THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION
If you are in any doubt as to any aspect of this circular or as to the action to be taken, you should consult your stockbroker or other registered dealer in securities, bank manager, solicitor, professional accountant or other professional adviser.
If you have sold or transferred all your shares in Kerry Properties Limited, you should at once hand this circular to the purchaser(s) or the transferee(s) or to the bank, stockbroker or other agent through whom the sale or transfer was effected for transmission to the purchaser(s) or the transferee(s).
The Stock Exchange of Hong Kong Limited takes no responsibility for the contents of this circular, makes no representation as to its accuracy or completeness and expressly disclaims any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this circular.
website: www.kerryprops.com (Stock Code: 00683)
MAJOR TRANSACTION
A letter from the board of directors of Kerry Properties Limited is set out on pages 5 to 25 of this circular.
* For identification purpose only
29 December 2004 CONTENTS
Page
Definitions ...... 1
Letter from the Board ...... 5
Appendix I – Accountants’ Report on Treasure Lake...... 26
Appendix II – Accountants’ Report on Eas HK ...... 33
Appendix III − Accountants’ Report on the Eas PRC Group ...... 51
Appendix IV – Financial Information of the Group ...... 93
Appendix V – Unaudited Pro Forma Financial Information of the Enlarged Group ...... 196
Appendix VI – Property Valuation Report ...... 203
Appendix VII – General Information ...... 287
−i− DEFINITIONS
In this circular, unless the context otherwise requires, the following expressions have the following meanings:
“Acquisition” the proposed acquisition by Kerry Logistics from Huatong of (a) Treasure Lake Shares and (b) Eas PRC Shares in accordance with the terms and conditions of the Sale and Purchase Agreement
“Agreed Rate” the exchange rate of HK$1.00 to RMB1.06, being the exchange rate agreed between Kerry Logistics and Huatong for the purpose of the Sale and Purchase Agreement, and unless otherwise stated adopted for use for convenience for the purpose of this circular
“associates” has the meaning as ascribed to it under the Listing Rules
“Beijing Huatong” (Beijing Huatong Chuangzhan Investment Consultancy Co., Ltd.), a wholly foreign owned enterprise established in the PRC on 12 November 2004 and an indirect wholly-owned subsidiary of Eas PRC
“Board” or “Director(s)” the director(s) of the Company
“Business Day” a day on which banks are open for business in Hong Kong (excluding Saturday)
“Company” Kerry Properties Limited, an exempted company incorporated in Bermuda with limited liability, the shares of which are listed on the Main Board of the Stock Exchange
“connected person” has the meaning as ascribed to it under the Listing Rules
“Consideration” the aggregate consideration of the Acquisition in the sum of RMB380,000,000 (equivalent to about HK$358,490,566 based on the Agreed Rate), subject to adjustment in accordance with the terms of the Sale and Purchase Agreement
“DTII” Da Tong International Investments Holdings Ltd. , a company incorporated in Samoa on 23 August 2004 and an indirect wholly-owned subsidiary of Eas PRC
−1− DEFINITIONS
“Eas HK” Eas Da Tong International Aircargo Company Limited ( ), a company incorporated in Hong Kong with limited liability on 11 November 1993 and wholly owned by Treasure Lake
“Eas PRC” (Eas International Transportation Ltd.), a sino-foreign joint venture company established in the PRC on 27 February 1985 and owned as to 50% by Eas HK and 50% by Huatong
“Eas PRC Group” Eas PRC and its subsidiaries, associated companies and other investments, branch offices and representative offices as detailed in the Sale and Purchase Agreement
“Eas PRC Shares” 20% equity interest in Eas PRC
“Enlarged Group” the Company and its subsidiaries upon completion of the Acquisition
“First Announcement” the Company’s announcement dated 24 September 2004 in relation to the Sale and Purchase Agreement and the Acquisition
“First Closing” completion of the sale and purchase of Treasure Lake Shares
“First Closing Conditions” pre-conditions for First Closing as referred to in paragraph (1) of the section headed “Conditions” in the letter from the Board set out in this circular
“First Closing Longstop Date” 31 December 2004
“Group” the Company and its subsidiaries
“HK$” and “HK cents” Hong Kong dollars and cents respectively, the lawful currency of Hong Kong
“HK GAAP” accounting principles generally accepted in Hong Kong
“Hong Kong” the Hong Kong Special Administrative Region of the PRC
“Huatong” (Huatong Industrial Development Co., Ltd.), a state-owned limited liability company established in the PRC
−2− DEFINITIONS
“Kerry Holdings” Kerry Holdings Limited, a company incorporated in Hong Kong with limited liability, which, as at the Latest Practicable Date, was interested in 750,842,646 Shares of the Company as disclosed in the register maintained by the Company under the SFO, representing approximately 62.00% of the 1,211,116,330 issued Shares of the Company as at the Latest Practicable Date
“Kerry Logistics” Kerry Logistics Network Limited, an exempted company incorporated in Bermuda with limited liability and a wholly-owned subsidiary of the Company
“Latest Practicable Date” 24 December 2004, being the latest practicable date prior to the printing of this circular for ascertaining certain information for inclusion in this circular
“Listing Rules” the Rules Governing the Listing of Securities on the Stock Exchange
“MOU” the legally binding memorandum of understanding dated 24 December 2004 between Huatong and Kerry Logistics
“NAV” the consolidated net asset value of the Eas PRC Group as at the date of the First Closing, assuming completion of the Restructuring, as certified by a firm of accountants appointed by Kerry Logistics in accordance with PRC GAAP and in accordance with the provisions of the Sale and Purchase Agreement
“PRC” The People’s Republic of China, excluding, for the purpose of this circular, Hong Kong, the Macao Special Administrative Region of the PRC and Taiwan
“PRC GAAP” relevant accounting rules and regulations applicable in the PRC
“Restructuring” the restructuring of the Eas PRC Group (before the Restructuring) by transferring certain companies, assets and liabilities, into and out of the Eas PRC Group (before the Restructuring) in accordance with the terms and conditions of the Restructuring Agreement
“Restructuring Agreement” the agreement dated 10 November 2004 between Huatong and Eas PRC in relation to the Restructuring
−3− DEFINITIONS
“RMB” Renminbi, the lawful currency of the PRC
“Sale and Purchase Agreement” an agreement dated 20 September 2004 entered into between Huatong and Kerry Logistics in relation to the sale and purchase of Treasure Lake Shares and Eas PRC Shares
“Second Closing” completion of the sale and purchase of Eas PRC Shares
“Second Closing Conditions” pre-conditions for Second Closing as referred to in paragraph (2) of the section headed “Conditions” in the letter from the Board set out in this circular
“Second Closing Longstop Date” the date which is 270 days after the date on which all the First Closing Conditions have been fulfilled or waived
“SFO” Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong)
“Shareholder(s)” holder(s) of the Shares of the Company
“Shares of the Company” ordinary shares of HK$1.00 each in the share capital of the Company
“Shortfall Amount” 70% of the amount by which the NAV is less than RMB357,594,000 (equivalent to about HK$337,352,830 based on the Agreed Rate)
“Stock Exchange” The Stock Exchange of Hong Kong Limited
“Target Group” Treasure Lake, Eas HK and the Eas PRC Group (after the Restructuring)
“Top Business” Top Business Enterprises Limited, a company incorporated in the British Virgin Islands with limited liability on 16 April 2004 and wholly owned by Huatong
“Treasure Lake” Treasure Lake Limited, a company incorporated in the British Virgin Islands with limited liability on 6 May 2004 and wholly owned by Top Business
“Treasure Lake Shares” the entire issued share capital of Treasure Lake
“%” per cent.
−4− LETTER FROM THE BOARD
website: www.kerryprops.com (Stock Code: 00683)
Executive Directors: Registered Office: Mr. ANG Keng Lam (Chairman) Canon’s Court Mr. WONG Siu Kong 22 Victoria Street (Deputy Chairman and Managing Director) Hamilton HM 12 Mr. HO Shut Kan Bermuda Mr. MA Wing Kai, William Head Office and Principal Place Independent Non-executive Directors: of Business in Hong Kong: Mr. William Winship FLANZ 13-14/F., Cityplaza 3 Mr. LAU Ling Fai, Herald 14 Taikoo Wan Road Mr. Christopher Roger MOSS, O.B.E. Taikoo Shing Hong Kong
29 December 2004
To the Shareholders and for information only, the optionholders of Kerry Properties Limited
Dear Sir or Madam,
MAJOR TRANSACTION
INTRODUCTION
On 24 September 2004, the Company announced that Kerry Logistics and Huatong entered into the Sale and Purchase Agreement on 20 September 2004 pursuant to which Kerry Logistics shall purchase or procure the purchase of and Huatong shall sell or procure the sale of Treasure Lake Shares and Eas PRC Shares (as the case may be) at an aggregate consideration of RMB380,000,000 (equivalent to about HK$358,490,566 based on the Agreed Rate), subject to adjustment.
* For identification purpose only
−5− LETTER FROM THE BOARD
THE SALE AND PURCHASE AGREEMENT
Date:
20 September 2004
Parties:
(1) (Huatong Industrial Development Co., Ltd.), a state-owned limited liability company established in the PRC, as vendor
(2) Kerry Logistics Network Limited, a wholly-owned subsidiary of the Company, as purchaser
Assets to be purchased by Kerry Logistics:
Kerry Logistics shall purchase or procure the purchase of and Huatong shall sell or procure the sale of the following:
(1) Treasure Lake Shares, representing 100% of the issued share capital of Treasure Lake at First Closing; and
(2) Eas PRC Shares, representing 20% equity interest in Eas PRC at Second Closing.
According to Jianda Law Firm, one of the Company’s PRC legal advisers, based on current PRC laws and regulations, Kerry Logistics is not required to obtain any prior regulatory approval or comply with any specific restrictions in respect of any subsequent sale of the Treasure Lake Shares. However, as far as the Eas PRC Shares are concerned, any subsequent sale of such equity interest by Eas HK requires prior approval to be obtained from the relevant governmental approval authorities in the PRC and such equity interest may be transferred in accordance with the terms and conditions of the articles of association and joint venture contract of Eas PRC. Any transfer of the Eas PRC Shares is required to be registered with the relevant administration department of industry and commerce in the PRC. Jianda Law Firm has advised the Company that based on current PRC laws and regulations, no specific legal impediment on the obtaining of the relevant approval and the necessary registration in the PRC in respect of any subsequent sale of the Eas PRC Shares is expected because such sale will not affect Eas PRC’s status as a sino-foreign joint venture company in the PRC. In addition, pursuant to the MOU, Huatong shall have a pre-emption right if Kerry Logistics directly or indirectly transfers all or part of its direct or indirect equity interest in Eas PRC or the control thereof to any party not related to Kerry Logistics.
−6− LETTER FROM THE BOARD
Conditions:
(1) First Closing
Completion of the sale and purchase of Treasure Lake Shares is conditional upon:
(a) the passing of resolution(s) by the shareholders of the Company in general meeting or the giving of written approval by a shareholder or a closely allied group of shareholders of the Company together holding more than 50% in nominal value of the Shares of the Company giving the right to attend and vote at general meetings of the Company and acceptance by the Stock Exchange that no general meeting is required to be convened, to approve:
(i) the Acquisition and any connected and/or continuing connected transactions that may arise in connection with the Acquisition; and
(ii) disposal of Treasure Lake Shares to Huatong in accordance with the terms of the Sale and Purchase Agreement in the event that the Second Closing does not take place (details of which are described under the section headed “Repurchase Obligations” below);
in each case, in compliance with the Listing Rules;
(b) due diligence on the legal and financial position and other affairs of Target Group having been completed to Kerry Logistics’ satisfaction;
(c) formal approvals having been issued by relevant governmental approval authorities in the PRC on terms and conditions satisfactory to Kerry Logistics, for amendments to the articles of association and joint venture contract of Eas PRC (such amendment documents shall be in form and substance agreed between the parties), which amendments shall include the change to the composition of the board of directors of Eas PRC (i.e. change to 3 directors of Eas PRC to be nominated by Eas HK and 2 directors of Eas PRC to be nominated by Huatong), and Huatong having reported the proposed transfer of the Treasure Lake Shares under the Sale and Purchase Agreement to the relevant governmental approval authorities in the PRC;
(d) the execution by Huatong and Eas PRC of the Restructuring Agreement;
(e) Huatong successfully procuring such documents in form and substance as are satisfactory to Kerry Logistics to be executed in order to confirm beneficial ownership of companies or entities comprised in the Target Group in accordance with the terms of the Sale and Purchase Agreement, in the event that Kerry Logistics reasonably takes the view that there is insufficient evidence to confirm such ownership;
−7− LETTER FROM THE BOARD
(f) the issuance of a legal opinion addressed to Huatong and copied to Kerry Logistics by Huatong’s PRC legal adviser in form and substance satisfactory to Kerry Logistics, confirming, among other matters, that:
(i) on completion of the Restructuring pursuant to the Restructuring Agreement, the licences, approvals and authorizations obtained by Eas PRC and its subsidiaries, associated companies and other investments, branch offices and representative offices in the PRC as may be required for carrying on their businesses in the PRC as stated in their business licences will not be invalidated, revoked, cancelled or terminated prior to their expiry as a result of the Restructuring;
(ii) the Restructuring is legally valid and will not violate any laws and regulations of the PRC;
(iii) the sale and purchase of Treasure Lake Shares as stipulated under the terms and conditions of the Sale and Purchase Agreement does not require any approvals of any relevant governmental approval authorities in the PRC and does not violate any PRC laws or regulations, and Huatong has reported to the relevant governmental approval authorities in the PRC; and
(iv) upon Second Closing, save as otherwise provided, Eas HK and Huatong will respectively beneficially hold 70% and 30% equity interests in Eas PRC, such holding is legally permissible and will not violate any laws and regulations of the PRC;
(g) there not having been any material breach of the warranties by Huatong under the Sale and Purchase Agreement from the date of the Sale and Purchase Agreement to the date on which the First Closing takes place. In this connection, in relation to any breach of warranty that gives rise to losses that can reasonably be quantified at the time of such breach, material breach means any breach or breaches that involve actual, contingent or potential compensation or damages that are not less than RMB17,000,000 (equivalent to about HK$16,037,736 based on the Agreed Rate) in aggregate;
(h) Huatong having issued an appointment letter to a director of Eas PRC nominated by Eas HK appointing such director as the legal representative of Eas PRC and the board of Eas PRC having passed a board resolution to approve such appointment; and
(i) (if necessary) Eas PRC and/or other members of the Eas PRC Group having given such prior notices or obtained such prior approvals as are required under any loan agreements to which Eas PRC and/or any other members of the Eas PRC Group is a party in relation to any change of control or transfer of any obligation under such loan agreements.
Kerry Logistics is responsible for procuring satisfaction of condition (a) above, which was satisfied as at the Latest Practicable Date and Huatong shall exercise best endeavours to procure satisfaction of all other First Closing Conditions.
−8− LETTER FROM THE BOARD
If any of the First Closing Conditions have not been fulfilled by Huatong or waived by Kerry Logistics in writing on or before the First Closing Longstop Date, Kerry Logistics may at its option (but without prejudice to any right or remedy it may have) by issuing a written notice to Huatong:
(i) waive any of such conditions; and/or
(ii) extend the First Closing Longstop Date to such other date as Kerry Logistics may determine; and/or
(iii) terminate the Sale and Purchase Agreement without prejudice to any accrued rights.
As at the Latest Practicable Date, all First Closing Conditions (except (e), (f), (h) and (i)) had been satisfied and First Closing Condition (h) had been waived by the Company as the Ministry of Commerce of the PRC has approved the articles of association and joint venture contract of Eas PRC dated 8 November 2004 pursuant to which the right to appoint the legal representative of Eas PRC lies with Eas HK instead of Huatong. A further announcement will be made by the Company on the First Closing, and it will be stated in that announcement if any of the other First Closing Conditions have been waived.
(2) Second Closing
Completion of the sale and purchase of Eas PRC Shares is conditional upon:
(a) any First Closing Condition waived by Kerry Logistics (if such condition is conditionally waived, any relevant conditions attaching to such waiver) being fulfilled;
(b) the Restructuring having been duly completed in accordance with the terms of the Restructuring Agreement and the accounts of Eas PRC having been adjusted, including but not limited to Eas PRC and its subsidiaries, associated companies and other investments, branch offices and representative offices at the time of completion of the Restructuring having on completion of the Restructuring obtained all necessary licences, approvals and authorizations required in the PRC for their businesses carried on at the date of the Sale and Purchase Agreement, and all transfer agreements or other documents implementing the Restructuring Agreement having been executed in such form and substance satisfactory to Kerry Logistics;
(c) formal approvals having been issued by relevant governmental approval authorities in the PRC (including the State-Owned Assets Administration Commission and the Ministry of Commerce of the PRC) on terms and conditions satisfactory to Kerry Logistics, for:
(i) the sale and purchase of the Eas PRC Shares; and
−9− LETTER FROM THE BOARD
(ii) amendments to the articles of association and joint venture contract of Eas PRC in relation to the Second Closing, including the change to the composition of the board of directors of Eas PRC (i.e. change to 6 directors of Eas PRC to be nominated by Eas HK and 3 directors of Eas PRC to be nominated by Huatong) and (if not already approved) the appointment of the legal representative of Eas PRC by Eas HK (such amendment documents shall be in form and substance agreed between the parties);
(d) the issuance of a legal opinion addressed to Huatong and copied to Kerry Logistics by Huatong’s PRC legal adviser in form and substance satisfactory to Kerry Logistics, confirming, among other matters, that:
(i) the Restructuring has been legally and validly completed in accordance with all relevant PRC laws and regulations;
(ii) as stipulated in (c) above, all relevant PRC governmental approval authorities have, in accordance with terms and conditions satisfactory to Kerry Logistics, issued approvals or authorizations to approve the sale and purchase of the Eas PRC Shares and amendments to the articles of association and joint venture contract of Eas PRC, including the change to the composition of the board of directors of Eas PRC (i.e. change to 6 directors of Eas PRC to be nominated by Eas HK and 3 directors of Eas PRC to be nominated by Huatong) and (if not already approved) the appointment of the legal representative of Eas PRC by Eas HK; and
(iii) when the approvals or authorizations have been issued by all relevant governmental approval authorities in the PRC (including the State-Owned Assets Administration Commission and the Ministry of Commerce of the PRC) as described in (c) above, all registrations as required for the transfer of Eas PRC Shares by Huatong to Eas HK can be validly completed (including but not limited to the issuance of a new business licence to Eas PRC by the State Administration of Industry and Commerce), and there is no legal obstacle to the due completion of the relevant registration;
(e) the auditors of Kerry Logistics having issued to Kerry Logistics and Huatong a statement relating to, inter alia, the NAV; and
(f) there has not been any material breach by Huatong from the date of the Sale and Purchase Agreement to the date on which the Second Closing takes place, of those warranties under the Sale and Purchase Agreement which are expressly stated to relate to the period up to and including the Second Closing. In this connection, in relation to any breach of warranty that gives rise to losses that can reasonably be quantified at the time of such breach, material breach means any breach or breaches that involve actual, contingent or potential compensation or damages that are not less than RMB17,000,000 (equivalent to about HK$16,037,736 based on the Agreed Rate) in aggregate.
