscription Price would encourage Shareholders to

participate in the Rights Issue and accordingly maintain their respective shareholding

interests in the Company and participate in the future growth of the Group, we concur

with the Directors that the Subscription Price is fair and reasonable so far as the

Independent Shareholders are concerned.

(3) Undertakings from the Underwriter and the underwriting arrangements

To the best of the Directors’ knowledge and information, the Underwriter, Emperor, and its

ultimate beneficial owners are third parties independent of and not connected with the Company

and its connected persons. Pursuant to the Underwriting Agreement (as supplemented by the first

supplemental agreement dated 11 December 2009 and the second supplemental agreement dated 23

December 2009), Emperor has conditionally agreed to fully underwrite not less than 2,047,129,110

Rights Shares and not more than 2,714,004,335 Rights Shares not taken up by the Shareholders

pursuant to the Underwriting Agreement, subject to the terms and conditions of the Underwriting

Agreement with an underwriting commission of 2% of the aggregate Subscription Price of

the maximum number of Rights Shares underwritten by the Underwriter (the “Underwriting Commission”).

From the Comparables as detailed in the table under the foregoing section, we noted that

the Underwriting Commission falls within the range of commissions of nil to 3% received by

underwriters in other rights issue transactions. Given the above, we are of the opinion that the

underwriting arrangements for the Rights Issue and the Underwriting Commission are in line with

common market practice.


– 46 –

(4) Application for excess Rights Shares

Pursuant to the terms of the Rights Issue, Qualifying Shareholders shall be entitled to apply

for any unsold Rights Shares provisionally allotted to but not accepted by the other Qualifying

Shareholders. The Board will allocate the excess Rights Shares, at its discretion, on principles

stated under the section headed “Application for excess Rights Shares” of the Board Letter (the

“Principles”). We have compared the Principles with the arrangements of those Comparables

which also allowed for excess application for rights shares, and we noted that the Principles are not

exceptional.

We have also reviewed the other terms of the Rights Issue and the Underwriting Agreement

and are not aware of any terms which are uncommon to normal market practice. Accordingly,

we consider that the terms of the Rights Issue and the Underwriting Agreement are on normal

commercial terms and are fair and reasonable so far as the Independent Shareholders are concerned.

(5) Potential dilution of the shareholding interests of the public Shareholders

The following table sets out the shareholding structure of the Company (assuming no

Shareholder subscribes for his/her/its entitlements under the Rights Issue except for those

undertaken by AWL, CEL and certain CEL’s subsidiaries pursuant to the Irrevocable Undertakings

and no exercise of the outstanding Warrants and Notes before the Record Date) (i) immediately

after the Capital Reorganisation; and (ii) immediately after the completion of the Rights Issue:

Immediately after the Capital Reorganisation

Immediately after the completion of the Rights Issue

No. of

Adjusted Shares

% No. of

Adjusted Shares

%

AWL (Note 1) 78,056,000 14.30 468,336,000 14.30


subsidiaries (Note 2) 58,510,424 10.72 351,062,544 10.72


(Note 3) 7,500 – 7,500 –

The Underwriter (Note 4) – – 2,047,129,125 62.48

Public Shareholders (Note 4) 409,418,325 74.98 409,418,325 12.50

Total 545,992,249 100.00 3,275,953,494 100.00

Notes:

1. As at the Latest Practicable Date, AWL held 1,561,120,000 Existing Shares and is also interested in (i)

Warrants conferring rights for it to subscribe for 305,846,000 Existing Shares; and (ii) the Notes in the

principal amount of HK$114.2 million convertible into a maximum of 336,873,156 Existing Shares. AWL is

indirectly-wholly owned by ITC.


Limited held 106,697,405 Existing Shares, 866,511,083 Existing Shares and 192,000,000 Existing Shares

respectively and are wholly-owned subsidiaries of CEL which also held 5,000,000 Existing Shares. CEL

and certain CEL’s subsidiaries are also interested in (i) Warrants conferring rights for them to subscribe for

233,511,481 Existing Shares; and (ii) the Notes in the principal amount of HK$63 million convertible into a

maximum of 185,840,707 Existing Shares.


– 47 –




together with their respective parties acting in concert (as defined in the Takeovers Code) will not own

30% or more voting rights in the Company immediately after the completion of the Rights Issue. The

Underwriter has further confirmed to the Company that none of the Underwriter or the sub-underwriters and

their respective ultimate beneficial owners is a connected person of the Company. The Underwriter shall and

shall cause the sub-underwriters to procure independent placees to take up such number of Rights Shares

as necessary to ensure that the public float requirements under Rule 8.08 of the Listing Rules are complied

with. The Directors confirmed that the Company will ensure compliance with the public float requirements

under Rule 8.08 of the Listing Rules upon completion of the Rights Issue.



All Qualifying Shareholders are entitled to subscribe for the Rights Shares. For those

Qualifying Shareholders who take up their entitlements in full under the Rights Issue, their

shareholding interests in the Company will remain unchanged after the Rights Issue.

Qualifying Shareholders who do not accept the Rights Issue can, subject to the then

prevailing market conditions, consider selling their nil-paid rights to subscribe for the Rights Shares

in the market. In such case, where all Qualifying Shareholders do not accept the Rights Issue and

hence the Underwriter is obligated to take up the unsubscribed Rights Shares except for those

undertaken by AWL, CEL and certain CEL’s subsidiaries pursuant to the Irrevocable Undertakings,

the shareholding interests of the Qualifying Shareholders in the Company will be diluted by a

maximum of 62.48 percent point. Details of such dilution effect are presented in the above table.

Meanwhile, those Qualifying Shareholders who wish to increase their shareholding interests

in the Company through the Rights Issue may (i) subject to availability, acquire additional nil-paid

rights in the market; and (ii) apply for the excess Rights Shares since the Rights Issue also allows

for excess application of the Rights Shares.

We are aware of the aforementioned potential dilution to the Independent Shareholders’

shareholding interests in the Company. Nonetheless, we consider that the foregoing should be

balanced against by the following factors:

• Independent Shareholders are offered a chance to express their views on the terms of

the Rights Issue and the Underwriting Agreement through their votes at the SGM;

• Qualifying Shareholders have their choice whether to accept the Rights Issue or not;

• Qualifying Shareholders have the opportunity to realise their nil-paid rights to

subscribe for the Rights Shares in the market;

• the Rights Issue offers Qualifying Shareholders a chance to subscribe for their pro-rata

Rights Shares for the purpose of maintaining their respective existing shareholding

interests in the Company at a relatively low price as compared to the historical and

prevailing market price of the Shares; and

• those Qualifying Shareholders who choose to accept the Rights Issue in full can

maintain their respective existing shareholding interests in the Company after the

Rights Issue.


– 48 –

Having considered the above, we consider the potential dilution effect on the shareholding

interests of the Independent Shareholders, which may only happen when the Qualifying

Shareholders do not subscribe for their pro-rata Rights Shares, to be acceptable.

(6) Financial effects of the Rights Issue

Effect on NTAV

A statement of unaudited pro forma adjusted consolidated net tangible asset value

(“NTAV”) of the Group based on the unaudited consolidated NTAV of the Group as at 30

June 2009 as if the Rights Issue had taken place on 30 June 2009 is set out in Appendix II to

the Circular (the “Statement”).

The unaudited pro forma adjusted consolidated NTAV of the Group and the unaudited

pro forma adjusted consolidated NTAV of the Group per Share were approximately

HK$1,394.4 million and HK$3.06 respectively as at 30 June 2009 according to the Statement

and based on 455,992,246 Adjusted Shares which represents 9,119,844,935 Shares in issue

as at 30 June 2009. Upon completion of the Rights Issue and based on the minimum number

of Rights Shares to be issued, the unaudited pro forma adjusted consolidated NTAV of the

Group and the unaudited pro forma adjusted consolidated NTAV of the Group per Share

would increase by approximately 28.6% to approximately HK$1,793.2 million and decrease

by approximately 81.7% to approximately HK$0.56 per Share respectively according to

the Statement. Upon completion of the Rights Issue and based on the maximum number

of Rights Shares to be issued, the unaudited pro forma adjusted consolidated NTAV of the

Group and the unaudited pro forma adjusted consolidated NTAV of the Group per Share

would increase by approximately 94.34% to approximately HK$2,709.9 million and decrease

by approximately 79.41% to approximately HK$0.63 per Share respectively according to the

Statement.

In light of that the Rights Issue would enlarge the total capital base of the Group, we

consider that the Rights Issue is in the interests of the Company and the Shareholders as a

whole.

Effect on gearing position

The gearing level of the Group (calculated as total borrowings to equity attributable

to owners of the Company) was approximately 77.5% as at 30 June 2009. As just mentioned,

the total capital base of the Group would be enlarged upon completion of the Rights Issue

but the total borrowings of the Group are not expected to change due to the Rights Issue.

Consequently, the gearing position of the Group would be relieved and the Directors expect

that the Group would enjoy more financial flexibility afterwards. Given the above, we

consider that the Rights Issue is in the interests of the Company and the Shareholders as a

whole.


– 49 –

Effect on liquidity

As advised by the Directors, the total cash and bank balances of the Group were

approximately HK$386.53 million as at 30 June 2009. As part of the net proceeds from the

Rights Issue will be applied as general working capital of the Group, the Group’s liquidity

position would be improved upon completion of the Rights Issue. We consider such possible

improvement in liquidity to be in the interests of the Company and the Shareholders as a

whole.

It should be noted that the aforementioned analyses are for illustrative purpose only

and does not purport to represent how the financial position of the Group will be upon

completion of the Rights Issue.

RECOMMENDATION ON THE RIGHTS ISSUE

Having taken into account the above principal factors and reasons, we consider that the terms of the

Rights Issue and the Underwriting Agreement are on normal commercial terms and are fair and reasonable

so far as the Independent Shareholders are concerned. Furthermore, the Rights Issue is in the interests of

the Company and the Shareholders as a whole. Accordingly, we advise the Independent Board Committee

to advise the Independent Shareholders, and we advise the Independent Shareholders to vote in favour of

the relevant resolution(s) at the SGM to approve the Rights Issue and the Underwriting Agreement, and the

transactions contemplated thereunder.

(II) THE REPURCHASE OFFER

The Board also announced on 8 December 2009 that it has resolved that the Company will make the

Repurchase Offer to repurchase (subject to the fulfillment of certain conditions precedent) the Notes at a

price payable in cash being equivalent to 80% of the outstanding principal amount of the Notes tendered

on acceptance of the Repurchase Offer. For details of the Repurchase Offer, please refer to the section

headed “Material Contracts” in Appendix III to the Circular.

The Notes

With reference to the Board Letter, the Notes bear interest at 2% per annum, convertible

into new Shares at the initial conversion price of HK$0.79 per Share (subject to adjustments), and

mature on the fifth anniversary from the date of the issue of the Notes, i.e. 7 June 2011.

Unless previously converted or lapsed or redeemed by the Company, the Company must

redeem the Notes on the maturity date at the redemption amount which is 110% of the principal

amount of the Notes outstanding. The Notes are, subject to certain restrictions, also exchangeable

into new shares of any affiliated company or subsidiary of the Company which is to be listed on a

stock exchange through initial public offering. The relevant subscription was completed on 8 June

2006 and the Notes in a total principal amount of HK$1,000 million were issued. For details of

terms of the Notes, please refer to the Company’s announcement and circular dated 27 March 2006

and 21 April 2006 respectively.

On 24 July 2009, the Company announced that it proposed to make a repurchase offer to

the Notes at their face value by the issue of the Shares at HK$0.035 per Share. On 16 November

2009, the Company announced that such repurchase offer was lapsed as certain of the conditions

precedent had not been fulfilled.


– 50 –

As at the Latest Practicable Date, the outstanding principal amount of the Notes was HK$640

million in aggregate. Pursuant to the terms of the Notes, 1,887,905,604 new Shares will fall to be

issued upon full conversion of the Notes at the prevailing conversion price of HK$0.339 per Share

(subject to adjustments). Subject to completion of the Rights Issue, adjustments to the conversion

price of the Notes may be required and the Company will issue the relevant announcement(s) as and

when appropriate.

Terms of the Repurchase Offer

The Company will make the Repurchase Offer (subject to the fulfillment of the conditions

precedent described below) to repurchase the Notes at a price payable in cash being equivalent

to 80% of the outstanding principal amount of the Notes, which is HK$512 million in aggregate.

Pursuant to the terms of the Repurchase Offer, partial acceptance of the Repurchase Offer (in HK$1

million or integral multiples thereof) by a Noteholder will be permitted.

Reasons for the Repurchase Offer

As referred to in the Board Letter, in view of the deteriorating financial results of the Group

as a result of the global financial crisis since late 2008 and the impact of the outbreak of swine

flu on the travel industry, the Company has been actively seeking ways to enhance the financial

position and prospects of the Group. Those ways include (i) acquiring hotel and travel related

assets and businesses with a view to improving the return to the Group; and (ii) conducting fund

raising exercises to raise additional capital for the Group’s working capital requirements and future

investment opportunities. In light of the fact that the coupon interest and imputed interest associated

with the Notes amount to tens of million in aggregate per annum (approximately HK$51.8 million

for the year ended 31 December 2008), the Directors are of the view that the Repurchase Offer, if

completed and thereafter the Notes are cancelled, would lower the Group’s gearing ratio and reduce

the finance cost of the Group significantly.

In addition, taking into account the size of the Notes and that the Notes are redeemable at

110% of their face value at maturity, the Directors expect that the possible redemption of all the

outstanding Notes at maturity would lead to considerable adverse impact on the Group’s cashflow

position. With this being the case, the Repurchase Offer is considered by the Directors to be a

means (i) to alleviate the pressure on the Group’s cashflow as posed by the possible redemption of

the Notes; and (ii) to improve the financial position of the Group.

The Notes would be repurchased at a price payable in cash being equivalent to 80% of the

outstanding principal amount of the Notes under the Repurchase Offer, but are redeemable at 110%

of their face value at maturity on 7 June 2011. In this regard, the Directors are of the view that the

Repurchase Offer would save approximately HK$192 million, being the difference between the

possible maximum payment by the Company under the Repurchase Offer and the full redemption of

the Notes at maturity, for the Company.

We have further discussed the reasons for the Repurchase Offer with the Directors and

were advised by the Directors that the Group’s gearing level and total cash and bank balances

were approximately 77.5% and HK$386.53 million respectively as at 30 June 2009. The Directors

advised us that the coupon interest and imputed interest associated with the Notes in aggregate

amounted to approximately HK$50.6 million for the eleven months ended 30 November 2009.

Accordingly, the Directors are of the view that the Company should initiate the Repurchase Offer to

improve the Group’s financial position and minimise its interest expense.


– 51 –

Furthermore, based on the outstanding principal amount of the Notes of HK$640 million as

at the Latest Practicable Date, 1,887,905,604 new Shares will fall to be issued upon full conversion

of the Notes at the prevailing conversion price of HK$0.339 per Share (subject to adjustments),

representing approximately 17.29% of the existing issued share capital of the Company. Although

we noted from the Board Letter that the Notes have been “out-of-the-money” for most of the period

since their issue, the possibility of conversion of the Notes in the future cannot be obviated. The

Directors are therefore of the view that the Repurchase Offer may protect the existing Shareholders’

interest from being diluted due to the possible conversion of the Notes.

Given the above reasons and benefits of the Repurchase Offer, we concur with the

Directors that the terms of the Repurchase Offer are fair and reasonable so far as the Independent

Shareholders are concerned and the Repurchase Offer is in the interests of the Company and the


RECOMMENDATION ON THE REPURCHASE OFFER

Taking into consideration the reasons and possible benefits of the Repurchase Offer, we consider

that the Repurchase Offer is in the interests of the Company and the Shareholders as whole and is fair and

reasonable so far as the Independent Shareholders are concerned. Accordingly, we advise the Independent

Board Committee to advise the Independent Shareholders to vote in favour of the relevant resolution(s) at

the SGM to approve the Repurchase Offer. We also recommend the Independent Shareholders to vote in

favour of the relevant resolution(s) to approve the Repurchase Offer at the SGM.

Yours faithfully,


Guangdong Securities LimitedGraham Lam

Managing Director

APPENDIX I FINANCIAL INFORMATION OF THE GROUP

– 52 –

1. SUMMARY OF FINANCIAL INFORMATION OF THE GROUP

Set out below is a summary of the audited consolidated results and financial position of the Group

for the three years ended 31 December 2008 as extracted from the annual report of the Company for the

year ended 31 December 2008.

RESULTS

For the year ended 31 December2006 2007 2008

HK$’000 HK$’000 HK$’000

Turnover 1,992,354 2,266,163 2,216,897

(Loss) before taxation (81,295) (42,143) (825,748)

Taxation credit (expenses) 1,891 46,631 (7,165)

(Loss) profit for the year (79,404) 4,488 (832,913)

Attributable to:

Shareholders of the parent (71,748) (16,199) (688,918)

Minority interests (7,656) 20,687 (143,995)

(79,404) 4,488 (832,913)

ASSETS AND LIABILITIES

At 31 December2006 2007 2008

HK$’000 HK$’000 HK$’000

Total assets 3,834,882 4,813,625 4,623,726

Total liabilities 2,148,095 2,251,098 2,372,211

Net assets 1,686,787 2,562,527 2,251,515

Equity attributable to shareholders of

the parent 1,255,312 2,044,482 1,836,344

Minority interests 431,475 518,045 415,171

Total equity 1,686,787 2,562,527 2,251,515


– 53 –

2. AUDITED CONSOLIDATED FINANCIAL STATEMENTS

Set out below is the audited consolidated financial statements of the Group for the financial years

ended 31 December 2007 and 31 December 2008 together with the relevant notes to the accounts, which

is extracted from the annual report of the Company for the year ended 31 December 2008. The auditors of

the Company have not issued any qualified opinion on the Group’s financial statements for the financial

years ended 31 December 2007 and 31 December 2008.

CONSOLIDATED INCOME STATEMENTFor the year ended 31 December 2008

2008 2007NOTES HK$’000 HK$’000

Turnover 5 2,216,897 2,266,163

Direct operating costs (1,793,199) (1,849,528)

Gross profit 423,698 416,635

Investment income 7 11,296 30,484

Other income 8 6,040 8,657

Distribution and selling expenses (51,718) (51,835)

Administrative expenses (471,565) (337,744)

Finance costs 9 (93,733) (139,123)

Share of results of associates (45,345) (44,891)

Share of result of a jointly controlled entity (6,760) (650)

Impairment loss recognised in respect of

loan and interest receivables – (14,534)


available-for-sale investments (87,008) (6,440)


goodwill (12,705) (11,214)


other intangible assets (192,840) –

(Impairment loss recognised) reversed

in respect of property, plant and equipment (316,473) 2,137

Loss on disposal of properties under

construction – (19,600)

Increase (decrease) in fair value of investments

held for trading 10,228 (7,143)

Increase in fair value of derivative financial

instruments 3,073 3,783

Gain on disposal of subsidiaries 52a, b & c 2,729 82,265

Loss on disposal of subsidiaries 52d – (274)

Discount on acquisition of subsidiaries 53a, d 161 47,344

Change in fair value of investment properties (4,826) –

Loss before taxation 10 (825,748) (42,143)

Taxation (expense) credit 12 (7,165) 46,631

(Loss) profit for the year (832,913) 4,488


– 54 –

2008 2007NOTES HK$’000 HK$’000

Attributable to:

Shareholders of the parent (688,918) (16,199)

Minority interests (143,995) 20,687

(832,913) 4,488

Dividends 13 9,103 11,908

HK$ HK$

Loss per share

– Basic and diluted 14 (0.12) (0.01)


– 55 –

CONSOLIDATED BALANCE SHEETAt 31 December 2008

2008 2007NOTES HK$’000 HK$’000

Non-current assetsProperty, plant and equipment 15 2,679,888 2,300,940Investment properties 16 217,777 174,938Prepaid lease payments 17 154,019 –Interests in associates 18 2,737 66,144Interest in a jointly controlled entity 19 9,069 6,329Available-for-sale investments 20 162,984 249,992Goodwill 21 – 12,705Other intangible assets 23 263,191 466,286Investment deposits and other assets 24 109,066 279,864Club debentures, at cost 713 713

3,599,444 3,557,911 Current assets

Inventories 25 7,559 9,283Amounts due from related companies 26 36,419 64,583Amounts due from associates 27 140,374 239,145Trade and other receivables 28 266,689 481,574Prepaid lease payments 17 5,635 –Loan receivables 29 37,744 94,349Loans to related companies 30 8,757 30,000Derivative financial instruments 31 – 5,972Investments held for trading 32 10,190 27,531Tax recoverable 5 –Pledged bank deposits 33 & 55 12,063 11,916Trading cash balances 33 238 273Bank balances and cash 33 498,609 198,774

1,024,282 1,163,400Assets classified as held for sale 34 – 92,314

1,024,282 1,255,714 Current liabilities

Trade and other payables 35 611,095 426,936Provision for loss contingencies 36 17,000 –Loans from related companies 37 188,981 277,045Amounts due to associates 27 10,075 12,749Tax liabilities 16,273 2,105Amounts due to related companies 38 51,627 54,544Amount due to a jointly controlled entity 19 920 –Obligations under finance leases

– amount due within one year 39 284 45Borrowings

– amount due within one year 40 411,901 88,753Promissory note 41 70,000 106,455Consideration note 42 – 21,545Amounts due to minority shareholders of

subsidiaries 43 105,167 98,761

1,483,323 1,088,938Liabilities associated with assets classified

as held for sale 34 – 21,019

1,483,323 1,109,957

Net current (liabilities) assets (459,041) 145,757

Total assets less current liabilities 3,140,403 3,703,668


– 56 –

Non-current liabilities

Obligations under finance leases

– amount due after one year 39 499 165

Borrowings

– amount due after one year 40 61,670 366,659

Convertible notes 44 593,235 554,215

Deferred taxation 45 233,484 220,102

888,888 1,141,141

Net assets 2,251,515 2,562,527

Capital and reserves

Share capital 46 91,199 182,076

Reserves 49 1,745,145 1,862,406

Equity attributable to shareholders of

the parent 1,836,344 2,044,482

Minority interests 415,171 518,045

Total equity 2,251,515 2,562,527

2008 2007NOTES HK$’000 HK$’000


– 57 –

CONSOLIDATED STATEMENT OF CHANGES IN EQUITYFor the year ended 31 December 2008

Attributable to shareholders of the parent

Sharecapital

Sharepremium

Specialreserve

Warrantreserve

Shareoptionsreserve

Convertiblenotes

reserveTranslation

reserve

Assetrevaluation

reserveStatutory

reserves

Retained profits

(accumulatedlosses) Total

Minorityinterests Total

HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000

(Note 49)

At 1 January 2007 61,059 101,705 652,290 – 12,006 205,139 30,209 – 150 192,754 1,255,312 431,475 1,686,787

Exchange difference arising on translation of

financial statements of foreign operations

recognised directly in equity – – – – – – 41,533 – – – 41,533 18,827 60,360

(Loss) profit for the year – – – – – – – – – (16,199) (16,199) 20,687 4,488

Total recognised income and expense

for the year – – – – – – 41,533 – – (16,199) 25,334 39,514 64,848

Issue of shares 75,000 405,000 – – – – – – – – 480,000 – 480,000

Shares issue expenses – (12,080) – – – – – – – – (12,080) – (12,080)

Recognition of equity-settled share-based

payments – – – – 2,924 – – – – – 2,924 – 2,924

Shares issued on exercise of share options 428 3,837 – – (1,146) – – – – – 3,119 – 3,119

Conversion into shares from convertible notes 45,570 329,892 – – – (73,850) – – – – 301,612 – 301,612

Disposal of subsidiaries – – – – – – – – – – – (124,237) (124,237)

Acquisition of subsidiaries – – – – – – – – – – – 177,299 177,299

Release of statutory reserves – – – – – – – – (150) 150 – – –

Issue of shares as scrip dividend 19 150 – – – – – – – – 169 – 169

Dividends paid – – – – – – – – – (11,908) (11,908) – (11,908)

Dividends paid to minority shareholders of

subsidiaries – – – – – – – – – – – (6,006) (6,006)

At 31 December 2007 182,076 828,504 652,290 – 13,784 131,289 71,742 – – 164,797 2,044,482 518,045 2,562,527


financial statements of foreign operations

recognised directly in equity – – – – – – 66,659 – – – 66,659 27,283 93,942

Loss for the year – – – – – – – – – (688,918) (688,918) (143,995) (832,913)

Total recognised income and expense

for the year – – – – – – 66,659 – – (688,918) (622,259) (116,712) (738,971)


Reduction in share capital (164,157) – 6,013 – – – – – – 158,144 – – –

Issue of shares and warrants on subscription of

rights issue 72,959 334,593 – 30,201 – – – – – – 437,753 – 437,753

Shares issue expenses – (16,811) – – – – – – – – (16,811) – (16,811)

Reserve released upon lapse of share options – – – – (13,784) – – – – 13,784 – – –

Acquisition of subsidiaries – – – – – – – 1,719 – – 1,719 13,838 15,557

Dividends paid – – – – – – – – – (9,103) (9,103) – (9,103)

At 31 December 2008 91,199 1,146,528 658,303 30,201 – 131,289 138,401 1,719 – (361,296) 1,836,344 415,171 2,251,515


– 58 –

CONSOLIDATED CASH FLOW STATEMENTFor the year ended 31 December 2008

2008 2007HK$’000 HK$’000

Cash flows from operating activities

Loss before taxation (825,748) (42,143)

Adjustments for:

Share of results of associates 45,345 44,891

Share of result of a jointly

controlled entity 6,760 650

Depreciation of property, plant and

equipment 68,586 58,455

Interest income (11,296) (30,484)

Interest expenses 41,830 77,255

Finance lease charges 37 11

Loss on disposal of property,

plant and equipment 518 1,839

Loss on disposal of properties under

construction – 19,600

Allowance for bad and doubtful debts 1,705 3,974

Allowance for inventories 1,530 1,381


loan and interest receivables – 14,534


amounts due from associates 9,020 –


available-for-sale investments 87,008 6,440


goodwill 12,705 11,214


other intangible assets 192,840 –

Impairment loss recognised (reversed) in

respect of property, plant and equipment 316,473 (2,137)

Discount on acquisition of subsidiaries (161) (47,344)

Effective interest expenses of

convertible notes 51,866 61,857

Decrease in fair value of

investment properties 4,826 –

(Increase) decrease in fair value of

investments held for trading (10,228) 7,143

Increase in fair value of derivative

financial instruments (3,073) (3,783)

Employee share option expenses – 2,924

Gain on disposal of subsidiaries (2,729) (82,265)

Loss on disposal of subsidiaries – 274

Gain on disposal of available-for-sale

investments – (564)

Loss on disposal of properties held for sale – 68

Amortisation of other intangible assets 7,825 2,608

Provision for loss contingencies 17,000 –

Operating cash flows before movements in

working capital 12,639 106,398


– 59 –

Movements in working capitalDecrease (increase) in investments

held for trading 29,022 (27,549)Decrease (increase) in inventories 266 (2,228)Decrease (increase) in amounts due from

related companies 3,617 (5,066)Increase in amounts due from associates (871) (3,633)Increase in trade and other receivables (56,918) (79,813)(Decrease) increase in trade and

other payables (36,746) 89,840Decrease in amounts due to associates (2,674) (601)Increase in amount due to a jointly

controlled entity 920 –Decrease in amounts due to related companies (5,177) (39,094)

(68,561) (68,144)

Cash (used in) generated from operations (55,922) 38,254Taxation in other jurisdictions paid (5) (30)Taxation in other jurisdictions refunded 29 21

Net cash (used in) from operating activities (55,898) 38,245

Cash flows from investing activitiesEarnest money refunded 356,017 –Investment deposit refunded 216,600 –Repayment of loans advanced to

certain companies 120,732 476,194Repayment from (advances to) associates 90,622 (236,279)Repayment from (advances to) related

companies 45,324 (30,000)Consideration receivable from disposal of

subsidiaries received 19,685 –Interest received 11,296 30,484Proceeds from maturity of derivative financial

instruments 9,045 –Proceeds from disposal of property,

plant and equipment 500 21,897Additions to property, plant and equipment (340,822) (101,469)Additions to prepaid lease payments (163,880) –Earnest money paid 24 (100,000) (356,017)Cash outflow of loans advanced to

certain companies and individuals (65,000) (219,142)Acquisition of investment properties (31,719) –(Advance to) repayment from other receivables (17,871) 323,112Capital injection in a jointly controlled entity (9,500) –Acquisition of subsidiaries 53 (4,938) (239,968)Disposal of subsidiaries 52 (363) 226,200Increase in pledged bank deposits (147) (481)Deposit received for the disposal of assets

classified as held for sale – 3,500Proceed from disposal of

available-for-sale investments – 570Proceeds from disposal of properties

held for sale – 30Purchase of available-for-sale investments – (183,700)Payment for investment deposits – (84,864)

Net cash from (used in) investing activities 135,581 (369,933)

2008 2007NOTES HK$’000 HK$’000


– 60 –

Cash flows from financing activities

Proceeds from issue of

new shares for cash 437,753 483,119

New bank loans and other loans raised 144,144 365,930

Repayment of bank loans and other loans (119,579) (666,968)

Net cash (outflow) inflow from loans from

related companies (88,064) 94,470

Interest paid (74,513) (93,313)

Repayment of promissory note (36,455) –

Repayment of consideration notes (21,545) –

Share issue expenses (16,811) (12,080)

Dividends paid (8,540) (11,739)

Repayment of obligations under

finance leases (218) (42)

Finance lease charges paid (37) (11)

Repayment to a related company – (171,260)

Repayment of amounts due to

minority shareholders – (8,612)

Dividends paid to minority shareholders of

subsidiaries – (6,006)

Net cash from (used in) financing activities 216,135 (26,512)

Net increase (decrease) in cash and

cash equivalents 295,818 (358,200)

Cash and cash equivalents at beginning of

the year 199,410 555,524

Effect of foreign exchange rate changes 3,619 2,086

Cash and cash equivalents at end of the year 498,847 199,410

Represented by:

Bank balances and cash 498,609 198,774

Bank balances and cash included in assets

classified as held for sale – 363

Trading cash balances 238 273

498,847 199,410

2008 2007HK$’000 HK$’000


– 61 –

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the year ended 31 December 2008

1. General

The Company is an exempted company incorporated in Bermuda with limited liability. Its

shares are listed on The Stock Exchange of Hong Kong Limited (the “Stock Exchange”). The

addresses of the registered office and principal place of business of the Company are disclosed in

the corporate information of the annual report.

The consolidated financial statements are presented in Hong Kong dollars which is the

functional currency of the Company.

The Company is an investment holding company. Its principal subsidiaries are engaged in the

business of providing package tours, travel and other related services, hotel operation and trading of

securities.

2. Application of new and revised Hong Kong Financial Reporting Standards (“HKFRSs”)

In the current year, the Group has applied the following amendments and interpretations

(“new HKFRSs”) issued by the Hong Kong Institute of Certified Public Accountants (“HKICPA”)

which are or have become effective.

HKAS 39 & HKFRS 7

(Amendments)

Reclassification of Financial Assets

HK(IFRIC) – Int 11 HKFRS 2: Group and Treasury Share Transactions

HK(IFRIC) – Int 12 Service Concession Arrangements

HK(IFRIC) – Int 14 HKAS 19 – The Limit on a Defined Benefit Asset,

Minimum Funding Requirements and their Interaction

The adoption of the new HKFRSs had no material effect on how the results and financial

position for the current or prior accounting periods have been prepared and presented. Accordingly,

no prior period adjustment has been required.


– 62 –

The Group has not early applied the following new and revised standards, amendments or

interpretations that have been issued but are not yet effective.

HKFRSs (Amendments) Improvements to HKFRSs1

HKAS 1 (Revised) Presentation of Financial Statements2

HKAS 23 (Revised) Borrowing Costs2

HKAS 27 (Revised) Consolidated and Separate Financial Statements3

HKAS 32 & 1

(Amendments)

Puttable Financial Instruments and Obligations Arising

on Liquidation2

HKAS 39 (Amendment) Eligible hedged items3

HKFRS 1 & HKAS 27

(Amendments)

Cost of an Investment in a Subsidiary, Jointly Controlled

Entity or Associate2

HKFRS 2 (Amendment) Vesting Conditions and Cancellations2

HKFRS 3 (Revised) Business Combinations3

HKFRS 7 (Amendment) Improving Disclosures about Financial Instruments2

HKFRS 8 Operating Segments2

HK(IFRIC) – Int 9 &

HKAS 39 (Amendments)

Embedded Derivatives4

HK(IFRIC) – Int 13 Customer Loyalty Programmes5

HK(IFRIC) – Int 15 Agreements for the Construction of Real Estate2

HK(IFRIC) – Int 16 Hedges of a Net Investment in a Foreign Operation6

HK(IFRIC) – Int 17 Distributions of Non-cash Assets to Owners3

HK(IFRIC) – Int 18 Transfers of Assets from Customers7

1 Effective for annual periods beginning on or after 1 January 2009 except the amendments to HKFRS 5,

effective for annual periods beginning on or after 1 July 20092 Effective for annual periods beginning on or after 1 January 20093 Effective for annual periods beginning on or after 1 July 20094 Effective for annual periods ending on or after 30 June 20095 Effective for annual periods beginning on or after 1 July 20086 Effective for annual periods beginning on or after 1 October 20087 Effective for transfers on or after 1 July 2009

The application of HKFRS 3 (Revised) may affect the Group’s accounting for business

combination for which the acquisition date is on or after 1 January 2010. HKAS 27 (Revised) will

affect the accounting treatment for changes in the Group’s ownership interest in a subsidiary. The

directors of the Company anticipate that the application of the other new and revised standards,

amendments or interpretations will have no material impact on the results and the financial position

of the Group.

3. Significant accounting policies

The consolidated financial statements have been prepared on the historical cost basis except

for investment properties and certain financial instruments, which are measured at fair values, as

explained in the accounting policies set out below.