−10− LETTER FROM THE BOARD
Huatong shall exercise best endeavours to procure satisfaction of all the Second Closing Conditions.
If any of the Second Closing Conditions have not been fulfilled by Huatong or waived by Kerry Logistics in writing on or before the Second Closing Longstop Date, Kerry Logistics may at its option (but without prejudice to any right or remedy it may have) by notice to Huatong:
(i) waive any of such conditions; and/or
(ii) extend the Second Closing Longstop Date to such other date as Kerry Logistics may determine; and/or
(iii) terminate the Sale and Purchase Agreement without prejudice to any accrued rights.
With respect to Second Closing Condition (c) above, Huatong has provided the Company with a copy of the approval dated 6 December 2004 and issued by the Ministry of Commerce of the PRC with respect to (i) the transfer of the Eas PRC Shares from Huatong to Eas HK so that Eas PRC shall be owned as to 30% by Huatong and 70% by Eas HK and (ii) the approval of the articles of association and joint venture contract of Eas PRC dated 8 November 2004. As at the Latest Practicable Date, none of the other Second Closing Conditions had been satisfied. A further announcement will be made by the Company on the Second Closing and it will be stated in that announcement if any of the Second Closing Conditions have been waived.
If any Second Closing Conditions are not satisfied or fulfilled and the Sale and Purchase Agreement is terminated by Kerry Logistics, Huatong is obliged to repurchase the Treasure Lake Shares sold to Kerry Logistics at the First Closing as disclosed in the section headed “Repurchase Obligations” below. The Company will comply with all relevant Listing Rules requirements in relation thereto.
The legal representative (who is also the chairman of the board of directors under PRC law) of Eas PRC does not have a casting vote. Pursuant to the Sale and Purchase Agreement: (a) at or before the First Closing, the number of directors of Eas PRC to be nominated by Eas HK will be changed from 1 to 3, and the number of directors of Eas PRC to be nominated by Huatong will be changed from 4 to 2; and (b) at or before the Second Closing, the number of directors of Eas PRC to be nominated by Eas HK will be changed from 3 (as changed at First Closing) to 6, and the number of directors of Eas PRC to be nominated by Huatong will be changed from 2 (as changed at First Closing) to 3.
Consideration:
The aggregate consideration of the Acquisition is RMB380,000,000 (equivalent to about HK$358,490,566 based on the Agreed Rate), subject to adjustment.
−11− LETTER FROM THE BOARD
If the NAV of the Eas PRC Group as at First Closing is less than RMB357,594,000 (equivalent to about HK$337,352,830 based on the Agreed Rate), the Consideration shall be adjusted by the Shortfall Amount. If the Shortfall Amount is less than RMB90,000,000 (equivalent to about HK$84,905,660 based on the Agreed Rate), Kerry Logistics shall, upon Second Closing, pay the balance of the Consideration after deducting the Shortfall Amount to Huatong. If the Shortfall Amount exceeds RMB90,000,000 (equivalent to about HK$84,905,660 based on the Agreed Rate), Kerry Logistics shall not be required to pay the balance of the Consideration, and Huatong shall pay to Kerry Logistics the amount of the Shortfall Amount exceeding the balance of the Consideration in cash at Second Closing.
The adjustment to the Consideration referred to above will only be made at the Second Closing but if the Second Closing does not take place in the circumstances mentioned in the section headed “Repurchase Obligations” below, the First Closing has to be unwound and such adjustment will no longer be relevant.
Basis of Consideration:
The total consideration for the Acquisition has been determined after arm’s length negotiations between Kerry Logistics and Huatong with reference to the financial information including the audited financial statements prepared in accordance with PRC accounting policies and standards of the Eas PRC Group (before the Restructuring) for the years ended 31 December 2002 and 31 December 2003 and the unaudited financial statements prepared in accordance with PRC accounting policies and standards of the Eas PRC Group (before the Restructuring) for the period from 1 January 2004 up to 30 June 2004, submitted by Huatong to Kerry Logistics for the purpose of the due diligence, after making necessary adjustments in accordance with the accounting policies of the Company and Hong Kong accounting standards, and the necessary adjustments to reflect the effect of the Restructuring. The results and net asset value of Treasure Lake and Eas HK were excluded by the Company when assessing the price earnings multiple and the acquisition premium of the Acquisition as both Treasure Lake and Eas HK has no operation except in relation to holding the shares in Eas HK and Eas PRC respectively.
Based on the financial information referred to above submitted by Huatong to Kerry Logistics for the purpose of the due diligence, after making the relevant adjustments in accordance with the accounting policies of the Company and Hong Kong accounting standards and the necessary adjustments to effect the Restructuring:
(a) the Consideration represents about 9.8 times of 70% of the average unaudited profit after taxation and extraordinary items of the Eas PRC Group for the years ended 31 December 2002 (RMB19,927,000 (equivalent to about HK$18,799,000 based on the Agreed Rate)) and 31 December 2003 (RMB42,386,000 (equivalent to about HK$39,987,000 based on the Agreed Rate)) and for the period from 1 January 2004 up to 30 June 2004 (RMB26,898,000 (equivalent to about HK$25,375,000 based on the Agreed Rate)) assuming completion of the Restructuring and after making necessary adjustments in accordance with the accounting policies of the Company and Hong Kong accounting standards. The average figure is calculated by adding the two full year figures and two times the six-month figure, and dividing the aggregate by three; and
−12− LETTER FROM THE BOARD
(b) the Consideration also represents an acquisition premium of about RMB100,964,000 (equivalent to about HK$95,249,000 based on the Agreed Rate) over RMB279,036,000 (equivalent to about HK$263,242,000 based on the Agreed Rate), being 70% of the unaudited net asset value of the Eas PRC Group as at 30 June 2004 assuming completion of the Restructuring and after making necessary adjustments in accordance with the accounting policies of the Company and Hong Kong accounting standards.
With reference to the accountants’ report on the Eas PRC Group (before the Restructuring) as set out in Appendix III to this circular, the price earnings multiple becomes 8.9 which is based on 70% of the average audited profit after taxation and extraordinary items of the Eas PRC Group (before the Restructuring) prepared under HK GAAP for the years ended 31 December 2002 (RMB21,577,000 (equivalent to about HK$20,356,000 based on the Agreed Rate)) and 31 December 2003 (RMB52,063,000 (equivalent to about HK$49,116,000 based on the Agreed Rate)) and the period from 1 January 2004 up to 30 June 2004 (RMB27,229,000 (equivalent to about HK$25,688,000 based on the Agreed Rate)). The operating results corresponding to various companies, assets and liabilities within the Eas PRC Group in connection with the Restructuring do not materially affect the price earnings multiple.
With reference to the unaudited pro forma financial information of the Enlarged Group as set out in Appendix V to this circular, the unaudited pro forma acquisition premium is about RMB129,684,000 (equivalent to about HK$122,343,000 based on the Agreed Rate), which is calculated based on the Consideration and the Group’s share of the book value of the assets and liabilities of the Eas PRC Group as at 30 June 2004 after adjusting for the Restructuring and the revaluation adjustment on the land and buildings of Eas PRC based on the independent professional valuation as at 30 June 2004 set out in Appendix VI to this circular as if the Acquisition had taken place on 30 June 2004. The final acquisition premium shall be determined based on the NAV of the Eas PRC Group as at First Closing.
As the future prospects of the Eas PRC Group lie in its ability to generate earnings, the Company considers that a 8.9 average price earnings multiple is a reasonable yardstick in valuing the Acquisition. In addition, the Company has taken into account that the Eas PRC Group is a long-established and leading international freight forwarding and logistics services provider in the PRC with a well-developed Pan-China operation network and a portfolio of properties which consists of properties of high quality with potential of further appreciation. Further, the Company considers that there is no relevant market price or transaction that may be used for comparison with the Acquisition or for evaluating the terms of the Acquisition. In view of the above and also the potential synergy of the Eas PRC Group (after the Restructuring) with the existing logistics businesses of the Group, the Company considers that such acquisition premium and price earnings multiple are fair and reasonable.
−13− LETTER FROM THE BOARD
Payment Terms:
The Consideration shall be paid by Kerry Logistics in the following manner:
(1) upon the signing of the Sale and Purchase Agreement, a deposit in the sum of HK$179,450,000 (equivalent to about RMB190,217,000 based on the Agreed Rate) has been paid to Huatong. The deposit shall be refunded in full to Kerry Logistics without interest (but without prejudice to any accrued rights of Kerry Logistics) if the First Closing does not take place as a result of any of the First Closing Conditions not being fulfilled or waived, or as a result of a termination of the Sale and Purchase Agreement by Kerry Logistics on account of any breach of obligations on the part of Huatong in accordance with the terms of the Sale and Purchase Agreement;
(2) at First Closing, Kerry Logistics shall pay HK$94,134,906 (equivalent to about RMB99,783,000 based on the Agreed Rate) to Huatong; and
(3) at Second Closing, Kerry Logistics shall pay RMB90,000,000 (equivalent to about HK$84,905,660 based on the Agreed Rate) to Huatong, subject to deduction of the Shortfall Amount, if any.
The obligations of Huatong to refund the deposit aforementioned to Kerry Logistics in the circumstances mentioned in paragraph (1) above is secured, inter alia, upon a pledge of the Treasure Lake Shares by Top Business in favour of a wholly-owned subsidiary of Kerry Logistics. Subject to First Closing taking place, the pledge will be discharged as a result of First Closing.
It is currently expected that the part of the Consideration payable on First Closing will be funded by the internal cash reserves of the Group and the part of the Consideration payable on Second Closing will be funded by the internal cash reserves of the Group and/or existing bank facilities of the Group.
Completion:
(1) First Closing will take place on the third Business Day or such later date as Kerry Logistics may determine after the date on which all the First Closing Conditions have been fulfilled or waived.
The First Closing Longstop Date is 31 December 2004.
The Company intends the First Closing to take place as soon as possible after the despatch of this circular and on or before the First Closing Longstop Date.
(2) Second Closing will take place on the third Business Day or such later date as Kerry Logistics may determine after the date on which all the Second Closing Conditions have been fulfilled or waived.
−14− LETTER FROM THE BOARD
The Second Closing Longstop Date is the date which is 270 days after the date on which all the First Closing Conditions have been fulfilled or waived.
Bearing in mind that approval has already been given by the Ministry of Commerce of the PRC with respect to the transfer of the Eas PRC Shares from Huatong to Eas HK so that Eas PRC shall be owned as to 30% by Huatong and 70% by Eas HK and the approval of the articles of association and joint venture contract of Eas PRC dated 8 November 2004, the Company intends the Second Closing to take place as soon as possible after the First Closing, subject to satisfaction and/or waiver of all other relevant Second Closing Conditions.
Restructuring:
The Eas PRC Group comprises the operating entities within the Target Group. The Eas PRC Group (before the Restructuring) currently undertakes certain activities which are not directly connected or have no business synergy with its existing logistics businesses. As a result, Huatong has undertaken to procure a Restructuring of the Eas PRC Group (before the Restructuring) in accordance with the restructuring plan referred to in the Sale and Purchase Agreement or as may be otherwise agreed in writing by Kerry Logistics and Huatong so as to streamline its logistics businesses for acquisition by Kerry Logistics. An outline restructuring plan is set out in the Sale and Purchase Agreement. The Sale and Purchase Agreement provides that details of the Restructuring and its implementation will be set out in the Restructuring Agreement, the conclusion of which is a First Closing Condition.
The Restructuring Agreement was entered into by Huatong and Eas PRC on 10 November 2004. Pursuant to the Restructuring Agreement, various companies, assets and liabilities that are not directly connected or have no business synergy with the logistics businesses that Kerry Logistics aims to acquire will be transferred out of the Eas PRC Group (before the Restructuring) in accordance with the terms of the Restructuring Agreement. Such assets and liabilities will be carved out from the Eas PRC Group at their book value as at 30 November 2004. These assets and liabilities will be transferred to Huatong, a Huatong nominee company or Beijing Huatong, a wholly-owned subsidiary of DTII, which in turn is held by a wholly- owned subsidiary of Eas PRC (as the case may be). DTII will ultimately be transferred to Huatong at book value. Pursuant to the MOU, Huatong warrants and undertakes to Kerry Logistics that it shall procure the completion of the transfer of all the issued shares of DTII to Huatong within 3 months of completion of the transfer of the relevant assets to Beijing Huatong. The investment in DTII will be stated at cost in the Eas PRC Group’s accounts before completion of the said transfer as DTII was incorporated solely for the purpose of carrying out the Restructuring and is not held for long term investment purpose.
In addition, Huatong has agreed in the MOU that it shall procure a 30% equity interest in (Huahan (Tianjin) Container Co., Ltd.) (“Huahan Tianjin”), which is being equity accounted for in Eas PRC’s accounts, to be legally transferred to Eas PRC as soon as practicable. Huahan Tianjin is principally engaged in container business in Tianjin, the PRC, and international container business. Although the 30% equity interest in
−15− LETTER FROM THE BOARD
Huahan Tianjin is not registered in the name of Eas PRC, Eas PRC is represented on the board of Huahan Tianjin and has received dividends paid by Huahan Tianjin as if it were the registered holder of the 30% equity interest in Huahan Tianjin.
Further, a vehicle related to the logistics businesses that Kerry Logistics aims to acquire will be transferred from Huatong to the Eas PRC Group at net book value as at 30 November 2004 in the sum of approximately RMB119,000 (equivalent to approximately HK$112,264 based on the Agreed Rate).
Pursuant to the Restructuring Agreement, various transfer agreements have been executed to effect the Restructuring. The Restructuring Agreement contains provisions to the effect that where further steps are required to be taken in order to complete and perfect the relevant transfers under law, such steps shall be taken as quickly as possible and Huatong has further agreed to indemnify Eas PRC for any economic loss sustained by the Eas PRC Group on account of its holding any assets to be carved out from the Eas PRC Group until all such steps have been taken.
Pursuant to the Sale and Purchase Agreement, Huatong is entitled to the distributable profits of the Eas PRC Group (less any tax payable in connection with the distribution thereof) before the First Closing, subject to deducting therefrom any amounts payable by Huatong on account of any assets transferred to Huatong or its nominee under the Restructuring or any other deductions agreed to by Huatong.
According to the Restructuring Agreement, Eas PRC has to declare distribution of profits in the total sum of RMB193,607,033.16 (equivalent to approximately HK$182,648,144 based on the Agreed Rate), of which RMB158,498,835.16 (equivalent to approximately HK$149,527,203 based on the Agreed Rate) has been declared on 29 September 2004. All such distribution of profits will be paid to Huatong only and the distribution of profits will be set off against the net amount payable by Huatong or its nominee to the Eas PRC Group in respect of the assets and liabilities transferred pursuant to the Restructuring. It is expected that after such set-off, there will be a net balance payable to Huatong and such balance will be payable in cash. Based on the information as shown in the unaudited pro forma financial information of the Enlarged Group set out in Appendix V to this circular, the net amount payable, after set-off, would be HK$46,274,000 as at 30 June 2004.
The actual amount payable to Huatong will be determined by a completion audit to be conducted as soon as possible following the First Closing. Pursuant to the MOU, Huatong and Eas PRC have agreed that RMB5,000,000 shall be distributed in each of the financial years ending 31 December 2005 and 2006, and it is expected that such distribution of profits will be funded from the internal cash reserves of Eas PRC. The time of payment of the further distribution of profits has not been determined and neither the Restructuring Agreement nor the MOU prescribes a deadline for payment. A valid resolution of the board of Eas PRC will be required to determine the time and terms of payment thereof taking into account the cash reserves and other working capital requirements of Eas PRC at the time.
Pursuant to the Sale and Purchase Agreement, Huatong has agreed to indemnify Kerry Logistics and each member of the Target Group in full in respect of all losses, costs, expenses and other responsibilities and liabilities, arising from any legal liabilities due to the Restructuring.
−16− LETTER FROM THE BOARD
Unless waived by Kerry Logistics, it is a Second Closing Condition that the Restructuring must have been completed in accordance with the terms of the Restructuring Agreement.
Repurchase Obligations:
It is the intention of Kerry Logistics to acquire, through the First Closing and the Second Closing, an effective interest of 70% in Eas PRC, the remaining 30% of which will be held by Huatong.
On that basis, the Sale and Purchase Agreement provides that if after the First Closing, the Second Closing does not take place either on account of (a) any Second Closing Conditions not having been satisfied or fulfilled and Kerry Logistics terminates the Sale and Purchase Agreement or (b) Kerry Logistics terminates the Sale and Purchase Agreement pursuant to the terms thereof on account of a breach or default by Huatong, Huatong shall be obliged to purchase or procure Top Business to purchase from Kerry Logistics (or its wholly-owned subsidiary) the Treasure Lake Shares sold by Huatong pursuant to the First Closing.
Completion of the repurchase shall take place within 30 days or such later date as Kerry Logistics may determine after termination of the Sale and Purchase Agreement by Kerry Logistics as mentioned above. The consideration for the repurchase payable to Kerry Logistics is HK$273,584,906 (equivalent to about RMB290,000,000 based on the Agreed Rate).
The Sale and Purchase Agreement also provides that in the event of such termination, Huatong shall indemnify Kerry Logistics for all costs and expenses incurred by Kerry Logistics in connection with the negotiation, preparation, signing or termination of the Sale and Purchase Agreement or the Acquisition (including all due diligence expenses) or costs and expenses incurred in respect of satisfying any pre-conditions (including legal, accounting and other professional fees).
Kerry Logistics intends to exercise its right to unwind the First Closing if the Second Closing does not take place.
A further announcement will be made by the Company in the event that the Second Closing does not take place and the First Closing has to be unwound.
−17− LETTER FROM THE BOARD
COMPANY AND OWNERSHIP STRUCTURE
The following charts summarise the existing structure of the Target Group, and how that structure will change immediately following the First Closing and the Second Closing.
Existing structure of the Target Group
Huatong
100% (indirect)
Top Business
100%
Treasure Lake 50%
100%
Eas HK
50%
Eas PRC
−18− LETTER FROM THE BOARD
Structure of the Target Group immediately after First Closing
The Company
100%
Kerry Logistics
100% (indirect)
Treasure Lake
100%
Huatong Eas HK
50% 50% (see Note)
Eas PRC
Note: The Company has been advised by Jianda Law Firm, one of its PRC legal advisers, that the transfer of the Eas PRC Shares has already been approved by the Ministry of Commerce of the PRC and the title of the Eas PRC Shares will only be transferred to Eas HK upon the issue of the amended business licence of Eas PRC. This will only be carried out subject to and conditional upon the Second Closing taking place.
Structure of the Target Group immediately after Second Closing
The Company
100%
Kerry Logistics
100% (indirect)
Treasure Lake
100%
Huatong Eas HK
30% 70%
Eas PRC
−19− LETTER FROM THE BOARD
INFORMATION ABOUT THE BUSINESS OF THE TARGET GROUP
The Target Group (whether before or after the Restructuring) is principally engaged in the business of supply chain management services in China including international and domestic freight forwarding, marine transportation, international and domestic express services, Pan-China warehousing and distribution, exhibition and bonded logistics centres.
Treasure Lake is wholly owned by Top Business (which is an indirect wholly-owned subsidiary of Huatong) and holds the entire issued share capital of Eas HK, which in turn holds a 50% equity interest in Eas PRC. The other 50% equity interest in Eas PRC is directly held by Huatong.
Treasure Lake was incorporated in the British Virgin Islands on 6 May 2004 for the purpose of holding the shares in Eas HK. Eas HK was incorporated in Hong Kong on 11 November 1993 and it was engaged in freight forwarding business up to 25 March 2002 when such business was transferred to one of Eas PRC’s indirect subsidiaries. Eas HK has been engaged in investment holding for each of the two years ended 25 December 2001 and 2002, the period from 26 December 2002 to 31 December 2003 and the six months ended 30 June 2004 and it holds a 50% interest in Eas PRC, which was established in the PRC on 27 February 1985. The Eas PRC Group (after the Restructuring) represents the principal assets and liabilities and the operations and business of the Target Group.
Based on information provided to the Company by Huatong for the due diligence, Eas HK and Huatong became investors of Eas PRC in 1996 and 1997 respectively. Eas PRC was formerly owned as to 25% and 75% by Eas HK and Huatong respectively and pursuant to the articles of association and joint venture contract of Eas PRC both dated 11 December 2002, each of Eas HK and Huatong has been holding 50% of Eas PRC. As disclosed in the accountants’ report on the Eas PRC Group set out in Appendix III to this circular, the directors of Eas PRC regard Huatong as the ultimate holding company of Eas PRC as at the date of the accountants’ report.
As disclosed in the accountants’ report on Eas HK set out in Appendix II to this circular, the directors of Eas HK regard Huatong as the ultimate holding company of Eas HK as at 25 December 2001 and Shanghai Industrial Investment (Holdings) Company Limited as the ultimate holding company of Eas HK as at 25 December 2002, 31 December 2003 and 30 June 2004. To the best of the Directors’ knowledge, information and belief and having made all reasonable enquiry, Shanghai Industrial Investment (Holdings) Company Limited and the ultimate beneficial owner of Shanghai Industrial Investment (Holdings) Company Limited were, as at the date of the Sale and Purchase Agreement and up to the Latest Practicable Date, third parties independent of the Company. On 2 July 2004, the directors of Eas HK resolved that within three business days after receipt of the distribution of profits for the 2002 and 2003 financial years from Eas PRC of not less than HK$25,936,702.22, to distribute an interim dividend of not less than HK$25,936,702 payable in cash to the shareholders of Eas HK as of 1 June 2004.
The accountants’ reports on Treasure Lake, Eas HK and the Eas PRC Group (before the Restructuring) are set out in Appendix I, Appendix II and Appendix III to this circular respectively.
−20− LETTER FROM THE BOARD
Pursuant to the Restructuring Agreement, the unaudited net book value of the transferred assets and liabilities under the Restructuring as at 30 June 2004 amounted to RMB99,116,000. The unaudited turnover, profit before tax and profit after tax corresponding to the investments carved out from the Eas PRC Group in connection with the Restructuring were Nil, Nil and Nil respectively for the year ended 31 December 2001; RMB37,590,000, RMB509,000 and RMB509,000 respectively for the year ended 31 December 2002; RMB141,354,000, RMB1,441,000 and RMB1,224,000 respectively for the year ended 31 December 2003; and RMB62,960,000, RMB256,000 and RMB211,000 respectively for the six months ended 30 June 2004.
The unaudited depreciation and amortisation expenses corresponding to the assets carved out from the Eas PRC Group in connection with the Restructuring for the year ended 31 December 2001, 31 December 2002, 31 December 2003 and the six months ended 30 June 2004 were RMB2,043,000, RMB2,298,000, RMB2,298,000 and RMB1,160,000 respectively.
INFORMATION ABOUT HUATONG
Huatong is a state-owned limited liability company established in the PRC and its permitted business scope includes high technology development; sales of construction materials, equipment and metres, chemical engineering products, automobile accessories, daily necessities; research on, and manufacture and sales of, rubbers, plastics, leather goods and glass products; and provision of consultation services on cultivation technologies.
To the best of the Directors’ knowledge, information and belief and having made all reasonable enquiry, Huatong and the ultimate beneficial owner of Huatong were, as at the date of the Sale and Purchase Agreement and up to and including the Latest Practicable Date, third parties independent of the Company and connected persons of the Company.
INFORMATION ABOUT THE GROUP
The Group is principally engaged in (a) property development and investment in Hong Kong, the PRC and the Asia Pacific region; (b) logistics, freight forwarding, warehouse ownership and operations; (c) infrastructure related investment in Hong Kong and the PRC; and (d) hotel ownership in the PRC.
REASONS FOR AND BENEFITS OF THE ACQUISITION
One of the main businesses of the Group is logistics, freight forwarding, and warehouse ownership and operations. The Group, through its logistics network division, carries on logistics, distribution and freight forwarding business in the PRC. The Eas PRC Group is a long-established and leading international freight forwarding and logistics services provider in the PRC with a well-developed Pan-China operation network and a portfolio of properties which consists of properties of high quality with potential of further appreciation.
The Directors considers that the terms of the Acquisition are fair and reasonable and are in the interests of the Company and its shareholders as a whole. The Directors therefore recommend the Shareholders to vote for the resolution approving the Acquisition.
−21− LETTER FROM THE BOARD
As discussed in the section headed “Major Transaction” below, the consolidated turnover of the Eas PRC Group (before the Restructuring) represented approximately 53.63% of the consolidated turnover of the Group for the year ended 31 December 2003. Although the consolidated turnover of the Target Group should be reduced as a result of the Restructuring, the reduction is not significant and will not have a material effect on this ratio.
The consolidated net profit before tax (excluding revaluation deficits and provisions amounting to approximately HK$471 million) and the consolidated net profit after tax and minority interests (excluding revaluation deficits, provisions and deferred tax credits amounting to approximately HK$429 million) of the Group for the year ended 31 December 2003 amounted to approximately HK$1,043 million and HK$824 million respectively. According to the accountants’ report on the Eas PRC Group set out in Appendix III to this circular, the consolidated net profit before tax and the consolidated net profit after tax of the Eas PRC Group for the year ended 31 December 2003 amounted to approximately RMB102 million and RMB74 million respectively (equivalent to about HK$96 million and HK$70 million respectively based on the Agreed Rate), representing approximately 9.2% and 8.5% respectively of the consolidated net profit before tax (excluding revaluation deficits and provisions) and the consolidated net profit after tax and minority interests (excluding revaluation deficits, provisions and deferred tax credits) of the Group for the year ended 31 December 2003. As the operating results corresponding to various companies, assets and liabilities within the Eas PRC Group in connection with the Restructuring are not material to the results of the Eas PRC Group for the year ended 31 December 2003, the Restructuring will not have a material effect on the above ratios.
Nevertheless, the Acquisition is not expected to have material impact on the profits and turnover of the Group for the year ending 31 December 2004.
The Acquisition is a strategic step in the expansion and consolidation of the logistics businesses of the Group. It will enable the Group to further expand its business in China and strengthen its Pan-China logistics network.
COMPLIANCE WITH THE LISTING RULES
Upon the First Closing, the Company will hold, through Eas HK, 50% of Eas PRC. Upon the Second Closing, the Company will hold, through Eas HK, 70% of Eas PRC.
Major Transaction:
The consolidated turnover of the Group for the year ended 31 December 2003 was HK$4,204,466,000. Based on the accountants’ report on the Eas PRC Group (before the Restructuring) as set out in Appendix III to this circular, the consolidated turnover of the Eas PRC Group (before the Restructuring), which approximates the consolidated turnover of the Target Group (before the Restructuring), for the year ended 31 December 2003 was about
−22− LETTER FROM THE BOARD
RMB2,390,356,000 (equivalent to about HK$2,255,053,000 based on the Agreed Rate), which represented approximately 53.63% of the consolidated turnover of the Group for the year ended 31 December 2003. Although the consolidated turnover of the Target Group (before the Restructuring) should be reduced as a result of the Restructuring, the difference does not materially affect the revenue ratio and the Acquisition constitutes a major transaction for the Company under Chapter 14 of the Listing Rules.
Connected Transactions:
It is a First Closing Condition that a majority of the board of directors of Eas PRC will be appointed and be subject to removal by Eas HK which will become a wholly-owned subsidiary of the Company upon the First Closing. As a result, it is anticipated that upon First Closing, Eas PRC will be regarded as a subsidiary of the Company for the purpose of the Companies Ordinance (Cap. 32 of the Laws of Hong Kong) and the Listing Rules, notwithstanding that the Company only holds, through Eas HK, 50% of Eas PRC. A decision on whether to consolidate the accounts of the Eas PRC Group to the Company’s accounts between the First Closing and the Second Closing will be made in consultation with the Company’s auditors after the First Closing. A further announcement will be made by the Company after such a decision has been made.
After the First Closing and the Second Closing, Huatong will be a controlling shareholder (within the meaning of the Listing Rules) of Eas PRC and it will become a connected person of the Company only by virtue of it becoming a substantial shareholder (within the meaning of the Listing Rules) of Eas PRC. Eas PRC will become a non wholly-owned subsidiary of the Company after the First Closing and the Second Closing. However, since (a) there are no connected persons of the Company (other than at the level of its subsidiaries) as defined under Rules 14A.11(1) to (4) of the Listing Rules who are individually or together entitled to exercise, or control the exercise of, 10% or more of the voting power at any general meeting of Eas PRC and (b) Huatong is not an associate of any of the directors of Eas PRC nominated by Huatong, Eas PRC will not be regarded as a connected person of the Company as a result of the First Closing or the Second Closing.
However, transactions between (a) Huatong and other substantial shareholders of the non wholly-owned subsidiaries of Eas PRC on the one hand and (b) members of the Enlarged Group on the other hand after the First Closing and the Second Closing may constitute connected and/or continuing connected transactions under Chapter 14A of the Listing Rules. Based on the Company’s due enquiries and investigations, there will not be any such connected transactions and all the relevant continuing connected transactions are exempt from the independent shareholders’ approval requirements under Chapter 14A of the Listing Rules as they fall within the de minimis exemptions under Rules 14A.33(3) and 14A.34 of the Listing Rules respectively and only some of such continuing connected transactions may be subject to the reporting and announcement requirements under Chapter 14A of the Listing Rules as each of the percentage ratios (other than the profits ratio) in respect of each of such transactions is on an annual basis less than 2.5%. The Company will make appropriate announcement in connection with such continuing connected transactions in compliance with the Listing Rules after the First Closing.
−23− LETTER FROM THE BOARD
APPROVAL FROM MAJOR SHAREHOLDER
Pursuant to the Listing Rules, shareholders’ approval is required for the Acquisition (including the disposal of Treasure Lake Shares to Huatong in accordance with the terms of the Sale and Purchase Agreement in the event that the Second Closing does not take place). To the best of the Directors’ knowledge, information and belief having made all reasonable enquiries, none of the Shareholders or their respective associates (other than through the Company and Kerry Logistics) have any material interest in the Acquisition. As no Shareholder is required to abstain from voting if the Company were to convene a general meeting for approving the Acquisition and the accountants’ reports on Treasure Lake, Eas HK and the Eas PRC Group are not subject to any qualified opinion, pursuant to Rule 14.44 of the Listing Rules, in lieu of holding a general meeting, shareholders’ written approval has been obtained on 23 December 2004 from a closely allied group of Shareholders whose names appear on the registers of members of the Company and who, as at the Latest Practicable Date, held approximately 52.85% in nominal value of the Shares of the Company then in issue giving the right to attend and vote at that general meeting of the Company (if the Company were to convene one), approving the Acquisition (including the disposal of Treasure Lake Shares to Huatong in accordance with the terms of the Sale and Purchase Agreement in the event that the Second Closing does not take place).
The respective names and shareholdings in the Company as at the Latest Practicable Date of the abovesaid Shareholders are as follows:
Percentage of aggregate interests to total number of Number of the Company’s the Company’s ordinary shares in Name of Shareholder ordinary shares issue (%)
Caninco Investments Limited 303,891,879 25.09 Darmex Holdings Limited 250,024,187 20.65 Moslane Limited 86,150,350 7.11
Total: 640,066,416 52.85
Caninco Investments Limited, Darmex Holdings Limited and Moslane Limited are wholly-owned subsidiaries of Kerry Holdings and would together be regarded as “acting in concert” for the purposes of the Hong Kong Code on Takeovers and Mergers. Each of these Shareholders has been a Shareholder for not less than two years and they have voted in the same direction in the past on shareholders’ resolutions other than routine resolutions at an annual general meeting of the Company.
−24− LETTER FROM THE BOARD
ADDITIONAL INFORMATION
Shareholders should note that there are certain material differences in respect of the financial information about Eas HK and the Eas PRC Group between this circular and the First Announcement. Further disclosure of such differences by way of a further announcement and inclusion of such information in a supplemental circular to Shareholders will be appropriately made.
Where there are differences between the financial information set out in this circular as against the First Announcement, Shareholders should refer to the financial information set out in this circular instead. Shareholders should also note that none of such differences affects the classification of the transaction contemplated under the Sale and Purchase Agreement for the purpose of the Listing Rules.
The Company will provide to Shareholders such additional information as may be required under Rule 4.29 of the Listing Rules in respect of the pro forma financial information as disclosed in the First Announcement as soon as practicable.
Your attention is drawn to the information set out in the appendices to this circular.
Yours faithfully, For and on behalf of Kerry Properties Limited Ang Keng Lam Chairman
−25− APPENDIX I ACCOUNTANTS’ REPORT ON TREASURE LAKE
The following is the text of a report, prepared for the purpose of incorporation in this circular, received from the reporting accountants, PricewaterhouseCoopers, Hong Kong.
29 December 2004
The Directors Kerry Properties Limited
Dear Sirs,
We set out below our report on the financial information relating to Treasure Lake Limited (“Treasure Lake”) for the period from 6 May 2004 (date of incorporation) to 30 June 2004 (the “Relevant Period”) for inclusion in the circular of Kerry Properties Limited (“KPL”) dated 29 December 2004 in connection with the proposed acquisitions of the entire share capital of Treasure Lake, which holds 50% equity interest of Eas International Transportation Ltd. (“Eas PRC”), and a 20% equity interest in Eas PRC from Huatong Industrial Development Co., Ltd. (“Huatong”).
Treasure Lake was incorporated in the British Virgin Islands on 6 May 2004 with limited liability under the Companies Law of the British Virgin Islands. Treasure Lake has been inactive since its incorporation.
Treasure Lake has adopted 31 December as its financial year end date. No audited statutory accounts of Treasure Lake have been prepared since its date of incorporation. The management accounts of Treasure Lake for the Relevant Period has been prepared in accordance with accounting principles generally accepted in Hong Kong. The directors of Treasure Lake are responsible for preparing the accounts which give a true and fair view. In preparing these accounts, it is fundamental that appropriate accounting policies are selected and applied consistently.
The financial information as set out on pages 28 to 32 (the “Financial Information”) has been prepared by the directors of Treasure Lake based on the management accounts. We have performed independent audit procedures on the Financial Information, which was made available to us by KPL, in accordance with Statements of Auditing Standards issued by the HKICPA and have carried out such additional procedures as are necessary in accordance with the Auditing Guideline “Prospectuses and the Reporting Accountant” issued by the HKICPA.
−26− APPENDIX I ACCOUNTANTS’ REPORT ON TREASURE LAKE
The directors of Treasure Lake are responsible for the Financial Information. It is our responsibility to form an independent opinion, based on our examination, on the Financial Information and to report our opinion to you.
In our opinion, the Financial Information, for the purpose of this report, gives a true and fair view of the state of affairs of Treasure Lake as at 30 June 2004 and of the results and cash flows of Treasure Lake for the Relevant Period.
−27− APPENDIX I ACCOUNTANTS’ REPORT ON TREASURE LAKE
I. FINANCIAL INFORMATION
Profit and Loss Account
Period from 6 May 2004 (date of incorporation) to 30 June 2004 HK$
Results for the period –
−28− APPENDIX I ACCOUNTANTS’ REPORT ON TREASURE LAKE
Balance Sheet
30 June 2004 Note HK$
ASSET
Current asset
Cash 8
CAPITAL AND RESERVES
Share capital 3 8
Shareholder’s fund 8
−29− APPENDIX I ACCOUNTANTS’ REPORT ON TREASURE LAKE
Statement of Changes in Equity
Period from 6 May 2004 (date of incorporation) to 30 June 2004 Note HK$
Issuance of ordinary share 3 8
Results for the period –
Total equity at the end of the period 8
−30− APPENDIX I ACCOUNTANTS’ REPORT ON TREASURE LAKE
Cash Flow Statement
Period from 6 May 2004 (date of incorporation) to 30 June 2004 HK$
Financing activities Issuance of ordinary share 8
Net cash inflow from financing activities 8 ------
Increase in cash 8
Cash at the beginning of the period –
Cash at the end of the period 8
−31− APPENDIX I ACCOUNTANTS’ REPORT ON TREASURE LAKE
II. NOTES TO FINANCIAL INFORMATION
1. Basis of preparation
The Financial Information has been prepared in accordance with accounting principles generally accepted in Hong Kong and comply with accounting standards issued by the HKICPA. It has been prepared under the historical cost convention.
2. Principal accounting policy
The principal accounting policy adopted in the preparation of the Financial Information is set out below:
Translation of foreign currencies
Transactions in foreign currencies are translated at exchange rates ruling at the transaction dates. Monetary assets and liabilities expressed in foreign currencies at the balance sheet date are translated at rates of exchange ruling at the balance sheet date. All exchange differences arising are dealt with in the profit and loss account.