– 63 –

The consolidated financial statements have been prepared in accordance with Hong Kong

Financial Reporting Standards issued by the HKICPA. In addition, the consolidated financial

statements include applicable disclosures required by the Rules Governing the Listing of Securities

on the Stock Exchange (the “Listing Rules”) and by the Hong Kong Companies Ordinance.

Basis of consolidation

The consolidated financial statements incorporate the financial statements of the

Company and entities controlled by the Company (its subsidiaries). Control is achieved

where the Company has the power to govern the financial and operating policies of an entity

so as to obtain benefits from its activities.

The results of subsidiaries acquired or disposed of during the year are included in the

consolidated income statement from the effective date of acquisition or up to the effective

date of disposal, as appropriate.

Where necessary, adjustments are made to the financial statements of subsidiaries to

bring their accounting policies into line with those used by other members of the Group.

All inter-company transactions and balances within the Group are eliminated on

consolidation.

Minority interests in the net assets of consolidated subsidiaries are presented

separately from the Group’s equity therein. Minority interests in the net assets consist of the

amount of those interests at the date of the original business combination and the minority’s

share of changes in equity since the date of the combination. Losses applicable to the

minority in excess of the minority’s interest in the subsidiary’s equity are allocated against

the interests of the Group except to the extent that the minority has a binding obligation and

is able to make an additional investment to cover the losses.

Business combinations

The acquisition of business is accounted for using the purchase method. The cost of

the acquisition is measured at the aggregate of the fair values, at the date of exchange, of

assets given, liabilities incurred or assumed, and equity instruments issued by the Group

in exchange for control of the acquiree, plus any costs directly attributable to the business

combination. The acquiree’s identifiable assets, liabilities and contingent liabilities that meet

the conditions for recognition under HKFRS 3 Business Combinations are recognised at their

fair values at the acquisition date.

Goodwill arising on acquisition is recognised as an asset and initially measured at

cost, being the excess of the cost of the business combination over the Group’s interest in

the net fair value of the identifiable assets, liabilities and contingent liabilities recognised.

If, after reassessment, the Group’s interest in the net fair value of the acquiree’s identifiable

assets, liabilities and contingent liabilities exceeds the cost of the business combination, the

excess is recognised immediately in profit or loss.

The interest of minority shareholders in the acquiree is initially measured at the

minority’s proportion of the net fair value of the assets, liabilities and contingent liabilities

recognised.


– 64 –

Goodwill

Goodwill arising on acquisition prior to 1 January 2005

Goodwill arising on an acquisition of net assets and operations of another entity

for which the agreement date is before 1 January 2005 represents the excess of the cost of

acquisition over the Group’s interest in the fair value of the identifiable assets and liabilities

of the relevant acquiree at the date of acquisition.

For previously capitalised goodwill arising on acquisition after 1 January 2001, the

Group has discontinued amortisation from 1 January 2005 onwards, and such goodwill is

tested for impairment annually, and whenever there is an indication that the cash generating

unit to which the goodwill relates may be impaired (see the accounting policy below).

Goodwill arising on acquisition on or after 1 January 2005

Goodwill arising on an acquisition of a business for which the agreement date is on or

after 1 January 2005 represents the excess of the cost of acquisition over the Group’s interest

in the fair value of the identifiable assets, liabilities and contingent liabilities of the relevant

business at the date of acquisition. Such goodwill is carried at cost less any accumulated

impairment losses.

Capitalised goodwill arising on an acquisition of a business is presented separately in

the consolidated balance sheet.

Impairment testing on capitalised goodwill

For the purposes of impairment testing, goodwill arising from an acquisition is

allocated to each of the relevant cash-generating units, or groups of cash-generating units,

that are expected to benefit from the synergies of the acquisition. A cash-generating unit to

which goodwill has been allocated is tested for impairment annually, and whenever there

is an indication that the unit may be impaired. For goodwill arising on an acquisition in a

financial year, the cash-generating unit to which goodwill has been allocated is tested for

impairment before the end of that financial year. When the recoverable amount of the cash-

generating unit is less than the carrying amount of the unit, the impairment loss is allocated

to reduce the carrying amount of any goodwill allocated to the unit first, and then to the other

assets of the unit pro rata on the basis of the carrying amount of each asset in the unit. Any

impairment loss for goodwill is recognised directly in the consolidated income statement. An

impairment loss for goodwill is not reversed in subsequent periods.

On subsequent disposal of the relevant cash-generating unit, the attributable amount

of goodwill capitalised is included in the determination of the amount of profit or loss on

disposal.

Excess of an acquirer’s interest in the net fair value of an acquiree’s identifiable assets, liabilities and contingent liabilities over cost (“discount on acquisition”)

A discount on acquisition arising on an acquisition of a business for which an

agreement date is on or after 1 January 2005 represents the excess of the net fair value of

an acquiree’s identifiable assets, liabilities and contingent liabilities over the cost of the

business combination. Discount on acquisition is recognised immediately in profit or loss.


– 65 –

Investments in associates

An associate is an entity over which the investor has significant influence and that is

neither a subsidiary nor an interest in a joint venture.

The results and assets and liabilities of associates are incorporated in these

consolidated financial statements using the equity method of accounting. Under the equity

method, investments in associates are carried in the consolidated balance sheet at cost as

adjusted for post-acquisition changes in the Group’s share of the net assets of the associate,

less any identified impairment loss. When the Group’s share of losses of an associate equals

or exceeds its interest in that associate (which includes any long-term interests that, in

substance, form part of the Group’s net investment in the associate), the Group discontinues

recognising its share of further losses. An additional share of losses is provided for and a

liability is recognised only to the extent that the Group has incurred legal or constructive

obligations or made payments on behalf of that associate.

Any excess of the cost of acquisition over the Group’s share of the net fair value of

the identifiable assets, liabilities and contingent liabilities of the associate recognised at the

date of acquisition is recognised as goodwill. The goodwill is included within the carrying

amount of the investment and is assessed for impairment as part of the investment.

Where a group entity transacts with an associate of the Group, profits and losses are

eliminated to the extent of the Group’s interest in the relevant associate.

Joint ventures

Jointly controlled entities

Joint venture arrangements that involve the establishment of a separate entity in which

venturers have joint control over the economic activity of the entity are referred to as jointly

controlled entities.

The results and assets and liabilities of jointly controlled entities are incorporated

in the consolidated financial statements using the equity method of accounting. Under the

equity method, investments in jointly controlled entities are carried in the consolidated

balance sheet at cost as adjusted for post-acquisition changes in the Group’s share of the

net assets of the jointly controlled entities, less any identified impairment loss. When the

Group’s share of losses of a jointly controlled entity equals or exceeds its interest in that

jointly controlled entity (which includes any long-term interests that, in substance, form

part of the Group’s net investment in the jointly controlled entity), the Group discontinues

recognising its share of further losses. An additional share of losses is provided for and a

liability is recognised only to the extent that the Group has incurred legal or constructive

obligations or made payments on behalf of that jointly controlled entity.

Any excess of the cost of acquisition over the Group’s share of the net fair value of

the identifiable assets, liabilities and contingent liabilities of the jointly controlled entity

recognised at the date of acquisition is recognised as goodwill. The goodwill is included

within the carrying amount of the investment and is assessed for impairment as part of the

investment.

When a group entity transacts with a jointly controlled entity of the Group, profits or

losses are eliminated to the extent of the Group’s interest in the jointly controlled entity.


– 66 –

Revenue recognition

Revenue is measured at the fair value of the consideration received or receivable and

represents amounts receivable for goods sold and services provided in the normal course of

business, net of discounts and sales related taxes.

Income from tour and travel services and other travel related services is recognised

when the services are rendered. Revenue from sales of air tickets is recognised when the

tickets are delivered.

Hotel revenue from rooms and other ancillary services are recognised when the

services are rendered.

Interest income from a financial asset is accrued on a time basis, by reference to

the principal outstanding and at the effective interest rate applicable, which is the rate that

exactly discounts the estimated future cash receipts through the expected life of the financial

asset to that asset’s net carrying amount.

Revenue from sales of goods are recognised when goods are delivered and title has

been passed.

Rental income from operating leases is recognised in the consolidated income

statement on a straight line basis over the term of the relevant lease.

Property, plant and equipment

Property, plant and equipment including land and buildings held for use in the

production or supply of goods or services or for administrative purposes other than

properties under construction and construction in progress are stated at cost less subsequent

accumulated depreciation and accumulated impairment losses.

Depreciation is provided to write off the cost of items of property, plant and

equipment other than properties under construction and construction in progress over their

estimated useful lives and after taking into account of their estimated residual value, using

the straight line method.

Construction in progress includes plant and equipment in the course of installation

and for own use purposes. Construction in progress is carried at cost less any recognised

impairment loss. Construction in progress is classified to the appropriate category of plant

and equipment when completed and ready for intended use. Depreciation of these assets, on

the same basis as other plant and equipment, commences when the assets are ready for their

intended use.

Properties under construction are stated at cost less accumulated impairment losses.

Cost includes all development expenditure and other direct costs attributable to such projects.

Properties under construction are not depreciated until completion of construction. Cost on

completed properties is transferred to other categories of property, plant and equipment.

Assets held under finance leases are depreciated over their estimated useful lives on

the same basis as owned assets.


– 67 –

An item of property, plant and equipment is derecognised upon disposal or when

no future economic benefits are expected to arise from the continued use of the asset. Any

gain or loss arising on derecognition of the asset (calculated as the difference between the

net disposal proceeds and the carrying amount of the item) is included in the consolidated

income statement in the year in which the item is derecognised.

Investment properties

Investment properties are properties held to earn rentals and/or for capital

appreciation. On initial recognition, investment properties are measured at cost, including

any directly attributable expenditure. Subsequent to initial recognition, investment properties

are measured using the fair value model. Gains or losses arising from changes in the fair

value of investment property are included in profit or loss for the period in which they arise.

An investment property is derecognised upon disposal or when the investment

property is permanently withdrawn from use or no future economic benefits are expected

from its disposal. Any gain or loss arising on derecognition of the asset (calculated as

the difference between the net disposal proceeds and the carrying amount of the asset) is

included in the consolidated income statement in the year in which the item is derecognised.

Financial instruments

Financial assets and financial liabilities are recognised on the consolidated balance

sheet when a group entity becomes a party to the contractual provisions of the instrument.

Financial assets and financial liabilities are initially measured at fair value. Transaction

costs that are directly attributable to the acquisition or issue of financial assets and financial

liabilities (other than financial assets and financial liabilities at fair value through profit

or loss (“FVTPL”)) are added to or deducted from the fair value of the financial assets

or financial liabilities, as appropriate, on initial recognition. Transaction costs directly

attributable to the acquisition of financial assets or financial liabilities at FVTPL are

recognised immediately in profit or loss.

Financial assets

The Group’s financial assets are classified into one of the three categories, including

financial assets at FVTPL, loans and receivables and available-for-sale financial assets. All

regular way purchases or sales of financial assets are recognised and derecognised on a trade

date basis. Regular way purchases or sales are purchases or sales of financial assets that

require delivery of assets within the time frame established by regulation or convention in the

marketplace. The accounting policies adopted in respect of each category of financial assets

are set out below.

Effective interest method

The effective interest method is a method of calculating the amortised cost of a

financial asset and of allocating interest income over the relevant period. The effective

interest rate is the rate that exactly discounts estimated future cash receipts (including all

fees paid or received that form an integral part of the effective interest rate, transaction costs

and other premiums or discounts) through the expected life of the financial asset, or, where

appropriate, a shorter period.

Income is recognised on an effective interest basis for debt instruments.


– 68 –

Financial assets at fair value through profit or loss

Financial assets at FVTPL has two subcategories, including financial assets held for

trading and those designated at FVTPL on initial recognition.

A financial asset is classified as held for trading if:

• it has been acquired principally for the purpose of selling in the near future; or

• it is a part of an identified portfolio of financial instruments that the Group

manages together and has a recent actual pattern of short-term profit-taking; or

• it is a derivative that is not designated and effective as a hedging instrument.

At each balance sheet date subsequent to initial recognition, financial assets held for

trading are measured at fair value, with changes in fair value recognised directly in profit

or loss in the period in which they arise. The net gain or loss recognised in profit or loss

includes any dividend earned on the financial assets.

Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable

payments that are not quoted in an active market. At each balance sheet date subsequent to

initial recognition, loans and receivables (including amounts due from related companies,

amounts due from associates, trade and other receivables, loan receivables, loan to related

companies, pledged bank deposits, trading cash balance and bank balances and cash) are

carried at amortised cost using the effective interest method, less any identified impairment

losses (see accounting policy on impairment loss on financial assets below).

Available-for-sale financial assets

Available-for-sale financial assets are non-derivatives that are either designated

or not classified as financial assets at FVTPL, loans and receivables or held-to-maturity

investments.

For available-for-sale equity investments that do not have a quoted market price in

an active market and whose fair value cannot be reliably measured, they are measured at

cost less any identified impairment losses at each balance sheet date subsequent to initial

recognition (see accounting policy on impairment loss on financial assets below).

Impairment of financial assets

Financial assets, other than those at FVTPL, are assessed for indicators of impairment

at each balance sheet date. Financial assets are impaired where there is objective evidence

that, as a result of one or more events that occurred after the initial recognition of the

financial asset, the estimated future cash flows of the financial assets have been impacted.


– 69 –

Objective evidence of impairment could include:

• significant financial difficulty of the issuer or counterparty; or

• default or delinquency in interest or principal payments; or

• it becoming probable that the borrower will enter bankruptcy or financial re-

organisation.

For certain categories of financial asset, such as trade receivables, that are assessed

not to be impaired individually are subsequently assessed for impairment on a collective

basis. Objective evidence of impairment for a portfolio of receivables could include the

Group’s past experience of collecting payments, an increase in the number of delayed

payments in the portfolio past the credit period, observable changes in national or local

economic conditions that correlate with default on receivables.

For financial assets carried at amortised cost, an impairment loss is recognised in

profit or loss when there is objective evidence that the asset is impaired, and is measured as

the difference between the asset’s carrying amount and the present value of the estimated

future cash flows discounted at the original effective interest rate.

For financial assets carried at cost, the amount of the impairment loss is measured as

the difference between the asset’s carrying amount and the present value of the estimated

future cash flows discounted at the current market rate of return for a similar financial asset.

Such impairment loss will not be reversed in subsequent periods.

The carrying amount of the financial asset is reduced by the impairment loss directly

for all financial assets with the exception of trade receivables and loan receivables, where the

carrying amount is reduced through the use of an allowance account. Changes in the carrying

amount of the allowance account are recognised in profit or loss. When a trade receivable or

a loan receivable is considered uncollectible, it is written off against the allowance account.

Subsequent recoveries of amounts previously written off are credited to profit or loss.

For financial assets measured at amortised cost, if, in a subsequent period, the

amount of impairment loss decreases and the decrease can be related objectively to an event

occurring after the impairment losses was recognised, the previously recognised impairment

loss is reversed through profit or loss to the extent that the carrying amount of the asset at

the date the impairment is reversed does not exceed what the amortised cost would have been

had the impairment not been recognised.

Financial liabilities and equity

Financial liabilities and equity instruments issued by a group entity are classified

according to the substance of the contractual arrangements entered into and the definitions of

a financial liability and an equity instrument.

An equity instrument is any contract that evidences a residual interest in the assets of

the Group after deducting all of its liabilities. The Group’s financial liabilities are generally

classified as other financial liabilities.


– 70 –

Effective interest method

The effective interest method is a method of calculating the amortised cost of a

financial liability and of allocating interest expense over the relevant period. The effective

interest rate is the rate that exactly discounts estimated future cash payments through the

expected life of the financial liability, or, where appropriate, a shorter period.

Interest expense is recognised on an effective interest basis.

Convertible notes

Convertible notes issued by the Company that contain both the liability and conversion

option components are classified separately into respective items on initial recognition.

Conversion option that will be settled by the exchange of a fixed amount of cash or another

financial asset for a fixed number of the Company’s own equity instruments is classified as

an equity instrument.

On initial recognition, the fair value of the liability component is determined using

the prevailing market interest of similar non-convertible debts. The difference between the

proceeds of the issue of the convertible notes and the fair value assigned to the liability

component, representing the conversion option for the holder to convert the notes into equity,

is included in equity (convertible notes reserve).

In subsequent periods, the liability component of the convertible notes is carried at

amortised cost using the effective interest method. The equity component, represented by the

option to convert the liability component into ordinary shares of the Company, will remain in

convertible notes reserve until the conversion option is exercised (in which case the balance

stated in convertible notes equity reserve will be transferred to share premium). Where the

option remains unexercised at the expiry date, the balance stated in convertible notes reserve

will be released to the retained profits (accumulated losses). No gain or loss is recognised in

profit or loss upon conversion or expiration of the option.

Transaction costs that relate to the issue of the convertible notes are allocated to the

liability and equity components in proportion to the allocation of the proceeds. Transaction

costs relating to the equity component are charged directly to equity. Transaction costs

relating to the liability component are included in the carrying amount of the liability portion

and amortised over the period of the convertible notes using the effective interest method.

Other financial liabilities

Other financial liabilities including trade and other payables, loans from related

companies, amounts due to associates, amounts due to related companies/a jointly controlled

entity, borrowings, promissory note, consideration note and amounts due to minority

shareholders of subsidiaries are subsequently measured at amortised cost, using the effective

interest method.

Equity instruments

Equity instruments issued by the Company are recorded at the proceeds received, net

of direct issue costs.


– 71 –

Derecognition

Financial assets are derecognised when the rights to receive cash flows from the assets

expire or, the financial assets are transferred and the Group has transferred substantially all

the risks and rewards of ownership of the financial assets. On derecognition of a financial

asset, the difference between the asset’s carrying amount and the sum of the consideration

received and receivable and the cumulative gain or loss that had been recognised directly in

equity is recognised in profit or loss.

Financial liabilities are derecognised when the obligation specified in the relevant

contract is discharged, cancelled or expires. The difference between the carrying amount of

the financial liability derecognised and the consideration paid and payable is recognised in

profit or loss.

Non-current assets held for sale

Non-current assets and disposal groups are classified as held for sale if their carrying

amount will be recovered principally through a sale transaction rather than through

continuing use. This condition is regarded as met only when the sale is highly probable and

the asset (or disposal group) is available for immediate sale in its present condition.

Non-current assets (and disposal groups) classified as held for sale are measured at the

lower of the assets’ (disposal groups’) previous carrying amount and fair value less costs to

sell.

Inventories

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

using the weighted average cost method.

Taxation

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

The tax currently payable is based on taxable profit for the year. Taxable profit differs

from profit as reported in the consolidated income statement because it excludes items of

income or expense that are taxable or deductible in other years and it further excludes items

that are never taxable or deductible. The Group’s liability for current tax is calculated using

tax rates that have been enacted or substantively enacted by the balance sheet date.

Deferred tax is recognised on differences between the carrying amount of assets and

liabilities in the consolidated financial statements and the corresponding tax bases used in the

computation of taxable profit, and is accounted for using the balance sheet liability method.

Deferred tax liabilities are generally recognised for all taxable temporary differences

and deferred tax assets are recognised to the extent that it is probable that taxable profit will

be available against which deductible temporary differences can be utilised. Such assets and

liabilities are not recognised if the temporary difference arises from goodwill or from the

initial recognition (other than in a business combination) of other assets and liabilities in a

transaction that affects neither the taxable profit nor the accounting profit.


– 72 –

Deferred tax liabilities are recognised for taxable temporary differences arising on

investments in subsidiaries, associates and jointly controlled entities, except where the

Group is able to control the reversal of the temporary difference and it is probable that the

temporary difference will not reverse in the foreseeable future.

The carrying amount of deferred tax assets is reviewed at each balance sheet date

and reduced to the extent that it is no longer probable that sufficient taxable profit will be

available to allow all or part of the asset to be recovered.

Deferred tax is calculated at the tax rates that are expected to apply in the period when

the liability is settled or the asset is realised. Deferred tax is charged or credited to profit or

loss, except when it relates to items charged or credited directly to equity, in which case the

deferred tax is also dealt with in equity.

Intangible assets

Intangible assets acquired separately and with finite useful lives are carried at costs

less accumulated amortisation and any accumulated impairment losses. Amortisation for

intangible assets with finite useful lives is provided on a straight line basis over their

estimated useful lives.

Gains or losses arising from derecognition of an intangible asset are measured at the

difference between the net disposal proceeds and the carrying amount of the asset and are

recognised in the consolidated income statement when the asset is derecognised.

Impairment losses on tangible and intangible assets other than goodwill (see the accounting policy in respect of goodwill above)

At each balance sheet date, the Group reviews the carrying amounts of its assets to

determine whether there is any indication that those assets have suffered an impairment loss.

If the recoverable amount of an asset is estimated to be less than its carrying amount, the

carrying amount of the asset is reduced to its recoverable amount. An impairment loss is

recognised as an expense immediately.

Where an impairment loss subsequently reverses, the carrying amount of the asset is

increased to the revised estimate of its recoverable amount, but so that the increased carrying

amount does not exceed the carrying amount that would have been determined had no

impairment loss been recognised for the asset in prior years. A reversal of an impairment loss

is recognised as income immediately.

Leasing

Leases are classified as finance leases whenever the terms of the lease transfer

substantially all the risks and rewards of ownership to the lessee. All other leases are

classified as operating leases.

The Group as lessor

Rental income from operating leases is recognised in the consolidated income

statement on a straight line basis over the term of the relevant lease.


– 73 –

The Group as lessee

Assets held under finance leases are recognised as assets of the Group at their fair

value at the inception of the lease or, if lower, at the present value of the minimum lease

payments. The corresponding liability to the lessor is included in the consolidated balance

sheet as a finance lease obligation. Lease payments are apportioned between finance charges

and reduction of the lease obligation so as to achieve a constant rate of interest on the

remaining balance of the liability.

Rentals payable under operating leases are charged to profit or loss on a straight line

basis over the term of the relevant lease. Benefits received and receivable as an incentive to

enter into an operating lease are recognised as a reduction of rental expense over the lease

term on a straight line basis.

Leasehold land and building

The land and buildings element of a lease of land and buildings are considered

separately for the purposes of lease classification, unless the lease payments cannot be

allocated reliably between the land and buildings element, in which case, the entire lease is

generally treated as a finance lease and account for as property, plant and equipment. To the

extent the allocation of lease payments can be made reliably, leasehold interests in land are

accounted for as operating lease, except for those that are classified and accounted for as

investment properties under the fair value model.

Investment properties

Investment properties are properties held to earn rentals and/or for capital

appreciation.

On initial recognition, investment properties are measured at cost, including any

directly attributable expenditure. Subsequent to initial recognition, investment properties are

measured at their fair values using the fair value model. Gains or losses arising from changes

in the fair value of investment property are included in profit or loss for the period in which

they arise.

Leasehold land held for undetermined future use

Leasehold land held for undetermined future use is regarded as held for capital

appreciation purpose and classified as an investment property, and carried at fair value.

Changes in fair value of the leasehold land are recognised directly in profit or loss for the

period in which changes take place. An investment property is derecognised upon disposal

or when the investment property is permanently withdrawn from use and no future economic

benefits are expected from its disposals. Any gain or loss arising on derecognition of the

asset (calculated as the difference between the net disposal proceeds and the carrying amount

of the asset) is included in the consolidated income statement in the year in which the item is

derecognised.


– 74 –

Borrowing costs

Borrowing costs directly attributable to the acquisition, construction or production

of qualifying assets are capitalised as part of the cost of those assets. Capitalisation of such

borrowing costs ceases when the assets are substantially ready for their intended use or

sale. Investment income earned on the temporary investment of specific borrowings pending

their expenditure on qualifying assets is deducted from the borrowing costs eligible for

capitalisation.

All other borrowing costs are recognised in profit or loss in the period in which they

are incurred.

Foreign currencies

In preparing the financial statements of each individual group entity, transactions in

currencies other than the functional currency of that entity (foreign currencies) are recorded

in its functional currency (i.e. the currency of the primary economic environment in which

the entity operates) at the rates of exchanges prevailing on the dates of the transactions. At

each balance sheet date, monetary items denominated in foreign currencies are re-translated

at the rates prevailing on the balance sheet date. Non-monetary items carried at fair value

that are denominated in foreign currencies are re-translated at the rates prevailing on the

date when the fair value was determined. Non-monetary items that are measured in terms of

historical cost in a foreign currency are not re-translated.

Exchange differences arising on the settlement of monetary items, and on the

retranslation of monetary items, are recognised in profit or loss in the period in which they

arise. Exchange differences arising on the re-translation of non-monetary items carried at

fair value are included in profit or loss for the period except for differences arising on the

re-translation of non-monetary items in respect of which gains and losses are recognised

directly in equity, in which cases, the exchange differences are also recognised directly in

equity.

For the purposes of presenting the consolidated financial statements, the assets and

liabilities of the Group’s foreign operations are translated into the presentation currency of

the Group (i.e. Hong Kong dollars) at the rate of exchange prevailing at the balance sheet

date, and their income and expenses are translated at the average exchange rates for the year,

unless exchange rates fluctuate significantly during the period, in which case, the exchange

rates prevailing at the dates of transactions are used. Exchange differences arising, if any,

are recognised as a separate component of equity (the translation reserve). Such exchange

differences are recognised in profit or loss in the period in which the foreign operation is

disposed of.

Retirement benefit costs

Payments to the Group’s defined contribution retirement benefit plans, including state-

managed retirement benefit schemes and the Mandatory Provident Fund Scheme, are charged

as an expense when employees have rendered service entitling them to the contributions.


– 75 –

Provisions

Provisions are recognised when the Group has a present obligation as a result of

a past event, and it is probable that the Group will be required to settle that obligations.

Provisions are measured at the Directors’ best estimate of the expenditure required to settle

the obligation at the balance sheet date and are discounted to present value when the effect is

material.

Equity settled share-based payment transactions

Share options granted to directors, employees of the Group and other eligible participants

The fair value of services received determined by reference to the fair value of share

options granted at the grant date is expensed on a straight line basis over the vesting period

with a corresponding increase in equity (share options reserve).

At each balance sheet date, the Group revises its estimates of the number of options

that are expected to ultimately vest. The impact of the revision of the estimates during the

vesting period, if any, is recognised in profit or loss, with a corresponding adjustment to

share options reserve.

At the time when the share options are exercised, the amount previously recognised

in share options reserve will be transferred to share premium. When the share options

are forfeited after the vesting date or are still not exercised at the expiry date, the amount

previously recognised in share options reserve will be transferred to retained earnings

(accumulated losses).

Other eligible participants represent individuals who rendered services to the Group

and the services rendered are similar to those rendered by employees.

Warrants

Warrants issued by the Company that will be settled by the exchange of a fixed

amount of cash for a fixed number of the Company’s own equity instruments are classified as

an equity instrument.

The fair value of warrants on the date of issue is recognised in equity (warrant

reserve). The warrant reserve will be transferred to share capital and share premium upon

exercise of the warrants. Where the warrants remain unexercised at the expiry date, the

amount previously recognised in warrant reserve will be released to the retained profits or

accumulated losses.

4. Key sources of estimation uncertainty

In the application of the Group’s accounting policies, which are described in note 3, the

directors of the Company are required to make estimates and assumptions about the carrying

amounts of assets and liabilities that are not readily apparent from other sources. The estimates and

associated assumptions are based on historical experience and other factors that are considered to

be relevant. Actual results may differ from these estimates.


– 76 –

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to

accounting estimates are recognised in the period in which the estimate is revised if the revision

affects only that period, or in the period of the revision and future periods if the revision affects

both current and future periods.

Estimated impairment of other intangible assets

When there is impairment indicator, the Group takes into consideration the estimation

of future cash flows to be generated from use of the intangible asset. The amount of the

impairment loss is measured as the difference between the asset’s carrying amount and the

present value of estimated future cash flows discounted at a suitable discount rate. Where the

actual future cash flows are less than expected, a material impairment loss may arise.

At 31 December 2008, an impairment loss of HK$192,840,000 (2007: Nil) was

recognised and the carrying amount of other intangible assets was written down to

approximately HK$263,191,000 (2007: HK$466,286,000). Details of the recoverable amount

calculation are disclosed in note 23.

Estimated impairment of available-for-sale investments

In determining whether there is objective evidence of impairment in relation to

the Group’s available-for-sale investments in unlisted equity securities, the Group takes

into consideration of the decline in market values of the properties held by its investees.

Judgment is required when determining whether it is necessary to make any impairment on

the investment cost in these available-for-sale investments by taking into consideration of

the decline in market values of the properties held by its investees over the respective costs.

Where the market price of the properties declines more than expected, a further impairment

loss may arise.

As at 31 December 2008, the carrying amount of available-for-sale investments is

HK$162,984,000 (2007: HK$249,992,000). The directors performed impairment assessment

of the Group’s available-for-sale investments and an impairment loss of HK$87,008,000

(2007: HK$6,440,000) was recognised in the consolidated income statement during the year.

Estimated impairment of property, plant and equipment

Property, plant and equipment are reviewed for impairment when events or changes in

circumstances indicate that the carrying amount of the assets exceeds its recoverable amount.

The recoverable amount is determined with reference to the fair value of the property,

plant and equipment less costs to sell or the value-in-use calculations. An impairment loss

is measured as the difference between the asset’s carrying amount and the recoverable

amount. Where the recoverable amount is less than expected, a material impairment loss

may arise. As at 31 December 2008, the carrying amount of property, plant and equipment

is approximately HK$2,679,888,000 (net of accumulated depreciation and impairment of

approximately HK$661,930,000). The directors performed impairment assessment of the

Group’s property, plant and equipment and a net impairment loss of HK$316,473,000 (2007:

reversal of impairment loss of HK$2,137,000) was recognised in the consolidated income

statement during the year.


– 77 –

Depreciation of hotel properties

The Group’s carrying amount of hotel properties as at 31 December 2008 was

approximately HK$1,956,750,000. The Group depreciates the hotel properties on a straight-

line basis over their remaining unexpired terms of the leases. It reflects the directors’

estimate of the periods that the Group intends to derive economic benefits from the use of

the Group’s hotel properties. During the year, the useful lives of the hotel properties have

been reviewed and these estimates are considered to be appropriate. Included in the above

amount is a hotel property with a carrying amount of approximately HK$247,503,000 of

which a subsidiary of the Company has been granted the right to operate and manage the

hotel in Guangzhou, the People’s Republic of China (the “PRC”) for a period from January

1987 to January 2017, and subject to certain conditions to be fulfilled by the subsidiary, the

operating period may be extended for a further period of 20 years. Should the conditions

not be fulfilled, the depreciation period of the hotel properties would be adjusted and up to

January 2017 only. When estimating the useful life of this hotel, it is assumed that the right

to operate and manage the hotel can be extended for 20 years.

Provision for loss contingency

The Group makes provisions for all loss contingencies when information available

prior to the issuance of the consolidated financial statements indicates that it is probable

that a liability has been incurred at the date of the consolidated financial statements. As

disclosed in note 36, the Group is involved in legal proceedings with its ex-employees for

claims relating to calculation of tour escort’s holiday compensation allowance and the Group

estimates the provision based on information from its legal counsels, the actual amounts

settled for some of the claims, and the best estimation of management. The actual settlement

of these claims may differ from the estimation made by management. If the claims are settled

for an amount greater than management’s estimation, a future charge to consolidated income

statement would result. Likewise, if the claims are settled for an amount that is less than the

estimation, a future credit to consolidated income statement would result. As at 31 December

2008, the provision for loss contingencies amounted to approximately HK$17,000,000 (2007:

Nil).

5. Turnover

Turnover represents the amounts received and receivable from outside customers, less trade

discounts and returns during the year. An analysis of the Group’s turnover is as follows:

2008 2007HK$’000 HK$’000

Travel and related services (Note) 1,899,370 1,993,792

Hotel and leisure services 317,527 272,371

2,216,897 2,266,163

Note: Included in the turnover of travel and related services is turnover in respect of sale of air tickets of

HK$194,357,000 (2007: HK$254,354,000).


– 78 –

6. Business and geographical segments

Business segments

In 2008, due to the increasing significance of securities trading and the Group’s

involvement in the business of providing luxury train services, management of the Company

have identified two additional segments and have determined that they are separate reportable

segments in 2008. Prior period segment data that is presented for comparative purposes have

been restated to reflect the new reportable segment as a separate segment. Accordingly, the

four operating divisions – travel and related services, hotel and leisure services, luxury train

services and securities trading are the basis on which the Group reports its primary segment

information for the respective periods.

Segment information about these businesses is presented as follows:

Travel and related

services

Hotel and leisure

services

Luxury train

servicesSecurities

trading Elimination ConsolidatedHK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000

For the year ended 31 December 2008

TurnoverExternal sales 1,899,370 317,527 – – – 2,216,897Inter-segment sales – 372 – – (372) –

Total 1,899,370 317,899 – – (372) 2,216,897

Inter-segment sales are charged at prevailing market price.

ResultsAmount excluding impairment

losses recognised in respect of goodwill, other intangible assets and property, plant and equipment 20,132 (9,400) (32,189) 10,217 – (11,240)

Impairment losses recognised in respect of goodwill, other intangible assets and property, plant and equipment (12,033) (109,985) (400,000) – – (522,018)

Segment results 8,099 (119,385) (432,189) 10,217 – (533,258)

Interest income 11,296Gain on disposal of subsidiaries 2,729 – – – – 2,729Impairment loss recognised in

respect of available-for-sale investments (87,008)

Unallocated corporate expenses (73,669)Finance costs (93,733)Share of results of associates (45,345) – – – – (45,345)Share of result of a jointly

controlled entity – – (6,760) – – (6,760)

Loss before taxation (825,748)Taxation expense (7,165)

Loss for the year (832,913)


– 79 –

Travel and related

services

Hotel and leisure

services

Luxury train

servicesSecurities

trading ConsolidatedHK$’000 HK$’000 HK$’000 HK$’000 HK$’000

At 31 December 2008

ASSETSSegment assets 237,255 2,440,298 638,943 10,341 3,326,837

Interests in associates 2,737 – – – 2,737

Interest in a jointly controlled entity – – 9,069 – 9,069

Unallocated corporate assets 1,285,083

Consolidated total assets 4,623,726

LIABILITIESSegment liabilities (285,068) (83,524) (247,296) – (615,888)

Unallocated corporate liabilities – – – – (1,756,323)

Consolidated total liabilities (2,372,211)

OTHER INFORMATIONAllowance for inventories 1,530 – – – 1,530

Allowance for bad and doubtful debts – 1,705 – – 1,705

Amortisation of other intangible assets – 7,825 – – 7,825

Capital additions 33,048 457,957 347,950 – 838,955

Depreciation of property,

plant and equipment 6,730 61,654 202 – 68,586


plant and equipment 8 510 – – 518


– 80 –

Travel and related

services

Hotel and leisure

services

Luxury train

servicesSecurities



TurnoverExternal sales 1,993,792 272,371 – – – 2,266,163Inter-segment sales – 159 – – (159) –

Total 1,993,792 272,530 – – (159) 2,266,163


ResultsAmount excluding impairment loss

recognised in respect of goodwill 51,854 38,647 (6,162) (7,154) – 77,185Impairment loss recognised

in respect of goodwill (11,214) – – – – (11,214)

Segment results 40,640 38,647 (6,162) (7,154) – 65,971

Interest income 30,484Gain on disposal of subsidiaries – 82,265 – – – 82,265Loss on disposal of subsidiaries (274) – – – – (274)Discount on acquisition of

subsidiaries – 47,344 – – – 47,344Impairment loss recognised in

respect of available-for-sale investments (6,440)

Increase in fair value of derivative financial instruments 3,783

Loss on disposal of properties under construction (19,600) – – – – (19,600)

Unallocated corporate expenses (61,012)Finance costs (139,123)Share of results of associates (44,891) – – – – (44,891)Share of result of a jointly

controlled entity – – (650) – – (650)

Loss before taxation (42,143)Taxation credit 46,631

Profit for the year 4,488


– 81 –

Travel and related

services

Hotel and leisure

services

Luxury train

servicesSecurities

trading ConsolidatedHK$’000 HK$’000 HK$’000 HK$’000 HK$’000

At 31 December 2007

ASSETSSegment assets 749,976 2,023,693 739,455 27,552 3,540,676

Interests in associates 66,144 – – – 66,144

Interest in a jointly controlled entity – – 6,329 – 6,329

Unallocated corporate assets 1,200,476

Consolidated total assets 4,813,625

LIABILITIESSegment liabilities 347,385 84,703 55,046 – 487,134

Unallocated corporate liabilities 1,763,964

Consolidated total liabilities 2,251,098

OTHER INFORMATIONAllowance for bad and doubtful debts – 3,974 – – 3,974

Allowance for inventories 1,381 – – – 1,381

Amortisation of other intangible assets 2,608 – – – 2,608

Capital additions 70,887 392,824 690,072 – 1,153,783

Depreciation of property,

plant and equipment 7,292 51,091 72 – 58,455


plant and equipment 1,152 687 – – 1,839

Geographical segments

Approximately 90% of the Group’s revenues were derived from Hong Kong. The

following table provides an analysis of the Group’s revenue by geographical market based on

location of customers, irrespective of the origin of the services:

2008 2007HK$’000 HK$’000

The PRC (excluding Hong Kong) 221,222 184,279

Hong Kong 1,947,262 2,038,982

Others 48,413 42,902

2,216,897 2,266,163


– 82 –

The analysis of carrying amount of segment assets and additions to property, plant and

equipment, prepaid lease payments, goodwill and other intangible assets by the geographical

area in which the assets are located is as follows:

Carrying amount of segment assets

Additions to property, plant and equipment,

prepaid lease payments, goodwill and other

intangible assets2008 2007 2008 2007

HK$’000 HK$’000 HK$’000 HK$’000

The PRC

(excluding Hong Kong) 2,184,821 2,148,051 579,460 1,071,814

Hong Kong 1,092,189 1,377,079 259,137 12,333

South-east Asia 22,000 12,810 2 68,917

Korea 22,337 – – –

Others 5,490 2,736 356 719

3,326,837 3,540,676 838,955 1,153,783

7. Investment income

2008 2007HK$’000 HK$’000

Interest income on:

Bank deposits 7,042 4,086

Loan receivables 3,905 23,718

Loans to related companies 349 2,680

11,296 30,484

8. Other income

2008 2007HK$’000 HK$’000

An analysis of the Group’s other income is as follows:

Exchange gain, net 830 58

Gain on disposal of available-for-sale investments – 564

Sundry income 5,210 8,035

6,040 8,657


– 83 –

9. Finance costs

2008 2007HK$’000 HK$’000

Interest on obligations under finance leases 37 11

Interest on borrowings wholly repayable

within five years 57,080 91,392

Loan facilities fee 24,773 –

Effective interest on convertible notes 51,866 61,857

Interest on promissory note and consideration note 4,587 3,205

Total finance costs 138,343 156,465

Less: amounts capitalised to construction in progress (44,610) (17,342)

93,733 139,123

Borrowing costs capitalised during the year arose on the general borrowing pool and are

calculated by applying a capitalisation rate of 10.2% (2007: 14.8%) per annum to expenditure on

qualifying assets.

10. Loss before taxation

2008 2007HK$’000 HK$’000

Loss before taxation has been arrived at after charging:

Depreciation of property, plant and equipment 68,586 58,455


Total depreciation and amortisation 76,411 61,063

Allowance for bad and doubtful debts 1,705 3,974

Allowance for inventories 1,530 1,381

Auditor’s remuneration 4,860 4,692

Cost of inventories recognised as expenses 39,106 32,590

Cost of sales of air tickets 183,403 240,624

Impairment loss recognised in respect of amounts

due from associates 9,020 –

Loss on disposal of properties held for sale – 68

Loss on disposal of property, plant and equipment 518 1,839

Minimum lease payments paid in respect of

rented premises and equipment 30,215 25,831

Share of tax of associates (included in share of

results of associates) 445 1,070

Staff costs 214,106 169,901

and after crediting:

Gross rental income from hotel properties

less direct operating expense of HK$811,000

(2007: HK$694,000) 17,409 17,258


– 84 –

11. Directors’ remuneration and highest paid employees

Details of emoluments paid by the Group to each of the directors are as follows:


Fees

Salaries and other

benefitsShare-based

payment

Retirement benefit scheme

contributionsTotal

emolumentsHK$’000 HK$’000 HK$’000 HK$’000 HK$’000

Executive directors:

Mr. Cheung Hon Kit (Note 1) – – – – –Dr. Yap, Allan (Note 1) – – – – –Mr. Chan Pak Cheung, Natalis – – – – –Mr. Lui Siu Tsuen, Richard (Note 1)

(resigned on 9 January 2009) – – – – –

Independent non-executive directors:

Mr. Kwok Ka Lap, Alva – 68 – – 68Mr. Poon Kwok Hing, Albert 50 – – – 50Mr. Sin Chi Fai

(resigned on 27 March 2007 and reappointed on 28 January 2008) 51 – – – 51

101 68 – – 169


Fees

Salaries and other

benefitsShare-based

payment

Retirement benefit scheme

contributionsTotal

emolumentsHK$’000 HK$’000 HK$’000 HK$’000 HK$’000

Executive directors:

Mr. Yu Kam Kee, Lawrence B.B.S., M.B.E., J.P.

(resigned on 1 December 2007) – – 254 – 254Mr. Cheung Hon Kit (Note 1) – – 254 – 254Dr. Yap, Allan (Note 1) – – 254 – 254Mr. Chan Pak Cheung, Natalis – – 95 – 95Mr. Lui Siu Tsuen, Richard (Note 1)

(resigned on 9 January 2009) – 152 292 – 444

Independent non-executive directors:

Mr. Kwok Ka Lap, Alva – 84 32 – 116Mr. Poon Kwok Hing, Albert

(appointed on 27 March 2007) 38 – – – 38Mr. Sin Chi Fai

(resigned on 27 March 2007 and reappointed on 28 January 2008) 13 – 16 – 29

Mr. Wong King Lam, Joseph(resigned on 31 October 2007) 42 – – – 42

93 236 1,197 – 1,526


– 85 –

No directors waived any emoluments for the years ended 31 December 2007 and 2008.

Note 1: These directors are also directors of Hanny Holdings Limited or ITC Properties Group Limited, which are

related companies of the Group. Their fees, salaries and other benefits are paid by the related companies

and management fees were charged to the Group by these related companies for services that these directors

rendered to the Group for both years.

Details of emoluments paid by the Group to the five highest paid individuals, which did not

include any directors are as follows:

2008 2007HK$’000 HK$’000

Salaries and other benefits 11,545 14,929

Retirement benefit scheme contributions 147 163

Share-based payment – 335

11,692 15,427

2008 2007

Emoluments of the five highest paid individuals

were within the following bands:

HK$1,000,001 – HK$1,500,000 – 2

HK$1,500,001 – HK$2,000,000 1 1

HK$2,000,001 – HK$2,500,000 3 –

HK$2,500,001 – HK$3,000,000 – 1

HK$3,000,001 – HK$3,500,000 1 –

HK$8,000,001 – HK$8,500,000 – 1


– 86 –

12. Taxation (expense) credit

2008 2007HK$’000 HK$’000

Current tax:

Hong Kong (5,556) (821)

Other jurisdictions (532) (113)

(6,088) (934)

Underprovision in other jurisdictions in prior years – (1)

Deferred tax (note 45) :

Current year (4,447) (2,707)

Attributable to a change in

Hong Kong Profits Tax rate 3,370 –

Attributable to a change in

the PRC Enterprise Income Tax rate – 50,273

(1,077) 47,566

Taxation (expense) credit (7,165) 46,631

On 26 June 2008, the Hong Kong Legislative Council passed the Revenue Bill 2008 which

reduced corporate profits tax rate from 17.5% to 16.5% effective from the year of assessment

2008/2009. Therefore, Hong Kong Profits Tax is calculated at 16.5% (2007: 17.5%) of the

estimated assessable profit for the year. The deferred tax balance has been adjusted to reflect the tax

rates that are expected to apply to the respective periods when the asset is realised or the liability is

settled.

Taxation arising in other jurisdictions during the year ended 31 December 2008 is calculated

at the rates prevailing in the relevant jurisdictions.

On 16 March 2007, the PRC promulgated the Law of the PRC on Enterprise Income Tax

(the “New Law”) by Order No. 63 of the President of the PRC. On 6 December 2007, the State

Council of the PRC issued Implementation Regulations of the New Law. Under the New Law and

Implementation Regulations, the Enterprise Income Tax rate of the Group’s subsidiaries established

in the PRC was reduced from 33% to 25% from 1 January 2008 onwards. No provision for the PRC

Enterprise Income Tax has been made in the consolidated financial statements as the assessable

profits are wholly absorbed by tax losses brought forward.


– 87 –

Taxation (expense) credit for the year can be reconciled to the loss before taxation per the

consolidated income statement as follows:

2008 2007HK$’000 HK$’000

Loss before taxation (825,748) (42,143)

Tax at the domestic income tax rate of 16.5%

(2007: 17.5%) 136,248 7,375

Tax effect of share of results of associates (7,482) (7,856)

Tax effect of share of results of a jointly

controlled entity (1,115) (114)

Tax effect of expenses that are not deductible in

determining taxable profit (160,871) (54,019)

Tax effect of income that is not taxable in

determining taxable profit 21,650 30,961

Tax effect of tax losses not recognised (14,819) (4,629)

Tax effect of tax losses utilised but not previously

recognised 14,352 33,715

Effect of different tax rates of subsidiaries operating

in other jurisdictions 1,502 (9,074)

Underprovision in prior years – (1)

Decrease in opening deferred tax liability resulting

from a decrease in applicable tax rate 3,370 50,273

Taxation (expense) credit for the year (7,165) 46,631

13. Dividends

2008 2007HK$’000 HK$’000

Dividends recognised as distribution during the year:

Ordinary shares:

Final – dividend for 2007 of HK0.5 cent per share

(2007: Final – dividend for 2006 of HK1.5 cents

per share) 9,103 11,908

No dividend was declared during the year in respect of dividend for 2008, nor has any

dividend been proposed since the balance sheet date.

A final dividend of HK0.5 cent per share in respect of 2007 was proposed by the directors

and approved and declared in 2008.


– 88 –

During the year, scrip dividend alternatives were offered in respect of the 2007 final

dividends (2007: 2006 final dividends). These scrip dividend alternatives were accepted by the

shareholders, as follows:

2007 2006Final Final

HK$’000 HK$’000

Dividends:

Cash 8,540 11,739

Share alternative 563 169

9,103 11,908

14. Loss per share

The calculation of the basic and diluted loss per share is based on the following data:

2008 2007HK$’000 HK$’000

Loss attributable to equity holders of the parent for

the purpose of basic and diluted loss per share 688,918 16,199

Number of shares2008 2007

Weighted average number of ordinary shares for

the purpose of basic and diluted loss per share 5,939,082,627 2,025,121,451

The calculation of diluted loss per share for the year ended 31 December 2008 has not

assumed the conversion of the Company’s convertible notes, and the exercise of the share options

and warrants (2007: has not assumed the conversion of the Company’s convertible notes and

exercise of the share options) as these potential ordinary shares are anti-dilutive during the year.

The weighted average number of ordinary shares for the basic and diluted loss per share for

both years have been adjusted for the rights issue in July 2008.


– 89 –

15. Property, plant and equipment

Leaseholdland andbuildings

Hotelproperties

Propertiesunder

construction

Furnitureand

fixturesLeasehold

improvementsMotor

vehicles

Officeequipment

andmachinery Vessels

Constructionin progress Total

HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000

Note (a)

COSTAt 1 January 2007 33,225 1,667,586 46,728 56,271 45,745 7,834 30,363 17,782 – 1,905,534

Currency realignment – 77,681 – 2,944 2,486 431 5,028 – – 88,570

Acquisition of subsidiaries – 225,500 – 608 – 269 3,921 – 300,269 530,567

Additions 6,083 – – 3,899 47,596 3,379 3,227 9 37,501 101,694

Disposals – – (46,728) (9,364) (1,093) (3,453) (788) (6,533) – (67,959)

Reclassified to assets classified

as held for sale – – – – – (303) (251) – – (554)

At 31 December 2007 39,308 1,970,767 – 54,358 94,734 8,157 41,500 11,258 337,770 2,557,852

Currency realignment 491 95,961 – 2,920 3,739 567 5,724 – (2,178) 107,224

Acquisition of subsidiaries – 58,042 – – – – – – – 58,042

Additions – 67,220 56,546 5,893 35,986 1,271 2,495 33 451,815 621,259

Disposals – – – (316) – (1,432) (811) – – (2,559)

At 31 December 2008 39,799 2,191,990 56,546 62,855 134,459 8,563 48,908 11,291 787,407 3,341,818

DEPRECIATION ANDIMPAIRMENT

At 1 January 2007 14,340 97,653 12,128 29,280 18,595 2,910 25,593 6,661 – 207,160

Currency realignment – 9,631 – 2,530 1,358 337 4,217 – – 18,073

Provided for the year 467 37,330 – 3,496 10,341 1,555 4,742 524 – 58,455

Reversal of impairment loss

in the income statement (2,137) – – – – – – – – (2,137)

Eliminated on disposals – – (12,128) (7,983) (1,093) (1,947) (742) (730) – (24,623)

Reclassified to assets classified

as held for sale – – – – – (5) (11) – – (16)

At 31 December 2007 12,670 144,614 – 27,323 29,201 2,850 33,799 6,455 – 256,912

Currency realignment 22 11,973 – 2,427 1,763 404 4,911 – – 21,500

Provided for the year 1,646 41,668 – 3,811 14,652 1,661 4,896 252 – 68,586

(Reversal of) impairment

loss recognised in

the income statement (672) 36,985 – – – – – – 280,160 316,473

Eliminated on disposals – – – (22) – (1,172) (347) – – (1,541)

At 31 December 2008 13,666 235,240 – 33,539 45,616 3,743 43,259 6,707 280,160 661,930

CARRYING VALUESAt 31 December 2008 26,133 1,956,750 56,546 29,316 88,843 4,820 5,649 4,584 507,247 2,679,888

At 31 December 2007 26,638 1,826,153 – 27,035 65,533 5,307 7,701 4,803 337,770 2,300,940


– 90 –

The above items of property, plant and equipment are depreciated on a straight line basis at

the following rates per annum:

Leasehold land and buildings Over the shorter of remaining unexpired terms of

the leases and 2.5%

Hotel properties Over the shorter of remaining unexpired terms of

the leases and 2.5%

Furniture and fixtures 10% – 20%

Leasehold improvements 10% – 20% or the term of the lease, if shorter

Motor vehicles 8.33% – 20%

Office equipment and machinery 20%

Vessels 5%

Construction in progress mainly represented construction cost incurred for the Group’s

luxury trains at 31 December 2008 and 2007.

An analysis of the properties of the Group held at the balance sheet date is as follows:

Leaseholdland and buildings

Hotelproperties

Propertiesunder construction

2008 2007 2008 2007 2008 2007HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000

Long leases in Hong Kong 20,069 14,700 597,894 603,548 – –

Medium term leases in

Hong Kong – 5,890 – – 56,546 –

Medium term leases in

the PRC (notes a and b) 6,064 6,048 1,358,856 1,222,605 – –

26,133 26,638 1,956,750 1,826,153 56,546 –

Notes:

(a) Included in the hotel properties at the balance sheet date is a hotel property with a carrying value of

HK$138,001,000 (2007: HK$149,056,000) situated in Luoyang, the PRC. The land use rights of the hotel

property is currently held by Luoyang Power Supply Bureau, a minority shareholder of the subsidiary

holding the hotel property. Pursuant to a land use rights agreement entered into between Luoyang Power

Supply Bureau and the subsidiary on 15 April 1999 (before the Group acquired the said subsidiary in 2004),

Luoyang Power Supply Bureau agreed to permit the said subsidiary to use the land upon which the hotel

property is now situated for a term commencing from April 1999 to April 2049 for hotel use.

(b) Included in the hotel properties held under medium term leases in the PRC of HK$1,358,856,000 (2007:

HK$1,222,605,000) is a hotel property with a carrying value of approximately HK$247,503,000 (2007:

HK$221,357,000) of which a subsidiary of the Company has been granted the right to operate and manage

the hotel in Guangzhou, the PRC for a period from January 1987 to January 2017, and subject to certain

conditions to be fulfilled by the subsidiary, the operating period may be extended for a further period of 20

years.

The carrying value of motor vehicles, office equipment and machinery of the Group held

under finance leases as at 31 December 2008 was HK$900,000 (2007: HK$230,000).

Depreciation expense on hotel properties of HK$41,668,000 (2007: HK$37,330,000) are

included in administrative expenses during the year.


– 91 –

In view of the recent economic downturn, and the expected decrease in revenue from the

hotel operation, the directors have reviewed the carrying amounts of the Group’s hotel properties

as at the balance sheet date with reference to the fair value of similar properties on an open market

value under existing use basis, and determined that the carrying amounts of the hotel properties

exceeded their recoverable amounts. Accordingly, an impairment loss of HK$36,985,000 has been

recognised in respect of the Group’s hotel properties.

For the year ended 31 December 2008, included in the impairment losses recognised in

respect of the Group’s construction in progress of HK$280,160,000 (2007: Nil) are impairment loss

on the Group’s luxury trains under construction of HK$263,360,000 (2007: Nil). Details of which

are disclosed in note 23.

16. Investment properties

HK$’000

FAIR VALUEAt 1 January 2007 –

Acquired on acquisition of a subsidiary 174,938

At 31 December 2007 and 1 January 2008 174,938

Additions 31,719

Currency realignment 15,946

Decrease in fair value recognised in the consolidated income statement (4,826)

At 31 December 2008 217,777

The fair value of the Group’s investment properties at 31 December 2008 has been

arrived at on the basis of a valuation carried out on that date by Norton Appraisals Limited

(“Norton Appraisals”), independent qualified professional valuers not connected with the Group.

Norton Appraisals is a member of the Hong Kong Institute of Surveyors, and have appropriate

qualifications and recent experiences in the valuation of similar properties in the relevant locations.

The valuation was arrived at by reference to market evidence of transaction prices for similar

properties in similar location.

All of the Group’s property interests held under operating leases to earn rentals or for capital

appreciation purposes are measured using the fair value model and are classified and accounted for

as investment properties.

The investment properties of the Group were situated on leasehold land under medium-term

in the PRC.


– 92 –

17. Prepaid lease payments

2008 2007HK$’000 HK$’000

The Group’s prepaid lease payments for leasehold

land in Hong Kong under medium-term lease 159,654 –

Analysed for reporting purpose as:

Current asset 5,635 –

Non-current asset 154,019 –

159,654 –

18. Interests in associates

2008 2007HK$’000 HK$’000

Cost of investments in associates

Tradeable on the Pink Sheets in

the United States of America – 94,983

Other unlisted investments 14,786 14,786

Share of post-acquisition losses (12,049) (43,625)

2,737 66,144

Particulars of the Group’s associates as at 31 December 2008 and 2007 are as follows:

Name of associateForm ofbusiness structure

Place ofincorporation/establishmentand operation

Issued andpaid up

share capital/registered

capital

Proportion ofissued/registered

capital heldby the Group Principal activities

’000 2008 2007

Advantmark Holdings

Limited

Limited liability

company

British Virgin

Islands

US$– 49% 49% Hotel management

services

Ananda Travel Service

(Aust.) Pty. Limited

Limited liability

company

Australia A$400 40% 40% Travel and related

services

Champion Universal Group

Limited

Limited liability

company

British Virgin

Islands

US$– 49% 49% Leisure club

operations

Hypermach Limited Limited liability

company

British Virgin

Islands

US$– 49% 49% Hotel management

services


– 93 –

Name of associateForm ofbusiness structure

Place ofincorporation/establishmentand operation

Issued andpaid up

share capital/registered

capital

Proportion ofissued/registered

capital heldby the Group Principal activities

’000 2008 2007

Sino Express Travel, Ltd.

(“Sino USA”)

Limited liability

company

United States of

America

US$84 – 48% Travel and related

services

Travoo International

Limited

Limited liability

company

British Virgin

Islands

US$6,120 50% 50% Investment holding

Wing On International

Travel Service Co. Ltd.,

Guangdong

Sino-foreign equity

joint venture

PRC RMB5,000 49% 49% Travel and related

services

Winner World Group

Limited

Limited liability

company

British Virgin

Islands

US$– 20% 20% Investment holding

On 15 December 2008, the Group, through a wholly owned subsidiary, acquired an

additional 18.42% equity interest in Sino USA for a consideration of HK$5,000,000. Sino USA

then became a subsidiary of the Group, and the cost of investment and share of post-acquisition

losses of Sino USA have accordingly been excluded from interests in associates as at 31 December

2008.

As at 31 December 2007, included in the cost of investment in associates of Sino USA

is goodwill of HK$17,484,000 arising on acquisition of interest in associates (2008: Nil). The

summarised financial information in respect of the Group’s associates is set out below:

2008 2007HK$’000 HK$’000

Total assets 410,952 619,596

Total liabilities (396,536) (505,554)

Net assets 14,416 114,042

Share of net assets 2,737 48,660

Turnover 110,589 135,020

Loss for the year (88,149) (28,698)

Share of results of associates for the year (45,345) (44,891)


– 94 –

The Group has discontinued recognition of its share of losses of certain associates. The

amounts of unrecognised share of those associates, extracted from the relevant management

accounts of associates, both for the year and cumulatively, are as follows:

2008 2007HK$’000 HK$’000

Unrecognised share of losses of associates

for the year 6,720 221

Accumulated unrecognised share of losses of

associates 7,038 318

19. Interest in a jointly controlled entity

As at 31 December 2008, the Group had interests in the following jointly controlled entity:

Name of entity

Form ofbusinessstructure

Place anddate ofestablishment Registered capital Paid up capital

Proportion ofregistered capital held

by the Group indirectly Principal activity2008 2007 2008 2007 2008 2007’000 ’000 ’000 ’000 % %

Tanggula Railtours Ltd. Limited liability

company

PRC

13 December 2006

RMB102,040 RMB102,040 RMB68,160 RMB59,540 49% 49% Conducting a tour train

service related business on

the Qinghai – Tibet

railway and other railways

in the PRC

2008 2007HK$’000 HK$’000

Cost of unlisted investment in jointly controlled entity 16,479 6,979

Share of post-acquisition loss (7,410) (650)

9,069 6,329

The amount due to a jointly controlled entity is unsecured, interest free and repayable on

demand.


– 95 –

The summarised financial information in respect of the Group’s interest in the jointly

controlled entity attributable to the Group’s interest thereon, which is accounted for using the

equity method is set out below:

2008 2007HK$’000 HK$’000

Current assets 4,171 5,639

Non-current assets 9,644 949

Current liabilities 4,746 259

Non-current liabilities – –

Income 36 7

Expenses 6,796 657

20. Available-for-sale investments

2008 2007HK$’000 HK$’000

Equity securities

Unlisted shares, at cost 283,160 283,160

Less: Impairment losses recognised (120,176) (33,168)

162,984 249,992

Particulars of the Group’s major available-for-sale investments as at 31 December 2008 and

2007 are as follows:

Name of entity

Place ofestablishment/incorporationand operation

Paid up capital/

registered capital

Proportion ofpaid up/registered

capital heldby the subsidiaries

Interest attributable to the Group Principal activities

’000 2008 2007 2008 2007

Guangxi Guijia Property

Management Company

Limited (“Guangxi

Guijia”) (Note 1)

PRC US$8,021 26% 26% 18.2% 18.2% Property holding and

operation of leisure

services

Smartshine Holdings Ltd. British Virgin

Islands/PRC

US$- 19% 19% 19% 19% Investment holding

Newskill Investments Ltd. British Virgin

Islands/PRC

US$1 3.5% 3.5% 3.5% 3.5% Property investment


– 96 –

Name of entity

Place ofestablishment/incorporationand operation

Paid up capital/

registered capital

Proportion ofpaid up/registered

capital heldby the subsidiaries

Interest attributable to the Group Principal activities

’000 2008 2007 2008 2007

廣州銀豪地產開發有限公司(“廣州銀豪”)

(Note 2)

PRC US$8,000 25% 25% 25% 25% Property investment

More Cash Ltd. British Virgin

Islands/PRC


Ally Fortune Investments

Ltd.

British Virgin

Islands/PRC


The above unlisted investments represent investments in unlisted equity securities issued

by private entities established in the PRC or incorporated in the British Virgin Islands. They are

measured at cost less impairment at each balance sheet date because the range of reasonable fair

value estimates is so significant that the directors of the Company are of the opinion that their fair

values cannot be measured reliably.

At 31 December 2008, the directors of the Company take into consideration of the

decline in market values of the properties held by their investees and considered that they are

unlikely to recover fully the carrying value of the investment. Accordingly an impairment loss of

HK$87,008,000 (2007: HK$6,440,000) was recognised in the consolidated income statement to

write down the carrying amounts of these investments to their recoverable amounts.

Notes:

1. Though a subsidiary of the Group holds a 26% interest in Guangxi Guijia, the directors considered that the

Group cannot exercise significant influence on the financial and operating policies of Guangxi Guijia and

accordingly, it is classified as an available-for-sale investment.

2. Though a subsidiary of the Group holds a 25% interest in 廣州銀豪, the directors considered that the Group

cannot exercise significant influence on the financial and operating policies of 廣州銀豪 and accordingly, it

is classified as an available-for-sale investment.

21. Goodwill

2008 2007HK$’000 HK$’000

COSTAt 1 January 16,705 50,021

Arising on acquisition of subsidiaries (notes 53b & c) – 52,628

Reclassified to assets classified as held for sale

(note 34) – (85,944)

At 31 December 16,705 16,705

IMPAIRMENTAt 1 January (4,000) (5,808)

Impairment loss recognised for the year (12,705) (11,214)

Eliminated on reclassified to assets as

held for sale (note 34) – 13,022

At 31 December (16,705) (4,000)

CARRYING VALUESAt 31 December – 12,705

Particulars regarding impairment testing on goodwill are disclosed in note 22.


– 97 –

22. Impairment testing on goodwill

As explained in note 6, the Group uses business segments as its primary segment for

reporting segment information. For the purpose of impairment testing, goodwill as set out in note

21 has been allocated to the cash generating unit (“CGU”) of Sichuan Henxin Tourism Company

Limited (“Sichuan Henxin”). Sichuan Henxin is engaged in travel and related service segment.

The recoverable amount of the CGU has been determined on the basis of value in use

calculation. The key assumptions for the value in use calculation are those regarding the discount

rates, growth rates and expected changes to revenue and direct costs during the year. Management

estimates discount rates using pre-tax rates that reflect current market assessments of the time

value of money and the risks specific to the CGU. The growth rates are based on industry growth

forecasts. Changes in revenue and direct costs are based on past practices and expectations of future

changes in the market.

The goodwill impairment review on Sichuan Henxin was based on cash flow forecasts

derived from the most recent financial budgets for the next five years approved by management

using a discount rate of 16%. The cash flows beyond the five year period have been extrapolated for

indefinite period using a steady 5% per annum growth rate. The directors reviewed the anticipated

profitability and the anticipated future operating cash flow of Sichuan Henxin. With reference to the

financial results, the earthquake took place in 2008, and the business operated by Sichuan Henxin,

the directors of the company identified an impairment loss in respect of goodwill of approximately

HK$12,705,000 for the year ended 31 December 2008 (2007: HK$4,000,000) and such an amount

was dealt with in the consolidated income statement for the year.

In December 2007, the Group entered into an agreement with an independent third party to

dispose of its online booking exchange platform business for a consideration of HK$37,000,000

and accordingly, a goodwill impairment loss of approximately HK$7,214,000 was recognised in the

consolidated income statement for the year ended 31 December 2007 and the net carrying amount

of such goodwill of approximately HK$36,988,000 is re-classified as assets classified as held for

sale as of 31 December 2007 (note 34) .


– 98 –

23. Other intangible assets

Railwayintangibles

Hoteloperating

agreements TotalHK$’000 HK$’000 HK$’000

COSTAt 1 January 2007 – – –

Acquired on acquisition of

subsidiaries 352,302 116,592 468,894

At 31 December 2007 and

1 January 2008 352,302 116,592 468,894

Eliminated on acquisition of

subsidiaries – (2,430) (2,430)

At 31 December 2008 352,302 114,162 466,464

AMORTISATIONAt 1 January 2007 – – –

Charge for the year – 2,608 2,608

At 31 December 2007 and

1 January 2008 – 2,608 2,608

Charge for the year – 7,825 7,825

Impairment loss recognised

for the year 136,640 56,200 192,840

At 31 December 2008 136,640 66,633 203,273

CARRYING VALUEAt 31 December 2008 215,662 47,529 263,191

At 31 December 2007 352,302 113,984 466,286

The above classes of intangible assets have finite useful lives. Such intangible assets are

amortised on a straight line basis over the following periods:

Railway intangibles 16 years

Hotel operating agreements 10 years to 15 years


– 99 –

Railway intangibles comprise exclusive rights, trademark and affiliation agreement. The

exclusive rights entitle the Group to conduct an exclusive tour train service related business on

the Qinghai-Tibet Railway in the PRC, which include conducting tour related services, engaging

in food and beverage service and lodging business, for a contractual period of 16 years from

the date of commencement of the railway operation. The trademark allows the Group to use the

brand “Tangula” and “Tangula Express” for railway operation while the affiliation agreement is

with an international hotel management chain which provides hospitality services on the train

and enables the Group to enhance its brand attractiveness of the train operations and to capture

the potential customers base of the international hotel management chain. As the commencement

of the commercial railway operation has been postponed to Spring of 2010, and the related

exclusive rights, trademark and affiliation agreement are for 16 years commencing from the date

of commencement of the commercial railway operation, the related amortisation has not yet

commenced.

The hotel operating agreements entitle the Group to manage and operate certain hotels

operations exclusively in Macau and the PRC for a period of 10 to 15 years.

Due to the general slowdown in the global economy brought by the financial tsunami,

the political instability in Tibet and the tightened regulations in granting entry visa for Chinese

Nationals to Macau during the year, the Group considered these as indications that an impairment

loss for other intangible assets, and related items of property, plant and equipment may have

occurred. For the purpose of impairment testing, railway intangible assets have been allocated

to the cash generating unit (”CGU”) of Tangula Group Limited (“Tangula”), and hotel operating

agreements intangible assets have been allocated to the CGU of Asia Times Limited (“Asia

Times”).

The recoverable amount of these CGUs has been determined on the basis of value in use

calculation. The key assumptions for the value in use calculation are those regarding the discount

rates, growth rates and expected changes to revenue and direct cost. Management estimates discount

rates using pre-tax rates that reflect current market assessments of the time value of money and

the risks specific to the CGU. The growth rates are based on industry growth forecasts. Changes

in revenue and direct costs are based on past practices and expectations of future changes in the

market.

The directors reviewed the anticipated profitability and the anticipated future operating

cash flow of Tangula and Asia Times. The directors of the Company identified an impairment loss

in respect of other intangible assets and luxury trains under construction related to Tangula of

approximately HK$136,640,000 and HK$263,360,000, respectively and of other intangible assets

related to Asia Times of approximately HK$56,200,000 for the year ended 31 December 2008 and

such amounts were dealt with in the consolidated income statement for the year. The impairment

review was based on cash flow forecasts derived from the most recent financial budgets and forecast

over the exclusive licence period of operations, approved by management using a discount rate of

16.1% to 18.3%.


– 100 –

24. Investment deposits and other assets

2008 2007HK$’000 HK$’000

Deposits for acquisition of 100% interests in

companies holding land use rights in the PRC

(note a) – 150,000

Deposits for acquisition of 100% interest in a

company awarded the tender to acquire a property

in Hong Kong (note b) – 16,388

Prepaid management fee (note c) – 40,000

Deposits for acquisition of interest in a property

development project in the PRC (note d) – 37,200

Unamortised loan facilities fees – 31,276

Earnest money (note e) 100,000 –

Other 9,066 5,000

109,066 279,864

Notes:

(a) The amount represented the deposits paid for the acquisition of 100% equity interests in certain companies

holding land use rights in the PRC for various development projects, with the objective of developing

hotels, shopping malls, recreational and other tourists related amenities respectively. The aggregate

consideration for the purchase amounted to HK$180,000,000. The projects were terminated during 2008 and

deposits of approximately HK$139,400,000 have been refunded to the Group during the year. The remaining

balance of HK$10,600,000 is included in other receivables at 31 December 2008 and all of which have been

settled as at the date of approval of these financial statements.