3. Share capital
As at 6 May 2004 (date of incorporation) and 30 June 2004 HK$
Authorised: 50,000 ordinary shares of US$1 each 390,000
Issued and fully paid: 1 ordinary share at US$1 each 8
1 ordinary share of US$1 (equivalent to HK$8) was issued at par for cash on 6 May 2004, date of incorporation.
4. Subsequent events
On 28 June 2004, a sale and purchase agreement was entered into between Treasure Lake and S.I. Logistics Group Limited (“SI Logistics”) for the acquisition by Treasure Lake of the entire issued share capital of Eas Da Tong International Aircargo Company Limited (“Eas HK”) and its underlying loan due to SI Logistics.
The consideration comprises share capital consideration and loan consideration, amounting to HK$51,659,062 and HK$141,737,164 respectively, and is required to be fully paid in cash on the date of completion. The acquisition was completed on 2 July 2004.
According to the relevant sale and purchase agreement, upon completion of the acquisition, Treasure Lake is obliged to procure Eas PRC, the 50% associate held by Eas HK, to distribute to SI Logistics its share of profit of Eas PRC prior to the acquisition of not less than RMB27,492,904.
III. SUBSEQUENT ACCOUNTS
No audited accounts of Treasure Lake have been prepared in respect of any period subsequent to 30 June 2004 up to the date of this report.
Yours faithfully, PricewaterhouseCoopers Certified Public Accountants Hong Kong
−32− APPENDIX II ACCOUNTANTS’ REPORT ON EAS HK
The following is the text of a report, prepared for the purpose of incorporation in this circular, received from the reporting accountants, PricewaterhouseCoopers, Hong Kong.
29 December 2004
The Directors Kerry Properties Limited
Dear Sirs,
We set out below our report on the financial information relating to Eas Da Tong International Aircargo Company Limited (“Eas HK”) for each of the two years ended 25 December 2001 and 2002, the period from 26 December 2002 to 31 December 2003 and the six months ended 30 June 2003 and 2004 (the “Relevant Periods”), for inclusion in the circular of Kerry Properties Limited (“KPL”) dated 29 December 2004 in connection with the proposed acquisitions of the entire share capital of Treasure Lake Limited, which holds 50% equity interest of Eas International Transportation Ltd. (“Eas PRC”) and a 20% equity interest in Eas PRC from Huatong Industrial Development Co., Ltd. (“Huatong”).
Eas HK was incorporated in Hong Kong on 11 November 1993 with limited liability. As at the date of this report, Eas HK is a wholly-owned subsidiary of Treasure Lake Limited and has a direct 50% interest in Eas PRC, an associate, details of which are set out in Note 11 of Section II. The financial year end of Eas HK and its associate is 31 December.
The accounts of Eas HK for the Relevant Periods were prepared in accordance with accounting principles generally accepted in Hong Kong. The accounts for the 2 years ended 25 December 2001 and 2002 were audited by Victor Ling, Tang & Partners and the accounts for the period from 26 December 2002 to 31 December 2003 were audited by Deloitte Touche Tohmatsu.
The financial information as set out on pages 35 to 50 (“Financial Information”) has been prepared based on the audited accounts or, where appropriate, unaudited management accounts of Eas HK. For the purpose of this report, we have examined the audited accounts or, where appropriate, the management accounts of Eas HK for the Relevant Periods, which were made available to us by the directors of KPL, and we have carried out such additional procedures as are necessary in accordance with the Auditing Guideline “Prospectuses and the Reporting Accountant” issued by the Hong Kong Institute of Certified Public Accountants (“HKICPA”).
The directors of Eas HK, at the Relevant Periods, are responsible for preparing these accounts which give a true and fair view. In preparing these accounts, it is fundamental that appropriate accounting policies are selected and applied consistently.
−33− APPENDIX II ACCOUNTANTS’ REPORT ON EAS HK
The directors of Eas HK are responsible for the Financial Information. It is our responsibility to form an independent opinion, based on our examination, on the Financial Information and to report our opinion to you.
In our opinion, the Financial Information, for the purpose of this report, gives a true and fair view of the state of affairs of Eas HK as at 25 December 2001 and 2002, 31 December 2003 and 30 June 2004 and of the results and cash flows of Eas HK for the Relevant Periods.
−34− APPENDIX II ACCOUNTANTS’ REPORT ON EAS HK
I. FINANCIAL INFORMATION
Profit and Loss Accounts
For the year 26.12.2002 For the six months ended 25 December to ended 30 June 2001 200231.12.2003 2003 2004 Notes HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
Turnover 3 56,314 14,436 – – –
Cost of sales (48,197) (12,167) – – –
Gross profit 8,117 2,269 – – –
Other income 4 1,460 32,945 1,003 1,003 –
Write off of amount due from associate (10,554) – – – –
Administrative expenses (10,593) (1,536) (742) (164) –
Operating (loss)/profit before finance costs 5 (11,570) 33,678 261 839 –
Finance costs 6 (21) (1,601) (1,003) (1,003) –
(Loss)/profit before taxation (11,591) 32,077 (742) (164) –
Taxation 8 – (150) 150 – –
(Loss)/profit for the year/period (11,591) 31,927 (592) (164) –
(Loss)/earnings per share – basic (HK$) 9 (116) 319 (6) (2) –
−35− APPENDIX II ACCOUNTANTS’ REPORT ON EAS HK
Balance Sheets
25.12.2001 25.12.2002 31.12.2003 30.6.2004 Notes HK$’000 HK$’000 HK$’000 HK$’000
Fixed assets 10 197–––
Associate 11 19,500 121,101 160,845 160,843
Current assets Accounts receivable, prepayments and deposits 12 10,155 – – – Amounts due from fellow subsidiaries 13 19,078 – – – Amounts due from related companies 13 1,433 – – – Taxation recoverable – – 44 44 Cash and bank balances 2,016 2 1 1
32,682 2 45 45 ------
Current liabilities Accounts payable, deposits received and accrued charges 14 4,473 645 1,041 44 Taxation payable – 150 – – Amount due to associate 15 7,320 – – – Amounts due to related companies 16 311––– Obligations under finance leases 17 7–––
12,111 795 1,041 44 ------
Net current assets/(liabilities) 20,571 (793) (996) 1 ------
Total assets less current liabilities 40,268 120,308 159,849 160,844
Financed by: Share capital 18 100 100 100 100 (Accumulated losses)/ retained profits (13,323) 18,604 18,012 18,012
Shareholders’ (deficits)/funds (13,223) 18,704 18,112 18,112 ------
Obligations under finance leases 17 24––– Amount due to an intermediate holding company 19 – 101,601 – – Amount due to immediate holding company 20 53,467 3 141,737 142,732
40,268 120,308 159,849 160,844
−36− APPENDIX II ACCOUNTANTS’ REPORT ON EAS HK
Statements of Changes in Equity
(Accumulated losses)/ Share retained capital profits Total HK$’000 HK$’000 HK$’000
At 26 December 2000 100 (1,732) (1,632) Loss for the year – (11,591) (11,591)
At 25 December 2001 100 (13,323) (13,223) Profit for the year – 31,927 31,927
At 25 December 2002 100 18,604 18,704 Loss for the period – (592) (592)
At 31 December 2003 100 18,012 18,112 Loss for the period – – –
At 30 June 2004 100 18,012 18,112
At 1 January 2003 100 18,604 18,704 Loss for the period – (164) (164)
At 30 June 2003 100 18,440 18,540
−37− APPENDIX II ACCOUNTANTS’ REPORT ON EAS HK
Cash Flow Statements
For the year 26.12.2002 For the six months ended 25 December to ended 30 June 2001 200231.12.2003 2003 2004 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
Operating activities Operating (loss)/profit before finance costs (11,570) 33,678 261 839 – Depreciation 164 37––– Loss on disposal of fixed assets 47–––– Gain on disposal of freight forwarding business – (31,065) – – – Bank interest income (47) (3) – – – Interest income on amount due from associate – (1,601) (1,003) (1,003) –
Operating (loss)/profit before working capital changes (11,406) 1,046 (742) (164) – Decrease/(increase) in accounts receivable, prepayments and deposits 1,314 (5,484) – – – (Increase)/decrease in amount due from a related company (129) 1,433 – – – Decrease/(increase) in amounts due from fellow subsidiaries 1,982 (1,267) – – – Decrease in amount due from a director 1,054 –––– Decrease in amounts due to related companies (339) (262) – – – (Decrease)/increase in accounts payable, deposits received and accrued charges (1,050) 3,954 396 (10) (997) (Decrease)/increase in amount due to associate (15,183) 1,702 – – –
Cash (used in)/from operations (23,757) 1,122 (346) (174) (997)
Taxation paid – – (44) – – Net cash (used in)/from operating activities (23,757) 1,122 (390) (174) (997) ------
−38− APPENDIX II ACCOUNTANTS’ REPORT ON EAS HK
For the year 26.12.2002 For the six months ended 25 December to ended 30 June 2001 200231.12.2003 2003 2004 Note HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
Investing activities Net cash outflow arising from disposal of freight forwarding business 22 – (3,055) – – – Increase in investment in associate – – (141,343) (141,343) – (Increase)/decrease in amount due from associate – (101,601) 101,599 101,599 2 Bank interest income 473––– Interest income on amount due from associate – 1,601 1,003 1,003 – Purchase of fixed assets – (7) – – –
Net cash from/(used in) investing activities 47 (103,059) (38,741) (38,741) 2 ------
Financing activities Increase/(decrease) in amount due to an intermediate holding company – 101,601 (101,601) (101,601) – Increase/(decrease) in amount due to immediate holding company 22,966 (75) 141,734 141,518 995 Interest element of finance leases (21) –––– Interest on amount due to an intermediate holding company – (1,601) (1,003) (1,003) – Capital element of finance leases (35) (2) – – –
Net cash from financing activities 22,910 99,923 39,130 38,914 995 ------
Net decrease in cash and cash equivalents (800) (2,014) (1) (1) –
Cash and cash equivalents at beginning of year/period 2,816 2,016 2 2 1
Cash and cash equivalents at year/period end, representing cash and bank balances 2,016 2111
−39− APPENDIX II ACCOUNTANTS’ REPORT ON EAS HK
II. NOTES TO FINANCIAL INFORMATION
1. Principal activity and change of financial year end
The company is a private company incorporated in Hong Kong with limited liability. The company was engaged in freight forwarding business up to 25 March 2002 when the business was disposed of for nil consideration to a wholly-owned subsidiary of the associate, Eas PRC. The company is also engaged in investment holding throughout the Relevant Periods.
The company changed its financial year end date from 25 December to 31 December with effect from 26 December 2002.
2. Principal accounting policies
(a) Basis of preparation
The financial information set out in this report has been prepared under historical cost convention and in accordance with accounting principles generally accepted in Hong Kong and comply with accounting standards issued by the Hong Kong Institute of Certified Public Accountants. The principal accounting policies adopted are set out below.
(b) Associate
An associate is a company, not being a subsidiary or a jointly controlled entity, in which an equity interest is held for the long-term and significant influence is exercised in its management.
The investment in associate is stated at cost less provision for impairment losses. The results of associate are accounted for on the basis of dividends received and receivable.
(c) Fixed assets
Fixed assets are stated at cost less aggregate depreciation and accumulated impairment losses. Cost represents the purchase price of the asset and other costs incurred to bring the asset into existing use.
Depreciation on fixed assets is calculated to write off their cost on a straight-line basis over their expected useful lives to the company. The principal annual rate used for this purpose is 20%.
The gain or loss on disposal of fixed assets is the difference between the net sales proceeds and the carrying amount of the relevant assets and is recognised in the profit and loss account.
Costs incurred in restoring fixed assets to their normal working condition are charged to the profit and loss account. Improvements are capitalised and depreciated over their expected useful lives to the company.
At each balance sheet date, both internal and external sources of information are considered to assess whether there is any indication that assets included in fixed assets are impaired. If any such indication exists, the recoverable amount of the asset is estimated and where relevant, an impairment loss is recognised to reduce the asset to its recoverable amount. Such impairment losses are recognised in the profit and loss account.
(d) Accounts receivable
Provision is made against accounts receivable to the extent they are considered to be doubtful. Accounts receivable in the balance sheet are stated net of such provision.
(e) Borrowing costs
All borrowing costs are charged to the profit and loss account in the year/period in which they are incurred.
−40− APPENDIX II ACCOUNTANTS’ REPORT ON EAS HK
(f) Deferred taxation
Deferred taxation is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the accounts. Taxation rates enacted or substantively enacted by the balance sheet date are used to determine deferred taxation.
Deferred tax assets are recognised to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised.
(g) Employee benefits
(i) Employee leave entitlements
Employee entitlements to annual leave and long service leave are recognised when they accrue to employees. A provision is made for the estimated liability for annual leave and long service leave as a result of services rendered by employees up to the balance sheet date.
Employee entitlements to sick leave and maternity or paternity leave are not recognised until the time of leave.
(ii) Profit sharing and bonus plans
The expected cost of profit sharing and bonus payments are recognised as a liability when the company has a present legal or constructive obligation as a result of services rendered by employees and a reliable estimate of the obligation can be made.
(iii) Retirement benefit costs
The company’s contributions to the mandatory provident fund scheme and the defined contribution retirement scheme are expensed as incurred. Contributions to the defined contribution retirement scheme which is operated in Hong Kong are reduced by contributions forfeited by those employees who leave the scheme prior to vesting fully in the contributions. The assets of all these schemes are held separately and independently from those of the company.
(h) Operating leases
Leases where substantially all the risks and rewards of ownership of assets remain with the leasing company are accounted for as operating leases. Payments made under operating leases net of any incentives received from the leasing company are charged to the profit and loss account on a straight-line basis over the lease periods.
(i) Translation of foreign currencies
Transactions in foreign currencies are translated at exchange rates ruling at the transaction dates. Monetary assets and liabilities expressed in foreign currencies at the balance sheet date are translated at rates of exchange ruling at the balance sheet date. All exchange differences arising are dealt with in the profit and loss account.
(j) Cash and cash equivalents
Cash and cash equivalents are carried in the balance sheet at cost. For the purposes of the cash flow statement, cash and cash equivalents comprise cash on hand, deposits held at call with banks, cash investments with a maturity of three months or less from the date of investment and bank overdrafts.
(k) Contingent liabilities and contingent assets
A contingent liability is a possible obligation that arises from past events and whose existence will only be confirmed by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the company. It can also be a present obligation arising from past events that is not recognised because it is not probable that outflow of economic resources will be required or the amount of obligation cannot be measured reliably.
−41− APPENDIX II ACCOUNTANTS’ REPORT ON EAS HK
A contingent liability is not recognised but is disclosed in the notes to the accounts. When a change in the probability of an outflow occurs so that outflow is probable, they will then be recognised as a provision.
A contingent asset is a possible asset that arises from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain events not wholly within the control of the company.
Contingent assets are not recognised but are disclosed in the notes to the accounts when an inflow of economic benefits is probable. When inflow is virtually certain, an asset is recognised.
(l) Provisions
Provisions are recognised when the company has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources will be required to settle the obligation, and a reliable estimate of the amount can be made. Where the company expects a provision to be reimbursed, for example under an insurance contract, the reimbursement is recognised as a separate asset but only when the reimbursement is virtually certain.
(m) Revenue and income recognition
(i) Revenue from provision of freight forwarding services is recognised when the services are rendered.
(ii) Interest income is recognised on a time proportion basis, taking into account the principal amounts outstanding and the interest rates applicable.
(iii) Dividend income is recognised when the right to receive payment is established.
3. Turnover
Turnover represents the net invoiced value of freight forwarding service income less discounts prior to 25 March 2002.
4. Other income
For the year 26.12.2002 For the six months ended 25 December to ended 30 June 2001 200231.12.2003 2003 2004 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
Bank interest income 473––– Interest income on amount due from associate (note 25) – 1,601 1,003 1,003 – Gain on disposal of freight forwarding business (note 22) – 31,065––– Others 1,413 276–––
1,460 32,945 1,003 1,003 –
−42− APPENDIX II ACCOUNTANTS’ REPORT ON EAS HK
5. Operating (loss)/profit before finance costs
Operating (loss)/profit before finance costs is arrived at after charging:
For the year 26.12.2002 For the six months ended 25 December to ended 30 June 2001 200231.12.2003 2003 2004 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
Auditors’ remuneration 25 17––– Depreciation on assets under finance lease 42––– Depreciation on own assets 160 35––– Staff costs – salaries and allowances 1,428 344––– – contributions to defined contribution schemes 75 19––– Loss on disposal of fixed assets 47–––– Management fee (note 25) 4,650–––– Operating lease – land and building 1,287 344––– Provision for doubtful debts 2,223––––
6. Finance costs
For the year 26.12.2002 For the six months ended 25 December to ended 30 June 2001 200231.12.2003 2003 2004 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
Interest on amount due to an intermediate holding company (note 25) – 1,601 1,003 1,003 – Interest on finance leases 21––––
21 1,601 1,003 1,003 –
7. Emoluments for directors and highest paid individuals
(a) Directors’ emoluments
None of the directors received or will receive any fees or emoluments in respect of their services rendered to the company during the Relevant Periods. No directors waived any remuneration during the Relevant Periods.
(b) Senior management emoluments
The five highest paid individuals included no director during the Relevant Periods and their emoluments were as follows:
For the year 26.12.2002 For the six months ended 25 December to ended 30 June 2001 200231.12.2003 2003 2004 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
Salaries and allowances 873 268––– Contributions to defined contribution schemes 46 12–––
919280–––
The emoluments of the five highest paid individuals were all less than HK$1,000,000.
−43− APPENDIX II ACCOUNTANTS’ REPORT ON EAS HK
During the Relevant Periods, no emoluments were paid by the company to any of the directors or the five highest paid individuals as an inducement to join or upon joining the company or as compensation for loss of office.
8. Taxation
For the year ended 25 December 2002, Hong Kong profits tax was provided at the rate of 16% on the estimated assessable profits for the year. No provision for Hong Kong profits tax was made for the remaining periods of the Relevant Periods as the company had no assessable profit for those periods. The tax credit for the period from 26 December 2002 to 31 December 2003 represented overprovision in prior years.
The taxation on the company’s profit/loss before taxation differs from the theoretical amount that would arise using the taxation rate of Hong Kong as follows:
For the year 26.12.2002 For the six months ended 25 December to ended 30 June 2001 200231.12.2003 2003 2004 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
(Loss)/profit before taxation (11,591) 32,077 (742) (164) –
Calculated at taxation rates of 17.5% for the six months ended 30 June 2004 and 2003 and the period from 26 December 2002 to 31 December 2003 and of 16% for the years ended 25 December 2002 and 2001 (1,855) 5,132 (130) (29) – Income not subject to taxation (7) (4,973) – – – Expenses not deductible for taxation purposes 2,044–––– Tax losses not recognised – – 130 29 – Utilisation of previously unrecognised tax losses (182) (9) – – – Overprovision in prior years – – (150) – –
Tax charges/(credit) – 150 (150) – –
Deferred income tax assets are recognised for tax loss carried forward to the extent that realisation of the related tax benefit through future taxation profits is probable. The company had unrecognised tax losses (subject to approval by relevant authority) of approximately HK$741,000 at 30 June 2004 and 31 December 2003, nil at 25 December 2002 and HK$1,186,000 at 25 December 2001 to carry forward against future taxable income. These tax losses had no expiry date.
9. (Loss)/earnings per share
The calculation of the basic loss/earnings per share is based on the loss or profit for each of the Relevant Periods and the 100,000 ordinary shares in issue throughout the Relevant Periods.
No diluted loss/earnings per share for each of the Relevant Periods has been presented as there were no potential dilutive shares throughout the Relevant Periods.
−44− APPENDIX II ACCOUNTANTS’ REPORT ON EAS HK
10. Fixed assets
Office Furniture Leasehold Motor equipment & fixtures improvement vehicles Total HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
Cost At 26 December 2000 315 291 285 713 1,604 Additions 35–––35 Disposal (114) (215) (24) – (353)
At 25 December 2001 236 76 261 713 1,286 Additions 43––7 Disposal (240) (79) (261) (713) (1,293)
At 25 December 2002 and thereafter ––––– ------
Aggregate depreciation At 26 December 2000 295 252 113 571 1,231 Charge for the year 6 2 37 119 164 Disposal (104) (187) (15) – (306)
At 25 December 2001 197 67 135 690 1,089 Charge for the year 3 2 9 23 37 Disposal (200) (69) (144) (713) (1,126)
At 25 December 2002 and thereafter ––––– ------
Net book value At 25 December 2001 39 9 126 23 197
At 25 December 2002 and thereafter –––––
11. Associate
25.12.2001 25.12.2002 31.12.2003 30.6.2004 HK$’000 HK$’000 HK$’000 HK$’000
Unlisted interest in registered capital – at cost 19,500 19,500 160,843 160,843 Amount due from associate – 101,601 2 –
19,500 121,101 160,845 160,843
−45− APPENDIX II ACCOUNTANTS’ REPORT ON EAS HK
Details of the associate are as follows:
Country of Percentage of incorporation interest in Name of associate and operation registered capital Principal activity
EAS International The People’s 50% Provision of freight Transportation Ltd. Republic of forwarding and logistics China services
The percentage of interest in the registered capital of the associate attributable to the company increased from 25% to 50% in April 2003.
The amount due from associate was unsecured, interest-free and not repayable within one year from the balance sheet date except for an amount of HK$100,000,000 at 25 December 2002 which was interest-bearing at prevailing market rates.
Highlights of financial information of the associate are as follows:
31.12.2001 31.12.2002 31.12.2003 30.6.2004 RMB’000 RMB’000 RMB’000 RMB’000
Non-current assets 458,576 451,999 411,272 416,975 Current assets 689,307 782,304 1,027,488 920,270 Current liabilities (924,574) (931,209) (750,122) (608,521) Non-current liabilities (13,331) (54,095) (210,337) (210,722)
For the year For the six months ended 31 December ended 30 June 2001 2002 2003 2003 2004 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Total revenue 1,820,450 1,853,697 2,396,465 1,023,394 1,324,367 Profit for the year/period 7,907 30,824 74,376 26,805 38,899
For details on contingent liabilities of the associate, please refer to note 21 to the financial information as set out on pages 87 to 88 in the accountants’ report on Eas PRC set out in Appendix III of this circular.
12. Trade receivables
Included in accounts receivable, prepayments and deposits are trade receivables. The ageing analysis of the trade receivables is as follows:
25.12.2001 25.12.2002 31.12.2003 30.6.2004 HK$’000 HK$’000 HK$’000 HK$’000
Below 30 days 221––– 30 to 90 days 8,248––– Over 90 days 1,393–––
9,862–––
In general, credit terms of 30 to 90 days were given to customers.
13. Amounts due from fellow subsidiaries/related companies
The amounts due from fellow subsidiaries and related companies were unsecured, interest-free and had no fixed repayment terms.
−46− APPENDIX II ACCOUNTANTS’ REPORT ON EAS HK
14. Trade payables
Included in accounts payable, deposits received and accrued charges are trade payables. The ageing analysis of the trade payables is as follows:
25.12.2001 25.12.2002 31.12.2003 30.6.2004 HK$’000 HK$’000 HK$’000 HK$’000
Below 30 days 953––– 30 to 90 days 434––– Over 90 days 526–––
1,913–––
15. Amount due to associate
The amount due to associate was derived from normal business activities, unsecured, interest-free and had no fixed repayment terms.
16. Amounts due to related companies
The amounts due to related companies were unsecured, interest-free and had no fixed repayment terms.
17. Obligations under finance leases
At 25 December 2001, the company’s obligations under finance leases were repayable as follows:
HK$’000
Within one year 9 In the second year 9 In the third to fifth years 23
41 Future finance charges (10)
Present value of lease obligations 31
The present value of lease obligations was as follows:
HK$’000
Within one year 7 In the second year 7 In the third to fifth years 17
31 Amount included under current liabilities (7)
Non-current amount 24
−47− APPENDIX II ACCOUNTANTS’ REPORT ON EAS HK
18. Share capital
25.12.2001 25.12.2002 31.12.2003 30.6.2004 HK$’000 HK$’000 HK$’000 HK$’000
Authorised, issued and fully paid: 100,000 ordinary shares of HK$1 each 100 100 100 100
19. Amount due to an intermediate holding company
The amount was unsecured, interest-bearing at prevailing market rates and not repayable within one year from the balance sheet date.
20. Amount due to immediate holding company
The amount is unsecured, interest-free and not repayable within one year from the balance sheet date.
21. Ultimate holding company
The directors regard Huatong Industrial Development Co., Ltd., a company incorporated in The People’s Republic of China, as being the ultimate holding company at 25 December 2001 and Shanghai Industrial Investment (Holdings) Company Limited, a company incorporated in Hong Kong, as being the ultimate holding company at 25 December 2002, 31 December 2003 and 30 June 2004.
22. Disposal of freight forwarding business
On 25 March 2002, the company disposed of its freight forwarding business for nil consideration to a wholly- owned subsidiary of the associate. Assets and liabilities of the freight forwarding business disposed of are as follows:
HK$’000
Fixed assets 167 Cash 3,055 Accounts receivable, prepayments and deposits 15,639 Amounts due from fellow subsidiaries 20,345 Obligations under finance leases (29) Accounts payable, deposits received and accrued charges (7,782) Amounts due to related companies (49) Amount due to associate (9,022) Amount due to immediate holding company (53,389)
Net liabilities disposed of (31,065)
Consideration received –
Gain on disposal of freight forwarding business 31,065
Net cash outflow arising from disposal of freight forwarding business (3,055)
−48− APPENDIX II ACCOUNTANTS’ REPORT ON EAS HK
23. Operating lease commitments
At 25 December 2001, the company had future aggregate minimum lease payments under non-cancellable operating leases as follows:
HK$’000
Land and buildings – expiring within one year 199 – expiring in the second to fifth years inclusive 116
315
The company did not have any operating lease commitment at 25 December 2002 and thereafter.
24. Capital commitment
25.12.2001 25.12.2002 31.12.2003 30.6.2004 HK$’000 HK$’000 HK$’000 HK$’000
Amount authorised but not provided for in respect of additional investment in the associate – 196,262 56,604 –
25. Related party transactions
Parties are considered to be related if one party has the ability, directly or indirectly, to control the other party or exercise significant influence over the other party in making financial and operating decision. Parties are also considered to be related if they are subject to common control or common significant influence.
In addition to the related party transactions disclosed elsewhere in the Financial Information, the company had the following related party transactions during the Relevant Periods:
For the year 26.12.2002 For the six months ended 25 December to ended 30 June 2001 200231.12.2003 2003 2004 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
Provision of freight forwarding services – to associate (note a) 13,840 3,604––– – to fellow subsidiaries (note a) 1,690 547––– Interest on amount due from associate (note b) – 1,601 1,003 1,003 – Interest on amount due to an intermediate holding company (note b) – (1,601) (1,003) (1,003) – Management fee to immediate holding company (note c) (4,650) ––––
Notes:
(a) The transactions were conducted on terms and prices agreed between both parties.
(b) The interest was charged at prevailing market rates.
(c) The management fee was paid to the immediate holding company for administrative and management services provided.
−49− APPENDIX II ACCOUNTANTS’ REPORT ON EAS HK
26. Subsequent events
On 2 July 2004, the directors of the company resolved that, upon receipt of profit distribution from Eas PRC, the associate, of not less than HK$25,936,702, to distribute an interim dividend of not less than HK$25,936,702 payable to the shareholders of the company as of 1 June 2004. On 29 September 2004, Eas PRC declared a dividend of RMB49,320,543 payable to the company.
On 9 November 2004, the company entered into an equity transfer agreement for the acquisition of a further 20% equity interest in Eas PRC at a consideration of RMB90,000,000.
III. SUBSEQUENT ACCOUNTS
No audited accounts of Eas HK have been prepared in respect of any period subsequent to 30 June 2004 up to the date of this report.
Yours faithfully PricewaterhouseCoopers Certified Public Accountants Hong Kong
−50− APPENDIX III ACCOUNTANTS’ REPORT ON THE EAS PRC GROUP
The following is the text of a report, prepared for the purpose of incorporation in this circular, received from the reporting accountants, PricewaterhouseCoopers, Hong Kong.
29 December 2004
The Directors Kerry Properties Limited
Dear Sirs,
We set out below our report on the consolidated financial information relating to Eas International Transportation Ltd. (“Eas PRC”) and its subsidiaries (hereinafter collectively referred to as “Eas PRC Group”) for each of the three years ended 31 December 2001, 2002 and 2003 and the six months ended 30 June 2003 and 2004 (the “Relevant Periods”), for inclusion in the circular of Kerry Properties Limited (“KPL”) dated 29 December 2004 in connection with the proposed acquisitions of the entire share capital of Treasure Lake Limited, which holds 50% equity interest in Eas PRC, and a 20% equity interest in Eas PRC, from Huatong Industrial Development Co., Ltd. (“Huatong”).
Eas PRC (formerly known as EAS Air Cargo (China) Company Limited) was established as a sino-foreign joint venture company in the People’s Republic of China (the “PRC”) on 27 February 1985. As at the date of this report, Eas PRC has direct or indirect interests in certain subsidiaries and associates. Details of the principal subsidiaries and associates are set out in Note 25 of Section II. The financial year end of companies comprising Eas PRC Group is 31 December, except as disclosed in Note 25 of Section II.
The statutory or management accounts of the companies comprising Eas PRC Group, that were incorporated outside Hong Kong, were prepared in accordance with the applicable accounting principles and relevant regulations in their places of incorporation for the Relevant Periods. For the purpose of this report, the directors of Eas PRC have prepared the consolidated accounts of Eas PRC Group for the Relevant Periods in accordance with accounting principles generally accepted in Hong Kong (the “HK GAAP accounts”). The directors of Eas PRC are responsible for preparing the HK GAAP accounts which give a true and fair view. In preparing the HK GAAP accounts, it is fundamental that appropriate accounting policies are selected and applied consistently. We have carried out an independent audit of the HK GAAP accounts in accordance with the Statements of Auditing Standards issued by the Hong Kong Institute of Certified Public Accountants (“HKICPA”).
−51− APPENDIX III ACCOUNTANTS’ REPORT ON THE EAS PRC GROUP
The financial information as set out on pages 53 to 92 (“Financial Information”) has been prepared based on the HK GAAP accounts. We have examined the Financial Information for the Relevant Periods which was made available to us by KPL and we have carried out such additional procedures as are necessary in accordance with the Auditing Guideline “Prospectuses and the Reporting Accountant” issued by the HKICPA. The directors of Eas PRC are responsible for the Financial Information. It is our responsibility to form an independent opinion, based on our examination, on the Financial Information and to report our opinion to you.
In our opinion, the Financial Information, for the purpose of this report, gives a true and fair view of the state of affairs of Eas PRC Group as at 31 December 2001, 2002 and 2003 and 30 June 2004 and of the results and cash flows of Eas PRC Group for the Relevant Periods.
−52− APPENDIX III ACCOUNTANTS’ REPORT ON THE EAS PRC GROUP
I. FINANCIAL INFORMATION
Consolidated Profit and Loss Accounts
For the year For the six months ended 31 December ended 30 June 2001 2002 2003 2003 2004 Notes RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Turnover 3 1,812,832 1,846,888 2,390,356 1,022,415 1,339,874 Other revenues 4 7,618 6,809 6,109 979 2,493
1,820,450 1,853,697 2,396,465 1,023,394 1,342,367 Transportation and other direct charges (1,483,296) (1,477,208) (1,945,385) (831,100) (1,130,870) Staff costs (including directors’ emoluments) 5, 6 (183,531) (187,492) (221,792) (100,127) (107,556) Depreciation and amortisation (45,563) (44,257) (37,953) (19,059) (17,720) Other operating expenses (67,363) (80,393) (73,763) (28,090) (28,637)
Operating profit 40,697 64,347 117,572 45,018 57,584 Finance costs 8 (31,374) (27,786) (19,775) (11,007) (9,359)
Group profit before taxation 9,323 36,561 97,797 34,011 48,225
Share of results of associates before taxation 3,499 2,965 4,670 2,104 2,336
Profit before taxation 7 12,822 39,526 102,467 36,115 50,561 Taxation 9(a) (3,926) (9,038) (26,052) (8,435) (11,243)
Profit after taxation 8,896 30,488 76,415 27,680 39,318 Minority interests (989) 336 (2,039) (875) (419)
Profit for the year/period 7,907 30,824 74,376 26,805 38,899
Earnings per share N/A N/A N/A N/A N/A
Note: Since Eas PRC is not a company limited by shares, no earnings per share is presented.
−53− APPENDIX III ACCOUNTANTS’ REPORT ON THE EAS PRC GROUP
Consolidated Balance Sheets
As at As at 31 December 30 June 2001 2002 2003 2004 Notes RMB’000 RMB’000 RMB’000 RMB’000
Non-current assets Fixed assets 10 366,460 350,669 312,598 313,648 Goodwill 11 – 4,495 4,258 4,140 Associates 12 49,740 50,065 53,381 58,617 Investment securities, at cost 5,320 5,000 6,076 5,987 Other non-current assets 7,773 7,349 4,181 3,546 Deferred tax assets 9(b) 29,283 34,421 30,778 31,037
458,576 451,999 411,272 416,975 ------Current assets Prepayments, deposits and other current assets 13 6,537 7,889 6,791 6,307 Inventories 14 2,757 4,956 2,314 2,150 Trade and other receivables 15 492,941 525,005 611,269 625,744 Pledged deposits 16 36,202 8,280 29,480 – Cash and cash equivalents 16 150,870 236,174 377,634 286,069
689,307 782,304 1,027,488 920,270 ------Current liabilities Trade payables 17 253,565 278,188 306,636 261,367 Salary and welfare payable 59,391 81,618 78,920 80,066 Other payables, accruals and other current liabilities 18 148,271 129,881 150,143 123,756 Receipts in advance from customers 392 354 12,490 13,889 Current tax liabilities 5,891 4,527 14,331 14,374 Borrowings 19 457,064 436,641 187,602 115,069
924,574 931,209 750,122 608,521 ------Net current (liabilities)/assets (235,267) (148,905) 277,366 311,749 ------Total assets less current liabilities 223,309 303,094 688,638 728,724
Financed by: Paid-in capital 100,000 100,000 150,000 150,000 Reserves 98,773 132,288 309,551 348,834 Minority interests 11,205 16,711 18,750 19,168 Long-term liabilities Borrowings 19 13,203 53,500 209,660 209,660 Deferred tax liabilities 9(b) 128 595 677 1,062
223,309 303,094 688,638 728,724
−54− APPENDIX III ACCOUNTANTS’ REPORT ON THE EAS PRC GROUP
Consolidated Cash Flow Statements
For the year For the six months ended 31 December ended 30 June 2001 2002 2003 2003 2004 Notes RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Cash flows from operating activities Cash generated from/ (used in) operations 20(a) 98,497 100,512 134,626 (82,708) (8,976) Interest paid (30,948) (23,729) (22,469) (12,074) (8,599) Interest income received 1,704 1,456 1,370 668 542 Tax paid (9,643) (14,480) (11,589) (11,210) (10,607)
Net cash from/(used in) operating activities 59,610 63,759 101,938 (105,324) (27,640) ------
Investing activities Disposals/(acquisition) of investment securities – 320 (1,076) – 89 Net cash paid for an acquisition of a subsidiary 20(b) – (289) – – – (Acquisition)/disposal of associates 10,000 – (953) – (3,725) Purchase of fixed assets (31,688) (30,928) (50,171) (24,305) (20,030) Proceeds from disposal of fixed assets 14,002 4,288 49,616 625 1,129 Decrease in other non-current assets 4,804 – 3,068 3,043 585 Dividends received from associates 471 358 3,117 3,005 1,080
Net cash (used in)/from investing activities (2,411) (26,251) 3,601 (17,632) (20,872) ------
−55− APPENDIX III ACCOUNTANTS’ REPORT ON THE EAS PRC GROUP
For the year For the six months ended 31 December ended 30 June 2001 2002 2003 2003 2004 Notes RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Financing activities 20(c) New bank borrowings 431,015 444,954 502,602 178,165 60,609 Repayments of bank borrowings (435,345) (522,730) (488,481) (98,299) (133,142) New other borrowings 44,610 136,960––– Repayments of other borrowings (5,300) (39,310) (107,000) (53,500) – Distribution to shareholders (11,020) –––– Cash contribution from a shareholder – – 150,000 150,000 – (Increase)/decrease in pledged deposits (36,202) 27,922 (21,200) 8,280 29,480
Net cash (used in)/from financing activities (12,242) 47,796 35,921 184,646 (43,053) ------
Net increase/(decrease) in cash and cash equivalents 44,957 85,304 141,460 61,690 (91,565) Cash and cash equivalents, at beginning of year/period 105,913 150,870 236,174 236,174 377,634
Cash and cash equivalents, at end of year/period 150,870 236,174 377,634 297,864 286,069
−56− APPENDIX III ACCOUNTANTS’ REPORT ON THE EAS PRC GROUP
Consolidated Statements of Changes in Equity
Foreign Paid-in Capital Statutory Retained exchange capital surplus reserve profits reserve Total RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
At 1 January 2001 100,000 – 45,068 45,798 – 190,866 Profit for the year – – – 7,907 – 7,907 Funds appropriation (note a) – – 946 (946) – – Exchange differences ––––––
At 31 December 2001 100,000 – 46,014 52,759 – 198,773 ------
Profit for the year – – – 30,824 – 30,824 Exchange differences ––––2,691 2,691
At 31 December 2002 100,000 – 46,014 83,583 2,691 232,288 ------
Profit for the year – – – 74,376 – 74,376 Contribution from a shareholder (note (b)) 50,000 100,000 – – – 150,000 Funds appropriation (note (a)) – – 1,199 (1,199) – – Exchange differences ––––2,887 2,887
At 31 December 2003 150,000 100,000 47,213 156,760 5,578 459,551 ------
Profit for the period – – – 38,899 – 38,899 Exchange differences ––––384384
At 30 June 2004 150,000 100,000 47,213 195,659 5,962 498,834
At 1 January 2003 100,000 – 46,014 83,583 2,691 232,288 Profit for the period – – – 26,805 – 26,805 Contribution from a shareholder (note (b)) 50,000 100,000 – – – 150,000 Funds appropriation (note (a)) – – 1,199 (1,199) – – Exchange differences ––––591591
At 30 June 2003 150,000 100,000 47,213 109,189 3,282 409,684
Notes: (a) Funds appropriation are made from retained earnings to statutory reserve at the directors’ discretion. (b) In the year ended 31 December 2003, a shareholder contributed RMB150,000,000 to Eas PRC in cash. The paid-in capital and capital surplus increased by RMB50,000,000 and RMB100,000,000 respectively.