(b) The amount represented deposit paid for the acquisition of 100% equity interest in a company which has

been awarded the tender to acquire a property at Tai Kok Tsui Road, Hong Kong for a total consideration

of HK$163,880,000, with an objective of re-developing it into a hotel. The transaction was completed in

January 2008.

(c) The amount represented prepaid management fee for property management service made by the Company to

undertake the management of a property located in the PRC. The arrangement was terminated during 2008

with all the prepaid fees refunded.

(d) The amount represented deposit paid for the acquisition of certain interest in a property development

project in the PRC with the objective of developing commercial buildings and carparks. The acquisition was

terminated during 2008 and the deposit has been fully refunded to the Group during the year.

(e) The amounts represent sums of earnest money paid to certain independent third parties in relation

to proposed acquisitions of companies which have property projects or hotel operations in the PRC.

Subsequent to 31 December 2008, the Group has determined to terminate one of the proposed acquisitions

and the earnest money previously paid of HK$10,000,000 has been fully returned before the date of

approval of these financial statements. The Company has the absolute right to demand for a full refund

of the earnest money should there be no definitive sale and purchase agreement entered into prior to the

stipulated deadlines of the respective proposed acquisitions.

25. Inventories

The inventories were carried at cost and represent principally food, beverages and general

stores which are to be utilised in the ordinary course of operations.


– 101 –

26. Amounts due from related companies

The amounts due from related parties are unsecured and interest free. These companies are

related to the Group as certain directors of the Company are also directors of and have beneficial

interests in these companies. Included in the amounts due from related companies as at 31

December 2008 were advances of HK$30,861,000 (2007: HK$55,301,000) which are repayable

upon written notice given from the Company within one year and were neither past due nor

impaired. The Group does not hold any collateral over these balances. The remaining balances were

principally trading balances with credit period of 30 days.

The aged analysis of the trade balances at the reporting dates is as follows:

2008 2007HK$’000 HK$’000

0 – 30 days 81 278

31 – 60 days 194 557

61 – 90 days 233 560

Over 90 days 5,050 7,887

5,558 9,282

Included in the above trade balances with related companies is aggregate carrying amount of

approximately HK$5,477,000 (2007: HK$9,004,000) which are past due at the reporting date for

which the Group has not provided for impairment loss as there has not been a significant change

in credit quality and the amounts are still considered recoverable. The Group does not hold any

collateral over these balances.

Aging of trading balances which are past due but not impaired

2008 2007HK$’000 HK$’000

31 – 60 days 194 557

61 – 90 days 233 560

Over 90 days 5,050 7,887

Total 5,477 9,004

27. Amounts due from (to) associates

Included in the amounts due from associates as at 31 December 2008 were advances of

HK$72,811,000 (2007: Nil) which are interest free and secured by equity securities listed in Hong

Kong. The remaining amounts due from (to) associates are unsecured and interest free. Amounts

due from associates are repayable upon written notice given from the Company within one year and

amounts due to associates are repayable on demand.


– 102 –

28. Trade and other receivables

2008 2007HK$’000 HK$’000

Trade receivables 26,906 27,338

Less: allowance for doubtful debts (1,763) (58)

25,143 27,280

Other receivables (notes a, b, c and d) 241,546 454,294

Total trade and other receivables 266,689 481,574

The Group allows a credit period of 30 to 60 days to customers.

The aged analysis of trade receivables (net of impairment) at the balance sheet dates is as

follows:

2008 2007HK$’000 HK$’000

0 – 30 days 9,643 12,145

31 – 60 days 4,128 4,767

61 – 90 days 1,625 2,469

Over 90 days 9,747 7,899

25,143 27,280

Before accepting any new customer, the Group has assessed the potential customer’s credit

quality and defined credit limits by customer. Limits attributed to customers are reviewed once a

year, the Group reviews the repayment history of receivables by each customer with reference to

the payment terms stated in contracts to determine the recoverability of a trade receivable. In the

opinion of directors of the Company, 44% (2007: 45%) of the trade receivables that are neither past

due nor impaired have good credit quality at the balance sheet date with reference to past settlement

history.

Included in the Group’s trade receivable balance are debtors with aggregate carrying amount

of approximately HK$14,045,000 (2007: HK$15,135,000) which are past due at the reporting date

for which the Group has not provided for impairment loss as there has not been a significant change

in credit quality and the amounts are still considered recoverable. The Group does not hold any



– 103 –

Aging of trade receivables which are past due but not impaired

2008 2007HK$’000 HK$’000

31 – 60 days 2,673 4,767

61 – 90 days 1,625 2,469

Over 90 days 9,747 7,899

Total 14,045 15,135

The Group performed assessment on individual trade receivables and recognised allowance

on specific balance.

Movement in the allowance for doubtful debts

2008 2007HK$’000 HK$’000

Balance at beginning of the year 58 58

Allowance for doubtful debts 1,705 –

Balance at end of the year 1,763 58

Included in the allowance for doubtful debts are individually impaired trade receivables

with an aggregate balance of HK$1,763,000 (2007: HK$58,000), of which the Group has chased

for settlements from customers but the amounts remained unsettled. The Group does not hold any


For the year ended 31 December 2008, direct write off of irrecoverable trade debts amounted

to Nil (2007: HK$3,974,000).

Notes:

(a) Included in the balances at 31 December 2007 were amounts paid to certain independent third parties in

total of HK$213,717,000 in relation to a proposed acquisition of certain interests in a company which has

a property project in the PRC. These balances were secured by equity interests of the target company. In

addition, the balances at 31 December 2007 also included a deposit of HK$142,300,000 placed in relation to

a proposed investment in certain clubhouse projects in the PRC. The sums of money were secured by equity

interests in the parent of the target company which owned the clubhouse projects in the PRC. These two

projects were terminated during 2008 and all deposits paid have been refunded.

(b) Included in the balances at 31 December 2008 are non-interest bearing advances made to land operators of

the Group of HK$44,337,000 (2007: Nil). The balances are pledged with the payables owed to these land

operators by the Group. The amount of pledge at 31 December 2008 is HK$5,324,000 (2007: Nil).

(c) Included in the balances are an aggregate of HK$50,815,000 (2007: Nil) relating to the balance of

consideration receivables from the disposal of 廣州天俠商旅服務有限公司 and the online booking

exchange platform business. These receivables are secured by equity securities listed in Singapore and Pink

Sheets in the United States of America, bearing interest at 10% per annum and due on 30 June 2009.

(d) Included in the balances at 31 December 2008 are non-interest bearing advances of HK$17,871,000 (2007:

Nil) which are secured by the right in a property located in the PRC of approximately HK$41,858,000

(2007: Nil). The amount is repayable on demand.


– 104 –

29. Loan receivables

2008 2007HK$’000 HK$’000

Variable-rate loan to certain companies and

individual third parties (notes a and b) 37,744 94,349

Notes:

(a) (i) Included in the balances were loans of Nil (2007: HK$6,518,000) which are secured by equity

interests in an enterprise established in the PRC.

(ii) Included in the balances were loans of HK$5,000,000 (2007: HK$5,000,000) which are secured by

the right in a property project in Macau of approximately HK$40,000,000 (2007: HK$40,000,000).

The above mentioned amounts carry interest at market rates and repayable upon written notice given from

the Company.

(b) Save for the loans above, the amounts are unsecured, carrying interest at market rates and repayable upon

written notice given from the Company.

The Group has no significant concentration of credit risk on loan receivables as the amounts

were due from various counterparties. Included in the carrying amount of loan receivables as at 31

December 2008 is accumulated impairment loss of HK$9,078,000 (2007: HK$9,078,000).

The range of effective interest rates (which also equal to contracted interest rates) on the

Group’s variable-rate loan receivables are Hong Kong Dollar Prime Rate to Hong Kong Dollar

Prime Rate plus 3% per annum for both years. Weighted average effective interest rate is 6.14%

(2007: 8.83%) per annum.

30. Loans to related companies

The loans to related companies are unsecured, interest bearing at Hong Kong Prime Rate plus

2% and repayable upon written notice from the Company within one year. These companies are

related to the Group as certain directors of the Company are also directors of and have beneficial

interests in these companies. Weighted effective interest rate is 7.5% per annum in 2008.

31. Derivative financial instruments

2008 2007HK$’000 HK$’000

Derivatives financial instruments classified

as held for trade

Foreign currency options – 5,972

During the year ended 31 December 2007, the Group acquired a subsidiary which had 5

foreign currency options outstanding with a bank.


– 105 –

Major terms of the significant foreign currency contracts are as follows:

Notional amount Maturity Exchange rates’000

Buy RMB122,978 31 January 2008 USD/RMB7.2917

Buy RMB121,681 31 March 2008 USD/RMB7.2148

Buy RMB36,455 8 August 2008 USD/RMB7.0499

Buy RMB36,326 28 August 2008 USD/RMB7.0250

Buy RMB45,698 12 September 2008 USD/RMB7.0050

The fair values of the outstanding foreign currency contracts as at the acquisition date

of the subsidiary and as at 31 December 2007 were determined based on a valuation technique

using an option pricing model, namely the Black Scholes Model. During the year, those foreign

currency contracts were matured and the fair value change of these instruments was included in the

consolidated income statement.

32. Investments held for trading

2008 2007HK$’000 HK$’000

Listed securities

Equity securities listed in Hong Kong 10,190 27,531

33. Pledged bank deposits/trading cash balances/bank balances

Pledged bank deposits/bank balances

Bank balances carry interest at prevailing market rates which range from 0.01% to

0.75% (2007: 1.2% to 3.53%) per annum. The pledged bank deposits carry fixed interest

rate of 1.73% (2007: 3%) per annum. The pledged bank deposits will be released upon the

settlement of relevant bank borrowings.

Trading cash balances

The amounts represent foreign currencies held for money exchange purposes.

34. Assets classified as held for sale/liabilities associated with assets classified as held for sale

In December 2007, the Group entered into an agreement with an independent third party

incorporated in the British Virgin Islands, in relation to the disposal of 100% interest in a

subsidiary, 廣州天俠商旅服務有限公司 at a consideration of HK$37,000,000. The transaction was

completed in January 2008.

In December 2007, the Group also entered into an agreement with an independent third party

incorporated in the British Virgin Islands, in relation to the disposal of its online booking exchange

platform business for a consideration of HK$37,000,000. The net proceeds of disposal were less

than the net carrying amount of the relevant assets and liabilities and accordingly, impairment loss

of HK$7,214,000 has been provided (note 22) . The transaction was completed in April 2008.


– 106 –

The major classes of assets and liabilities comprising the disposal group classified as held for

sale are as follows:

31.12.2007HK$’000

Property, plant and equipment 538

Goodwill 72,922

Trade and other receivables 18,491

Bank balances and cash 363

Total assets classified as held for sale 92,314

Trade and other payables, and liabilities associated with assets

classified as held for sale 21,019

35. Trade and other payables

Included in trade and other payables are trade payables of approximately HK$147,301,000

(2007: HK$174,687,000) and the aged analysis of the trade payables at the reporting dates is as

follows:

2008 2007HK$’000 HK$’000

0 – 30 days 75,949 90,915

31 – 60 days 30,586 39,281

61 – 90 days 20,829 21,911

Over 90 days 19,937 22,580

147,301 174,687

The average credit period on purchases of goods is 60 days. The Group has financial risk

management policies in place to ensure that all payables within the credit time frame. Included

in the balances are advance receipts from customers deposits of approximately HK$110,894,000

(2007: HK$81,412,000) and payables for construction progress of HK$214,422,000 (2007: Nil).

36. Provision for loss contingencies

HK$’000

At 1 January 2007, 31 December 2007 and 1 January 2008 –

Provision for the year 17,000

At 31 December 2008 17,000

Provision for loss contingencies represents management’s best estimate of the Group’s

liability relating to the claims made by the Group’s existing and ex-employees on calculating

tour escort’s holiday compensation allowance, and is based on information from the Group’s

legal counsels, actual settlement for some of the claims, and the estimated number of successful

claimants.


– 107 –

37. Loans from related companies

These companies are related to the Group as certain directors of the Company are also

directors of and have beneficial interests in those companies. Loans are variable-rate loans which

bear interest ranged from Hong Kong Dollar Prime Rate to Hong Kong Dollar Prime Rate plus 2%

per annum. The weighted average effective borrowing rate is 10.3% (2007: 7.3%) per annum. All

the loans are unsecured and repayable within one year.

Included in the balances is a loan of approximately HK$188,157,000 (2007:

HK$208,157,000) that is denominated in United States dollars.

38. Amounts due to related companies

The balances represent principally loan interest payable for the loan balances set out in note

37, which are unsecured, interest free and repayable on demand.

39. Obligations under finance leases

Minimum lease payments

Present value of minimum

lease payments2008 2007 2008 2007

HK$’000 HK$’000 HK$’000 HK$’000

Amounts payable under

finance leases:

Within one year 326 53 284 45

Between one to two years 310 53 284 45

Between two to five years 243 139 215 120

879 245 783 210

Less: Future finance charges (96) (35) – –

Present value of

lease obligations 783 210 783 210

Less: Amount due within one

year shown under

current liabilities (284) (45)

Amount due after one year 499 165

The Group entered into finance leases to acquire certain of its property, plant and equipment.

The terms of the finance leases ranged from 2 to 4 years and the average effective borrowing rate

was 5.8% (2007: 3.3%) per annum. Interest rate was fixed at the contract date. The leases were

on a fixed repayment basis. The Group’s obligations under the finance leases were secured by the

lessors’ charge over the leased assets.


– 108 –

40. Borrowings

Borrowings comprise:

Effective interest rate Carrying amount2008 2007 2008 2007

HK$’000 HK$’000

Floating-rate borrowings:

Hong Kong Inter-Bank

Offered Rate (“HIBOR”)

plus 0.8% (2007: HIBOR

+ 0.8%) secured HKD

bank loan(1) 3.0% 5.1% 365,840 410,480

HIBOR plus 1.2% (2007:

HIBOR + 0.5%) secured

HKD bank loan(2) 2.7% 4.8% 28,000 28,000

Hong Kong Dollar Prime

Rate plus 2% (2007:

Hong Kong Dollar Prime

Rate Plus 2%) unsecured

HKD loan(3) 7.5% 9.3% 10,000 10,000

Secured HKD overdraft

at Hong Kong Dollar

Prime Rate plus 3%(4) 8.5% 10.3% 8,052 6,932

HIBOR plus 1.1% secured

HKD bank loan(5) 3.3% – 61,670 –

473,562 455,412

Fixed-rate borrowings:

0.0257% per day(4) 9 –

Total borrowings 473,571 455,412

Less: Amount due within one

year shown under

current liabilities (411,901) (88,753)

Amount due after one year 61,670 366,659

Borrowings are repayable as

follows:

Within one year or on demand 411,901 88,753

Between one to two years – 366,659

Between two to five years 61,670 –

473,571 455,412


– 109 –

(1) The amounts will be repayable by installment and in full on 17 April 2009; however the borrowings

have been refinanced on 31 March 2009 with the proceeds arising from a new bank loan facility of

HK$430,000,000. The new loan facility is repayable by installment and in full on 31 March 2012.

(2) Repayable in full on 16 July 2009.

(3) Repayable in full on 4 July 2009.

(4) Repayable on demand.

(5) Repayable in full on 28 February 2011.

As at the balance sheet date, the Group has the following undrawn borrowing facilities:

2008 2007HK$’000 HK$’000

Floating rate – expiring beyond one year 350,000 741,238

41. Promissory note

The promissory note was issued as partial consideration for the acquisition of the entire

issued share capital of and shareholder’s loan to Shenyang Limited through a 67.9% owned

subsidiary of the Group (note 53(d)) . Shenyang Limited holds indirectly a 87% interest in Time

Plaza (Shenyang) Limited (“Time Plaza”). The promissory note was interest bearing at HIBOR plus

2% per annum and secured by the Group’s entire interest in the issued share capital of Shenyang

Limited and shareholders’ loan to Shengyang Limited and in turn, secured by Shenyang Limited’s

95% equity interest in Shenyang Hotel Holdings Limited which holds the 92% equity interest in

Time Plaza. Repayments of HK$36,455,000 was made during the year. The outstanding principal

amount of HK$70,000,000 was due for settlement on 29 August 2008 but was further extended with

the same terms and repayable on 31 March 2009. The outstanding principal amount has been fully

repaid after the balance sheet date.

42. Consideration note

The consideration note was issued as partial consideration for the acquisition of entire issued

share capital of and shareholder’s loan to Shenyang Limited, through a 67.9% owned subsidiary of

the Group (note 53(d)) . The consideration note was interest bearing at HIBOR plus 1% per annum,

and was fully repaid during the year.

43. Amounts due to minority shareholders of subsidiaries

The amounts are unsecured, interest-free and repayable on demand except for a balance of

HK$27,300,000 (2007: HK$27,300,000) carried interest at a fixed rate of 7% per annum.


– 110 –

44. Convertible notes

The movement of the liability component of the convertible loan notes for the year is set out

below:

2008 2007HK$’000 HK$’000

Carrying amount at the beginning of the year 554,215 810,026

Interest charge (Note 9) 51,866 61,857

Interest paid (12,846) (16,056)

Conversion into shares – (301,612)

Carrying amount at the end of the year 593,235 554,215

During the year ended 31 December 2006, the Company issued convertible notes of

nominal value amounting to HK$1,000,000,000 (the “Notes”). The Notes carried interest at 2%

per annum and are repayable on 7 June 2011 (the “Maturity Date”). China Enterprises Limited, a

substantial shareholder of the Company, subscribed for the notes of nominal value amounting to

HK$300,000,000 by cash.

The initial conversion price of the Notes is HK$0.79 per share and subject to anti-dilutive

adjustments. Unless converted or lapsed or redeemed by the Company, the Company will redeem

the Notes on the Maturity Date at the redemption amount which is 110% of the principal amount of

the Notes outstanding.

Each of the noteholders shall have the right to convert, on any business day commencing

from the 7th day after the date of issue of the Notes up to and including the date which is 7

days prior to the Maturity Date, the whole or any part (in an amount or integral multiple of

HK$1,000,000) of the principal amount of the Notes into the shares of the Company at the then

prevailing conversion price.

Subject to certain restrictions which are intended to facilitate compliance of relevant rules

and regulations, each noteholder shall have the right to exchange from time to time all or part (in

the amount of HK$10,000,000 or integral multiples thereof) of 50% of the initial principal amount

of its Notes for shares in the share capital of any company which is an affiliated company as defined

in Rule 13.11(2)(a) of the Listing Rules or subsidiary of the Company that is to be listed on the

Stock Exchange through an initial public offering at the price (the “Spin-off Shares”), subject to

anti-dilutive adjustments, at which the Spin-off Shares are actually issued to the public at the time

of the listing on that stock exchange. The decision on whether to list any of its affiliated company

or subsidiary in the future is at the sole discretion of the directors of the Company.

During the year ended 31 December 2007, Notes with nominal value amounting to

HK$360,000,000 were converted into 455,696,195 shares in the Company of HK$0.10 each at

a conversion price of HK$0.79 per share. In July 2008, the conversion price was reduced from

HK$0.79 per share to HK$0.339 per share as a result of rights issue of shares of the Company (note

46) . No Notes were converted during the year ended 31 December 2008.

The convertible notes were split between the liability and equity elements. The equity

element is presented in equity heading “convertible notes reserve”. The effective interest rate of the

liability component is 9.35% (2007: 9.35%) per annum.


– 111 –

45. Deferred taxation

The followings are the major deferred tax liabilities (assets) recognised and movement

thereon during the current and prior years:

Accelerated tax

depreciation on hotel

properties

Fair value of properties

on business combination Tax losses Other Total

HK$’000 HK$’000 HK$’000 HK$’000 HK$’000

At 1 January 2007 250,179 – – – 250,179Currency realignment 11,989 – – – 11,989Acquisition of subsidiaries 5,500 – – – 5,500Effect of change in the PRC Enterprise

Income Tax rate (50,273) – – – (50,273)Charge to the consolidated income statement

(note 12) 2,707 – – – 2,707

At 31 December 2007 220,102 – – – 220,102Currency realignment 11,111 – – – 11,111Acquisition of subsidiaries – 1,194 – – 1,194Effect of change in Hong Kong Profits Tax rate (3,370) – – – (3,370)Charge (credit) to the consolidated income

statement (note 12) 1,777 – (1,802) 4,472 4,447

At 31 December 2008 229,620 1,194 (1,802) 4,472 233,484

As at 31 December 2008, the Group has unused tax losses subject to the agreement of tax

authorities of approximately HK$714,206,000 (2007: HK$717,886,000) available for offset against

future profits. A deferred tax asset has been recognised in respect of HK$7,209,000 (2007: Nil) of

such loss, no deferred tax asset has been recognised in respect of the remaining HK$706,997,000

(2007: HK$717,886,000) tax losses due to the unpredictability of future profit streams. Pursuant

to the relevant laws and regulations in the PRC, the unutilised tax losses of approximately

HK$95,182,000 (2007: HK$129,147,000) can be carried for a period of five years. The losses

arising from overseas subsidiaries are insignificant, which will expire after a specific period of

time. Other unrecognised tax losses may be carried forward indefinitely.

The deferred tax balance has been adjusted to reflect the tax rates that are expected to apply

to the respective periods when the asset is realised or the liability is settled.


– 112 –

46. Share capital

Number of shares Amount

HK$’000

AuthorisedShares of HK$0.10 each at 1 January 2007 and

31 December 2007 15,000,000,000 1,500,000

Subdivision of shares 135,000,000,000 –

Shares of HK$0.01 each at 31 December 2008 150,000,000,000 1,500,000

Issued and fully paidShares of HK$0.10 each at 1 January 2007 610,586,108 61,059

Issue of shares 750,000,000 75,000

Exercise of share options 4,285,000 428

Conversion into shares from Notes (note 44) 455,696,195 45,570

Issue of shares on scrip dividend 191,217 19

Shares of HK$0.10 each at 31 December 2007 1,820,758,520 182,076

Issue of shares on scrip dividend 3,210,227 321

Reduction in share capital – (164,157)

Issue of shares on subscription of rights issue 7,295,874,988 72,959

Issue of shares on exercise of warrants 200 –

Shares of HK$0.01 each at 31 December 2008 9,119,843,935 91,199

In May and June 2007, the Company entered into placing agreements with Kingston

Securities Limited (“Kingston Securities”) pursuant to which Kingston Securities conditionally

agreed to place up to 450,000,000 shares (the “Placing Shares”) in the Company at a price of

HK$0.80 per share to independent investors. The placing of the first tranche of 120,000,000 shares

was completed on 31 May 2007 and the remainder of 330,000,000 shares was completed on 6

August 2007.

In November 2007, the Company entered into another placing agreement with Kingston

Securities pursuant to which Kingston Securities conditionally agreed to place up to 300,000,000

shares in the Company at a price of HK$0.40 per share to independent investors. The placing was

completed on 12 December 2007.

In order to facilitate the rights issue of shares, the Company conducted a capital

reorganisation in July 2008 (“Capital Reorganisation”) which involved (i) the subdivision of every

share of HK$0.10 each in the authorised but unissued share capital of the Company into 10 new

shares of HK$0.01 each (“New Shares”) resulting in an authorised share capital of 150,000,000,000

New Shares; and (ii) the reduction of the nominal value of the then issued share capital of the

Company from HK$0.10 to HK$0.01 by cancelling an equivalent amount of paid-up capital to the

extent of HK$0.09 per then issued share such that the then issued share capital of the Company

was reduced by the sum of approximately HK$164,157,000 for transfer to the special reserve.

Approximately HK$158,144,000 of such amount was then applied to set off fully against the

accumulated losses of the Company.


– 113 –

The Company then issued and allotted 7,295,874,988 ordinary shares of HK$0.01 each to

the qualifying shareholders pursuant to the rights issue on the basis of four rights shares (with

bonus warrants in the proportion of one bonus warrant for every four rights shares subscribed) for

every share currently held (the “Rights Issue”) at a subscription price of HK$0.06 per share. The

net proceeds of approximately HK$421 million was used as general working capital of the Group.

Details of the Capital Reorganisation and the Rights Issue are set out in the prospectus of the

Company dated 7 July 2008.

The new shares issued rank pari passu in all respects with the then existing shares.

47. Warrants

Pursuant to the Rights Issue as detailed in note 46, the Company has issued 1,823,968,747

warrants on 1 August 2008 to the subscribers of the rights shares conferring the rights to the holders

thereof to subscribe in cash for 1,823,968,747 New Shares of the Company at an initial exercise

price of HK$0.091 per share (subject to anti-dilutive adjustment) at any time during the period from

1 August 2008 to 29 January 2010.

At 31 December 2008, the Company had outstanding 1,823,968,547 warrants and their

exercise in full would result in the issuance of 1,823,968,547 New Shares.

The subscription rights attaching to the warrants are measured at fair value of approximately

HK$30,201,000 on initial recognition and are recognised in equity in the warrant reserve.

The fair value of the warrants issued during the year was calculated using the Trinominal

Option Pricing model performed by Norton Appraisals, independent qualified professional

valuers not connected with the Group. Norton Appraisals have necessary qualifications and recent

experiences to perform the valuation of warrants. The inputs into the model were as follows:

Date of issue 1 August 2008

Share price HK$0.062

Exercise price HK$0.091

Time to maturity 1.5 years

Expected volatility 79.028%

Expected dividend yield Nil

Risk free rate 2.352%

The variables and assumptions used in computing the fair value of the warrants are based on

the management’s best estimate.


– 114 –

48. Share option scheme

The Company has a share option scheme (the “Scheme”), which was approved and adopted

by shareholders of the Company on 3 May 2002, enabling the directors to grant options to

employees, executives or officers of the Company or any of its subsidiaries (including executive and

non-executive directors of the Company or any of its subsidiaries) and any suppliers, consultants,

agents or advisers who will contribute or have contributed to the Company or any of its subsidiaries

as incentives and rewards for their contribution to the Company or such subsidiaries. The maximum

number of shares in respect of which options may be granted under the Scheme, when aggregated

with any shares subject to any other schemes, shall not exceed 10% of the issued share capital

of the Company on the date of approval and adoption of the Scheme (the “General Limit”). The

Company proposed to refresh the General Limit so that the number of shares which may be issued

upon exercise of all options to be granted under the Scheme and any other share option schemes

of the Company would be increased to 10% of the shares in issue as at the date of approval of

the General Limit as “refreshed”. The refreshment of the General Limit was approved by the

shareholders of the Company in the annual general meeting held on 27 May 2005, 19 May 2006

and 23 May 2008. The Scheme is valid and effective for a period of 10 years after the date of

adoption.

In the general meeting held on 19 May 2006, the shareholders of the Company has approved

that the existing scheme General Limit in respect of the granting of options to subscribe for shares

in the Company (“Shares”) under the Scheme be refreshed and renewed provided that the total

number of Shares which may be allotted and issued upon exercise of all options to be granted under

the Scheme and any other share option schemes of the Company (excluding options previously

granted, outstanding, cancelled, lapsed or exercised under the Scheme) must not exceed 10% of the

ordinary shares in issue as at the date of approval of such refreshment of the General Limit (subject

to adjustment for consolidation and sub-division of share subsequent to that date) and that any

director be authorised to do all such acts and execute such document to effect the refreshed General

Limit.

At 31 December 2008, all outstanding share options were lapsed. At 31 December 2007, the

number of shares in respect of which options had been granted and remained outstanding under the

Scheme was 46,685,000, representing 2.6% of the Shares in issue at that date. Option granted must

be taken up within 30 days of the date of offer. The consideration payable for the option is HK$1.

Options may be exercised at any time from the date of acceptance of the share option to such date

as determined by the board of directors but in any event not exceeding 10 years. The exercise price

is determined by the directors of the Company and will not be less than the higher of (i) the average

closing price of the shares for the five business days immediately preceding the date of grant,

(ii) the closing price of the shares on the date of grant or (iii) the nominal value of the shares of the

Company.


– 115 –

Details of options granted and a summary of the movements of the outstanding options under

the Scheme during the current and prior years are as follows:

Number of share options

Eligible participant

Outstandingas at

1 January 2007

Exercisedduring

the year

Lapsedduring

the year

Outstandingas at

31 December 2007 and

1 January 2008

Lapsedduring

the year

Outstandingas at

31 December2008

Exerciseprice

per shareDate of grant Exercisable period

(Note 4) HK$ (Note 1) (Note 2)

Director

Mr. Yu Kam Kee, Lawrence

(resigned on

1 December 2007) 4,000,000 – (4,000,000) – – – 0.728 22.6.2006 22.6.2006 – 21.6.2008

Mr. Cheung Hon Kit 4,000,000 – – 4,000,000 (4,000,000) – 0.728 22.6.2006 22.6.2006 – 21.6.2008

Dr. Yap, Allan 4,000,000 – – 4,000,000 (4,000,000) – 0.728 22.6.2006 22.6.2006 – 21.6.2008

Mr. Chan Pak Cheung, Natalis 1,500,000 – – 1,500,000 (1,500,000) – 0.728 22.6.2006 22.6.2006 – 21.6.2008

Mr. Lui Siu Tsuen, Richard 4,600,000 (1,000,000) – 3,600,000 (3,600,000) – 0.728 22.6.2006 22.6.2006 – 21.6.2008

Mr. Kwok Ka Lap, Alva 500,000 (250,000) – 250,000 (250,000) – 0.728 22.6.2006 22.6.2006 – 21.6.2008

Mr. Sin Chi Fai

(resigned on 27 March 2007

and appointed on

28 January 2008) 500,000 – (500,000) – – – 0.728 22.6.2006 22.6.2006 – 21.6.2008

Employees 30,480,000 (1,895,000) (2,650,000) 25,935,000 (25,935,000) – 0.728 22.6.2006 22.6.2006 – 21.6.2008

Other eligible participants

(Note 3) 9,100,000 (1,140,000) (560,000) 7,400,000 (7,400,000) – 0.728 22.6.2006 22.6.2006 – 21.6.2008

58,680,000 (4,285,000) (7,710,000) 46,685,000 (46,685,000) –

Exercisable at year end 46,685,000 –

Notes:

1. On 22 June 2006, a total of 58,880,000 share options were granted. The closing price of the shares of the

Company immediately before the date of grant (as of 21 June 2006) was HK$0.72.

2. The options are to vest as follows:

Up to a maximum of 50% of the options are exercisable during the first year of the option period

commencing from 22 June 2006 to 21 June 2007. The balance of the 50% of the options not yet exercised in

the first year and the other 50% could be exercised in the second year commencing from 22 June 2007 to 21

June 2008. There was no share options that are outstanding at 31 December 2008 (2007: 46,685,000).

The Group recognised a total expense of approximately nil for the year ended 31 December 2008 (2007:

HK$2,924,000) in relation to share options granted by the Company.

3. Other eligible participants represent individuals who render personal services to the subsidiaries and the

services rendered are similar to those rendered by employees.

4. The weighted average closing prices of the shares of the Company immediately before and on the dates

on which the share options were exercised during the year ended 31 December 2007 were ranged from

HK$0.85 to HK$0.93.


– 116 –

49. Reserves

The special reserve represents (i) the difference between the nominal value of the shares

of the acquired subsidiaries and the nominal value of the shares of the Company issued for the

acquisition under the group reorganisation in September 1997; and (ii) reduction of share capital

took place during the years ended 31 December 2006 and 31 December 2008.

50. Capital risk management

The Group manages its capital to ensure that entities in the Group will be able to continue as

a going concern while maximising the return to shareholders through the optimisation of the debt

and equity balance. The Group’s overall strategy remains unchanged from prior year.

The capital structure of the Group consists of net debt, which principally includes the

borrowings disclosed in notes 37, 40, 43 and 44 (net of cash and cash equivalents) and equity

attributable to equity holders of the Company, comprising issued share capital, retained profits and

other reserves.

The directors of the Company review the capital structure on a quarterly basis. As part of this

review, the directors consider the cost of capital and the risks associates with each class of capital.

The Group will balance its overall capital structure through the payment of dividends, new share

issues and share buy-backs as well as the issue of new debt or the redemption of existing debt.

51. Financial instruments

51a. Categories of financial instruments

2008 2007HK$’000 HK$’000

Financial assetsFVTPL

– Investment held for trading 10,190 27,531

– Derivative financial instruments – 5,972

Loans and receivables (including cash and

cash equivalents) 924,310 815,036

Available-for-sale financial assets 162,984 249,992

Financial liabilitiesAmortised cost 1,914,457 1,832,367

51b. Financial risk management objectives and policies

The Group’s major financial instruments include amounts due from/to related

companies, amounts due from associates, trade and other receivables, loan receivables,

loans from related companies, pledged bank deposits, bank balances and cash, trade and

other payables, borrowings, promissory note, consideration note, amounts due to minority

shareholders of subsidiaries and convertible notes. Details of these financial instruments

are disclosed in respective notes. The risks associated with these financial instruments and

the policies on how to mitigate these risks are set out below. The management manages and

monitors these exposures to ensure appropriate measures are implemented on a timely and

effective manner.


– 117 –

There has been no significant change to the Group’s exposure to market risks or the

manner in which it manages and measures the risk.

Market risk

(i) Currency risk

Several subsidiaries of the Group have foreign currency sales and purchases,

which expose the Group to foreign currency risk. Approximately 10.3% of the Group’s

sales are denominated in currencies other than the functional currency of the Group

entity that making the sale, whilst almost 96.0% of costs are denominated in the

Group entity’s functional currency.