−57− APPENDIX III ACCOUNTANTS’ REPORT ON THE EAS PRC GROUP
II. NOTES TO FINANCIAL INFORMATION
1. Basis of presentation
Eas PRC was established on 27 February 1985 as a sino-foreign joint venture company, with an operating period of 30 years. Eas PRC Group is principally engaged in the business of supply chain management service in PRC including international and domestic freight forwarding, marine transportation, international and domestic express services, Pan-China warehousing and distribution, exhibition and bonded logistic centres.
On 20 September 2004, Kerry Logistics Network Limited and Huatong entered into a sale and purchase agreement pursuant to which Kerry Logistics Network Limited will purchase 70% interest in Eas PRC in two stages at an aggregate consideration of RMB380,000,000 (the “Acquisition”). In the first stage, Kerry Logistics Network Limited will acquire the entire shares of Treasure Lake Limited, a wholly-owned subsidiary of Huatong which holds 50% interest in Eas PRC. In the second stage, Kerry Logistics Network Limited will acquire an additional 20% interest in Eas PRC directly from Huatong. If certain conditions in connection to the completion of the second stage are not satisfied or fulfilled, Huatong is obligated to repurchase the shares in Treasure Lake Limited.
In connection with the Acquisition, Eas PRC and Huatong entered into a restructuring agreement on 10 November 2004 (“Restructuring Agreement”). Eas PRC Group currently undertakes certain activities which are not directly connected or have no business synergy with the logistics businesses that Kerry Logistics Network Limited aims to acquire (“non-core businesses”). Pursuant to the Restructuring Agreement, Eas PRC will transfer certain assets and liabilities that are related to these non-core businesses (“transferred assets and liabilities”) to Huatong ultimately at the net book value at 30 November 2004 and acquire a vehicle which is related to the logistics business that Kerry Logistics Network Limited aims to acquire from Huatong (“Restructuring”). Since the Restructuring has not yet been completed up to the date of this report, the transferred assets and liabilities are included in the financial statements of Eas PRC Group during the Relevant Periods. The net book value of the transferred assets and liabilities as at 30 June 2004 is as follows:
RMB’000
Fixed assets 15,882 Other non-current assets 2,885 Goodwill 4,140 Deferred tax assets 22,381
45,288
Current assets Accounts receivable, prepayments and deposits 115,367 Cash and bank balances 5,128
120,495
Current liabilities Accounts payable, deposits received and accrued charges (59,367) Taxation (86)
(59,453)
Net current assets 61,042
Minority interests and loans (7,214)
Net assets 99,116
−58− APPENDIX III ACCOUNTANTS’ REPORT ON THE EAS PRC GROUP
2. Principal accounting policies
The principal accounting policies adopted in the preparation of these accounts are set out below:
(a) Basis of preparation
The financial information set out in this report have been prepared under the historical cost convention and in accordance with accounting principles generally accepted in Hong Kong and comply with accounting standards issued by the HKICPA.
(b) Group accounting
(i) Consolidation
The consolidated accounts include the accounts of Eas PRC and its subsidiaries made up to 31 December.
Subsidiaries are those entities in which Eas PRC, directly or indirectly, controls more than one half of the voting power; has the power to govern the financial and operating policies; to appoint or remove a majority of the members of the board of directors; or to cast a majority of votes at the meetings of the board of directors.
During 2001, Huatong, Eas PRC’s immediate holding company at that time, transferred certain of its wholly-owned subsidiaries operated in Hong Kong to a wholly-owned subsidiary of Eas PRC, namely EAS International Transportation (H.K.) Limited (“EIT”) incorporated in Hong Kong, at net asset value of HK$95,013,093. During 2002, Huatong further transferred certain of its freight forwarding business operated in Hong Kong from Eas Da Tong International Aircargo Company Limited, a wholly-owned subsidiary of Huatong, to EIT at nil consideration. Since both transfers are group restructuring and the ultimate shareholder remained the same immediately before and after the transfers, pursuant to the Statement of Standard Accounting Practice 27 “Group Restructuring”, both transfers are accounted for using merger accounting. Accordingly, the results and financial position of the transferred subsidiaries and business are included in the consolidated financial statements as if the subsidiaries and business were operated by Eas PRC at the beginning of the earliest period presented.
Save for the transfers among entitles under common control, all transactions during the Relevant Periods are accounted for using purchase accounting. The results of subsidiaries acquired or disposed of during the year/period are included in the consolidated profit and loss account from the effective date of acquisition or up to the effective date of disposal, as appropriate.
All significant intercompany transactions and balances within Eas PRC Group are eliminated on consolidation.
Minority interests represent the interests of outside shareholders in the operating results and net assets of subsidiaries.
(ii) Associates
An associate is a company, not being a subsidiary, in which an equity interest is held for the long-term and significant influence is exercised in its management.
The consolidated profit and loss account includes Eas PRC Group’s share of the results of associates for the year/period, and the consolidated balance sheet includes Eas PRC Group’s share of the net assets of the associates and goodwill (net of accumulated amortisation) on acquisition.
Equity accounting is discontinued when the carrying amount of the investment in an assoicate reaches zero, unless Eas PRC Group has incurred obligations or guaranteed obligations in respect of the assoicate.
Unrealised gains on transactions between Eas PRC Group and its associates are eliminated to the extent of Eas PRC Group’s interest in the associates; unrealised losses are eliminated unless the transaction provides evidence of an impairment of the asset transferred.
−59− APPENDIX III ACCOUNTANTS’ REPORT ON THE EAS PRC GROUP
(iii) Translation of foreign currencies
Transactions in foreign currencies are translated at exchange rates ruling at the transaction dates. Monetary assets and liabilities expressed in foreign currencies at the balance sheet date are translated at rates of exchange ruling at the balance sheet date. Exchange differences arising in these cases are dealt with in the profit and loss account.
The balance sheet of subsidiaries and associates expressed in foreign currencies are translated at the rates of exchange ruling at the balance sheet date whilst the profit and loss account is translated at an average rate. Exchange differences are dealt with as movements in reserves.
(c) Goodwill
Goodwill represents the excess of the cost of an acquisition over the fair value of Eas PRC Group’s share of the net assets of the acquired subsidiary at the date of acquisition.
Goodwill is amortised using the straight-line method over its estimated useful life and is amortised over 20 years.
Where an indication of impairment exists, the carrying amount of the goodwill is assessed and written down immediately to its recoverable amount.
(d) Investment securities
Investment securities are stated at cost less any provision for impairment losses.
(e) Fixed assets
(i) Construction in progress
Construction in progress are investments in land and buildings on which construction work has not been completed. These properties are carried at cost which includes development and construction expenditure incurred and other direct costs attributable to the development less any accumulated impairment losses. On completion, the properties are transferred to land and buildings at cost less accumulated impairment losses.
(ii) Other fixed assets
Fixed assets other than construction in progress are stated at cost less accumulated depreciation and accumulated impairment losses.
(iii) Depreciation
Leasehold land is depreciated over the period of the lease while other fixed assets are depreciated at rates sufficient to write off their cost less accumulated impairment losses and estimated residual values over their estimated useful lives on a straight-line basis. The principal annual rates are as follows:
Buildings 3–4.5% Electronic equipment 20–50% Motor vehicles 20% Others 20%
(iv) Impairment and gain or loss on disposal
At each balance sheet date, both internal and external sources of information are considered to assess whether there is any indication that assets included in construction in progress and other fixed assets are impaired. If any such indication exists, the recoverable amount of the asset is estimated and where relevant, an impairment loss is recognised to reduce the asset to its recoverable amount. Such impairment losses are recognised in the profit and loss account. Estimated recoverable amounts are determined based on estimated discounted future cash flows of the cash-generating unit at the lowest level to which the assets belongs. The recoverable amount is the higher of value in use or net selling price.
The gain or loss on disposal of a fixed asset is the difference between the net sales proceeds and the carrying amount of the relevant asset, and is recognised in the profit and loss account.
−60− APPENDIX III ACCOUNTANTS’ REPORT ON THE EAS PRC GROUP
(f) Operating leases
(i) A group company is the lessee
Leases where a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are charged to the profit and loss account on a straight-line basis over the period of the lease.
(ii) A group company is the lessor
Assets leased out under operating leases are included in fixed assets in the balance sheet. They are depreciated over their expected useful lives on a basis consistent with similar owned fixed assets. Rental income (net of any incentives given to lessees) is recognised on a straight-line basis over the lease term.
(g) Inventories
Supplies, consumables and spare parts are stated at the lower of cost or net realised value. Cost is determined by the first-in, first-out method. Net realised value is determined on the basis of anticipated sales proceeds less estimated selling expenses.
(h) Accounts receivable
Provision is made against accounts receivable to the extent they are considered to be doubtful. Accounts receivable in the balance sheet are stated net of such provision.
(i) Cash and cash equivalents
Cash and cash equivalents are carried in the balance sheet at cost. For the purposes of the cash flow statement, cash and cash equivalents comprise cash on hand, deposits held at call with banks, cash investments with a maturity of three months or less from date of investment and bank overdrafts.
(j) Pension obligations
The full-time employees of Eas PRC Group employed by the PRC subsidiaries are covered by various government-sponsored pension plans under which the employees are entitled to a monthly pension based on certain formulae. The relevant government agencies are responsible for the pension liability to these retired employees. Eas PRC Group contributes on a monthly basis to these pension plans. Under these plans, Eas PRC Group has no obligation for post-retirement benefits beyond the contributions made. Contributions to these plans are expensed as incurred.
Eas PRC Group also operates a mandatory provident fund scheme (“Scheme”) for eligible employees in Hong Kong which is a defined contribution plan. The assets of the Scheme are held in a separate trustee-administered fund. Eas PRC Group’s contributions to the Scheme are expensed as incurred.
(k) Deferred taxation
Deferred taxation is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the accounts. Taxation rates enacted or substantively enacted by the balance sheet date are used to determine deferred taxation.
Deferred tax assets are recognised to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised.
Deferred taxation is provided on temporary differences arising on investments in subsidiaries and associates, except where the timing of the reversal of the temporary difference can be controlled and it is probable that the temporary difference will not reverse in the foreseeable future.
−61− APPENDIX III ACCOUNTANTS’ REPORT ON THE EAS PRC GROUP
(l) Contingent liabilities and contingent assets
A contingent liability is a possible obligation that arises from past events and whose existence will only be confirmed by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of Eas PRC Group. It can also be a present obligation arising from past events that is not recognised because it is not probable that outflow of economic resources will be required or the amount of obligation cannot be measured reliably.
A contingent liability is not recognised but is disclosed in the notes to the accounts. When a change in the probability of an outflow occurs so that the outflow is probable, it will then be recognised as a provision.
A contingent asset is a possible asset that arises from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain events not wholly within the control of Eas PRC Group.
Contingent assets are not recognised but are disclosed in the notes to the accounts when an inflow of economic benefits is probable. When inflow is virtually certain, an asset is recognised.
(m) Revenue recognition
Turnover comprises the value of charges for the sale of services to third parties net of disbursements made on behalf of customers. Turnover/revenues are recognised on the following bases:
(i) Freight forwarding
Revenue is recognised when the freight forwarding services are rendered, which generally coincides with the date of departure for outward freight and the date of arrival for inward freight, where Eas PRC Group effectively acts as a principal in arranging transportation of goods for customers, revenue recognised generally includes the carrier’s charges to Eas PRC Group. Where Eas PRC Group effectively acts as an agent for the customers, revenue recognised represents fees for services provided by Eas PRC Group.
(ii) Agency services
Revenue from agency services is recognised upon completion of the agency services, which generally coincides with the date of departure of the relevant vessel from port.
(iii) Express services
Revenue from express services is recognised upon delivery of the relevant document or package.
(iv) Marine transportation
Revenue from liner shipping is recognised when the services are rendered. For uncompleted voyage at the end of a reporting period, revenue is allocated between reporting periods based on relative transit time in each reporting period.
(v) Other logistics services
Revenue from the provision of other logistics services is recognised when the services are rendered.
(vi) Rental income
Rental income under operating leases of warehouses and depots is recognised on a straight-line accrual basis.
(vii) Interest income
Interest income is recognised on a time proportion basis, taking into account the principal amounts outstanding and the interest rates applicable.
(viii) Dividend income
Dividend income is recognised when the right to receive payment is established.
−62− APPENDIX III ACCOUNTANTS’ REPORT ON THE EAS PRC GROUP
(n) Borrowing costs
All borrowing costs are charged to the profit and loss account in the period/year in which they are incurred.
(o) Segment reporting
In accordance with Eas PRC Group’s internal financial reporting Eas PRC Group has determined that business segments be presented as the primary reporting format and geographical as the secondary reporting format. Unallocated costs represent corporate expenses and operating costs which are common to certain business segments.
In respect of geographical segment reporting, sales are based on the geographical area of operation is located.
Since the balance sheet items cannot be allocated among the business segments and geographical segments, no separate segmental reporting of balance sheet items is presented.
3. Segmental information
By business segment
For the year ended 31 December 2001 Air Sea Express freight freight and other Inter- forwarding forwarding logistics Marine segment and agency and agency services transportation Other elimination Group RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Operating results Turnover – External 777,757 564,838 315,223 121,212 33,802 − 1,812,832 Turnover – Internal 169,037 120,412 60,594 5,326 – (355,369) –
946,794 685,250 375,817 126,538 33,802 (355,369) 1,812,832
Other revenues 7,618
Segment results 189,240 82,723 214,054 12,034 12,342 − 510,393 Unallocated costs (469,696)
Operating profit 40,697 Finance costs (31,374)
Group profit before taxation 9,323 Share of results of associates before taxation 3,499
Profit before taxation 12,822 Taxation (3,926)
Profit after taxation 8,896 Minority interests (989)
Profit for the year 7,907
−63− APPENDIX III ACCOUNTANTS’ REPORT ON THE EAS PRC GROUP
For the year ended 31 December 2002 Air Sea Express freight freight and other Inter- forwarding forwarding logistics Marine segment and agency and agency services transportation Other elimination Group RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’00
Operating results Turnover – External 729,973 568,099 335,855 161,360 51,601 − 1,846,888 Turnover – Internal 167,591 127,545 61,683 4,297 – (361,116) –
897,564 695,644 397,538 165,657 51,601 (361,116) 1,846,888
Other revenues 6,809
Segment results 224,825 93,651 245,331 14,854 20,876 − 599,537 Unallocated costs (535,190)
Operating profit 64,347 Finance costs (27,786)
Group profit before taxation 36,561 Share of results of associates before taxation 2,965
Profit before taxation 39,526 Taxation (9,038)
Profit after taxation 30,488 Minority interests 336
Profit for the year 30,824
−64− APPENDIX III ACCOUNTANTS’ REPORT ON THE EAS PRC GROUP
For the year ended 31 December 2003 Air Sea Express freight freight and other Inter- forwarding forwarding logistics Marine segment and agency and agency services transportation Other elimination Group RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Operating results Turnover – External 936,163 799,896 406,561 190,306 57,430 − 2,390,356 Turnover – Internal 179,736 157,964 123,157 47,573 – (508,430) –
1,115,899 957,860 529,718 237,879 57,430 (508,430) 2,390,356
Other revenues 6,109
Segment results 259,347 123,366 324,451 9,435 24,409 − 741,008 Unallocated costs (623,436)
Operating profit 117,572 Finance costs (19,775)
Group profit before taxation 97,797 Share of results of associates before taxation 4,670
Profit before taxation 102,467 Taxation (26,052)
Profit after taxation 76,415 Minority interests (2,039)
Profit for the year 74,376
−65− APPENDIX III ACCOUNTANTS’ REPORT ON THE EAS PRC GROUP
For the six months ended 30 June 2003 Air Sea Express freight freight and other Inter- forwarding forwarding logistics Marine segment and agency and agency services transportation Other elimination Group RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Operating results Turnover – External 385,782 321,128 178,050 110,517 26,938 − 1,022,415 Turnover – Internal 90,925 83,721 55,745 – – (230,391) –
476,707 404,849 233,795 110,517 26,938 (230,391) 1,022,415
Other revenues 979
Segment results 117,959 65,728 140,135 4,299 17,986 − 346,107 Unallocated costs (301,089)
Operating profits 45,018 Finance costs (11,007)
Group profit before taxation 34,011 Share of results of associates before taxation 2,104
Profit before taxation 36,115 Taxation (8,435)
Profit after taxation 27,680 Minority interests (875)
Profit for the period 26,805
−66− APPENDIX III ACCOUNTANTS’ REPORT ON THE EAS PRC GROUP
For the six months ended 30 June 2004 Air Sea Express freight freight and other Inter- forwarding forwarding logistics Marine segment and agency and agency services transportation Other elimination Group RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Operating results Turnover – External 542,401 477,152 188,046 121,309 10,966 − 1,339,874 Turnover – Internal 53,897 70,430 59,889 23,782 – (207,998) –
596,298 547,582 247,935 145,091 10,966 (207,998) 1,339,874
Other revenues 2,493
Segment results 126,978 56,755 149,080 15,281 9,317 − 357,411 Unallocated costs (299,827)
Operating profit 57,584 Finance costs (9,359)
Group profit before taxation 48,225 Share of results of associates before taxation 2,336
Profit before taxation 50,561 Taxation (11,243)
Profit after taxation 39,318 Minority interests (419)
Profit for the period 38,899
−67− APPENDIX III ACCOUNTANTS’ REPORT ON THE EAS PRC GROUP
By geographical segment
Eas PRC Group operates its businesses in four main districts within the PRC, Hong Kong Special Administrative Region (“HK”) and overseas as below:
(i) Northern China – Including core strategic locations in Beijing, Tanggu, Tianjin, Shanxi, Hebei, Henan, Xinjiang, Dalian, Ha’erbin, Liaoning, Datong, Jilin and Yingkou, etc.