The carrying amounts of the Group’s foreign currency denominated monetary

assets and monetary liabilities at the reporting date are as follows:

2008 2007HK$’000 HK$’000

AssetsUnited States dollars 5,185 14,806

Renminbi 400 1,589

LiabilitiesUnited States dollars 209,416 216,009

Australian dollars 10,567 13,519

Euro 1,758 7,196

Renminbi 6,319 6,418

The Group currently does not have a foreign currency hedging policy. However,

the management monitors foreign exchange exposure by closely monitoring the

movement of foreign currency rate and will enter into foreign currency options or

forward contract, when and where appropriate.

The directors are of the opinion that the Group’s major foreign currency

transaction is mainly in the United States dollars. The Group’s sensitivity to the

change in the foreign exchange rate is low as the functional currency of the relevant

group entities is Hong Kong dollars which is pegged with United States dollars.

(ii) Cash flow interest rate risk

The Group is also exposed to cash flow interest rate risk in relation to variable-

rate loan receivables, loans to/from related companies, borrowings, promissory

note and consideration note (see notes 29, 30, 37, 40, 41 and 42 for details of these

borrowings) . The Group also have fixed interest rate financial assets and liabilities

which exposed the Group to fair value interest rate risk. It is the Group’s policy to

keep its borrowings at floating rate of interests so as to minimise the fair value interest

rate risk.


– 118 –

The Group’s exposures to interest rates risk on financial liabilities are detailed

in the liquidity risk management section of this note. The Group’s cash flow interest

rate risk is mainly concentrated on the fluctuation of HIBOR arising from the Group’s

Hong Kong dollars denominated borrowings.

Sensitivity analysis

The sensitivity analyses below have been determined based on the

exposure to interest rates for non-derivative instruments at the balance sheet

date. For variable-rate financial assets and liabilities, the analysis is prepared

assuming the amounts of assets and liabilities outstanding at the balance sheet

date were outstanding for the whole year. A 50 basis point increase or decrease

is used when reporting interest rate risk internally to key management personnel

and represents management’s assessment of the reasonably possible change in

interest rates.

If interest rates had been 50 basis points higher/lower and all other

variables were held constant, the Group’s loss for the year ended 31 December

2008 would increase/decrease by HK$3,430,000 (2007: profit for the year

would decrease/increase by HK$4,303,000). This is mainly attributable to the

Group’s exposure to interest rates on its variable-rate bank borrowings.

The Group’s sensitivity to interest rates has decreased during the current

year mainly due to the decrease in variable rate debt instruments.

(iii) Other price risk

The Group is exposed to other price risk through its investments in equity

securities and derivative financial instruments. The management manages this

exposure by maintaining a portfolio of investments with different risks. In addition,

the Group has appointed a special team to monitor the price risk and will consider

hedging the risk exposure should the need arise. The Group’s other price risk is

mainly concentrated on equity instruments quoted in the Stock Exchange.

Sensitivity analysis

The sensitivity analyses below have been determined based on the

exposure to equity price risk at the reporting date for the held-for-trading

investments.

If the prices of the respective equity instruments had been 5% higher/

lower, loss for the year ended 31 December 2008 would be decreased/increased

by HK$510,000 (2007: profit for the year would be increased/decreased by

HK$1,675,000) as a result of the changes in fair value of held-for-trading

investments.

The Group’s sensitivity to held-for-trading investments has been

decreased from the prior year due to the decrease in held-for-trading

investments.


– 119 –

Credit risk

The Group’s maximum exposure to credit risk in the event of the counterparties

failure to perform their obligations as at 31 December 2008 in relation to each class

of recognised financial assets is the carrying amount of those assets as stated in the

consolidated balance sheet. In order to minimise the credit risk, the management of

the Group has delegated a team responsible for determination of credit limits, credit

approvals and other monitoring procedures to ensure that follow-up action is taken to

recover overdue debts. In addition, the Group reviews the recoverable amount of each

individual debt at each balance sheet date to ensure that adequate impairment losses

are made for irrecoverable amounts. In this regard, the directors of the Company

consider that the Group’s credit risk is significantly reduced.

The credit risk for bank deposits and bank balances exposed is considered

minimal as such amounts are placed with banks with good credit ratings.

Other than concentration of credit risk on liquid funds which are deposited

with several banks with high credit ratings, and amounts due from associates which

are with several of the Group’s associates, and save as disclosed elsewhere in the

consolidated financial statements, the Group does not have any other significant

concentration of credit risk.

Liquidity risk

In preparing the consolidated financial statements, the directors of the Company

have given careful consideration to the future liquidity and going concern of the Group

in light of the fact of the Group’s loss of approximately HK$832,913,000 for the

year ended 31 December 2008 and its current liabilities exceeded its current assets of

approximately HK$459,041,000 at 31 December 2008. The directors of the Company

are satisfied that the Group will have sufficient financial resources to meet its financial

obligations as they fall due for the foreseeable future, after taking into consideration

the credit facilities granted by one of the Group’s bankers in March 2009 for

refinancing borrowings with maturity of more than one year of HK$430,000,000 as

well as other undrawn borrowing facilities of HK$770,000,000 at 31 December 2008.

The directors of the Company are of the opinion that, taking into account of

the internally generated funds of the Group and the presently available borrowing

facilities, the Group has sufficient working capital for its present requirements for

the next twelve months from the balance sheet date. Accordingly, the consolidated

financial statements have been prepared on a going concern basis.

The Group relies on bank and other borrowings as a significant source of

liquidity, in the management of the liquidity risk, the Group monitors and maintains

a level of cash and cash equivalents deemed adequate by the management to finance

the Group’s operations and mitigate the effects of fluctuations in cash flows. The

management monitors the utilisation of bank and other borrowings and ensures

compliance with loan covenants.


– 120 –

The following tables detail the Group’s remaining contractual maturity for its

non-derivative financial liabilities. For non-derivative financial liabilities, the table has

been drawn up based on the undiscounted cash flows of financial liabilities based on

the earliest dates on which the Group can be required to pay. The table includes both

undiscounted cash flows and principal cash flows.

Weightedaverage

effective interest rate

Less than1 year

1-2years

2-5years

Totalundiscounted

cashflows

Carryingamount at

balancesheet date

% HK$’000 HK$’000 HK$’000 HK$’000 HK$’000

2008Trade and other payables – 420,881 – – 420,881 420,881

Loans from related companies 10.32 208,484 – – 208,484 188,981

Amounts due to associates – 10,075 – – 10,075 10,075

Amounts due to related

companies – 51,627 – – 51,627 51,627

Amount due to a jointly

controlled entity – 920 – – 920 920

Borrowings 3.05 424,468 – 66,903 491,371 473,571

Promissory note 3.50 70,554 – – 70,554 70,000

Amounts due to minority

shareholders of subsidiaries 7.00 105,167 – – 105,167 105,167

Convertible notes 2.00 12,800 12,800 709,541 735,141 593,235

1,304,976 12,800 776,444 2,094,220 1,914,457

2007Trade and other payables – 251,641 – – 251,641 251,641

Loans from related companies 7.30 297,269 – – 297,269 277,045

Amounts due to associates – 12,749 – – 12,749 12,749

Amounts due to related

companies – 54,544 – – 54,544 54,544

Borrowings 6.00 94,078 411,978 – 506,056 455,412

Promissory note 6.80 113,694 – – 113,694 106,455

Consideration note 5.80 22,795 – – 22,795 21,545

Amounts due to minority

shareholders of subsidiaries 7.00 98,761 – – 98,761 98,761

Convertible notes 2.00 12,800 12,800 722,341 747,941 554,215

958,331 424,778 722,341 2,105,450 1,832,367

The fair value of financial assets and financial liabilities are determined as

follows:

• the fair value of financial assets with standard terms and conditions and

traded on active liquid markets are determined with reference to quoted

market bid prices; and

• the fair value of other financial assets and financial liabilities are

determined in accordance with generally accepted pricing models based

on discounted cash flow analysis using prices or rates from observable

current market transactions as input.

The directors consider that the carrying amounts of other financial assets and

financial liabilities recorded at amortised cost in the consolidated financial statements

approximate their fair values.


– 121 –

52. Disposal of subsidiaries

(a) As described in note 34, the Group disposed of its 100% interest in 廣州天俠商旅服務有限公司 at a consideration of approximately HK$37,000,000 in January 2008. The

net assets at the date of disposal were as follows:

31.1.2008HK$’000

Goodwill 35,922




Trade and other payables (21,019)

Amount due to the Group (24)

Net assets disposed of 34,271

Gain on disposal 2,729

Total consideration 37,000

Satisfied by:

Deposit received in 2007 3,500

Consideration receivables 33,500

37,000

Cash outflow arising on disposal:

Bank balances and cash disposed of (363)

(b) As described in note 34, the Group disposed of its 100% interest of its online booking

exchange platform business for a consideration of approximately HK$37,000,000. The

net assets at the date of disposal were as follows:

30.4.2008HK$’000

Goodwill 37,000

Trade and other receivables 305

Amount due from the Group 10

Trade and other payables (315)

Net assets disposed of and total consideration 37,000

Satisfied by:



– 122 –

(c) The Group disposed of its approximately 56.91% interest in Triumph Up Investments

Limited at a consideration of approximately HK$252,789,000 in May 2007. The net

assets of Triumph Up Investments Limited at the date of disposal were as follows:

31.5.2007HK$’000

Interest in associates 204,351


Amounts due from associates 84,419

Amounts due to associates (170)


Minority interests (124,237)



Satisfied by:

Cash 226,100

Other receivable 895

Deposit received 25,794

252,789

Net cash inflow arising on disposal 226,100

(d) The Group disposed of its 100% interest in Wing On Air Services Ltd at a

consideration of HK$100,000 in October 2007. The net assets of Wing On Air

Services Ltd at the date of disposal were as follows:

22.10.2007HK$’000

Net assets disposed of:



374

Loss on disposal (274)

Total consideration 100

Satisfied by:

Cash 100

Net cash inflow arising on disposal 100

The impact of these dispositions on the Group’s result and cash flow in the current and

prior period was insignificant.


– 123 –

53. Acquisition of subsidiaries

Business acquisition:

(a) In December 2008, the Group acquired a further 18.4% interest in the issued share

capital of Sino USA, a then 48% owned associate of the Group for a consideration

of HK$5,000,000 and Sino USA then became a 66.4% owned subsidiary of the

Group. Sino USA is engaged in travel and related services. This transaction has been

accounted for using the purchase method of accounting.

The net assets acquired in the transaction and the discount on acquisition are as

follows:

Acquiree’scarrying

amount beforecombination

Fair valueadjustments

Fair valueon

acquisitionHK$’000 HK$’000 HK$’000

Property, plant and equipment 53,266 4,776 58,042

Investment deposits and other assets 4,097 – 4,097

Inventories 72 – 72

Amounts due from related companies 114 – 114

Trade and other receivables 310 – 310

Bank balances and cash 62 – 62

Trade and other payables (9,232) – (9,232)

Amounts due to related companies (9,365) – (9,365)

Taxation payable (1,697) – (1,697)

Deferred tax – (1,194) (1,194)

Net assets acquired 37,627 3,582 41,209


Reclassify from the Group’s

interests in associates (18,061)

Reclassify from the Group’s

other intangible assets (2,430)

Asset revaluation reserve (1,719)

Discount on acquisition of

additional interest in Sino USA (161)

Total consideration, satisfied by cash 5,000

Net cash outflow arising on

acquisition:

Cash consideration paid (5,000)

Bank balances and cash acquired 62

(4,938)


– 124 –

Sino USA contributed approximately HK$197,000 to the Group’s revenue and

contributed approximately HK$1,089,000 to the Group’s loss before tax for the period

between the date of acquisition and the balance sheet date.

If the acquisition had been completed on 1 January 2008, total Group’s revenue for

the year would have been approximately HK$2,220,093,000, and the loss for the year

would have been approximately HK$898,186,000 . The pro forma information is for

illustrative purposed only and is not necessarily an indication of revenue and results

of operations of the Group that actually would have been achieved had the acquisition

been completed on 1 January 2008, nor is it intended to be a projection of future

results.

(b) On 31 May 2007, the Group, through a wholly owned subsidiary, acquired a 51%

interest in Sichuan Henxin for a consideration of approximately HK$17,500,000.

Sichuan Henxin is engaged in travel agency business and this acquisition has been

accounted for using the purchase method.

The net assets acquired in these transactions, and the then goodwill arising, were as

follows:

AmountHK$’000





Net assets acquired 1,562

Minority interests (767)

Goodwill arising on acquisition 16,705

17,500

Satisfied by:

Cash 2,000

Investment deposits 15,500

17,500

Net cash outflow arising on acquisition:

Cash consideration paid 2,000

Bank balances and cash acquired (708)

1,292

Goodwill arose in the business combination because the consideration paid effectively

included amounts in relation to the benefit of expected synergies, revenue growth and

future market development.


– 125 –

(c) On 30 June 2007, the Group, through a wholly owned subsidiary, acquired 100%

interest in 廣州天俠商旅服務有限公司 for a consideration of approximately

HK$35,000,000 and incurred transaction costs of HK$2,675,000. 廣州天俠商旅服務有限公司 is engaged in travel agency business and this acquisition has been accounted

for using the purchase method.

The net assets acquired in these transactions, and the then goodwill arising, were as

follows:

AmountHK$’000



Bank balances and cash 1,412



Goodwill arising on acquisition 35,923

Cash consideration 37,675



Expenses incurred for the acquisition 2,675

Bank balances and cash acquired (1,412)

36,263

In December 2007, the Group entered into an agreement in relation to the disposal

of its 100% interest in 廣州天俠商旅服務有限公司 for a consideration of

HK$37,000,000, details of which are disclosed in notes 34 and 52a.


– 126 –

(d) On 15 August 2007, the Group, through its 67.9% subsidiary, acquired 100% of

issued share capital of Shenyang Limited for a consideration of HK$178,000,000

and incurred transaction costs of HK$633,000. Shenyang Limited is engaged in hotel

operation business in the PRC and this acquisition has been accounted for using the

purchase method. The amount of discount arising as a result of the acquisition was

approximately HK$47,344,000. The net assets acquired in the transaction and the

discount on acquisition were as follows:

Acquiree’scarrying

amount beforecombination

Fair valueadjustments

Fair valueon

acquisitionHK$’000 HK$’000 HK$’000

Property, plant and

equipment 199,811 27,367 227,178

Inventories 956 – 956

Trade and other receivables 5,210 – 5,210

Bank balances and cash 17,536 – 17,536

Trade and other payables (9,700) – (9,700)

Amount due to a minority

shareholder (7,646) – (7,646)

Deferred tax – (5,500) (5,500)

Net assets acquired 206,167 21,867 228,034


Discount on acquisition of

subsidiaries (47,344)

178,633

Satisfied by:

Cash 50,000

Expenses incurred

for the acquisition 633

Consideration note 21,545

Promissory note 106,455

178,633

Net cash outflow arising on

acquisition:


Bank balances and

cash acquired (17,536)

33,097


– 127 –

Shenyang Limited’s property, plant and equipment include a hotel property. At

the time of preparing a circular to the shareholders containing information on the

acquisition, the Group has appointed Norton Appraisals to perform a valuation of the

hotel property as of 30 April 2007, and the valuation was arrived at by reference to

market evidence of transaction prices for similar properties. Details of the valuation

are disclosed in the circular issued by the Company dated 23 July 2007. Upon

completion of the acquisition on 15 August 2007, the Group has appointed another

valuer, Greater China Appraisal Limited, independent qualified professional valuer not

connected with the Group to assess the valuation of the property at 15 August 2007,

which was arrived at by reference to both market evidence of transaction prices for

similar properties and income approach. Both Norton Appraisals and Greater China

Appraisal Limited are members of the Hong Kong Institute of Surveyors, and have

appropriate qualifications and recent experiences in the valuation of similar properties

in the relevant locations. Both of them had come up with a similar valuation of this

hotel property.

Shenyang Limited is making loss in past years and the directors of the Company

believed that the Group has more bargaining power to negotiate for a better

consideration and resulting in a discount on acquisition of the subsidiaries after

reassessment.

Assets acquisition:

(e) In January 2008, the Group acquired 100% interest in More Star Limited for a

consideration of approximately HK$20 million. The acquisition has been accounted

for as acquisition of assets as the subsidiary acquired is not a business.

The assets acquired in this transaction were as follows:

AmountHK$’000


Other receivables 12


Assets acquired and cash consideration 20,000

Satisfied by:

Considerations paid in prior period 20,000

Cash inflow arising on acquisition:

Bank balances and cash acquired 3,600

(f) On 28 August 2007, the Group, through a wholly owned subsidiary, acquired

the entire issued share capital of Asia Times Limited for a consideration of

HK$70,000,000 and incurred transaction costs of HK$6,706,000. This acquisition has

been accounted for as acquisition of assets and liabilities as the subsidiary acquired is

not a business.


– 128 –

The net assets acquired in these transactions are as follows:

AmountHK$’000


Intangible assets 78,250

Inventories 51

Amounts due from associates 472

Amounts due from related companies 52



Trade and other payables (4,249)

Tax liabilities (1,197)

Net assets acquired and cash consideration 76,706





75,298

(g) On 13 September 2007, the Group through its 52.5% owned subsidiary, Enjoy Media

Holdings Limited, completed the acquisition of the entire issued share capital of

Square Inn Hotel Management Limited for a consideration of HK$30,000,000 and

incurred transaction costs of HK$5,263,000. This acquisition has been accounted for

as acquisition of assets and liabilities as the subsidiary acquired is not a business.

The net assets acquired in these transactions are as follows:

AmountHK$’000


Other payables (3,079)




Expense incurred for the acquisition 5,263

35,263


– 129 –

(h) On 15 November 2007, the Company, through its wholly owned subsidiary, Fortune

Up International Limited, completed the share subscription representing a 72% of the

enlarged share capital of Tangula Group Limited for a consideration of approximately

HK$412,011,000 and incurred transaction costs of HK$36,649,000. This acquisition

has been accounted for as acquisition of assets and liabilities as the subsidiary

acquired is not a business.

The net assets acquired in this transaction are as follows:

AmountHK$’000

Property, plant and equipment 301,259


Other financial assets 2,185

Investment in a jointly controlled entity 6,979



Amounts due to minority shareholders (99,484)

Other borrowings (290,702)



Share subscription proceeds from the Group 412,011


448,660

Net cash outflow arising acquisition:



31,992

(i) In December, 2007, the Group, through a wholly owned subsidiary, acquired 100%

interest in Dinna Capital Limited for a consideration of HK$36,000,000 and incurred

transaction costs of HK$4,000,000. This acquisition has been accounted for as

acquisition of assets and liabilities as the subsidiary acquired is not a business.


– 130 –


AmountHK$’000

Investment property 174,938




Amounts due to related companies (147,868)





26,763

The fair value of the Group’s investment properties at 31 December 2007 has been

arrived at on the basis of a valuation carried out on that date by Norton Appraisals.

Norton Appraisals has recent experiences in the valuation of similar properties in the

relevant locations. The valuation was arrived at by reference to market evidence of

transaction prices for similar properties.

54. Major non-cash transactions

Save as otherwise disclosed, the Group entered into the following major non-cash

transactions:

(i) During the year ended 31 December 2008, the Group entered into finance lease

arrangement in respect of assets with a total capital value at the inception of lease of

HK$791,000 (2007: HK$250,000).

(ii) During the year ended 31 December 2008, the Group purchased construction in

progress of approximately HK$214,422,000. Such amount is outstanding and is

included in other payables at 31 December 2008.

(iii) During the year ended 31 December 2007, the Group acquired 30,000,000 common

stock of Sino USA. The consideration was satisfied by amount due from an associate

of HK$30,000,000 and loan receivables of HK$7,000,000 respectively.


– 131 –

55. Pledge of assets

Save as otherwise disclosed, at 31 December 2008, the Group’s credit facilities were secured

by the Group’s assets as follows:

2008 2007HK$’000 HK$’000

Hotel property 597,894 603,548

Leasehold land and building 14,328 13,557

Investments held for trading 9,923 –

Properties under construction 56,546 –

Prepaid lease payments 159,654 –

Bank balances 12,063 11,916

850,408 629,021

The Group has also effected a pledge of fixed charge over all the revenue and a floating

charge over all the assets of certain subsidiaries for bank borrowings. Revenue of those subsidiaries

amounted to approximately HK$95,858,000 for 2008 (2007: HK$92,305,000) and their total assets

are approximately HK$13,977,000 (2007: HK$14,571,000) at 31 December 2008.

Further, the Group has a fixed charge over the entire issued share capital of and/or

shareholder’s loan to certain subsidiaries for bank borrowings and promissory note, and

the carrying amount of their net assets at 31 December 2008 amounted to approximately

HK$258,056,000 (2007: HK$231,562,000).

56. Operating lease commitments

As lessee

At 31 December 2008, the Group had commitments for future minimum lease

payments under non-cancellable operating leases which fall due as follows:

2008 2007HK$’000 HK$’000

Land and buildingsWithin one year 20,085 20,054

In the second to fifth years inclusive 17,072 8,938

37,157 28,992

EquipmentWithin one year 597 358

In the second to fifth years inclusive 1,566 179

2,163 537

Operating lease payments represent rentals payable by the Group for certain of its

office properties, shops and employees’ quarters as well as equipment. Leases are negotiated

for an average term of two years.


– 132 –

As lessor

Property rental income earned during the year was HK$18,220,000 (2007:

HK$17,952,000).

At the balance sheet date, the Group had contracted with tenants for the following

future minimum lease payments under non-cancellable operating leases for its investment

properties and premises within the hotel properties:

2008 2007HK$’000 HK$’000

Within one year 17,753 17,952

In the second to fifth years inclusive 42,790 41,764

After five years 1,693 3,698

62,236 63,414

57. Capital commitments

2008 2007HK$’000 HK$’000

Contracted for but not provided in the consolidated

financial statements in respect of

Acquisition of companies holding prepaid

lease payment – 177,492

Investment in a jointly controlled entity 37,687 45,476

Purchase of property, plant and equipment 463,269 397,858

500,956 620,826

58. Provident fund schemes

The Group has retirement schemes covering a substantial portion of its employees in Hong

Kong. The principal schemes are defined contribution schemes. The assets of these schemes are

held separately from those of the Group in funds under the control of independent trustees.

The Group participates in both a defined contribution scheme which is registered under the

Occupational Retirement Scheme Ordinance (the “ORSO Scheme”) and a Mandatory Provident

Fund Scheme (the “MPF Scheme”) established under the Mandatory Provident Fund Ordinance

in December 2000. The assets of the schemes are held separately from those of the Group, in

funds under the control of trustees. Employees who were members of the ORSO Scheme prior to

the establishment of the MPF Scheme were offered a choice of staying within the ORSO Scheme

or switching to the MPF Scheme, whereas all new employees joining the Group on or after 1

December 2000 are required to join the MPF Scheme.

For members of the MPF Scheme, the Group contributes 5% of relevant payroll costs to the

Scheme, which contribution is matched by the employee.

The ORSO Scheme is funded by monthly contributions from both employees and the Group

at 5% of the employee’s basic salary.


– 133 –

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

The amounts charged to the consolidated income statement represent contributions paid or payable to schemes by the Group of approximately HK$10,953,000 (2007: HK$8,385,000) less forfeiture of HK$34,000 (2007: HK$105,000) arising from employees leaving the Group prior to completion of the qualifying service period, if any.

At the balance sheet date, the total amount of forfeited contributions, which arose upon employees leaving the retirement benefit schemes and which are available to reduce the contributions payable in future years was HK$60,000 (2007: HK$43,000).

59. Related party transactions

Save as disclosed in elsewhere of this consolidated financial statements, during the year, the Group had transactions with related parties as follows:

(a) Nature of transactions Name of company 2008 2007HK$’000 HK$’000

Air ticketing and travel service income received and receivable by the Group

Hanny Holdings Limited and its subsidiaries (i) 739 732

PYI Corporation Limited and its subsidiaries (iv) 2,113 3,069

See Corporation Limited (v) – 575

China Enterprises Limited (iv) – 4

ITC Corporation Limited and its subsidiaries (iv) 808 411

ITC Properties Group Limited and its subsidiaries (i) 1,370 1,323

PSC Corporation Limited (i) 124 123

5,154 6,237

Tour costs paid and payable by the Group

Ananda Travel Services (Aust.) Pty Ltd. (iii) 32,467 35,538

Wing On Int’l Travel Service Ltd. Guangdong (iii) 4,449 5,553

36,916 41,091

Interest paid and payable on convertible notes

China Enterprises Limited (iv) 1,263 3,489

PSC Corporation Limited (i) 242 –

ITC Properties Group Limited and its subsidiaries (i) 505 –

2,010 3,489


– 134 –

(a) Nature of transactions Name of company 2008 2007HK$’000 HK$’000

Loan interest paid and

payable by the Group

PYI Corporation Limited and

its subsidiaries (v) 19,715 2,766

Hanny Holdings Limited and

its subsidiaries (i) 62 1,036

ITC Management Limited (iv) 952 10,594

ITC Properties Group Limited

and its subsidiaries (i) 1,012 4,892

TIL Capital Corporation Limited (ii) 4,358 144

TZG Holding Limited (ii) 1,931 167

28,030 19,599

Loan interest received and

receivable by the Group

See Corporation Limited (v)

– 1,087

– 1,087

Staff secondment fee

paid and payable

by the Group

Mass Success International

Limited (i) 3,000 3,000

3,000 3,000

Property rental and

management fee

received and receivable

by the Group


its subsidiaries (i) 553 447

553 447

Website maintenance

services received and

receivable

by the Group


its subsidiaries (i) 36 38

Travoo Asia Limited (iii) 1,217 1,193

China Enterprises Limited (iv) 4 –

1,257 1,231

Property rental and

management fee paid

and payable by the

Group

Travoo Asia Limited (iii) 1,212 816

1,212 816


– 135 –

The relationship between the above related parties and the Group are as follows:

(i) Certain directors of the Company are also directors of and have beneficial

interests in these companies;

(ii) These companies are minority shareholders of subsidiaries of the Company;

(iii) The above companies are associates of the Group;

(iv) The above companies have beneficial interest in the Company; and

(v) Certain directors of the Company are also directors of and have beneficial

interests in this company in 2007.

(b) During the years ended 31 December 2008 and 2007, the Group advanced loans to and

received loans from related companies. Details of their relationships and the terms of

the loans are set out in notes 30 and 37, respectively.

(c) The Group maintained current accounts with jointly controlled entity, related

companies and associates. Their balances as at 31 December 2008 are set out in notes

19, 26, 27 and 38.

Certain directors of the Company are also directors of and have beneficial interests in

those related companies.

(d) During the year ended 31 December 2007, a director of the Company has given

personal guarantees of HK$300 million to a financial institution in respect of loan

facilities utilised by the Group. All outstanding loans under such facilities were settled

as at 31 December 2007 and the loan facilities were expired accordingly.

(e) During the year ended 31 December 2008, the Company also entered into agency

arrangements with certain related companies to handle at their instructions and on

their behalf, matters relating to their potential and existing projects in the PRC for a

fee to be finalised and agreed upon.

(f) Compensation of key management personnel

The remuneration of key management members, who are the directors of the Company

during the year, was as follows:

2008 2007HK$’000 HK$’000

Short-term benefits 169 329

Share-based payments – 1,197

Post-employment benefits – –

169 1,526

The remuneration of directors is determined by the remuneration committee having

regard to the performance of individuals and market trends.


– 136 –

60. Principal subsidiaries

Details of the Company’s principal subsidiaries as at 31 December 2008 and 2007 are as

follows:

Name of company

Place ofincorporation/registration

Issued and paid upshare capital/

registered capital

Proportion of nominal value of issued share capital/registered

capital held by CompanyPrincipal activities andplace of operation

Directly Indirectly2008 2007 2008 2007

% % % %

Allied Glory Investment

Limited (“Allied Glory”)

Hong Kong HK$2 – – 55.7 55.7 Investment holding

in Hong Kong

Apex Quality Group Limited British Virgin Islands US$5,548,172 – – 67.9 67.9 Investment holding

Asia Times Limited British Virgin Islands US$100 – – 100 100 Investment holding

Benchmark Pacific Limited British Virgin Islands US$1 – – 100 100 Investment holding

in Hong Kong

DS Eastin Limited Hong Kong HK$20 – – 67.9 67.9 Investment holding

in Hong Kong

Fortress State International

Limited

Hong Kong HK$10,000 – – 100 100 Property holding

in Hong Kong

Hey Wealth Limited Hong Kong HK$2 – – 67.9 67.9 Hotel ownership

in Hong Kong

HKWOT (BVI) Limited British Virgin Islands US$1 100 100 – – Investment holding

in Hong Kong

HMH China Investments

Limited

Bermuda CAD1,152,913 – – 55.7 55.7 Investment holding

in Canada

Hong Kong Wing On Travel

Service Limited

Hong Kong Ordinary –

HK$180,000,100

Deferred –

HK$20,000,000*

– – 100 100 Outbound travel and

related services

International Travel Systems

Inc.

British Virgin Islands US$1 – – 100 100 Investment holding

Kingsgrove International

Limited

Hong Kong HK$2 – – 100 100 Property investment

in Hong Kong


– 137 –

Name of company



registered capital




% % % %

Lucky Million Investments

Limited

British Virgin Islands US$1 – – 67.9 67.9 Investment holding

in Hong Kong

Luoyang Golden Gulf Hotel

Co., Ltd.

PRC# RMB145,000,000 – – 40.8 40.8 Hotel ownership and

operation in the PRC

Makerston Limited British Virgin Islands US$1 – – 67.9 67.9 Investment holding

in Hong Kong

Many Good Money Exchange

Limited

Hong Kong HK$100,000 – – 100 100 Money exchange

services in Hong Kong

Millennium Target Holdings

Limited

British Virgin Islands US$1 – – 100 100 Trading of securities

in Hong Kong

Rail Partners, Inc. British Virgin Islands US$812 – – 72 72 Train operation

in the PRC

Rosedale Group Management

Limited

Hong Kong HK$2 – – 67.9 67.9 Provision of management

and secretarial services

in Hong Kong

Rosedale Hotel Beijing

Co., Ltd.

PRC# US$17,200,000 – – 64.5 64.5 Hotel ownership and


Rosedale Hotel Group

Limited

British Virgin Islands US$1 – – 67.9 67.9 Investment holding

in Hong Kong

Rosedale Hotel Guangzhou

Co., Ltd. (“Rosedale

Guangzhou”)

PRC## US$11,500,000 – – 55 55 Hotel ownership and


Rosedale Park Limited Hong Kong HK$2 – – 67.9 67.9 Hotel operation

in Hong Kong

The Rosedale Luxury Hotel

& Suites Ltd.

PRC### US$19,350,000 – – 100 100 Property investment

in the PRC

Shenyang Limited British Virgin Islands US$1 – – 67.9 67.9 Investment holding

in Hong Kong

Shropshire Property Limited British Virgin Islands Ordinary –

US$10

Preference –

US$1,000

– – 67.9 67.9 Investment holding

in Hong Kong


– 138 –

Name of company



registered capital




% % % %

Sino Express Travel, Ltd. United States of

America

US$135,657 – – 66.4 48** Provision of travel and

related services

Sino Express Travel Limited British Virgin Islands US$100 – – 66.4 48** Investment holding

Square Inn Hotel

Management Limited

Macau MOP100,000 – – 52.5 52.5 Budget hotel operation

in Macau

Square Inn Budget Hotels

Management, Inc.

United States of

America

US$1,420,474 – – 52.5 52.5 Investment holding

Success Billion Limited British Virgin Islands US$1 – – 100 100 Trading of securities

in Hong Kong

Super Grade Investment

Limited

British Virgin Islands US$1 – – 100 100 Property investment

in Hong Kong

Tangula Group Limited Cayman Islands US$1,000 – – 72 72 Investment holding

Time Plaza (Shenyang)

Limited

PRC# RMB168,000,000 – – 59.1 59.1 Hotel ownership and


Watertours of Hong Kong

Limited

Hong Kong Ordinary –

HK$1,500,000

“B” – HK$100*

– – 100 100 Watertour services

in Hong Kong

WHS Marine Services

Limited

Hong Kong HK$1,000,000 – – 100 100 Ship Building, repair

and holdings of leisure

boats in Hong Kong

Wing On Holidays (Macau)

Limited

Macau MOP1,300,000 – – 100 100 Travel and related

services in Macau

Wing on Travel Finance

Limited

Hong Kong HK$2 – – 100 100 Money lending

in Hong Kong

Wing On Travel International

Limited

British Virgin Islands US$1 100 100 – – Investment holding

Wing On Travel (BVI)

Limited

British Virgin Islands US$10,000 – – 100 100 Investment holding


– 139 –

Name of company



registered capital




% % % %

Wing On Travel (U.K.)

Limited

United Kingdom £2 – – 100 100 Travel and related

services in the

United Kingdom

WOT Holidays (Canada)

Limited

Canada C$15,000 – – 100 100 Travel and related

services in Canada

Yangjiang Silver Beach

Entertainment Services

Limited

PRC### RMB10,500,000 – – 66.4 48** Hotel ownership and


* The deferred shares and “B” shares are owned by the Group, practically carry no rights to dividends or to

receive notice of or to attend or vote at any general meeting of the respective companies or to participate in

any distribution in winding up.

** The entities were 48% owned associates of the Group at 31 December 2007.

# The subsidiaries are PRC Sino-foreign equity joint ventures.

## This subsidiary is a PRC Sino-foreign co-operative joint venture. Allied Glory is entitled to recoup its total

investment (including capital and interest) from the after-tax earnings of Rosedale Guangzhou before any

amounts are distributed. Thereafter, the after-tax earnings of Rosedale Guangzhou are to be distributed at

80% and 20% to Allied Glory and other joint venture partner respectively.

### The subsidiaries are PRC wholly foreign owned entities.

#### The subsidiary is a PRC domestic company.

The above table lists the subsidiaries of the Group which, in the opinion of the directors,

principally affected the results or assets and liabilities of the Group. To give details of other

subsidiaries would, in the opinion of the directors, result in particulars of excessive length.

No debt securities have been issued by any of the subsidiaries during the year.


– 140 –

3. UNAUDITED INTERIM RESULTS

Set out below is the summary of the unaudited condensed consolidated financial statements of

the Group together with the relevant notes to the accounts, as extracted from the interim report of the

Company for the six months ended 30 June 2009.