(ii) Eastern China – Including core strategic locations in Shanghai, Wuxi, Suzhou, Jiangsu, Nantong, Ningbo, Anhui, Hangzhou, Qingdao, Yantai, Shandong and Weifang, etc.
(iii) Southern China – Including core strategic locations in Guangzhou, Xiamen, Hainan, Shenzhen, Zhuhai, Shantou, Chengdu, Yunnan, Chongqing, Guizhou, Mianyang, Leshan, Xichang and Xizang, etc.
(iv) Central China – Including core strategic locations in Hubei, Hunan, Huangshi and Yichang, etc.
Year ended 31 December 2001 Turnover − Turnover − Segment External Inter-segment Total turnover results RMB’000 RMB’000 RMB’000 RMB’000
Northern China 781,685 210,257 991,942 181,647 Eastern China 415,832 145,112 560,944 142,859 Southern China 347,668 – 347,668 102,102 Central China 49,570 – 49,570 11,524 HK 42,387 – 42,387 30,095 Overseas 175,690 – 175,690 42,166 Inter-segment elimination – (355,369) (355,369) –
1,812,832 – 1,812,832 510,393
Unallocated costs (469,696)
Operating profit 40,697
Year ended 31 December 2002 Turnover − Turnover − Segment External Inter-segment Total turnover results RMB’000 RMB’000 RMB’000 RMB’000
Northern China 754,867 215,637 970,504 187,315 Eastern China 503,355 145,479 648,834 176,174 Southern China 326,811 – 326,811 106,427 Central China 27,170 – 27,170 7,360 HK 124,985 – 124,985 91,545 Overseas 109,700 – 109,700 30,716 Inter-segment elimination – (361,116) (361,116) –
1,846,888 – 1,846,888 599,537
Unallocated costs (535,190)
Operating profit 64,347
−68− APPENDIX III ACCOUNTANTS’ REPORT ON THE EAS PRC GROUP
Year ended 31 December 2003 Turnover − Turnover − Segment External Inter-segment Total turnover results RMB’000 RMB’000 RMB’000 RMB’000
Northern China 927,107 295,405 1,222,512 222,506 Eastern China 652,263 213,025 865,288 183,383 Southern China 393,155 – 393,155 120,127 Central China 21,737 – 21,737 6,748 HK 248,189 – 248,189 176,697 Overseas 147,905 – 147,905 31,547 Inter-segment elimination − (508,430) (508,430) −
2,390,356 – 2,390,356 741,008
Unallocated costs (623,436)
Operating profit 117,572
Six months ended 30 June 2003 Turnover − Turnover − Segment External Inter-segment Total turnover results RMB’000 RMB’000 RMB’000 RMB’000
Northern China 400,899 139,183 540,082 101,971 Eastern China 268,944 91,208 360,152 93,220 Southern China 176,603 – 176,603 63,577 Central China 10,377 – 10,377 3,293 HK 96,760 – 96,760 68,700 Overseas 68,832 – 68,832 15,346 Inter-segment elimination – (230,391) (230,391) –
1,022,415 – 1,022,415 346,107
Unallocated costs (301,089)
Operating profit 45,018
−69− APPENDIX III ACCOUNTANTS’ REPORT ON THE EAS PRC GROUP
Six months ended 30 June 2004 Turnover − Turnover − Segment External Inter-segment Total turnover results RMB’000 RMB’000 RMB’000 RMB’000
Northern China 580,299 121,160 701,459 121,863 Eastern China 438,230 86,838 525,068 105,456 Southern China 158,187 – 158,187 51,430 Central China 9,518 – 9,518 3,041 HK 120,434 – 120,434 68,141 Overseas 33,206 – 33,206 7,480 Inter-segment elimination – (207,998) (207,998) –
1,339,874 – 1,339,874 357,411
Unallocated costs (299,827)
Operating profit 57,584
4. Other revenues
For the six months For the year ended 31 December ended 30 June 2001 2002 2003 2003 2004 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Rental income 3,129 2,181 2,820 311 1,665 Interest income 1,704 1,456 1,370 668 542 Others 2,785 3,172 1,919 − 286
7,618 6,809 6,109 979 2,493
5. Directors’ and senior management emoluments
(a) Directors’ emoluments
Details of the emoluments paid or payable to the directors of Eas PRC by Eas PRC Group in respect of their services rendered for managing the business of Eas PRC Group during the Relevant Periods are as follows:
For the six months For the year ended 31 December ended 30 June 2001 2002 2003 2003 2004 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Fees −−−−− Other emoluments – Basic salaries, housing allowances and other allowances and benefits in kind 2,217 696 839 420 430 – Contributions to pension plans 29 15 19 9 11 – Discretionary bonuses 1,491 673 827 413 456
3,737 1,384 1,685 842 897
−70− APPENDIX III ACCOUNTANTS’ REPORT ON THE EAS PRC GROUP
No directors of Eas PRC waived any remuneration during the years ended 31 December 2001, 2002 and 2003, and the six months ended 30 June 2003 and 2004.
The emoluments of the directors were within the following band:
Number of directors For the six months For the year ended 31 December ended 30 June 2001 2002 2003 2003 2004
Nil – HK$1,000,000 (equivalent to RMB1,060,000) 55555
(b) Five highest paid individuals
The five individuals whose emoluments were the highest in Eas PRC Group for the Relevant Periods are as follows:
For the six months For the year ended 31 December ended 30 June 2001 2002 2003 2003 2004
Directors 42222 Senior management 13333
Details of remuneration to the highest paid individuals who are not directors of Eas PRC are as follows:
For the six months For the year ended 31 December ended 30 June 2001 2002 2003 2003 2004 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Basic salaries, housing allowances and other allowances and benefits in kind 346 561 881 442 471 Contributions to pension plans 10 25 36 17 19 Discretionary bonuses 272 648 1,015 507 583
628 1,234 1,932 966 1,073
The emoluments of these individuals fell within the following band:
Number of individuals For the six months For the year ended 31 December ended 30 June 2001 2002 2003 2003 2004
Nil – HK$1,000,000 (equivalent to RMB1,060,000) 13333
During the Relevant Periods, no emoluments have been paid by Eas PRC Group to the directors or any of the five highest paid individuals as an inducement to join or upon joining Eas PRC Group or as compensation for loss of office.
−71− APPENDIX III ACCOUNTANTS’ REPORT ON THE EAS PRC GROUP
6. Staff costs
Staff costs for the Relevant Periods which included remuneration to directors of Eas PRC are as follows:
For the six months For the year ended 31 December ended 30 June 2001 2002 2003 2003 2004 Note RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Wages and salaries 121,766 133,938 158,839 72,708 76,939 Contributions to pension plans a 19,425 18,556 26,008 11,834 14,810 Welfare and other expenses 42,340 34,998 36,945 15,585 15,807
183,531 187,492 221,792 100,127 107,556
Note a: The PRC employees of Eas PRC Group participate in various pension plans organised by the relevant municipal and provincial governments under which Eas PRC Group was required to make monthly defined contributions at rates ranging from 8% to 30%, dependent upon the applicable local regulations, of the employees’ basic salary for the Relevant Periods.
7. Profit before taxation
Profit before taxation is stated after charging the following:
For the six months For the year ended 31 December ended 30 June 2001 2002 2003 2003 2004 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Auditors’ remuneration 609 1,247 682 413 307 Depreciation 45,563 44,021 37,716 18,941 17,602 Loss on disposal of fixed assets 5 709 971 88 239 Operating leases – Land and buildings 25,614 27,155 31,002 15,607 16,173 – Vessels 24,051 30,882 48,282 21,191 29,142 Provision for doubtful debt – Accounts receivable 16,606 4,490 5,046 1,918 524 – Other receivables 2,669 5,183 369 185 565 Amortisation of goodwill – 236 237 118 118
8. Finance costs
For the six months For the year ended 31 December ended 30 June 2001 2002 2003 2003 2004 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Interest expense repayable within five years – bank loans 30,409 23,781 20,911 11,064 8,347 – other loans 539 2,522 1,082 1,010 – Exchange (gains)/loss, net (299) 226 (2,831) (1,396) 451 Bank charges 648 1,184 613 329 561 Others 77 73–––
31,374 27,786 19,775 11,007 9,359
−72− APPENDIX III ACCOUNTANTS’ REPORT ON THE EAS PRC GROUP
9. Taxation
Taxation in the consolidated profit and loss accounts represents:
For the six months For the year ended 31 December ended 30 June 2001 2002 2003 2003 2004 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
PRC enterprise income tax 2,955 11,350 19,227 6,804 9,797 Hong Kong profits tax – 162 416 – 430 Overseas profits tax 3,833 1,604 1,750 737 423 Deferred tax (3,562) (4,671) 3,725 368 126 Share of taxation attributable to associates 700 593 934 526 467
3,926 9,038 26,052 8,435 11,243
The provision for PRC current income tax is based on the statutory rate of 33% of the assessable income of each of the companies and enterprises comprising Eas PRC Group as determined in accordance with the relevant PRC income tax rules and regulations for the years ended 31 December 2001, 2002 and 2003, and the six months ended 30 June 2003 and 2004, except for certain subsidiaries which are taxed at preferential rates ranging from 15% to 30% based on the relevant PRC tax laws and regulations.
Hong Kong profits tax has been provided at the rate of 17.5% (2001–2002: 16%) on the estimated assessable profit for the period/year. Taxation on overseas profits has been calculated on the estimated assessable profit for the period/year at the rates of taxation prevailing in the countries in which the Group operates.
(a) The reconciliation between Eas PRC Group’s actual tax charge and the theoretical amount which is calculated based on the statutory tax rate of 33% in the PRC is as follows:
For the six months For the year ended 31 December ended 30 June 2001 2002 2003 2003 2004 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Profit before taxation 12,822 39,526 102,467 36,115 50,561
Tax calculated at the statutory tax rate of 33% 4,231 13,044 33,814 11,918 16,685 Income not subject to taxation (10,088) (10,509) (6,588) (4,360) (5,428) Expenses not deductible for tax purposes 9,926 5,175 6,491 5,282 4,415 Tax loss not recognised 2,338 5,346 1,360 765 612 Utilisation of previously unrecognised tax losses (208) (119) (1,289) (204) (259) Effect of different taxation rates of subsidiaries and associates (4,038) (4,991) (8,389) (5,798) (4,356) Others 1,765 1,092 653 832 (426)
Tax charge 3,926 9,038 26,052 8,435 11,243
−73− APPENDIX III ACCOUNTANTS’ REPORT ON THE EAS PRC GROUP
(b) The movement in the deferred taxation accounts is as follows:
Deferred tax assets:
For the six months ended For the year ended 31 December 30 June 2001 2002 2003 2004 RMB’000 RMB’000 RMB’000 RMB’000
At beginning of year/period 25,593 29,283 34,421 30,778 Credited/(charged) to the profit and loss account during the year/period 3,690 5,138 (3,643) 259
At end of year/period 29,283 34,421 30,778 31,037
Provided for in respect of:
Provision for receivables 25,782 29,909 27,339 27,839 Impairment and depreciation of fixed assets 3,487 3,461 3,146 2,904 Other temporary differences 14 1,051 293 294
29,283 34,421 30,778 31,037
Deferred tax liabilities:
For the six months ended For the year ended 31 December 30 June 2001 2002 2003 2004 RMB’000 RMB’000 RMB’000 RMB’000
At beginning of year/period – 128 595 677 Charged to the profit and loss account during the year/period 128 467 82 385
At end of year/period 128 595 677 1,062
Provided for in respect of:
Depreciation on fixed assets 128 595 677 1,062
−74− APPENDIX III ACCOUNTANTS’ REPORT ON THE EAS PRC GROUP
10. Fixed assets
(a) Movements
Land and Electronic Motor Construction buildings equipment vehicles in progress Others Total RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Cost As at 1 January 2001 313,442 50,238 181,775 2,533 50,325 598,313 Additions 1,796 10,107 13,139 1,235 5,411 31,688 Disposals (16,795) (2,093) (6,299) – (4,212) (29,399) Exchange difference – (43) (143) – (95) (281)
As at 31 December 2001 298,443 58,209 188,472 3,768 51,429 600,321 ------
Aggregate depreciation and impairment losses As at 1 January 2001 37,690 24,978 115,062 – 26,203 203,933 Charge for the year 9,795 7,267 19,472 – 9,029 45,563 Disposals (4,486) (1,831) (5,492) – (3,583) (15,392) Exchange difference – (40) (119) – (84) (243)
As at 31 December 2001 42,999 30,374 128,923 – 31,565 233,861 ------
Net book value As at 31 December 2001 255,444 27,835 59,549 3,768 19,864 366,460
Cost As at 1 January 2002 298,443 58,209 188,472 3,768 51,429 600,321 Acquisition of a subsidiary (note 20(b)) – – 293 – 1,854 2,147 Additions 1,685 7,473 5,253 5,343 11,174 30,928 Disposals (694) (9,492) (7,990) – (9,328) (27,504) Exchange difference – 61 127 – 459 647
As at 31 December 2002 299,434 56,251 186,155 9,111 55,588 606,539 ------
Aggregate depreciation and impairment losses As at 1 January 2002 42,999 30,374 128,923 – 31,565 233,861 Charge for the year 9,402 10,113 14,296 – 10,210 44,021 Disposals (83) (8,121) (6,081) – (8,222) (22,507) Exchange difference – 56 81 – 358 495
As at 31 December 2002 52,318 32,422 137,219 – 33,911 255,870 ------
Net book value As at 31 December 2002 247,116 23,829 48,936 9,111 21,677 350,669
−75− APPENDIX III ACCOUNTANTS’ REPORT ON THE EAS PRC GROUP
Land and Electronic Motor Construction buildings equipment vehicles in progress Others Total RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Cost As at 1 January 2003 299,434 56,251 186,155 9,111 55,588 606,539 Additions – 10,095 13,186 11,605 15,285 50,171 Disposals (49,581) (3,604) (19,516) − (4,194) (76,895) Exchange difference – 19 35 – 319 373
As at 31 December 2003 249,853 62,761 179,860 20,716 66,998 580,188 ------
Aggregate depreciation and impairment losses As at 1 January 2003 52,318 32,422 137,219 – 33,911 255,870 Charge for the year 9,138 7,989 11,162 – 9,427 37,716 Disposals (5,839) (3,213) (13,927) – (3,329) (26,308) Exchange difference – 18 26 – 268 312
As at 31 December 2003 55,617 37,216 134,480 – 40,277 267,590 ------
Net book value As at 31 December 2003 194,236 25,545 45,380 20,716 26,721 312,598
Cost As at 1 January 2004 249,853 62,761 179,860 20,716 66,998 580,188 Additions – 3,673 6,912 7,602 1,843 20,030 Disposals – (1,650) (3,737) – (1,090) (6,477) Exchange difference – (10) (3) – (80) (93)
As at 30 June 2004 249,853 64,774 183,032 28,318 67,671 593,648 ------
Aggregate depreciation and impairment losses As at 1 January 2004 55,617 37,216 134,480 – 40,277 267,590 Charge for the period 4,232 4,003 5,563 – 3,804 17,602 Disposals – (1,212) (3,254) – (643) (5,109) Exchange difference – (8) (2) – (73) (83)
As at 30 June 2004 59,849 39,999 136,787 – 43,365 280,000 ------
Net book value As at 30 June 2004 190,004 24,775 46,245 28,318 24,306 313,648
−76− APPENDIX III ACCOUNTANTS’ REPORT ON THE EAS PRC GROUP
(b) Land and buildings pledged as security for bank loans (Note 19) were as follows:
As at As at 31 December 30 June 2001 2002 2003 2004 RMB’000 RMB’000 RMB’000 RMB’000
Net book value of land and buildings pledged 132,566 80,318 76,683 71,666
(c) Land and buildings leased out (note 23(b)) were as follows:
As at As at 31 December 30 June 2001 2002 2003 2004 RMB’000 RMB’000 RMB’000 RMB’000
Cost 13,959 13,959 13,959 13,959 Aggregate depreciation (628) (1,256) (1,885) (2,199)
Net book value of land and buildings leased out 13,331 12,703 12,074 11,760
(d) Included in the net book value of land and buildings as at 30 June 2004 are amounts of RMB36,436,000 (31 December 2001: RMB41,519,000; 31 December 2002: RMB39,456,000, 31 December 2003: RMB37,450,000) which represent properties in respect of which the Eas PRC Group had no property certificates. The directors, having sought legal advice, are of the opinion that Eas PRC should meet all the conditions to apply for the property certificates without having to incur any material costs, and is therefore considered to have all the risks and rewards associated with the ownership of such properties.
(e) All properties are located in the PRC with lease period up to the 50 years.
11. Goodwill
As at As at 31 December 30 June 2001 2002 2003 2004 RMB’000 RMB’000 RMB’000 RMB’000
Cost As at 1 January – – 4,731 4,731 Additions (note 20(b)) – 4,731 – –
As at 31 December/30 June – 4,731 4,731 4,731 ------
Aggregate amortisation As at 1 January – – 236 473 Charge for the year/period – 236 237 118
As at 31 December/30 June – 236 473 591 ------
Net book value As at 31 December/30 June – 4,495 4,258 4,140
−77− APPENDIX III ACCOUNTANTS’ REPORT ON THE EAS PRC GROUP
12. Associates
As at As at 31 December 30 June 2001 2002 2003 2004 RMB’000 RMB’000 RMB’000 RMB’000
Unlisted investments, at cost 45,303 45,303 46,256 49,981 Share of post-acquisition profits less losses 5,925 8,297 12,033 13,902 Dividends received (1,488) (3,535) (4,908) (5,266)
49,740 50,065 53,381 58,617
Please refer to note 25(b) for a list of the principal associates of Eas PRC Group.
13. Prepayments, deposits and other current assets
As at As at 31 December 30 June 2001 2002 2003 2004 RMB’000 RMB’000 RMB’000 RMB’000
Dividend receivables 1,017 2,706 962 240 Prepaid expenses 5,402 5,183 5,792 6,028 Others 118 – 37 39
Total 6,537 7,889 6,791 6,307
The prepaid expenses mainly represent rental paid in advance and prepaid insurance premium for staff and vehicles.
14. Inventories
These mainly represent supplies and consumables and spares parts.