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOMEFor the six months ended 30 June 2009

Six months ended30.6.2009 30.6.2008

NOTES HK$’000 HK$’000

(unaudited) (unaudited)

Turnover 3 883,241 1,068,752

Direct operating costs (723,113) (872,684)

Gross profit 160,128 196,068

Other income 6,571 6,107

Distribution and selling expenses (14,365) (24,659)

Administrative expenses (189,509) (175,034)

(Decrease) increase in fair value of

investments held for trading (4,959) 28,157

Gain on disposal of subsidiaries – 2,729

Finance costs (48,626) (68,484)

Loss on disposal of available-for-sale

investments (39,370) –

Impairment loss recognised in respect

of available-for-sale investments (4,965) –

Share of results of associates (26,560) (43,408)

Share of results of a jointly controlled entity (3,075) (4,897)

Increase in fair value of investment properties 31,236 306

Increase in fair value of derivative

financial instruments – 3,852

Impairment loss recognised

in respect of goodwill – (11,305)

Loss before taxation 4 (133,494) (90,568)

Taxation expense 5 (159) (3,668)

Loss for the period (133,653) (94,236)

Other comprehensive income


financial statements of foreign operations 1,336 55,513

Total comprehensive expense for the period (132,317) (38,723)


– 141 –




Loss for the period attributable to:

Owners of the Company (115,146) (80,435)

Minority interests (18,507) (13,801)

(133,653) (94,236)

Total comprehensive expense

for the period attributable to:

Owners of the Company (113,810) (40,788)

Minority interests (18,507) 2,065

(132,317) (38,723)

HK cents HK cents

Loss per share 7

– Basic and diluted (1.26) (2.35)


– 142 –

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITIONAt 30 June 2009

At30.6.2009

At31.12.2008

NOTES HK$’000 HK$’000(unaudited) (audited)

Non-current assetsProperty, plant and equipment 8 2,688,495 2,679,888Investment properties 8 251,543 217,777Prepaid lease payments 151,202 154,019Interests in associates 47,033 2,737Interest in a jointly controlled entity 8,310 9,069Available-for-sale investments 116,229 162,984Other intangible assets 289,144 263,191Investment deposits and other assets 79,547 109,066Club debenture, at cost 713 713

3,632,216 3,599,444

Current assetsInventories 7,034 7,559Amounts due from related companies 34,439 36,419Amounts due from associates 29,323 140,374Trade and other receivables 9 202,196 266,689Prepaid lease payments 5,635 5,635Loan receivables 31,209 37,744Loan to a jointly controlled entity 10,174 –Loans to related companies – 8,757Investments held for trading 11,404 10,190Tax recoverable 5 5Pledged bank deposits 12,094 12,063Trading cash balances 173 238Bank balances and cash 386,534 498,609

730,220 1,024,282

Current liabilitiesTrade and other payables 10 577,342 611,095Provision for loss contingencies 11 14,542 17,000Loans from related companies 185,714 188,981Amounts due to associates 10,667 10,075Tax liabilities 14,143 16,273Amounts due to related companies 64,493 51,627Amount due to a jointly controlled entity 1,346 920Obligations under finance leases

– amount due within one year 288 284Borrowings – amount due within one year 12 92,717 411,901Promissory note – 70,000Amounts due to minority shareholders of

subsidiaries 115,147 105,167

1,076,399 1,483,323

Net current liabilities (346,179) (459,041)

Total assets less current liabilities 3,286,037 3,140,403


– 143 –

Non-current liabilities

Obligations under finance leases

– amount due after one year 360 499

Borrowings – amount due after one year 12 412,461 61,670

Convertible notes 13 614,326 593,235

Deferred taxation 233,192 233,484

1,260,339 888,888

Net assets 2,025,698 2,251,515

Capital and reserves

Share capital 14 91,199 91,199

Reserves 1,592,338 1,745,145

Equity attributable to owners of the Company 1,683,537 1,836,344

Minority interests 342,161 415,171

Total equity 2,025,698 2,251,515

At30.6.2009

At31.12.2008


(unaudited) (audited)


– 144 –

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITYFor the six months ended 30 June 2009

Sharecapital

Sharepremium

Specialreserve

Otherreserve

Warrantreserve

Convertiblenotes

reserve

Shareoptionsreserve

Translationreserve

Assetrevaluation

reserve

Retainedprofits

(accumulatedlosses)

Attributableto owners

of theCompany

Minorityinterests Total

HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000

At 1 January 2008 (audited) 182,076 828,504 652,290 – – 131,289 13,784 71,742 – 164,797 2,044,482 518,045 2,562,527

Loss for the period – – – – – – – – – (80,435) (80,435) (13,801) (94,236)

Exchange difference arising

on translation of financial

statements of foreign

operations – – – – – – – 39,647 – – 39,647 15,866 55,513


for the period – – – – – – – 39,647 – (80,435) (40,788) 2,065 (38,723)


Dividends paid (Note 6) – – – – – – – – – (9,103) (9,103) – (9,103)

At 30 June 2008 (unaudited) 182,397 828,746 652,290 – – 131,289 13,784 111,389 – 75,259 1,995,154 520,110 2,515,264

At 1 January 2009 (audited) 91,199 1,146,528 658,303 – 30,201 131,289 – 138,401 1,719 (361,296) 1,836,344 415,171 2,251,515

Loss for the period – – – – – – – – – (115,146) (115,146) (18,507) (133,653)

Exchange difference arising

on translation of financial

statements of foreign

operations – – – – – – – 1,336 – – 1,336 – 1,336


for the period – – – – – – – 1,336 – (115,146) (113,810) (18,507) (132,317)

Purchase of shares of

subsidiaries from minority

shareholders – – – (38,997) – – – – – – (38,997) (54,503) (93,500)

At 30 June 2009 (unaudited) 91,199 1,146,528 658,303 (38,997) 30,201 131,289 – 139,737 1,719 (476,442) 1,683,537 342,161 2,025,698


– 145 –

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWSFor the six months ended 30 June 2009




Net cash from operating activities 38,537 117,336

Investing activities

Repayment of loans advanced to

certain companies and individuals,

net of loans advanced 6,535 37,726

Earnest money refunded 10,000 142,300

Investment deposits refunded – 109,200

Purchase of property,

plant and equipment 8 (21,994) (296,162)

Acquisition of subsidiaries 16 (10,568) 3,600

Disposal of subsidiaries 17 – (363)

Other investing cash flows 12,829 276,162

Net cash (used in) from investing activities (3,198) 272,463

Financing activities

Net advance from (repayment of)

loans from related companies 13,872 (47,921)

Repayment of bank loans and other loans (405,209) (22,320)

Repayment of consideration note – (21,545)

Repayment of promissory note (70,000) (16,455)

Purchase of shares of subsidiaries from

minority shareholders (93,500) –

New bank loans and other loans raised 446,489 121,084

Other financing cash flows (40,801) (59,600)

Net cash used in financing activities (149,149) (46,757)

Net (decrease) increase in cash and

cash equivalents (113,810) 343,042

Cash and cash equivalents at beginning of

the period 498,847 199,410

Effect of foreign exchange rate changes 1,670 (1,834)

Cash and cash equivalents at end of the period 386,707 540,618

Analysis of the balances of cash and

cash equivalents

Bank balances and cash 386,534 540,456

Trading cash balances 173 162

386,707 540,618


– 146 –

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTSFor the six months ended 30 June 2009

1. Basis of preparation

The condensed consolidated financial statements of Wing On Travel (Holdings) Limited

(the “Company”) and its subsidiaries (collectively referred to as the “Group”) have been prepared

in accordance with the applicable disclosure requirements of Appendix 16 to the Rules Governing

the Listing of Securities on The Stock Exchange of Hong Kong Limited (the “Listing Rules”) and

with Hong Kong Accounting Standard 34, “Interim Financial Reporting” issued by the Hong Kong

Institute of Certified Public Accountants (“HKICPA”).

In preparing the condensed consolidated financial statements, the directors of the Company

have given careful consideration to the future liquidity and going concern of the Group in light of

the Group’s loss of approximately HK$133,653,000 for the six months ended 30 June 2009 and

net current liabilities of approximately HK$346,179,000 at 30 June 2009. The directors of the

Company are satisfied that the Group will have sufficient financial resources to meet its financial

obligations as they fall due in the foreseeable future, after taking into consideration the completion

of the disposal of the entire issued share capital of a subsidiary for HK$833,000,000 in September

2009 (see Note 20(a)) . Accordingly, the condensed consolidated financial statements have been

prepared on a going concern basis.

2. Principal accounting policies

The condensed consolidated financial statements have been prepared on the historical cost

basis except for certain properties and financial instruments, which are measured at fair value, as

appropriate.

Except as described below, the accounting policies used in the condensed consolidated

financial statements are consistent with those followed in the preparation of the Group’s annual

financial statements for the year ended 31 December 2008.

In the current interim period, the Group has, for the first time, adopted an accounting policy

on acquisition of additional interest in subsidiaries. When the Group increases its interest in an

entity that is already an entity controlled by the Company, it is accounted for as equity transactions.

The carrying amounts of the controlling interests and minority interests are adjusted to reflect the

changes in their relative interests in the subsidiary. Any differences between the amount by which

the minority interests are adjusted and the fair value of the consideration paid are recognised

directly in equity as other reserve.

In the current interim period, the Group has applied, for the first time, a number of new

and revised standards, amendments and interpretations (“new and revised HKFRSs”) issued by the

HKICPA, which are effective for the Group’s financial year beginning on 1 January 2009.


– 147 –

HKAS 1 (Revised 2007) has introduced a number of terminology changes, including

revised titles for the condensed consolidated financial statements, and has resulted in a number

of changes in presentation and disclosure. HKFRS 8 is a disclosure standard that requires the

identification of operating segments to be performed on the same basis as financial information that

is reported internally for the purpose of allocating resources between segments and assessing their

performance. The predecessor standard, HKAS 14 Segment Reporting , required the identification

of two sets of segments (business and geographical) using a risks and returns approach. In the past,

the Group’s primary reporting format was business segments. The application of HKFRS 8 has

not resulted in a redesignation of the Group’s reportable segments as compared with the primary

reportable segments determined in accordance with HKAS 14 (see Note 3) . The adoption of the

new and revised HKFRSs has had no material effect on the reported results and financial position of

the Group for the current or prior accounting periods. Accordingly, no prior period adjustment has

been recognised.

The Group has not early applied new and revised standards, amendments or interpretations

that have been issued but are not yet effective. The adoption of HKFRS 3 (Revised 2008) may

affect the Group’s accounting for business combination for which the acquisition dates are on or

after 1 January 2010. HKAS 27 (Revised 2008) may have other effect on the accounting treatment

for changes in the Group’s ownership interest in a subsidiary.

The directors of the Company anticipate that the application of other new and revised

standards, amendments or interpretations will have no material impact on the results and the

financial position of the Group.

3. Segment information

The Group has adopted HKFRS 8 Operating Segments with effect from 1 January 2009.

HKFRS 8 requires operating segments to be identified on the basis of internal reports about

components of the Group that are regularly reviewed by the chief operating decision maker in

order to allocate resources to segments and to assess their performance. In contrast, the predecessor

standard (HKAS 14, Segment Reporting ) required an entity to identify two sets of segments

(business and geographical) using a risks and returns approach, with the entity’s “system of

internal financial reporting to key management personnel” serving only as the starting point for

the identification of such segments. In the past, the Group’s primary reporting format was business

segments. The application of HKFRS 8 has not resulted in a redesignation of the Group’s reportable

segments as compared with the primary reportable segments determined in accordance with HKAS

14. Nor has the adoption of HKFRS 8 changed the basis of measurement of segment profit or loss.

The Group is currently organised into four operating divisions – travel and related services,

hotel and leisure services, luxury train services, and securities trading. The information reported to

the Group’s chief operating decision maker (i.e. Executive Directors) for the purposes of resource

allocation and assessment of performance is focused on these operating divisions.


– 148 –

The following is an analysis of the Group’s revenue and results, for each of the reportable

segments, for the period under review:

Travel and related

services

Hotel and leisure

services

Luxury train

servicesSecurities


Six months ended 30 June 2009 (unaudited)

TurnoverExternal sales 764,839 118,402 – – – 883,241Inter-segment sales – 1,393 – – (1,393) –

Total 764,839 119,795 – – (1,393) 883,241


ResultsSegment results 18,566 (18,279) (14,003) (4,969) – (18,685)

Interest income 4,490

Finance costs (48,626)Loss on disposal of available-for-sale

investments (39,370)Impairment loss recognised in respect of

available-for-sale investments (4,965)Share of results of associates (26,560)Central administrative costs and

other unallocated corporate expenses (27,939)Increase in fair value of investment properties 31,236Share of results of a jointly controlled entity (3,075)

Loss before taxation (133,494)


– 149 –

Travel and related

services

Hotel and leisure

services

Luxury train

servicesSecurities


Six months ended 30 June 2008 (unaudited)

TurnoverExternal sales 924,189 144,563 – – – 1,068,752Inter-segment sales – 41 – – (41) –

Total 924,189 144,604 – – (41) 1,068,752


ResultsAmount excluding impairment losses

recognised in respect of goodwill 13,021 14,718 (8,514) 28,147 – 47,372Impairment losses recognised in respect of

goodwill (11,305) – – – – (11,305)

Segment results 1,716 14,718 (8,514) 28,147 – 36,067

Interest income 3,852

Increase in fair value of investment properties 306Gain on disposal of subsidiaries 2,729Central administrative costs and

other unallocated corporate expenses (16,733)Finance costs (68,484)Share of results of associates (43,408)Share of results of a jointly controlled entity (4,897)

Loss before taxation (90,568)

Segment result represents the profit earned or loss incurred by each segment without

allocation of central administrative costs and other unallocated corporate expenses, interest

income, finance costs, impairment loss recognised in respect of available-for-sale investments,

loss on disposal of available-for-sale investments, increase in fair value of investment properties,

gain on disposal of subsidiaries, share of results of a jointly controlled entity and share of results

of associates. This is the measure reported to the Group’s chief operating decision maker for the

purposes of resource allocation and performance assessment.


– 150 –

4. Loss before taxation

Six months ended30.6.2009 30.6.2008HK$’000 HK$’000


Loss before taxation has been arrived at after charging:


Depreciation of property, plant and equipment 36,156 32,302

and after crediting:

Interest income 4,490 3,852

5. Taxation expense



Taxation expense comprises:

Current tax:

Hong Kong – (5,953)

Other jurisdiction (451) (131)

Deferred tax:

Current period 292 (1,584)

Attributable to a change

in Hong Kong Profits Tax rate – 4,000

Taxation expense (159) (3,668)

Hong Kong Profits Tax is recognised based on management’s best estimate of the weighted

average annual income tax rate expected for the full financial year. The estimated average annual

tax rate used is 16.5% for both periods under review. People’s Republic of China (“PRC”)

enterprise income tax is calculated at the applicable rates in accordance with the relevant laws and

regulations in the PRC. Taxation arising in other jurisdiction is recognised based on management’s

best estimate of the weighted average annual income tax rate expected for the full financial year.


– 151 –

6. Dividends



Dividends recognised as distribution during

the period:

Ordinary shares:

Final – dividend for 2008 of Nil per share

(2008: Final – dividend for 2007 of HK0.5 cent

per share) – 9,103

The directors do not recommend the payment of an interim dividend.

During the period ended 30 June 2008, scrip dividend alternatives were offered in respect of

the 2007 final dividends. These scrip dividend alternatives were accepted by the shareholders, as

follows:



Dividends:

Cash – 8,540

Share alternative – 563

– 9,103

7. Loss per share

The calculation of the basic and diluted loss per share attributable to the owners of the

Company is based on the following data:



Loss for the purposes of basic and diluted

loss per share (Loss for the period

attributable to owners of the Company) (115,146) (80,435)

Number of shares

Weighted average number of ordinary shares for

the purposes of basic and diluted loss per share 9,119,844,438 3,428,323,402


– 152 –

The calculation of diluted loss per share for the period ended 30 June 2009 has not assumed

the conversion of the Company’s convertible notes and the exercise of the warrants (six months

ended 30.6.2008: has not assumed the conversion of the Company’s convertible notes and exercise

of the share options) as these potential ordinary shares are anti-dilutive during the period.

The weighted average number of ordinary shares for the basic and diluted loss per share for

the period ended 30 June 2008 have been adjusted for the rights issue in July 2008.

8. Movements in property, plant and equipment and investment properties

During the period, the Group spent approximately HK$21,994,000 (HK$296,162,000 for the

six months ended 30.6.2008) on acquisition of property, plant and equipment.

The fair value of the Group’s investment properties were determined by Norton Appraisals

Limited, independent qualified professional valuers not connected with the Group at 30 June

2009. Norton Appraisals Limited is a member of the Hong Kong Institute of Surveyors, and has

appropriate qualifications and recent experiences in the valuation of similar properties in the

relevant locations. The valuation was arrived at by reference to market evidence of transaction

prices for similar properties. The resulting increase in fair value of investment properties of

HK$31,236,000 (HK$306,000 for the six months ended 30.6.2008) has been recognised in the

condensed consolidated statement of comprehensive income.

9. Trade and other receivables

Included in trade and other receivables are trade receivables of approximately

HK$18,299,000 (at 31.12.2008: HK$25,143,000) and the aged analysis of the trade receivables (net

of impairment) at the end of the reporting period is as follows:

At 30.6.2009

At 31.12.2008

HK$’000 HK$’000


0 – 30 days 5,180 9,643

31 – 60 days 2,637 4,128

61 – 90 days 4,368 1,625

Over 90 days 6,114 9,747

18,299 25,143

The Group allows a credit period of 30 to 60 days to customers.

Trade and other receivables at 30 June 2009 included the following:

(a) Other receivables of HK$22,000,000 (at 31.12.2008: HK$44,337,000) being non-

interest bearing advances made to land operators of the Group.


– 153 –

(b) Other receivables in aggregate of HK$50,936,000 (at 31.12.2008: HK$50,815,000)

relating to the balance of consideration receivables from the disposal of 廣州天俠商旅服務有限公司 and the online booking exchange platform business. These receivables

are secured by equity securities listed in Singapore and OTC Bulletin Board in the

United States of America, bearing interest at 10% per annum and due on 31 December

2009.

(c) Other receivables of HK$23,011,000 (at 31.12.2008: HK$17,871,000) being non-

interest bearing advances which are secured by the right in a property located in the

PRC. The amount is repayable on demand.

10. Trade and other payables

Included in trade and other payables are trade payables of approximately HK$163,795,000

(at 31.12.2008: HK$147,301,000) and the aged analysis of the trade payables at the end of the

reporting period is as follows:

At 30.6.2009

At 31.12.2008

HK$’000 HK$’000


0 – 30 days 50,522 75,949

31 – 60 days 32,205 30,586

61 – 90 days 38,145 20,829

Over 90 days 42,923 19,937

163,795 147,301

11. Provision for loss contingencies

At 30.6.2009

At 31.12.2008

HK$’000 HK$’000


At the beginning of the period 17,000 –

Provision for the period – 17,000

Utilisation of provision (2,458) –

At the end of the period 14,542 17,000

Provision for loss contingencies represents management’s best estimate of the Group’s

liability relating to the claims made by the Group’s existing and ex-employees on calculating tour

escort’s holiday compensation allowance, and is estimated based on information from the Group’s

legal counsels, actual settlement for some of the claims, and the estimated number of successful

claimants.


– 154 –

12. Borrowings

During the period, the Group obtained new bank and other loans amounting to HK$446

million (HK$121 million for the six months ended 30.6.2008). The loans carry interest at market

rates ranging from 1.8% to 20.0% per annum and are repayable in instalments over a period of 1 to

3 years. The proceeds were used for working capital purposes.

13. Convertible notes

The movement of the liability component of the convertible notes for the period is set out

below:

At 30.6.2009

At 31.12.2008

HK$’000 HK$’000


Carrying amount at the beginning of the period 593,235 554,215

Interest charge 27,438 51,866

Interest paid (6,347) (12,846)

Carrying amount at the end of the period 614,326 593,235

14. Share capital

Numberof shares

Sharecapital

HK$’000

Authorised

Shares of HK$0.10 each at 1 January 2008 and

30 June 2008 15,000,000,000 1,500,000

Subdivision of shares 135,000,000,000 –

Shares of HK$0.01 each at 1 January 2009 and

30 June 2009 150,000,000,000 1,500,000

Issued and fully paid

Shares of HK$0.10 each at 1 January 2008 1,820,758,520 182,076

Issue of shares on scrip dividend 3,210,227 321

Shares of HK$0.10 each at 30 June 2008 1,823,968,747 182,397

Reduction in share capital – (164,157)

Issue of shares on subscription of rights issue 7,295,874,988 72,959

Issue of shares on exercise of warrants 200 –

Shares of HK$0.01 each at 31 December 2008 and

1 January 2009 9,119,843,935 91,199

Issue of shares on exercise of warrants 1,000 –

Shares of HK$0.01 each at 30 June 2009 9,119,844,935 91,199


– 155 –

During the period ended 30 June 2008, scrip dividend alternatives were offered in respect of

the 2007 final dividends.

During the period ended 30 June 2009, 1,000 ordinary shares of HK$0.01 each were issued

on exercise of warrants by the holders.

15. Commitments

At 30.6.2009

At 31.12.2008

HK$’000 HK$’000


Contracted for but not provided in

the condensed consolidated financial statements

in respect of

Investment in a jointly controlled entity 36,051 37,687

Purchase of property, plant and equipment 342,258 463,269

378,309 500,956

16. Acquisition of subsidiaries

Assets acquisition:

(a) On 8 May 2009, the Group, through a wholly-owned subsidiary, acquired the

entire issued share capital of Sky Victory Resources Limited (“Sky Victory”) for a

consideration of HK$35,000,000 and incurred transaction costs of HK$568,000. Sky

Victory is an investment holding company whose subsidiary will be engaged in hotel

operation in the PRC. This acquisition has been accounted for as acquisition of assets

and liabilities as the subsidiary acquired does not constitute a business.


– 156 –


HK$’000

Property, plant and equipment 8,374

Intangible asset 28,329

Other receivables 1,476



Satisfied by:

Deposit paid in prior period 25,000

Cash 10,000

Expenses incurred for the acquisition 568

35,568



Expenses incurred for the acquisition 568

10,568

Intangible asset represents a hotel operating agreement that entitles the subsidiary of

Sky Victory to manage and operate a hotel exclusively in the PRC for a period of 15

years.

(b) In January 2008, the Group acquired 100% interest in More Star Limited (“More

Star”) for a consideration of approximately HK$20,000,000. More Star is an

investment holding company whose subsidiary is engaged in property holding in Hong

Kong. The acquisition has been accounted for as acquisition of assets as the subsidiary

acquired does not constitute a business. The assets acquired in this transaction were as

follows:

HK$’000


Other receivables 12


Assets acquired and cash consideration 20,000

Satisfied by:

Consideration paid in prior period 20,000

Net cash inflow arising on acquisition:

Bank balances and cash acquired 3,600


– 157 –

17. Disposal of subsidiaries

The Group disposed of its 100% interest in 廣州天俠商旅服務有限公司 and its online

booking exchange platform business for a total consideration of approximately HK$74,000,000 in

January 2008. The net assets at the date of disposal were as follows:

31.1.2008HK$’000




Satisfied by:

Deposit received in 2007 3,500


74,000

Cash outflow arising on disposal:

Bank balances and cash disposed of (363)

The impact of 廣州天俠商旅服務有限公司 and the Group’s online booking exchange

platform business on the Group’s result and cash flow in the prior period was insignificant. A gain

of HK$2.7 million was arisen on such disposal.

18. Major non-cash transaction

During the period, the Group subscribed shares of and reimbursed expenses in associates

in proportion to its shareholding by the capitalisation in aggregate of HK$72,810,000 (six months

ended 30.6.2008: Nil) of the amounts due from associates account.


– 158 –

19. Related party transactions

The following is a summary of significant related party transactions carried out during the

period:


Nature of transactions Name of company (unaudited) (unaudited)

Air ticketing and travel service

income received and receivable by

the Group


its subsidiaries (b) 1,506 1,475


and its subsidiaries (a) 198 765


its subsidiaries (a) 325 382

See Corporation Limited (a) 214 –

PSC Corporation Limited (a) – 101

ITC Corporation Limited and

its subsidiaries (b) 159 210

2,402 2,933

Interest paid and payable on

convertible notes

China Enterprises Limited (b) 625 628

PSC Corporation Limited (a) 213 –


and its subsidiaries (a) 446 –

ITC Corporation Limited and

its subsidiaries (b) 640 –

Intraco Limited (a) 142 –

2,066 628

Loan interest paid and payable

by the Group


and its subsidiaries (a) – 1,934

ITC Management Limited (b) 28 685


its subsidiaries (b) 9,322 9,949

TIL Capital Corporation (c) 6,788 2,181

TZG Holding Limited (c) 3,909 966

20,047 15,715


– 159 –

Staff secondment fee paid and

payable by the Group

Mass Success International

Limited (a) – 1,500

Website maintenance service fees

received and receivable by

the Group



Travoo Asia Limited (d) 608 608

635 626

Property rental and management fee

received and receivable by

the Group



271 254

Property rental and management fee

paid and payable by the Group

Travoo Asia Limited (d) 121 330

Tour costs paid and payable

by the Group

Ananda Travel Services

(Aust.) Pty Ltd. (d) 17,160 17,824

Wing On International

Travel Service Co. Ltd.,

Guangdong (d) 1,904 1,838

19,064 19,662

Design and construction fees paid

and payable by the Group

Paul Y. Engineering Group

Limited (b) 9,898 –

Project management consulting fees

paid and payable by the Group

Paul Y. Engineering Group

Limited (b) 900 –

The relationship between the above related parties and the Company are as follow:

(a) Certain directors of the Company are also directors of and have beneficial interests in

these companies;

(b) The above companies or their holding companies have beneficial interest in the

Company;


Nature of transactions Name of company (unaudited) (unaudited)


– 160 –

(c) These companies are minority shareholders of subsidiaries of the Company; and

(d) The above companies are associates of the Group.

The amounts due from/to associates, related companies and minority shareholders of

subsidiaries as included in the condensed consolidated statement of financial position on pages 3

and 4 and are unsecured, interest free and repayable on demand.

During the six months ended 30 June 2009, the Company also entered into an agency

arrangement with a related company to handle at its instructions and on its behalf, matters relating

to its potential projects in the PRC for a fee to be finalised and agreed upon.

Compensation of key management personnel

The remuneration of key management personnel, which are the directors of the

Company, during the period was as follows:



Short-term benefits 69 86

20. Events after the end of the interim reporting period

Other than disclosed elsewhere in the condensed consolidated financial statements, the

following events occurred subsequent to 30 June 2009:

(a) On 1 August 2009, Rosedale Hotel Group Limited, a non wholly-owned subsidiary of

the Company, entered into an agreement with an independent third party incorporated

in the British Virgin Islands, in relation to the disposal of the entire issued share

capital of a subsidiary, Yarra Group Limited (“Yarra”), at an aggregate consideration

of HK$833,000,000 (subject to adjustment).

Yarra is an investment holding company and is the legal and beneficial owner of the

entire equity interest in Hey Wealth Limited, which is in turn the legal and beneficial

owner of the property known as “Rosedale on the Park” (the “Property”), a 30-storey

4-star hotel located at No. 8 Shelter Street, Causeway Bay, Hong Kong.

The disposal transaction has completed at the date of this report and the secured

bank borrowing relating to the Property of HK$419,000,000 has also been repaid.

Pursuant to the agreement, Rosedale Park Limited, a non wholly-owned subsidiary of

the Company, has entered into a lease agreement with Hey Wealth Limited to lease

back the Property for its current hotel operations at a monthly rental of approximately

HK$4,500,000 exclusive of rates, government rent and other payments and outgoings

for a term of five years.


– 161 –

(b) On 14 July 2009, the Company and Emperor Securities Limited (the “Placing Agent”)

entered into (i) a general mandate placing agreement in relation to a best endeavour

placing of a maximum of 1,800,000,000 shares of the Company of HK$0.01 each at a

price of HK$0.035 per share; and (ii) a specific mandate placing agreement in relation

to a best endeavour placing of not less than 20,000,000,000 shares but not more than

30,000,000,000 shares at a price of HK$0.035 per share.

The best endeavour placing of the general mandate was completed on 4 August 2009,

under which a total of 1,800,000,000 new shares were issued by the Company.

On 24 September 2009, the Company and the Placing Agent have agreed in writing to

extend the long stop date from 30 September 2009 to 15 October 2009 (or such other

date as may be agreed by both the Company and the Placing Agent) to allow time for

the parties to procure fulfillment of the conditions.

(c) On 24 July 2009, the Company announced that it proposed to make the repurchase

offer to repurchase the convertible notes (the “Notes”) with an aggregate outstanding

principal amount of HK$640,000,000. The conversion price of the Notes was reduced

from HK$0.79 per share to HK$0.339 per share as a result of the rights issue of shares

of the Company in July 2008. The purchase price is to be satisfied by the issue of the

new shares of the Company of HK$0.01 each (the “Offer Consideration Shares”) at

HK$0.035 per share, credited as fully paid.

The acceptance period under the repurchase offer ended on 21 August 2009 and valid

acceptances in respect of the Notes in aggregate principal amount of HK$412,800,000

were received, in respect of which the Company will issue an aggregate of

11,794,285,709 Offer Consideration Shares upon completion of the repurchase offer.

The repurchase offer will be conditional upon:

(i) the independent shareholders (the shareholders of the Company other than Asia

Will Limited which is a wholly-owned subsidiary of ITC Corporation Limited,

and China Enterprises Limited which is an associate of Hanny Holdings

Limited) approving the issue of the Offer Consideration Shares as required by

the Listing Rules;

(ii) the Listing Committee of the Stock Exchange of Hong Kong Limited granting

the listing of, and permission to deal in, the Offer Consideration Shares; and

(iii) completion of the placing of shares as mentioned in Note 20(b).

If the conditions precedent above are not satisfied on or before 31 October 2009, the

repurchase offer will lapse.


– 162 –

4. INDEBTEDNESS

At the close of business on 30 November 2009, being the latest practicable date for the purpose of

this indebtedness statement prior to the printing of this circular, the Group had outstanding borrowings

of approximately HK$893.9 million comprising secured borrowings of approximately HK$52.0 million

and unsecured borrowings of approximately HK$841.9 million. The secured borrowings of approximately

HK$52.0 million included bank borrowings of approximately HK$41.5 million, bank overdrafts of

approximately HK$4.2 million, other borrowings of approximately HK$5.8 million and obligations under

finance leases of approximately HK$0.5 million. The unsecured borrowings of approximately HK$841.9

million included other borrowings of approximately HK$10.0 million, loans from related companies of

approximately HK$111.4 million, amounts due to minority shareholders of subsidiaries of approximately

HK$88.4 million and carrying amount of liability component of the Notes of approximately HK$632.1

million.

The Directors consider that the claims and alleged claims set out in the section headed “Litigations”

in Appendix III to this circular do not constitute any material contingent liability of the Company.

Save as aforesaid or as otherwise disclosed herein, and apart from intra-group liabilities, the

Group did not have outstanding at the close of business on 30 November 2009, any loan capital issued

and outstanding or agreed to be issued, bank overdrafts, loans or other similar indebtedness, liabilities

under acceptances or acceptable credits, debentures, mortgages, charges, hire purchases commitments,

guarantees or other material contingent liabilities.

5. PLEDGE OF ASSETS

As at the close of business on 30 November 2009, (i) the secured bank borrowings of approximately

HK$41.5 million were pledged with a hotel development site located in Hong Kong at an aggregate

carrying value of approximately HK$234.3 million as at 30 November 2009; (ii) the other borrowings

of approximately HK$5.8 million were pledged by the securities with an aggregate carrying value of

approximately HK$10.3 million as at 30 November 2009 held for trading purpose under respective

securities accounts; and (iii) the obligations under finance leases of approximately HK$0.5 million were

secured by the office equipments with an aggregate carrying value of approximately HK$0.7 million as at

30 November 2009 held under the respective finance leases.

6. WORKING CAPITAL

The Directors are satisfied after due and careful enquiry that taking into account the present

internal financial resources of the Group, the banking facilities presently available and in the absence of

unforeseen circumstances, the Group has sufficient working capital for its present requirements, that is,

for at least twelve months from the date of this circular.


– 163 –

7. FINANCIAL AND TRADING PROSPECTS

Business review

Travel and Related Services

Travel and related services of the Group comprise mainly outbound tours, air ticketing and

air/hotel packages. The performance of this segment in 2008 was severely affected by the disastrous

earthquake happened in Sichuan Province in May 2008, global financial tsunami and the political

confrontation in Thailand.

Hotel and Leisure Services

The Group’s hotel business comprises the “Rosedale” 4-star rated business hotels and the

“Square Inn” budget hotels chain. The performance of this segment in 2008 was greatly affected

by the impairment loss in the fair value of the Group’s hotel properties in the PRC following a

downturn of the property market consequent to the financial tsunami especially during the last

quarter of 2008 and the intangible assets attributable to the Group’s hotel operation in Macau

following the scale down of the gaming business and tightened regulations in granting entry visa for

Chinese Nationals to Macau during the year.

Luxury Train Services

The Group has 72% controlling interests in Tangula Group Limited (“Tangula”) and its

subsidiary has the right to operate two routes on the Qinghai-Tibet Railway from Beijing to each of

Lhasa and Lijiang. In view of the current recession of both Europe and the United States of America

and the prolonged political and social instability in Lhasa, commencement of the business has been

further postponed to the first quarter of 2010. Significant loss recorded in the year of 2008 for this

segment was resulted from the provision of impairment loss on intangible assets and construction

costs of the train compartments which amounted in aggregate to approximately HK$400 million

and was determined based on the revised budget on this luxury train business and taking into

consideration the risk associated with the current political situation in Tibet and the worldwide

economy.

Prospects

According to the prediction made by an authoritative PRC outbound research specialist

during the 5th International Forum on Chinese Outbound Tourism held in May 2009 in Beijing,

the number of outbound travellers of 2009 shall increase by 6% and a further 10% in 2010

notwithstanding the impact from the financial tsunami. In Asia, despite that Japan and South Korea

shall continuously be the hottest destinations for the Chinese citizens, Mainland tourists to Taiwan

shall realize a sharp increase in 2009 following the inauguration of the “Three Direct Links” in

December 2008. It is expected that the total PRC outbound travellers to Asia destinations shall

reach 44 million in 2009. On the inbound aspect, the PRC tourism industry has also proved its

capability to resist the impact of the financial downturn and the human swine flu. The number

of travellers to the Mainland reached approximately 66 million during the first half of 2009,

represented only a small decrease of 4.4% from the corresponding period in 2008. In August 2009,

PRC inbound travellers even attained approximately 11 million, an increase of 3.1% against that of

August 2008.


– 164 –

The Group has already equipped itself to get its share in this flourishing PRC market.

Following the opening of the Square Inn branded hotels located at Mount Dapi in August 2009 and

the planned opening the hotel in Macau in the second quarter of 2010; the grant of the international

agent licence to its subsidiary in the Sichuan Province; the upcoming Tangula luxury train services

and its well established Rosedale hotel chain, the Group is confident that its PRC section shall be

fruitful in the coming year and shall provide enormous contributions to the Group other than its

traditional Hong Kong based leading outbound travel business.

The Company shall continue to look for further quality investment opportunities to enhance

its shareholders’ wealth.

8. MATERIAL ADVERSE CHANGE

As at the Latest Practicable Date, the Directors were not aware of any material adverse change

in the financial or trading position of the Group since 31 December 2008, the date to which the latest

published audited consolidated financial statements of the Group were made up.

APPENDIX II UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE GROUP

– 165 –

(A) UNAUDITED PRO FORMA STATEMENT OF ADJUSTED CONSOLIDATED NET TANGIBLE ASSETS OF THE GROUP

Introduction

The unaudited pro forma statement of adjusted consolidated net tangible assets of the Group has been prepared by the directors of the Company in accordance with Paragraph 4.29 of The Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited to illustrate the effect of the proposed rights issue on the basis of five rights shares for every share held on the record date (“Rights Issue”) on the unaudited consolidated net tangible assets of the Group as if the Rights Issue had taken place on 30 June 2009.

The unaudited pro forma statement of adjusted consolidated net tangible assets of the Group is prepared based on the consolidated net assets of the Group as at 30 June 2009, as extracted from the published interim report of the Group for the six months ended 30 June 2009 set out in Appendix 1 to this Circular, after incorporating the unaudited pro forma adjustments described in the accompanying notes.

The unaudited pro forma statement of adjusted consolidated net tangible assets of the Group has been prepared for illustrative purposes only and, because of its hypothetical nature, it may not give a true picture of the consolidated net tangible assets of the Group following the Rights Issue.

Consolidated net assets of

the Group attributable to the owners of the Company

as at 30 June 2009

Other intangible

assets

Unaudited consolidated net tangible

assets of the Group

attributable to the owners of the Company as at 30 June

2009

Estimated net proceeds from

the Rights Issue

Convertible exchangeable

notesExercise

of warrants

Unaudited pro forma

adjusted consolidated net

tangible assets of the Group attributable

to the owners holders of the

Company after Completion of

the Rights IssueHK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000

(Note 1) (Note 2) (Note 3) (Note 6) (Note 6)

Minimum number of right shares 1,683,537 (289,144) 1,394,393 398,804 N/A N/A 1,793,197

Maximum number of right shares 1,683,537 (289,144) 1,394,393 535,215 614,326 165,981 2,709,915

Unaudited consolidated net tangible

assets per share attributable to

the owners of the Company as

at 30 June 2009 after Completion

of the Capital Reorganisation

but prior to the Completion of

the Rights Issue (Note 4) HK$3.06

Unaudited pro forma adjusted

consolidated net tangible


the owners of the Company after

Completion of the Rights Issue

(Based on minimum number of

right shares to be issued) (Note 5) HK$0.56

Unaudited pro forma adjusted

consolidated net tangible


the owners of the Company after

Completion of the Rights Issue

(Based on maximum number of

right shares to be issued) (Note 6) HK$0.63


– 166 –

Notes:

(1) The consolidated net assets of the Group attributable to the owners of the Company as at 30 June 2009 is extracted from the

published interim report of the Company for the six months ended 30 June 2009 as set out in Appendix I to this Circular.

(2) Other intangible assets of HK$289,144,000 is extracted from the published interim report of the Company for the six months

ended 30 June 2009 as set out in Appendix I to this Circular.

(3) The estimated net proceeds from the Rights Issue of the minimum number of rights shares of approximately HK$398.8

million are based on 2,729,961,245 rights shares which calculated on the basis of five rights shares for every share adjusted

for the completion of the Capital Reorganisation to consolidate every 20 existing issued shares to 1 consolidated share (the

“Adjusted Shares”) of 455,992,247 Adjusted Shares in issue as at 30 June 2009, 90,000,000 Adjusted Shares attributable

to placing as mentioned in note 7 below to be issued at the subscription price of HK$0.15 per rights share, 2 Adjusted

Shares issued on 23 December 2009 upon exercise of warrants by a warrant holder and after deduction of estimated related

expenses of approximately HK$10.7 million.

The estimated net proceeds from the Rights Issue of the maximum number of rights shares of approximately HK$535.2

million are based on 3,657,929,510 rights shares which calculated on the basis of five rights shares for every Adjusted

Shares of 455,992,246 Adjusted Shares in issue as at 30 June 2009, 90,000,000 Adjusted Shares attributable to placing as

mentioned in note 7 below, 2 Adjusted Shares issued on 23 December 2009 upon exercise of warrants by a warrant holder,

94,395,280 Adjusted Shares issued upon full conversion of the outstanding convertible exchange notes and 91,198,374

Adjusted Shares to be issued upon full exercise of the outstanding warrants to be issued at the subscription price of HK$0.15

per rights share and after deduction of estimated related expenses of approximately HK$13.5 million.

(4) The number of shares used for the calculation of unaudited consolidated net tangible assets per share attributable to the

owners of the Company is based on 455,992,247 Adjusted Shares which represent 9,119,844,935 shares issued as at 30

June 2009 and adjusted for the completion of the Capital Reorganisation to consolidate every 20 existing issued shares to 1

consolidated share and prior to the completion of the Rights Issue.

(5) The number of shares used for the calculation of unaudited pro forma adjusted consolidated net tangible assets per share

attributable to the owners of the Company after the completion of the Rights Issue is calculated based on 3,185,953,492

Adjusted Shares in issue upon completion of the Rights Issue, which represents 455,992,247 Adjusted Shares in issue as at

30 June 2009 and 2,729,961,245 shares to be issued pursuant to the Rights issue, but has not taken into account the effects

of any shares which are to be issued upon full conversion of the outstanding convertible exchangeable notes issued by the

Company and the shares to be issued to warrant holders upon full exercise of the outstanding warrants by the Company.

(6) The number of shares used for the calculation of unaudited pro forma adjusted consolidated net tangible assets per share

attributable to the owners of the Company after the completion of the Rights Issue is calculated based on 4,299,515,413

Adjusted Shares in issue upon completion of the Rights Issue, which represents the existing 455,992,247 Adjusted Shares

in issue as at 30 June 2009, 3,657,929,515 shares to be issued pursuant to the Rights Issue, 2 Adjusted Shares issued on 23

December 2009 upon exercise of warrants by a warrant holder, 94,395,280 Adjusted Shares to be issued upon full conversion

of the outstanding convertible exchange notes issued by the Company and 91,198,374 Adjusted Shares upon full exercise of

the outstanding warrants issued by the Company.

The pro forma consolidated net tangible assets of the Group has been adjusted for (i) the liability component of the

convertible notes amounting to approximately HK$614.3 million as at 30 June 2009; and (ii) the proceeds of approximately

HK$166.0 million upon full exercise of the outstanding warrants at the subscription price of HK$1.82 (as adjusted for

Capital Reorganisation) per Adjusted Share.

(7) No adjustment has been made to reflect any trading result or other transaction of the Group entered into subsequent to 30

June 2009.

The number of Adjusted Shares in issue has been increased by 90,000,002 shares from 455,992,247 as at 30 June 2009 after

completion of a share placing to 545,992,249 as at the Latest Practicable Date.

The increase in the number of the issued shares represents the issue of 1,800,000,000 shares or 90,000,000 Adjusted Shares

pursuant to a share placing as announced by the Company on 4 August 2009 to raise a net proceeds of approximately

HK$61.0 million for general working capital of the Group and 2 Adjusted Shares issued on 23 December 2009 upon exercise

of warrants by a warrant holder. However, for the purpose of calculating the relevant figures of the net tangible assets per

share in notes (4), (5) and (6) above, the figures are derived from the latest published financial statements at 30 June 2009

and such increase in the number of issued share after this date has not been included.


– 167 –

(B) ACCOUNTANTS’ REPORT ON UNAUDITED PRO FORMA FINANCIAL INFORMATION

TO THE DIRECTORS OF WING ON TRAVEL (HOLDINGS) LIMITED

We report on the unaudited pro forma statement of adjusted consolidated net tangible assets

(the “Unaudited Pro Forma Financial Information”) of Wing On Travel (Holdings) Limited (the

“Company”) and its subsidiaries (hereinafter collectively referred to as the “Group”), set out in

Section A of Appendix II to the circular of the Company dated 8 January 2010 (the “Circular”). The

Unaudited Pro Forma Financial Information has been prepared by the directors of the Company

for illustrative purposes only, to provide information about how the proposed rights issue on the

basis of five rights shares for every Adjusted Shares (as defined in the Circular) held on the Record

Date (as defined in the Circular) at the subscription price of HK$0.15 per rights share, might have

affected the financial information presented. The basis of preparation of the Unaudited Pro Forma

Financial Information is set out in the introduction and notes to the Unaudited Pro Forma Financial

Information as set out in Section A of this Appendix.

Respective responsibilities of directors of the Company and reporting accountants

It is the responsibility solely of the directors of the Company to prepare the Unaudited Pro

Forma Financial Information in accordance with paragraph 29 of Chapter 4 of the Rules Governing

the Listing of Securities on The Stock Exchange of Hong Kong Limited (the “Listing Rules”) and

with reference to Accounting Guideline 7 “Preparation of Pro Forma Financial Information for

Inclusion in Investment Circulars issued by the Hong Kong Institute of Certified Public Accountants

(the “HKICPA”).

It is our responsibility to form an opinion, as required by paragraph 29(7) of Chapter 4 of

the Listing Rules, on the Unaudited Pro Forma Financial Information and to report our opinion to

you. We do not accept any responsibility for any reports previously given by us on any financial

information used in the compilation of the Unaudited Pro Forma Financial Information beyond that

owed to those to whom those reports were addressed by us at the dates of their issue.

Basis of opinion

We conducted our engagement in accordance with Hong Kong Standard on Investment

Circular Reporting Engagements 300 “Accountants’ Reports on Pro Forma Financial Information

in Investment Circulars” issued by the HKICPA. Our work consisted primarily of comparing the

unadjusted financial information with source documents, considering the evidence supporting the

adjustments and discussing the Unaudited Pro Forma Financial Information with the directors of

the Company. This engagement did not involve independent examination of any of the underlying

financial information.


– 168 –

We planned and performed our work so as to obtain the information and explanations we

considered necessary in order to provide us with sufficient evidence to give reasonable assurance

that the Unaudited Pro Forma Financial Information has been properly compiled by the directors

of the Company on the basis stated, that such basis is consistent with the accounting policies of

the Group and that the adjustments are appropriate for the purpose of the Unaudited Pro Forma

Financial Information as disclosed pursuant to paragraph 29(1) of Chapter 4 of the Listing Rules.

The Unaudited Pro Forma Financial Information is for illustrative purpose only, based on the

judgments and assumptions of the directors of the Company, and, because of its hypothetical nature,

does not provide any assurance or indication that any event will take place in future and may not be

indicative of the financial position of the Group as at 30 June 2009 or any future date.

Opinion

In our opinion:

a) the Unaudited Pro Forma Financial Information has been properly compiled by the

directors of the Company on the basis stated;

b) such basis is consistent with the accounting policies of the Group; and

c) the adjustments are appropriate for the purposes of the Unaudited Pro Forma Financial

Information as disclosed pursuant to paragraph 29(1) of Chapter 4 of the Listing

Rules.

Deloitte Touche TohmatsuCertified Public Accountants

Hong Kong

8 January 2010

APPENDIX III GENERAL INFORMATION

– 169 –

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, having made all

reasonable enquiries, confirm that to the best of their knowledge and belief, there are no other facts the

omission of which would make any statement in this circular misleading.

2. SHARE CAPITAL

Authorised and issued share capital

The authorised and issued share capital of the Company as at the Latest Practicable Date

were (assuming the Capital Reorganisation had become effective on the Latest Practicable Date),

and immediately following completion of the Rights Issue will be, as follows:

Authorised: HK$

150,000,000,000 Adjusted Shares 1,500,000,000.00

Issued and fully paid:

545,992,249 Adjusted Shares as at the Latest Practicable

Date 5,459,922.49

94,395,280 Adjusted Shares to be issued upon the exercise

of the outstanding Notes 943,952.80

91,198,373 Adjusted Shares to be issued upon the exercise

of the outstanding Warrants 911,983.73

Not less than

2,729,961,245

but not more than

3,657,929,510

Rights Shares to be issued pursuant to

the Rights Issue

Not less than

27,299,612.45

but not more than

36,579,295.10

Not less than

3,275,953,494

but not more than

4,389,515,412

Not less than

32,759,534.94

but not more than

43,895,154.12

All of the Shares in issue and the Adjusted Shares to be issued rank and will rank pari passu

in all respects with each other, including, in particular, as to dividends, voting rights and return of

capital. The Rights Shares to be issued are or will be listed on the Stock Exchange.

No part of the share capital or any other securities of the Company is listed or dealt on/in

any stock exchange other than the Stock Exchange and no application is being made or is currently

proposed or sought for the Shares, the Adjusted Shares, the Rights Shares or any other securities of

the Company to be listed or dealt on/in any other stock exchange.


– 170 –

Dealings in the Shares and the Adjusted Shares may be settled through CCASS and you

should consult your stockbroker or other registered dealer of securities, bank manager, solicitors,

professional accountant or other professional adviser for details of these settlement arrangements

and how such arrangements may affect your rights and interest.

As at the Latest Practicable Date, there are outstanding Notes with principal amount of

HK$640 million convertible into 1,887,905,604 Existing Shares upon exercise in full at the

conversion price of HK$0.339 per Existing Share and outstanding Warrants granted which entitle

the holders thereof to subscribe for 1,823,967,497 Existing Shares in full at the subscription price

of HK$0.091 per Existing Share.

Save as mentioned above, the Company has no other outstanding convertible securities,

options or warrants in issue which confer any right to subscribe for, convert or exchange into the

Shares as at the Latest Practicable Date.

There is no arrangement under which future dividends are/will be waived or agreed to be

waived.

3. DISCLOSURE OF INTERESTS

(a) Interests of Directors or chief executive of the Company

As at the Latest Practicable Date, the interests and short positions of the Directors or chief

executive of the Company in the shares, underlying shares or debentures of the Company or any

of its associated corporations (within the meaning of Part XV of the SFO), which were required

(i) to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV

of the SFO (including interests and short positions which they are taken or deemed to have under

such provisions of the SFO); or (ii) pursuant to section 352 of the SFO, to be entered in the register

referred to therein; or (iii) pursuant to the Model Code for Securities Transactions by Directors of

Listed Issuers set out in Appendix 10 to the Listing Rules adopted by the Company to be notified to

the Company and the Stock Exchange, were as follows:

Interests in the Shares

Name of DirectorLong position/Short position Capacity

Natureof interest

Number ofShares held

Approximate percentage

of the issued share

capital of the Company

Mr. Kwok Ka Lap, Alva Long position Beneficial

owner

Personal

interest

150,000 0.00%

Save as disclosed above, as at the Latest Practicable Date, none of the Directors and chief

executive of the Company had any interest or short position in the shares, underlying shares or

debentures of the Company or any of its associated corporations (within the meaning of Part XV of

the SFO), which were required (i) to be notified to the Company and the Stock Exchange pursuant

to Divisions 7 and 8 of Part XV of the SFO (including interests and short positions which they

are taken or deemed to have under such provisions of the SFO); or (ii) pursuant to section 352 of

the SFO, to be entered in the register referred to therein; or (iii) pursuant to the Model Code for

Securities Transactions by Directors of Listed Issuers set out in Appendix 10 to the Listing Rules

adopted by the Company to be notified to the Company and the Stock Exchange.


– 171 –

(b) Interests of Shareholders discloseable pursuant to the SFO

As at the Latest Practicable Date, so far as was known to the Directors or chief executive of

the Company, the following persons (other than a Director or chief executive of the Company) had

an interest or short position in the Shares and underlying Shares which would fall to be disclosed to

the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO:

(i) Interests in the Shares

Name of ShareholderLong position/Short position Capacity

Natureof interest

Number ofAdjusted

Shares held


of the issued share


(Note 5)

(a) Dr. Chan Kwok Keung,

Charles (Note 2)

Long position Beneficial owner Personal interest 1,132,450 0.03%

Long position Interest of

controlled

corporation

Corporate interest 468,336,000 14.30%

Ms. Ng Yuen Lan, Macy

(Note 2)


spouse

Spouse interest 469,468,450 14.33%

ITC (Note 2) Long position Interest of

controlled

corporation


ITC Investment

Holdings Limited

(Note 2)


controlled

corporation


Leaptop Investments

Limited (Note 2)


controlled

corporation


AWL (Note 2) Long position Beneficial

owner


(b) CEL (Note 3) Long position Interest of

controlled

corporation


Long position Beneficial

owner


Cosmos Regent Ltd.

(Note 3)


owner



– 172 –


Natureof interest

Number ofAdjusted

Shares held


of the issued share


(Note 5)

(c) Dr. Yeung Sau Shing,

Albert (Note 4)

Long position Founder of

a trust

Personal interest 2,714,004,335 82.85%

Ms. Luk Siu Man, Semon

(Note 4)


spouse

Spouse interest 2,714,004,335 82.85%

STC International

Limited (Note 4)


controlled

corporation

Corporate interest 2,714,004,335 82.85%

Million Way Holdings

Limited (Note 4)


controlled

corporation


Emperor Capital Group

Limited (Note 4)


controlled

corporation


Emperor (Note 4) Long position Beneficial

owner


(ii) Interests in the underlying Shares under equity derivatives


Natureof interest

Number of underlying

Shares (under equity

derivatives of the Company)


of the issued share


(Note 5)

(a) Mr. Li Ka-Shing

(Note 1)

Long position Founder of

discretionary

trusts and

interest of

controlled

corporation

Corporate and

other interests

589,970,501 18.01%

Li Ka-Shing Unity Trustee

Corporation Limited

(as trustee of The

Li Ka-Shing Unity

Discretionary Trust)

(Note 1)

Long position Trustee and

beneficiary of

a trust

Other interest 589,970,501 18.01%


– 173 –


Natureof interest





of the issued share


(Note 5)

Li Ka-Shing Unity

Trustcorp Limited

(as trustee of another

discretionary trust)

(Note 1)

Long position Trustee and

beneficiary of

a trust

Other interest 589,970,501 18.01%

Li Ka-Shing Unity Trustee

Company Limited

(as trustee of The

Li Ka-Shing Unity Trust)

(Note 1)

Long position Trustee Other interest 589,970,501 18.01%

Cheung Kong (Holdings)

Limited (“CKH”)

(Note 1)


controlled

corporation


Hutchison Whampoa

Limited (“HWL”)

(Note 1)


controlled

corporation


Hutchison International

Limited (“HIL”)

(Note 1)


owner


(b) Dr. Chan Kwok Keung,

Charles (Note 2)

Long position Beneficial owner Personal interest 226,490 0.01%


controlled

corporation


Ms. Ng Yuen Lan, Macy

(Note 2)


spouse

Spouse interest 32,362,447 0.99%

ITC (Note 2) Long position Interest of

controlled

corporation


ITC Investment Holdings

Limited (Note 2)


controlled

corporation



– 174 –


Natureof interest





of the issued share


(Note 5)

Leaptop Investments

Limited (Note 2)


controlled

corporation


AWL (Note 2) Long position Beneficial

owner


(c) CEL (Note 3) Long position Interest of

controlled

corporation



owner


Cosmos Regent Ltd.

(Note 3)


owner


Notes:

(1) Li Ka-Shing Unity Holdings Limited, of which each of Mr. Li Ka-Shing, Mr. Li Tzar Kuoi, Victor

and Mr. Li Tzar Kai, Richard is interested in one-third of the entire issued share capital, owns

the entire issued share capital of Li Ka-Shing Unity Trustee Company Limited. Li Ka-Shing

Unity Trustee Company Limited as trustee of The Li Ka-Shing Unity Trust, together with certain

companies which Li Ka-Shing Unity Trustee Company Limited as trustee of The Li Ka-Shing Unity

Trust is entitled to exercise or control the exercise of more than one-third of the voting power at

their general meetings, hold more than one-third of the issued share capital of CKH.

In addition, Li Ka-Shing Unity Holdings Limited also owns the entire issued share capital of

Li Ka-Shing Unity Trustee Corporation Limited (“TDT1”) as trustee of The Li Ka-Shing Unity

Discretionary Trust (“DT1”) and Li Ka-Shing Unity Trustcorp Limited (“TDT2”) as trustee of

another discretionary trust (“DT2”). Each of TDT1 and TDT2 holds units in The Li Ka-Shing Unity

Trust. The discretionary beneficiaries of DT1 and DT2 are, inter alia, Mr. Li Tzar Kuoi, Victor, his

wife and children and Mr. Li Tzar Kai, Richard.

Certain subsidiaries of CKH are entitled to exercise or control the exercise of one-third or more

of the voting power at the general meetings of HWL. HWL holds the entire issued share capital of

HIL.

By virtue of the SFO, each of HWL, CKH, Li Ka-Shing Unity Trustee Company Limited, TDT1,

TDT2 and Mr. Li Ka-Shing who is the settlor and may be regarded as a founder of each of DT1 and

DT2 for the purpose of the SFO, was deemed to be interested in 589,970,501 underlying Shares (in

respect of unlisted equity derivatives of the Company) held by HIL.


– 175 –

Pursuant to the subscription agreement dated 23 March 2006 and entered into between HIL and

the Company, HIL conditionally agreed to subscribe for the Notes with a principal amount of

HK$200,000,000 (the “HIL Note”). Completion of the subscription agreement took place on 8 June

2006. HIL is entitled to convert the HIL Note into 589,970,501 Shares on full conversion at an

prevailing conversion price of HK$0.339 per Share (subject to any further adjustment) at any time

up to and including the date which is 7 days prior to the maturity date of the HIL Note.

The 589,970,501 Shares are calculated on the basis that the Capital Reorganisation is not yet

effective.

(2) In accordance with the SFO, AWL has total interest in 500,471,957 Shares, of which 32,135,957

Shares relate to its derivative interests, and is a wholly-owned subsidiary of Leaptop Investments

Limited which in turn is a wholly-owned subsidiary of ITC Investment Holdings Limited. ITC

Investment Holdings Limited is a wholly-owned subsidiary of ITC. Dr. Chan Kwok Keung,

Charles (“Dr. Chan”) directly and indirectly holds a total of more than one third of the issued share

capital of ITC. Ms. Ng Yuen Lan, Macy is the spouse of Dr. Chan. Out of the 468,336,000 Shares,

390,280,000 Shares would fall to be issued by the Company upon completion of the Rights Issue.

The numbers of Shares in this note (2) are calculated on the basis that the Capital Reorganisation

and the Rights Issue are effective.

(3) In accordance with the SFO, Million Good Limited, Cosmos Regent Ltd. and Cyber Generation

Limited have interests in 53,348,701 Shares, 432,725,324 Shares and 96,000,000 Shares

respectively and are wholly-owned subsidiaries of CEL which has total interest in 770,414,732

Shares, of which 419,352,188 Shares relate to its derivative interests. Among the 419,352,188

Shares, 185,840,707 Shares relate to the Notes and CEL accepted the Repurchase Offer to

repurchase the Notes on 23 December 2009. Out of the 349,562,544 Shares and 1,500,000 Shares,

291,302,120 Shares and 1,250,000 Shares would fall to be issued by the Company upon completion

of the Rights Issue.

The numbers of the Rights Shares involved in this note (3) are calculated on the basis that

the Capital Reorganisation and the Rights Issue are effective. The numbers of Shares relating

to derivative interests involved in this note (3) are calculated on the basis that the Capital

Reorganisation and the Rights Issue are not yet effective.

(4) In accordance with the SFO, Emperor has interest in 2,714,004,335 Shares and is an indirectly

wholly-owned subsidiary Emperor Capital Group Limited which is owned as to 46.2% by Win

Move Group Limited. Win Move Group Limited is a wholly-owned subsidiary of Million Way

Holdings Limited which is a wholly-owned subsidiary of STC International Limited, a trust of The

Albert Yeung Discretionary Trust. Ms. Luk Siu Man, Semon is the spouse of Dr. Yeung Sau Shing,

Albert, who is a founder of The Albert Yeung Discretionary Trust.

The 2,714,004,335 Shares are the maximum Rights Shares underwritten by Emperor pursuant to the


(5) The issued share capital of the Company for calculating the percentages in this column refers to the

issued share capital as enlarged by the Rights Shares to be issued on the basis that no other Shares

will be issued on or before the Record Date (i.e. HK$32,759,534.94 divided into 3,275,953,494

Adjusted Shares of HK$0.01 each).

As at the Latest Practicable Date, (i) Mr. Cheung Hon Kit, an executive Director, was

also an executive director of ITC; and (ii) Ms. Chan Ling, Eva and Dr. Yap, Allan, executive

Directors, were also directors of CEL and Cosmos Regent Ltd.. Save as disclosed above,

none of the Director was a director or employee of any substantial Shareholder as at the

Latest Practicable Date.


– 176 –

(iii) Substantial shareholders of other members of the Group

So far as was known to the Directors or chief executive of the Company, the

following persons (other than a Director or chief executive of the Company) were, directly

or indirectly, interested in 10% or more of the nominal value of any class of share capital

carrying rights to vote in all circumstances at general meetings of the other members of the

Group as at the Latest Practicable Date:

Name of subsidiary Name of shareholderPercentage of shareholding

Silver Bay Commodities Limited China Fortune Resources

Limited

30%

Wing On Travel

Online Limited

Fullex Limited 20%

四川恒信國際旅行社有限責任公司Sichuan Henxin

International Tour Co., Ltd. *

Zhong Xiaojin 42.75%

Sichuan Square Inn Hotel

Management Limited

Zhong Yan 49.5%

Tangula Group Limited TIL Capital Corporation 18.1%

Luoyang Golden Gulf Hotel

Company Limited

洛陽電力局 40%

洛陽電力旅行社有限公司洛陽市電力廣告有限公司 33.33%

* For identification purpose only

Save as disclosed above, the Directors or chief executive of the Company were not aware that there were any other persons (not being a Director or chief executive of the Company) who, as at the Latest Practicable Date, had an interest or short position in Shares and underlying Shares which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO, or who were, directly or indirectly, interested in 10% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meeting of any other members of the Group, or had any options in respect of such capital.


– 177 –

(c) Directors’ interests in competing business

As at the Latest Practicable Date, save as disclosed below, none of the Directors or their

respective associates was interested in any business which competes or was likely to compete,

whether directly or indirectly, with the business of the Group. The Directors confirm that the Group

is capable of carrying on its businesses independent of, and at arm’s length from, the businesses

as disclosed below which are considered to compete or likely to compete with the businesses of

the Group. The Directors also confirm that the respective management and administration of the

businesses as set out below are independent from the Group.

Name of Director

Name of entity whichbusinesses are consideredto compete or likely tocompete with thebusinesses of the Group

Description of businesses ofthe entity which areconsidered to compete orlikely to compete with thebusinesses of the Group

Nature of interest ofthe Director in the entity

Mr. Cheung Hon Kit ITC Properties Group Limited

(“ITC Properties”) and

its subsidiaries

Property investment

in Hong Kong

Chairman of ITC

Properties

China Development Limited Property investment

in Hong Kong

Director and shareholder

Artnos Limited Property investment in

Hong Kong


Co-Forward Development Ltd. Property investment

in Hong Kong


Orient Centre Limited Property investment

in Hong Kong

Shareholder

Super Time Limited Property investment

in Hong Kong


Asia City Holdings Ltd Property investment

in Hong Kong


Supreme Best Ltd. Property investment

in Hong Kong

Shareholder

Orient Holdings Limited Property investment

in Hong Kong


Link Treasure International Ltd Property investment

in Hong Kong


Silver City Limited Property investment

in Hong Kong



– 178 –

4. DIRECTORS’ SERVICE CONTRACTS

As at the Latest Practicable Date, none of the Directors had any existing or proposed service

contract with any member of the Group which is not determinable by the Group within one year without

payment of compensation other than statutory compensation.

5. DIRECTORS’ INTERESTS IN CONTRACTS

As at the Latest Practicable Date, none of the Directors was materially interested in any contract or

arrangement subsisting and which was significant in relation to the business of the Group.

6. DIRECTORS’ INTEREST IN ASSETS OF THE GROUP

As at the Latest Practicable Date, none of the Directors had any interest, direct or indirect, in any

assets which had been acquired or disposed of by or leased to any member of the Group or were proposed

to be acquired or disposed of by or leased to any member of the Group since 31 December 2008, the date

to which the latest published audited consolidated financial statements of the Group were made up.

7. MATERIAL CONTRACTS

The following contracts (not being contracts entered into in the ordinary course of business) have

been entered into by members of the Group within the two years immediately preceding the date of this

circular:

(a) the agreement dated 31 December 2007 entered into between Eagle Spirit Holdings Limited,

a wholly-owned subsidiary of the Company, and Ms. Mak Yin Ling, Ursula (“Ms. Mak”) in

relation to the acquisition of the entire interests in More Star Limited (“More Star”) and the

entire amount owed by More Star to Ms. Mak immediately prior to completion thereof for a

consideration of HK$20 million;

(b) the underwriting agreement dated 15 May 2008 entered into between the Company and

Kingston Securities Limited in relation to the issue of not less than 7,283,034,080 rights

Shares but not more than 10,594,505,212 rights Shares (with bonus warrants in the

proportion of one bonus warrant for every four rights Shares subscribed) as varied and

supplemented by a supplemental agreement dated 4 June 2008;

(c) the sale and purchase agreement dated 8 May 2009 entered into between the Company, Wing

On Travel (China) Limited (“WOT China”), a wholly-owned subsidiary of the Company,

Jetsway Investments Limited (“Jetsway”) and He Jian Xin as guarantor pursuant to which

WOT China agreed to purchase and Jetsway agreed to sell 1 share of US$1.00 in the capital

of Sky Victory Resources Limited (“Sky Victory”) and the shareholder’s loan owing by Sky

Victory to Jetsway as at the completion date at the consideration of HK$35 million;

(d) the conditional sale and purchase agreement dated 30 June 2009 entered into between

Millennium Target Holdings Limited (“Millennium”), an indirect wholly-owned subsidiary

of the Company, and Mr. Wang Yung Tyng (“Mr. Wang”) pursuant to which Mr. Wang agreed

to sell and Millennium agreed to purchase 22,204,500 ordinary shares of US$0.02 each in

the capital of Apex Quality Group Limited (“Apex Quality”) for a consideration of HK$70

million;

(e) the placing agreement dated 14 July 2009 entered into between the Company and Emperor as

placing agent (the “Placing Agent”) in relation to a best endeavours placing of a maximum of

1,800,000,000 new Shares at a price of HK$0.035 per Share;


– 179 –

(f) the placing agreement dated 14 July 2009 entered into between the Company and the Placing

Agent in relation to a best endeavours placing of not less than 20,000,000,000 new Shares

but not more than 30,000,000,000 new Shares at price of HK$0.035 per Share as varied and

supplemented by supplemental agreements dated 24 September 2009, 15 October 2009 and

30 October 2009 respectively;

(g) the conditional sale and purchase agreement dated 1 August 2009 entered into among the

Company, Rosedale Hotel Group Limited (“Rosedale”), a wholly-owned subsidiary of Apex

Quality, Golden Spirit Enterprises Corp. (“Golden Spirit”) and Apex Quality, an indirectly

75.9% owned subsidiary of the Company, pursuant to which Golden Spirit agreed to

purchase and Rosedale agreed to sell 1 share of US$1.00 par value in the capital of Yarra

Group Limited (“Yarra”) and the shareholder’s loan owing by Yarra and its subsidiary to

Rosedale as at the completion date at the consideration of HK$833 million;

(h) the offer letter dated 31 July 2009 issued by the Company to PSC Corporation Limited

(“PSC”) (as varied and supplemented by a side letter dated 15 October 2009 between the

Company and PSC in relation to the extension of the long stop date) in relation to the

repurchase of the Company’s Notes with an outstanding principal amount of HK$21.5

million to be satisfied by the issue of shares of HK$0.01 each by the Company credited as

fully paid at HK$0.035 per share and the form of acceptance dated 7 August 2009 from PSC;

(i) the offer letter dated 31 July 2009 issued by the Company to Success Securities Limited

(“Success Securities”) (as varied and supplemented by a side letter dated 15 October 2009

between the Company and Success Securities in relation to the extension of the long stop

date) in relation to the repurchase of the Company’s Notes with an outstanding principal

amount of HK$15 million to be satisfied by the issue of shares of HK$0.01 each by the

Company credited as fully paid at HK$0.035 per share and the form of acceptance dated 11

August 2009 from Success Securities;

(j) the offer letter dated 31 July 2009 issued by the Company to Intraco Limited (“Intraco”) (as

varied and supplemented by a side letter dated 15 October 2009 between the Company and

Intraco in relation to the extension of the long stop date) in relation to the repurchase of the

Company’s Notes with an outstanding principal amount of HK$14.3 million to be satisfied

by the issue of shares of HK$0.01 each by the Company credited as fully paid at HK$0.035

per share and the form of acceptance dated 13 August 2009 from Intraco;

(k) the offer letter dated 31 July 2009 issued by the Company to Rich Concept Investments

Limited (“Rich Concept”) (as varied and supplemented by a side letter dated 15 October

2009 between the Company and Rich Concept in relation to the extension of the long stop

date) in relation to the repurchase of the Company’s Notes with an outstanding principal



August 2009 from Rich Concept;

(l) the offer letter dated 31 July 2009 issued by the Company to AWL (as varied and

supplemented by a side letter dated 15 October 2009 between the Company and AWL

relation to the extension of the long stop date) in relation to the repurchase of the Company’s

Notes with an outstanding principal amount of HK$108.2 million and the form of acceptance

in respect of the Notes in principal amount of HK$81 million to be satisfied by the issue of

shares of HK$0.01 each by the Company credited as fully paid at HK$0.035 per share dated

19 August 2009 from AWL;


– 180 –

(m) the offer letter dated 31 July 2009 issued by the Company to CEL (as varied and

supplemented by a side letter dated 15 October 2009 between the Company and CEL in


Notes with an outstanding principal amount of HK$63 million to be satisfied by the issue of

shares of HK$0.01 each by the Company credited as fully paid at HK$0.035 per share and

the form of acceptance dated 19 August 2009 from CEL;

(n) the offer letter dated 14 August 2009 issued by the Company to Fong Shing Kwong (as

varied and supplemented by a side letter dated 15 October 2009 between the Company

and Fong Shing Kwong in relation to the extension of the long stop date) in relation to the

repurchase of the Company’s Notes with an outstanding principal amount of HK$12 million

to be satisfied by the issue of shares of HK$0.01 each by the Company credited as fully paid

at HK$0.035 per share and the form of acceptance dated 20 August 2009 from Fong Shing

Kwong;

(o) the offer letter dated 31 July 2009 issued by the Company to Oriental Mind Limited

(“OML”) (as varied and supplemented by a side letter dated 15 October 2009 between the

Company and OML in relation to the extension of the long stop date) in relation to the


to be satisfied by the issue of shares of HK$0.01 each by the Company credited as fully paid

at HK$0.035 per share and the form of acceptance dated 21 August 2009 from OML;

(p) the offer letter dated 14 August 2009 issued by the Company to Add Win Investments

Limited (“Add Win”) (as varied and supplemented by a side letter dated 15 October 2009

between the Company and Add Win in relation to the extension of the long stop date) in

relation to the repurchase of the Company’s Notes with an outstanding principal amount

of HK$22 million to be satisfied by the issue of shares of HK$0.01 each by the Company

credited as fully paid at HK$0.035 per share and the form of acceptance dated 21 August

2009 from Add Win;

(q) the offer letter dated 14 August 2009 issued by the Company to Hyde Park Group Limited

(“Hyde Park”) (as varied and supplemented by a side letter dated 15 October 2009 between

the Company and Hyde Park in relation to the extension of the long stop date) in relation

to the repurchase of the Company’s Notes with an outstanding principal amount of HK$6

million to be satisfied by the issue of shares of HK$0.01 each by the Company credited as

fully paid at HK$0.035 per share and the form of acceptance dated 21 August 2009 from

Hyde Park;

(r) the offer letter dated 21 August 2009 issued by the Company to Taifook Securities Nominees

Limited (“Taifook Securities”) (as varied and supplemented by a side letter dated 15 October

2009 between the Company and Taifook Securities in relation to the extension of the long

stop date) in relation to the repurchase of the Company’s Notes with an outstanding principal



August 2009 from Taifook Securities;

(s) the Underwriting Agreement;

(t) the Placing Agreement;


– 181 –

(u) the offer letter dated 10 December 2009 issued by the Company to CEL (as varied and

supplemented by a side letter dated 23 December 2009 between the Company and CEL in


Notes with an outstanding principal amount of HK$63 million to be satisfied by cash equal

to 80% of the outstanding principal amount of such Notes payable by the Company and the

form of acceptance dated 23 December 2009 from CEL;

(v) the offer letter dated 10 December 2009 issued by the Company to Rich Concept (as varied

and supplemented by a side letter dated 23 December 2009 between the Company and Rich

Concept in relation to the extension of the long stop date) in relation to the repurchase of

the Company’s Notes with an outstanding principal amount of HK$66 million to be satisfied

by cash equal to 80% of the outstanding principal amount of such Notes payable by the

Company and the form of acceptance dated 23 December 2009 from Rich Concept;

(w) the offer letter dated 10 December 2009 issued by the Company to Success Securities (as

varied and supplemented by a side letter dated 23 December 2009 between the Company

and Success Securities in relation to the extension of the long stop date) in relation to the


to be satisfied by cash equal to 80% of the outstanding principal amount of such Notes

payable by the Company and the form of acceptance dated 23 December 2009 from Success

Securities;

(x) the offer letter dated 10 December 2009 issued by the Company to OML (as varied and

supplemented by a side letter dated 23 December 2009 between the Company and OML in




form of acceptance dated 23 December 2009 from OML;

(y) the offer letter dated 10 December 2009 issued by the Company to Add Win (as varied and

supplemented by a side letter dated 23 December 2009 between the Company and Add

Win in relation to the extension of the long stop date) in relation to the repurchase of the

Company’s Notes with an outstanding principal amount of HK$22 million to be satisfied

by cash equal to 80% of the outstanding principal amount of such Notes payable by the

Company and the form of acceptance dated 23 December 2009 from Add Win;

(z) the offer letter dated 10 December 2009 issued by the Company to Taifook Securities (as


and Taifook Securities in relation to the extension of the long stop date) in relation to the



payable by the Company and the form of acceptance dated 23 December 2009 from Taifook

Securities;

(aa) the offer letter dated 10 December 2009 issued by the Company to AWL (as varied and

supplemented by a side letter dated 23 December 2009 between the Company and AWL in


Notes with an outstanding principal amount of HK$108.2 million to be satisfied by cash

equal to 80% of the outstanding principal amount of such Notes payable by the Company and

the form of acceptance dated 23 December 2009 from AWL;


– 182 –

(bb) the offer letter dated 15 December 2009 issued by the Company to AWL (as varied and

supplemented by a side letter dated 23 December 2009 between the Company and AWL in




form of acceptance dated 23 December 2009 from AWL; and

(cc) the offer letter dated 22 December 2009 issued by the Company to Citystar Limited (as


and Citystar Limited in relation to the extension of the long stop date) in relation to the



payable by the Company and the form of acceptance dated 23 December 2009 from Citystar

Limited.

8. LITIGATIONS

In 2005, Huaxing Northeast Automobile Trading Company (“Huaxing Automobile”) has initiated

legal proceedings at the Shenyang Intermediate People’s Court in Liaoning Province, the PRC, against

Time Plaza (Shenyang) Limited (“TPSL”), an indirect subsidiary of the Company, for the repayment of

the outstanding amount of an interest-bearing shareholder’s loan in the sum of RMB18,660,000 due by

TPSL (which is held as to 92% by Shenyang Hotel Holdings Limited (“SHHL”) and as to 8% by Huaxing

Automobile) together with the interest. The Shenyang Intermediate People’s Court in Liaoning Province,

the PRC, has delivered a First Instance Civil Judgment and a Civil Decision, according to which TPSL

is obliged to repay the principal amount of RMB18,660,000 together with interests accrued thereunder.

An appeal made by TPSL in respect of the decisions was later dismissed by the People’s High Court of

Liaoning Province, the PRC (“Final Civil Judgment”) and the said First Instance Civil Judgment and

the said Civil Decision were upheld, except for an amendment to the period for calculating the amount

of interest accrued thereunder. In July 2005, Huaxing Automobile, TPSL and SHHL entered into a

settlement agreement pursuant to which Huaxing Automobile agreed to transfer all its 8% equity interest

in and the shareholder’s loan made to TPSL to SHHL at an aggregate consideration of RMB14,980,000,

of which RMB11,243,000 has been paid by TPSL to Huaxing Automobile. The outstanding amount of

RMB3,737,000 is to be paid by TPSL to Huaxing Automobile within three days upon the completion of

the transfer of the 8% equity interest in TPSL from Huaxing Automobile to SHHL and the completion of

registration of the said transfer at the relevant PRC authorities. Upon payment of the outstanding amount

of RMB3,737,000 which has already accrued in the books of TPSL, all claims and liabilities under the

said First Instance Civil Judgments, the said Civil Decision and the Final Civil Judgment will cease. As at

the Latest Practicable Date, the Company, Huaxing Automobile and TPSL are taking all necessary steps to

effect the transfer of the 8% equity interest in TPSL to SHHL and to carry out the terms of the settlement

agreement. Details of the case have been disclosed in the circular of the Company dated 23 July 2007.

Since June 2007, a former financial advisor, who was engaged to provide consultancy services to

RailPartners, Inc. (“RPI”), a subsidiary held as to 72% by the Company indirectly, for soliciting investors

for RPI, has through its legal advisers issued various letters to RPI, notifying an intention to initiate legal

proceedings against RPI for an outstanding commission amount of US$5,290,000 plus out-of-pocket

expenses and an alleged claim to shares in RPI pursuant to a consulting and success fee agreement which

was governed by Swiss law. The commission claimed represented approximately 2% of the net assets of

the Group as at 31 December 2008. Accordingly, the Directors consider that this litigation case is not price

sensitive in nature and would not have any material impact on the financial position of the Group as a

whole. RPI has been advised by the lawyer of that former financial advisor that legal proceedings would

be issued against it in the Commercial Court in Zurich on or about 11 April 2008. However, up to the

Latest Practicable Date, RPI has not been served any notice of claim by the Swiss courts. The Company

is unable to ascertain whether the said former financial advisor has filed his alleged claim to the Swiss

courts. The Directors considered that the claims are remote since the services that the former financial

advisor claimed commission on or to shares in RPI did not match with what has been specifically stated in

the engagement.


– 183 –

In June 2004, a former employee (the “Claimant”) of Hong Kong Wing On Travel Service Limited

(“HK Wing On”), an indirect wholly-owned subsidiary of the Company, lodged a consolidated action

against HK Wing On at the Labour Tribunal. The claims included the difference in wages for annual leave

pay, statutory holiday pay, meal allowance, overtime payment, rest day pay etc. The claim was dismissed

after a trial on 11 April 2006. The claimant was granted leave to appeal to High Court and the appeal was

allowed on 11 June 2007. The matter was ordered to be remitted to the Labour Tribunal for assessment

of the quantum. HK Wing On was granted leave to appeal to the Court of Appeal but the appeal was

dismissed on 2 May 2008. HK Wing On further sought leave to appeal to the Court of Final Appeal at

both the Court of Appeal and Court of Final Appeal but both applications were dismissed on 8 October

2008 and 29 January 2009 respectively. The case was then remitted to Labour Tribunal for assessment in

March 2009. On 10 August 2009, the parties have settled by consent the claims for annual leave pay and

statutory holiday pay. All other claims except rest day pay have been withdrawn by the Claimant. The

claim on rest day pay has been waived by the Claimant prior to the hearing scheduled to be held on 7

October 2009. As at the Latest Practicable Date, there are remaining 65 cases filed at the Labour Tribunal

pending settlement and the estimated aggregate amount claimed under theses cases were approximately

HK$1.3 million. Based on the aggregate amount claimed, the Directors consider that these cases are not

price sensitive in nature and would not have any material impact on the financial position of the Group as

a whole.

Save as disclosed above, as at the Latest Practicable Date, no member of the Group was engaged

in any litigation or arbitration or claims of material importance and there was no litigation, arbitration or

claim of material importance which was known to the Directors to be pending or threatened by or against

any member of the Group.

9. EXPERT(S) AND CONSENT(S)

The followings are the qualifications of the expert(s) or professional adviser(s) who has/have given

opinion or advice contained in this circular:

Name Qualification

Deloitte Touche Tohmatsu Certified Public Accountants

Guangdong Securities a licensed corporation to carry out types 1 (dealing in

securities), 2 (dealing in futures contracts), 4 (advising

on securities), 6 (advising on corporate finance) and 9

(asset management) regulated activities under the SFO

Each of the above experts has given and has not withdrawn its written consent to the issue of this

circular with the inclusion of its letter and references to its name in the form and context in which they

appear.

As at the Latest Practicable Date, each of the above experts:

(a) did not have any shareholding in or any right (whether legally enforceable or not) to

subscribe for or to nominate persons to subscribe for securities in any member of the Group;

and

(b) was not interested, directly or indirectly, in any assets which have been acquired or disposed

of by or leased to any member of the Group since 31 December 2008, being the date to

which the latest published consolidated financial statements of the Company were made up.


– 184 –

10. DIRECTORS, CORPORATE INFORMATION AND PARTIES INVOLVED IN THE RIGHTS ISSUE

Name and address of the directors

Name Correspondence Address

Executive Directors

Mr. Cheung Hon Kit 7th Floor

Paul Y. Centre

51 Hung To Road

Kwun Tong

Kowloon

Hong Kong

Ms. Chan Ling, Eva 7th Floor

Paul Y. Centre

51 Hung To Road

Kwun Tong

Kowloon

Hong Kong

Dr. Yap, Allan 7th Floor

Paul Y. Centre

51 Hung To Road

Kwun Tong

Kowloon

Hong Kong

Mr. Chan Pak Cheung, Natalis 7th Floor

Paul Y. Centre

51 Hung To Road

Kwun Tong

Kowloon

Hong Kong

Independent Non-Executive Directors

Mr. Kwok Ka Lap, Alva 7th Floor

Paul Y. Centre

51 Hung To Road

Kwun Tong

Kowloon

Hong Kong

Mr. Poon Kwok Hing, Albert 7th Floor

Paul Y. Centre

51 Hung To Road

Kwun Tong

Kowloon

Hong Kong


– 185 –

Mr. Sin Chi Fai 7th Floor

Paul Y. Centre

51 Hung To Road

Kwun Tong

Kowloon

Hong Kong

Senior Management

Ms. Leung Kong Lan, Lanny 7th Floor

Paul Y. Centre

51 Hung To Road

Kwun Tong

Kowloon

Hong Kong

Ms. Chan Shuk Fong, Jo Jo 7th Floor

Paul Y. Centre

51 Hung To Road

Kwun Tong

Kowloon

Hong Kong

Mr. Ng Chack Yan Unit 3001, 30/F.

Paul Y. Centre

51 Hung To Road

Kwun Tong

Kowloon

Hong Kong

Mr. Cheng Chun Chau Unit 3001, 30/F.

Paul Y. Centre

51 Hung To Road

Kwun Tong

Kowloon

Hong Kong

QUALIFICATIONS OF THE DIRECTORS

Executive Directors

Mr. Cheung Hon Kit, aged 56, is the Chairman of the Company. Mr. Cheung was appointed

as the Managing Director of the Company in October 2003 and was re-designated as the Chairman

of the Company in May 2009. Mr. Cheung graduated from the University of London with a

Bachelor of Arts degree and has over 31 years of experience in real estate development, property

investment and corporate finance. He has worked in key executive positions in various leading

property development companies in Hong Kong. Currently, Mr. Cheung is the chairman of ITC

Properties Group Limited and an executive director of ITC Corporation Limited. He is also an

independent non-executive director of International Entertainment Corporation and Future Bright

Holdings Limited (formerly known as Innovo Leisure Recreation Holdings Limited).


– 186 –

Ms. Chan Ling, Eva, aged 44, has been the Managing Director of the Company since June

2009 and is the director of major subsidiaries of the Group. She joined the Company in May 2002.

Ms. Chan has over 20 years’ experience in auditing, accounting and finance in both international

accounting firms and listed companies. She is a member of the Institute of Chartered Accountants

in Australia, a fellow member of the Association of Chartered Certified Accountants and also a

practicing member of the Hong Kong Institute of Certified Public Accountants. Ms. Chan is an

executive director of China Strategic Holdings Limited and independent non-executive director of

Trasy Gold Ex Limited, companies whose shares are listed in Hong Kong. She is also the deputy

chairman of China Enterprises Limited, a company whose shares are traded on the OTC Securities

Market in the United States of America and a director of MRI Holdings Limited, a company whose

shares are listed on the Australian Securities Exchange.

Dr. Yap, Allan, aged 54, has been an Executive Director of the Company since April 2002.

He obtained the honorary degree of Doctor of Laws and has over 27 years’ experience in finance,

investment and banking. Dr. Yap is the chairman of Hanny Holdings Limited; executive director of

See Corporation Limited; and chairman and chief executive officer of China Enterprises Limited,

a company whose shares are traded on the OTC Securities Market in the United States of America.

Dr. Yap is also the chairman and chief executive officer of Burcon NutraScience Corporation, a

company whose shares are listed on the TSX Venture Exchange in Canada and Frankfurt Stock

Exchange in Germany; and an executive chairman of PSC Corporation Ltd, Intraco Limited and

Tat Seng Packaging Group Ltd, companies whose shares are listed in Singapore. He is also the

chairman of MRI Holdings Limited, a company whose shares are listed on the Australian Securities

Exchange.

Mr. Chan Pak Cheung, Natalis, aged 59, has been an Executive Director of the Company

since April 2002. He is a well-known actor, master of ceremonies, and horseracing and soccer

commentator. Mr. Chan has over 29 years’ experience in the entertainment and film industry in

Hong Kong.

Independent Non-Executive Directors

Mr. Kwok Ka Lap, Alva, aged 61, has been an Independent Non-Executive Director of

the Company since December 2002. He was a marketing manager in an international company

engaging in the design of business administration system. Mr. Kwok has been in the insurance

and investments business for over 27 years, principally in the senior managerial position leading

a sizable sales team. He is also an independent non-executive director of ITC Properties Group

Limited and Hanny Holdings Limited.

Mr. Poon Kwok Hing, Albert, aged 48, has been an Independent Non-Executive Director of

the Company since March 2007. He graduated from the University of Bath, United Kingdom with a

Master of Science degree in Business Administration. Mr. Poon is also a member of the Hong Kong

Institute of Certified Public Accountants and a member of the CPA Australia. Mr. Poon is currently

the independent non-executive director of Hanny Holdings Limited.

Mr. Sin Chi Fai, aged 50, has been an Independent Non-Executive Director of the Company

since January 2008. Mr. Sin is a director and shareholder of a Singapore company engaged in

the distribution of data storage media and computer related products in Asian countries. Mr. Sin

obtained a diploma in Banking from The Hong Kong Polytechnic (now known as The Hong Kong

Polytechnic University). He has over 10 years’ experience in banking field and has over 13 years’

sales and marketing experience in information technology industries. He is also an independent

non-executive director of Hanny Holdings Limited.


– 187 –

Senior Management

Ms. Leung Kong Lan, Lanny, aged 49, is the Chief Executive Officer of Hong Kong Wing

On Travel Service Limited and director of a few of the Company’s subsidiaries and associates.

She joined the Group in November 1984. Ms. Leung focuses on formulating strategies for the

overall management of travel division, exploring business opportunities in new markets including

the potential mainland China market and promoting the development of the travel industry. She

holds a Bachelor degree in Arts. Ms. Leung is the vice chairman of the Hong Kong Association of

China Travel Organizers Limited, a member of the Advisory Committee on Cruise Industry of the

Government of the Hong Kong Special Administrative Region, the Outbound Committee of the

Travel Industry Council of Hong Kong, and a certified instructor of both the Tourism Industry Skill

Upgrading Scheme and the Outbound Escort Examination Course of the Travel Industry Council.

She has over 20 years of experience in the travel industry.

Ms. Chan Shuk Fong, Jo Jo, aged 45, is the General Manager of Hong Kong Wing On

Travel Service Limited. She joined the Group in December 1994. She is a core member of the

Strategic Planning and Operations Management team of the travel division. Ms. Chan’s expanded

role includes strategic development and operations management in all aspects of Hong Kong Wing

On Travel Service Limited. Ms. Chan currently serves in the Inbound Committee of the Travel

Industry Council of Hong Kong, and the Council of the Hong Kong Association of China Travel

Organizers Limited. She is a member of advisory panels and committees of the University of

South Australia Tourism & Hospitality Management, the Hong Kong Baptist University College

of International Education, and the Associate of Social Science (Tourism) of Hong Kong Institute

of Education. Ms. Chan holds a Master Degree in Business Administration and a Postgraduate

Diploma from the University of Leicester. She has over 15 years of management experience in

travel and related industries.

Mr. Ng Chack Yan, aged 59, joined Rosedale Hotel Management Limited in November 2002

and was appointed as the Assistant General Manager since April 2003. Mr. Ng holds a bachelor’s

degree in business administration and a master’s degree in accounting. He has over 22 years of

experience in the hotel industry. Prior to joining the Group, Mr. Ng held a number of executive

positions in various hotels of the renowned multinational hotel chains in the PRC, Hong Kong,

Singapore and Indonesia.

Mr. Cheng Chun Chau, aged 44, participated in the foundation of Rosedale on the Park

(“Rosedale-HK”) in 2000. Mr. Cheng is currently the General Manager of Rosedale-HK and was

also appointed as the General Manager of Rosedale Hotel & Suites, Guangzhou since August 2008.

Mr. Cheng holds a master’s degree in strategic hospitality management and is a member of the

Institute of Hospitality, UK. He has over 25 years of experience and knowledge in managing hotels

and projects in both Hong Kong and the PRC. Prior to joining the Group, Mr. Cheng held a number

of executive positions in various hotels in Hong Kong and the PRC.


– 188 –

Corporate information and parties involved in the Rights Issue

Registered office Clarendon House

2 Church Street

Hamilton HM 11

Bermuda

Head office and principal place of

business

7th Floor

Paul Y. Centre

51 Hung To Road

Kwun Tong, Kowloon

Hong Kong

Authorised representatives Dr. Yap, Allan

Ms. Law Sau Lai

Company secretary Ms. Law Sau Lai, ACIS, ACS

Legal advisers to the Company As to Hong Kong Law:

Richards Butler in association with Reed Smith LLP

20th Floor, Alexandra House

16-20 Chater Road

Central, Hong Kong

As to Bermuda Law:

Conyers Dill & Pearman

2901 One Exchange Square

8 Connaught Place

Central, Hong Kong

Financial Adviser to the Company Emperor Capital Limited

28/F, Emperor Group Centre

288 Hennessy Road

Wanchai

Hong Kong

Independent Financial Adviser to the

Independent Board Committee and the

Independent Shareholders

Guangdong Securities Limited

2505-06, 25/F., Low Block

Grand Millennium Plaza

181 Queen’s Road

Central, Hong Kong

Auditor Deloitte Touche Tohmatsu

35th Floor, One Pacific Place

88 Queensway

Hong Kong

Principal share registrar Butterfield Fulcrum Group (Bermuda) Limited

Rosebank Centre

11 Bermudiana Road

Pembroke HM 08

Bermuda


– 189 –

Hong Kong branch share registrar Tricor Secretaries Limited

26th Floor, Tesbury Centre

28 Queen’s Road East

Wanchai

Hong Kong

Principal banker Hang Seng Bank Limited

83 Des Voeux Road Central

Hong Kong

Underwriter Emperor Securities Limited

23/F-24/F, Emperor Group Centre

288 Hennessy Road

Wanchai

Hong Kong

11. EXPENSES

The expenses in connection with the Rights Issue, including financial and legal advisory fees,

underwriting commission, printing and translation expenses are estimated to be approximately HK$10

million of the minimum number of the Right Shares subscribed and approximately HK$14 million of the

maximum number of the Right Shares subscribed and will be payable by the Company.

12. MISCELLANEOUS

As at the Latest Practicable Date, no commissions, discounts, brokerages or other special terms had

been granted or agreed to be granted by any member of the Group to any Directors or proposed Directors,

promoters in connection with the issue or sale of any capital by any such member of the Group.

13. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents are available for inspection during normal business hours at

the Company’s principal place of business in Hong Kong at 7th Floor, Paul Y. Centre, 51 Hung To Road,

Kwun Tong, Kowloon, Hong Kong, from the date of this circular and up to and including Monday, 1

February 2010, being the date of the SGM:

(a) the memorandum of association of the Company and Bye-Laws;

(b) the material contracts referred to in the section headed “Material contract(s)” of this

Appendix;

(c) the letter from the Independent Board Committee dated 8 January 2010, the texts of which

are set out in this circular;

(d) the letter from Guangdong Securities dated 8 January 2010, the texts of which are set out in

this circular;

(e) the letters of consent referred to under the section headed “Expert(s) and consent(s)” of this

Appendix;


– 190 –

(f) the annual reports of the Company for the three financial years ended 31 December 2006,

31 December 2007 and 31 December 2008 and the interim report of the Company for the six

months ended 30 June 2009;

(g) the letter on the unaudited pro forma financial information on the Group as set out in

Appendix II to this circular;

(h) a copy of each circular issued by the Company pursuant to the requirements set out in

Chapters 14 and/or 14A of the Listing Rules since 31 December 2008 (being the date to

which the latest published audited accounts of the Company were made up to);

(i) the respective letters of Repurchase Offer sent by the Company to AWL and CEL dated 10

December 2009 and their respective acceptance letters to the Company dated 23 December

2009; and

(j) the letter of Repurchase Offer sent by the Company to AWL dated 15 December 2009 and

AWL’s acceptance letter to the Company dated 23 December 2009.

14. GENERAL

(a) The company secretary of the Company is Ms. Law Sau Lai. She is an associate of The

Hong Kong Institute of Chartered Secretaries and The Institute of Chartered Secretaries and

Administrators.

(b) The registered office of the Company is situated at Clarendon House, 2 Church Street,

Hamilton HM 11, Bermuda.

(c) The branch share registrar and transfer office of the Company in Hong Kong is Tricor

Secretaries Limited at 26th Floor, Tesbury Centre, 28 Queen’s Road East, Wanchai, Hong

Kong.

(d) The English text of this circular and the accompanying form of proxy shall prevail over the

Chinese text.

NOTICE OF SGM

– 191 –


(Stock Code: 1189)

(Warrant Code: 774)

NOTICE IS HEREBY GIVEN that a special general meeting of Wing On Travel (Holdings)

Limited (the “Company”) will be held at Shop B27, Basement, Bank of America Tower, 12 Harcourt

Road, Central, Hong Kong on Monday, 1 February 2010 at 10:00 a.m. for the purpose of considering and,

if thought fit, passing, with or without modifications, the following resolutions of the Company:–

SPECIAL RESOLUTION

1. “THAT, conditional upon:

(a) compliance with the relevant legal procedures and requirements under the Rules

Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited

(the “Stock Exchange”) and the Companies Act 1981 of Bermuda to effect the

following;

(b) the Listing Committee of the Stock Exchange granting the listing of, and permission

to deal in, the Adjusted Shares (as defined below); and

(c) the passing of this resolution as a special resolution of the Company,

with effect from 9:30 a.m. on Tuesday, 2 February 2010 (Hong Kong time):

(i) every twenty (20) issued shares of HK$0.01 each of the Company be

consolidated (the “Share Consolidation”) into one (1) consolidated share of a

par value of HK$0.20 (the “Consolidated Share”);

(ii) upon the Share Consolidation becoming effective, the issued share capital of the

Company be reduced by cancelling the paid-up capital to the extent of HK$0.19

on each of the issued Consolidated Share of HK$0.20 such that the nominal

value of each of the issued shares of the Company be reduced (the “Issued Capital Reduction”) from HK$0.20 to HK$0.01 (the “Adjusted Shares”);

(iii) the credit amount arising from the Issued Capital Reduction be transferred to

the contributed surplus account of the Company, and an appropriate amounts in

the contributed surplus account be applied to set off against part of the amount

of the accumulated losses of the Company (the “Set-Off against Accumulated Losses”); and

(iv) the directors of the Company be and are hereby authorised to utilise the credit

balance in the contributed surplus account in accordance with the bye-laws

of the Company and applicable laws (including by way of Set Off against

Accumulated Losses of the Company) and do all things and acts and sign

all documents and take such steps as they consider necessary, desirable, or

expedient in connection with the implementation of the above.”

NOTICE OF SGM

– 192 –

ORDINARY RESOLUTIONS

2. “THAT:

(i) the underwriting agreement between the Company and Emperor Securities Limited

(“Emperor”) dated 3 December 2009 as varied and supplemented by the first

supplemental agreement dated 11 December 2009 and the second supplemental

agreement dated 23 December 2009 (collectively, the “Underwriting Agreement”)

(a copy of the Underwriting Agreement having been produced to this meeting

and marked “A” and initialed by the chairman of the meeting for the purpose of

identification) be and is hereby confirmed, approved and ratified;

(ii) the offer and issue of not less than 2,729,961,245 and not more than 3,657,929,510

Adjusted Shares (the “Rights Shares”) of HK$0.01 each in the share capital of the

Company by way of rights issue (the “Rights Issue”) at the subscription price of

HK$0.15 per Rights Share to the shareholders of the Company whose names appear

on the register of members of the Company on the Record Date (as defined in the

circular of the Company dated 8 January 2010 (the “Circular”), a copy of the Circular

having been produced to this meeting and marked “B” and initialed by the chairman

of the meeting for the purpose of identification) excluding those shareholders of the

Company whose registered address as shown on such register are outside Hong Kong

on the Record Date and to whom the directors of the Company, after making enquiries,

on account either of legal restrictions under the laws of the relevant place or the

requirements of the relevant regulatory body or stock exchange of that place, consider

it necessary or expedient not to offer the Rights Shares, in the proportion of five (5)

Rights Shares for each Adjusted Share so held on the Record Date, on and subject

to the terms and conditions set out in the Circular and the Underwriting Agreement,

and on such other terms and conditions as may be determined by the directors of the

Company be and is hereby approved; and

(iii) the directors of the Company be and are hereby authorised to allot and issue the

Rights Shares on terms as set out in the Circular and to do all such acts and things,

to sign and execute all documents and to take such steps as they consider necessary,

desirable, or expedient to give effect to or in connection with the Rights Issue and the

Underwriting Agreement or any of the transactions contemplated thereunder.”

3. “THAT:

(i) the issue by the Company pursuant to the placing agreement (a copy of which

having been produced to the meeting marked “C” and initialed by the chairman of

the meeting for the purpose of identification) dated 3 December 2009 (as varied and

supplemented by the supplemental agreement dated 7 January 2010) (collectively, the

“Placing Agreement”) entered into between the Company and Emperor of convertible

bonds with an aggregate principal amount up to HK$300,000,000 (the “Placing Bonds”) entitling the holders thereof to convert the principal amount thereof into

Adjusted Shares to be issued by the Company (the “Conversion Shares”) at an initial

conversion price of HK$0.18 per Conversion Share (subject to adjustments) and the

issue and allotment of the Conversion Shares upon exercise of the conversion rights

attaching to the Placing Bonds be and are hereby approved; and

NOTICE OF SGM

– 193 –

(ii) the directors of the Company be and are hereby authorised to exercise all the powers

of the Company and take all steps as might in their opinion be desirable, necessary

or expedient in relation to the issue of the Placing Bonds and the issue and allotment

of the Conversion Shares and otherwise in connection with the implementation of the

transactions contemplated under the Placing Agreement including without limitation

to the execution, amendment, supplement, delivery, submission and implementation of

any further documents or agreements.”

4. “THAT:

(i) the making of the repurchase offer by the Company dated 10, 15 and 22 December

2009 respectively (as varied and supplemented by side letters dated 23 December

2009 between the Company and each of the Noteholders who have accepted the

Repurchase Offer) (a copy of which having been produced to the meeting marked

“D” and initialed by the chairman of the meeting for the purpose of identification)

to repurchase the 2% convertible notes due 2011 issued by the Company (the

“Convertible Notes”) from the holders of the Convertible Notes (the “Repurchase Offer”), including either or both of Asia Will Limited and China Enterprises Limited,

at a price payable by the Company in cash equal to 80% of the outstanding principal

amount of the Convertible Notes be and are hereby confirmed, approved and ratified;

and

(ii) the directors of the Company be and are hereby authorised to exercise all the powers

of the Company and take all steps as might in their opinion be desirable or necessary

in connection with the Repurchase Offer.”

By Order of the Board

Wing On Travel (Holdings) LimitedLaw Sau Lai

Company Secretary

Hong Kong, 8 January 2010

Notes:

1. Any shareholder of the Company entitled to attend and vote at a meeting of the Company shall be entitled to appoint

another person as his proxy to attend and vote instead of him. A shareholder who is the holder of two or more shares may

appoint more than one proxy to represent him and vote on his behalf at the meeting of the Company. A proxy need not be a

shareholder of the Company. In addition, a proxy or proxies representing either an individual shareholder or a shareholder

which is a corporation, shall be entitled to exercise the same powers on behalf of the shareholder which he or they represent

as such shareholder could exercise.

2. The instrument appointing a proxy shall be in writing under the hand of the appointor or of his attorney duly authorised in

writing, or if the appointor is a corporation, either under seal or under the hand of an officer or attorney duly authorised.

The instrument appointing a proxy and the power of attorney, or other authority, if any, under which it is signed or notarially

certified copy of the power or authority shall be deposited at the branch share registrar of the Company in Hong Kong, Tricor

Secretaries Limited at 26/F., Tesbury Centre, 28 Queen’s Road East, Wanchai, Hong Kong not less than forty-eight (48)

hours before the time for holding the meeting or adjourned meeting at which the person named in the instrument proposes to

vote, and in default the instrument of proxy shall not be treated as valid.

3. Delivery of an instrument appointing a proxy shall not preclude a shareholder of the Company from attending and voting in

person at the meeting and, in such event, the instrument appointing a proxy shall be deemed to be revoked.

4. Where there are joint holders of any share of the Company, any one of such holders may vote at the meeting, either

personally or by proxy, in respect of such share as if he were solely entitled thereto, but if more than one of such joint

holders be present at the meeting personally or by proxy, then the one of such holders whose name stands first on the register

of members of the Company in respect of such share shall alone be entitled to vote in respect thereof. Several executors

or administrators of a deceased shareholder in whose name any share stands shall for this purpose be deemed joint holders

thereof.

5. A form of proxy for use at the special general meeting is enclosed herewith.