As at As at 31 December 30 June 2001 2002 2003 2004 RMB’000 RMB’000 RMB’000 RMB’000
Inventory, at cost 3,000 5,199 2,356 2,192 Less: Provision for obsolescence (243) (243) (42) (42)
2,757 4,956 2,314 2,150
−78− APPENDIX III ACCOUNTANTS’ REPORT ON THE EAS PRC GROUP
15. Trade and other receivables
As at As at 31 December 30 June 2001 2002 2003 2004 RMB’000 RMB’000 RMB’000 RMB’000
Trade receivables (note (a)) 339,775 380,938 441,493 469,306 Bills receivable (note (b)) 250 2,394 1,458 1,611 Other receivables (note (c)) 59,725 43,834 61,744 45,128 Due from group companies (note (d)) 93,191 97,839 106,574 109,699
492,941 525,005 611,269 625,744
(a) Trade receivables
As at As at 31 December 30 June 2001 2002 2003 2004 RMB’000 RMB’000 RMB’000 RMB’000
Trade receivables 368,330 413,719 468,404 495,792 Less: Provision for doubtful debts (28,555) (32,781) (26,911) (26,486)
339,775 380,938 441,493 469,306
The credit period of Eas PRC Group’s trade receivables generally ranges from 1 to 3 months.
Aging analyses of trade receivables at the respective balance sheet dates are as follows:
As at As at 31 December 30 June 2001 2002 2003 2004 RMB’000 RMB’000 RMB’000 RMB’000
Within 6 months 319,685 357,967 417,510 455,354 Between 6 and 12 months 10,014 11,761 20,954 12,167 Between 1 and 2 years 16,935 14,552 9,651 7,991 Over 2 years 21,696 29,439 20,289 20,280
368,330 413,719 468,404 495,792
(b) Bills receivable
Bills receivable are bills of exchange with maturity dates of within 6 months.
(c) Other receivables
As at As at 31 December 30 June 2001 2002 2003 2004 RMB’000 RMB’000 RMB’000 RMB’000
Deposits receivable 13,856 19,500 24,622 26,783 Others 45,869 24,334 37,122 18,345
59,725 43,834 61,744 45,128
−79− APPENDIX III ACCOUNTANTS’ REPORT ON THE EAS PRC GROUP
(d) Due from group companies
The amounts due from group companies can be analysed as follows:
As at As at 31 December 30 June 2001 2002 2003 2004 RMB’000 RMB’000 RMB’000 RMB’000
Trade receivables: Ultimate holding company – – – 575 Associates 525 3,025 6,561 3,215
525 3,025 6,561 3,790 Less: Provision ––––
525 3,025 6,561 3,790
Other receivables: Ultimate holding company 91,050 93,399 98,458 104,819 Fellow subsidiaries 19,016 19,302 19,442 18,977
110,066 112,701 117,900 123,796 Less: Provision (17,400) (17,887) (17,887) (17,887)
92,666 94,814 100,013 105,909
Total: Ultimate holding company 91,050 93,399 98,458 105,394 Associates 525 3,025 6,561 3,215 Fellow subsidiaries 19,016 19,302 19,442 18,977
110,591 115,726 124,461 127,586 Less: Provision (17,400) (17,887) (17,887) (17,887)
93,191 97,839 106,574 109,699
The aging of the amounts due from ultimate holding company and associates, which are trading in nature with similar terms as other trade receivables, is summarised as follows:
As at As at 31 December 30 June 2001 2002 2003 2004 RMB’000 RMB’000 RMB’000 RMB’000
Within 6 months 525 3,025 5,688 3,766 Between 6 and 12 months – – 47 5 Between 1 and 2 years – – 826 12 Over 2 years –––7
525 3,025 6,561 3,790
−80− APPENDIX III ACCOUNTANTS’ REPORT ON THE EAS PRC GROUP
16. Cash and bank deposits
Included in the cash and bank deposits as at 31 December 2001, 2002 and 2003, and 30 June 2004 are Renminbi denominated balances kept in the PRC amounting to RMB166,129,000, RMB188,997,000, RMB288,143,000 and RMB173,991,000 respectively. The conversion of Renminbi denominated balanes into foreign currencies and the remittance of bank balances and cash out of the PRC are subject to the rules and regulation of foreign exchange control promulgated by the PRC government.
17. Trade payables
As at As at 31 December 30 June 2001 2002 2003 2004 RMB’000 RMB’000 RMB’000 RMB’000
Trade payables (note (a)) 253,114 277,271 306,474 259,825 Due to associates (note (b)) 451 917 162 1,542
253,565 278,188 306,636 261,367
(a) Trade payables
The normal credit period for trade payables generally ranges from 1 to 3 months. Aging analyses of trade payables at the respective balance sheet dates are as follows:
As at As at 31 December 30 June 2001 2002 2003 2004 RMB’000 RMB’000 RMB’000 RMB’000
Within 6 months 211,591 224,109 250,252 199,023 Between 6 and 12 months 10,844 12,035 25,431 22,834 Between 1 and 2 years 15,708 15,729 16,272 22,903 Over 2 years 14,971 25,398 14,519 15,065
253,114 277,271 306,474 259,825
(b) Due to associates
The aging of the amounts due to associates, which are trading in nature with similar credit terms as other trade payables, is summarised as follows:
As at As at 31 December 30 June 2001 2002 2003 2004 RMB’000 RMB’000 RMB’000 RMB’000
Within 6 months 91 549 128 1,513 Between 6 and 12 months 13 8 4 11 Between 1 and 2 years 33 15 24 6 Over 2 years 314 345 6 12
451 917 162 1,542
−81− APPENDIX III ACCOUNTANTS’ REPORT ON THE EAS PRC GROUP
18. Other payables, accruals and other current liabilities
As at As at 31 December 30 June 2001 2002 2003 2004 RMB’000 RMB’000 RMB’000 RMB’000
Other payables and accruals (note (a)) 100,580 86,817 106,786 83,184 Due to group companies (note (b)) 47,691 43,064 43,357 40,572
148,271 129,881 150,143 123,756
(a) Other payables and accruals
As at As at 31 December 30 June 2001 2002 2003 2004 RMB’000 RMB’000 RMB’000 RMB’000
Accrued expenses 18,457 16,441 36,288 23,946 Customers’ deposits 90 37 932 2,340 Advances received 12,000 2,000 2,000 2,000 Other tax payable 7,810 4,901 5,108 3,420 Others 62,223 63,438 62,458 51,478
100,580 86,817 106,786 83,184
(b) Due to group companies
The amounts due to group companies can be analysed as follows:
As at As at 31 December 30 June 2001 2002 2003 2004 RMB’000 RMB’000 RMB’000 RMB’000
Ultimate holding company 15,190 16,289 16,289 16,289 Fellow subsidiaries 20,576 12,000 12,000 12,000 Associates 11,925 14,775 15,068 12,283
47,691 43,064 43,357 40,572
Amounts due to group companies are of non-trade nature and are generally unsecured and non-interest bearing.
−82− APPENDIX III ACCOUNTANTS’ REPORT ON THE EAS PRC GROUP
19. Borrowings
(a) Borrowings include bank loans and other loans which are analysed as follows:
As at As at 31 December 30 June 2001 2002 2003 2004 Notes RMB’000 RMB’000 RMB’000 RMB’000
Current: Short term bank loans 195,700 303,478 157,500 84,500 Current portion of long term bank loans (b) 222,054 49,703 142 609 Other loans – Loans from a shareholder (c) – 53,500 – – – Loans from a fellow subsidiary (d) 19,310 29,960 29,960 29,960 – Loan from other related party (e) 20,000 – – –
457,064 436,641 187,602 115,069 ------
Non-current: Long term bank loans (b) 13,203 – 209,660 209,660 Loans from a shareholder (c) – 53,500 – –
13,203 53,500 209,660 209,660 ------
Total borrowings 470,267 490,141 397,262 324,729
Borrowings: Unsecured 217,625 321,663 214,763 170,229 Secured 252,439 168,478 182,499 154,500
470,064 490,141 397,262 324,729
(b) Eas PRC Group’s long-term bank loans were repayable as follows:
As at As at 31 December 30 June 2001 2002 2003 2004 RMB’000 RMB’000 RMB’000 RMB’000
Bank borrowings: Within 1 year 222,054 49,703 142 609 Between 1 and 2 years 13,203 – – 59,660 Between 2 and 5 years – – 209,660 150,000
235,257 49,703 209,802 210,269
Less: current portion (222,054) (49,703) (142) (609)
13,203 – 209,660 209,660
The bank loans are mainly denominated in Renminbi or United States Dollar with interest rates ranging from 5.16% to 6.18% per annum.
−83− APPENDIX III ACCOUNTANTS’ REPORT ON THE EAS PRC GROUP
The secured bank loans were secured by the following:
As at As at 31 December 30 June 2001 2002 2003 2004 RMB’000 RMB’000 RMB’000 RMB’000
Cash and cash equivalents pledged 36,202 8,280 29,480 – Land and buildings (note 10(b)) 132,566 80,318 76,683 71,666
Total 168,768 88,598 106,163 71,666
(c) Loans from a shareholder are unsecured, interest bearing at Hong Kong Interbank borrowing rate plus 1% per annum and repayable within two years. The loans were fully settled during 2003.
(d) Short-term loans from a fellow subsidiary are unsecured, interest bearing at London Interbank borrowing rate plus 1.5% per annum.
(e) Short-term loan from related party was unsecured, non-interest bearing and fully settled during 2002.
−84− APPENDIX III ACCOUNTANTS’ REPORT ON THE EAS PRC GROUP
20. Notes to consolidated cash flow statements
(a) Reconciliation of profit before taxation to cash generated from/(used in) operations
For the year For the six months ended 31 December ended 30 June 2001 2002 2003 2003 2004 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Profit before taxation 12,822 39,526 102,467 36,115 50,561 Interest income (1,704) (1,456) (1,370) (668) (542) Interest expense 30,948 26,303 21,993 12,074 8,347 Loss on disposal of fixed assets 5 709 971 88 239 Provision for receivables 19,275 9,673 5,415 2,103 1,089 Depreciation of fixed assets 45,563 44,021 37,716 18,941 17,602 Amortisation of goodwill – 236 237 118 118 Decrease in other non-current assets 402 424 100 50 50 Share of results of associates, before taxation (3,499) (2,965) (4,670) (2,104) (2,336)
Profit before taxation before working capital change 103,812 116,471 162,859 66,717 75,128 Decrease/(increase) in prepayments, deposits and other current assets (5,520) 337 (646) 893 (238) Decrease/(increase) in inventories 132 (2,199) 2,642 2,672 164 Increase in trade and other receivables (115,006) (20,474) (91,679) (88,634) (15,564) Increase/(decrease) in trade payables 53,849 8,197 28,448 13,479 (45,269) Increase/(decrease) in other payables accruals and other current liabilities 40,355 (26,548) 20,738 (68,655) (26,135) Increase/(decrease) in receipts in advance from customers 392 (38) 12,136 (809) 1,399 Increase/(decrease) in salary and welfare payable 20,445 22,227 (2,698) (8,961) 1,146 Exchange difference 38 2,539 2,826 590 393
Cash generated from/ (used in) operations 98,497 100,512 134,626 (82,708) (8,976)
−85− APPENDIX III ACCOUNTANTS’ REPORT ON THE EAS PRC GROUP
(b) Acquisition of a subsidiary
During the year ended 31 December 2002 RMB’000
Net assets acquired: Fixed assets 2,147 Cash and cash equivalents 10,523 Trade receivables 17,977 Other receivables 3,286 Trade payables (16,426) Other payables (5,584)
11,923 Minority interests (5,842)
Share of net assets 6,081 Goodwill on acquisition of a subsidiary 4,731
Consideration paid 10,812
Satisfied by cash paid 10,812
Net cash outflow arising on acquisition: Cash consideration (10,812) Cash and cash equivalents acquired 10,523
(289)
(c) Analysis of changes in financing during the Relevant Periods
Bank loans For the year For the six months ended 31 December ended 30 June 2001 2002 2003 2003 2004 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
At 1 January 435,287 430,957 353,181 353,181 367,302 New bank borrowings 431,015 444,954 502,602 178,165 60,609 Repayment of bank borrowings (435,345) (522,730) (488,481) (98,299) (133,142)
At 31 December/30 June 430,957 353,181 367,302 433,047 294,769
−86− APPENDIX III ACCOUNTANTS’ REPORT ON THE EAS PRC GROUP
Other loans For the year For the six months ended 31 December ended 30 June 2001 2002 2003 2003 2004 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
At 1 January – 39,310 136,960 136,960 29,960 New other borrowings 44,610 136,960––– Repayment of other borrowings (5,300) (39,310) (107,000) (53,500) –
At 31 December/30 June 39,310 136,960 29,960 83,460 29,960
Pledged deposits For the year For the six months ended 31 December ended 30 June 2001 2002 2003 2003 2004 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
At 1 January – 36,202 8,280 8,280 29,480 lncrease/(decrease) in pledged deposits 36,202 (27,922) 21,200 (8,280) (29,480)
At 31 December/30 June 36,202 8,280 29,480 – –
(d) Major non-cash transaction
The transfer of subsidiaries from the ultimate holding company during 2001 was settled by setting off against intercompany balance.
21. Contingent liabilities
(a) Guarantees
As at As at 31 December 30 June 2001 2002 2003 2004 RMB’000 RMB’000 RMB’000 RMB’000
Loan guarantees granted to third parties 29,000 13,500 78,700 78,700
Included in the loan guarantees granted to third parties as at 30 June 2004 are amounts of RMB40 million and RMB25 million granted to two borrowers respectively which are in default. In respect of the RMB40 million guarantee, the borrower, its holding company, Eas PRC and the lending bank have been in negotiation for the extension of the loan and for a counter guarantee to be given by the holding company of the borrower to Eas PRC. In respect of the RMB25 million guarantee, the borrower and Eas PRC are in negotiation to seek to recover the assets of the borrower in order to reduce the exposure of Eas PRC. As at the date of this report, the above negotiations are still ongoing. No provision has been made as the directors cannot reliably estimate the ultimate liability, if any, which will be attributable to Eas PRC as a result of these guarantees.
−87− APPENDIX III ACCOUNTANTS’ REPORT ON THE EAS PRC GROUP
(b) Pending litigations
At 30 June 2004, Eas PRC Group had contingent liabilities in respect of a number of litigation proceedings. Save for the cases disclosed below, the directors of Eas PRC are of the opinion that there is no other pending litigation which would have a significant financial impact on the Eas PRC Group.
(i) Malaysian Airlines Case
Malaysian Airline System Berhad, together with five other plaintiffs, brought an action in the High Level People’s Court of Beijing on or about 13 March 2002 for damages, costs and interest, against Eas PRC and other defendants (subsequently increased to a total number of six) on a joint and several basis in relation to the damage caused to a Malaysian Airline aircraft on 15 March 2000 in respect of the transportation of certain chemical substance. The amount claimed by the plaintiffs is approximately US$66 million.
A hearing took place in June 2004 but was adjourned on account of certain evidential and procedural issues to be resolved, and no new hearing date has yet been fixed at the date of this report. No provision has been made in respect of this case as the directors, having sought legal advice, are of the opinion that the final outcome of this case is not known.
For details of the case, please refer to the paragraph headed “Litigation” as set out in Appendix VII to this circular.
(ii) Liability as guarantor
Hubei Province Foreign Economic Trading Industrial Company (“Hubei Borrower”) borrowed loans totalling RMB22 million from China Dongfang Asset Management Company Wuhan Office (“the Plaintiff”) where Eas PRC, Hubei Branch acted as the guarantor.
Since Hubei Borrower was unable to repay the loan in accordance with the loan agreements, the Plaintiff filed three separate law suits against Eas PRC, Hubei Branch at Hubei Municipal Intermediate People’s Court.
On 9 July 2004, three judgements were handed down by the Hubei Municipal Intermediate People’s Court, which held that Eas PRC, Hubei Branch and Eas PRC were liable as guarantor with regard to the relevant loan agreements.
The total potential liability, exclusive of interest to be calculated from the judgement date, payable by Eas PRC under the three decisions is approximately RMB15 million.
Eas PRC lodged an appeal against these judgements, and a hearing was held on 28 October 2004 at the Hubei Provincial High Level People’s Court. The Plaintiff has proposed to settle the case for an amount of RMB3 million which has not been agreed by Eas PRC.
At the date of the report, the court has not given its ruling on the case. No provision has been made as the directors, having sought legal advice, are of the opinion that the final outcome of this case is not known.
(c) Indemnity
In connection with the Acquisition as set out in note 1, Huatong had undertaken to idemnify the Eas PRC Group in full in respect of all losses, costs, expenses and other responsibilities and liabilities arising from all litigations against the Eas PRC Group and guarantees granted by the Eas PRC Group before the Acquisition.
−88− APPENDIX III ACCOUNTANTS’ REPORT ON THE EAS PRC GROUP
22. Capital commitments
Eas PRC Group has the following outstanding capital commitments not provided for in the consolidated financial statements:
As at As at 31 December 30 June 2001 2002 2003 2004 RMB’000 RMB’000 RMB’000 RMB’000
Authorised and contracted for but not recorded 32,528 26,204 16,626 13,374 Authorised but not contracted for ––––
32,528 26,204 16,626 13,374
An analysis of the above capital commitments by nature is as follows:
As at As at 31 December 30 June 2001 2002 2003 2004 RMB’000 RMB’000 RMB’000 RMB’000
Construction commitment 30,432 24,782 16,310 12,734 Purchase of software 2,096 1,422 316 640
32,528 26,204 16,626 13,374
23. Operating lease commitments
(a) Eas PRC Group as lessee
Eas PRC Group has commitments to make the following future minimum lease payments under non-cancellable operating leases:
As at As at 31 December 30 June 2001 2002 2003 2004 RMB’000 RMB’000 RMB’000 RMB’000
Office buildings – Not later than one year 13,002 18,406 16,652 15,989 – Later than one year but not later than five years 11,659 31,619 21,754 26,323 – Later than five years 2,663 19,604 9,159 4,860 27,324 69,629 47,565 47,172 Warehouse – Not later than one year 724 165 1,006 2,580 – Later than one year but not later than five years 769 496 1,068 732 – Later than five years 1,655 1,681 1,568 1,655 3,148 2,342 3,642 4,967 Vessels – Not later than one year 1,086 4,726 4,074 4,376
31,558 76,697 55,281 56,515
−89− APPENDIX III ACCOUNTANTS’ REPORT ON THE EAS PRC GROUP
(b) Eas PRC Group as lessor
Eas PRC Group has contracted with customers for the following future minimum lease receivables:
As at As at 31 December 30 June 2001 2002 2003 2004 RMB’000 RMB’000 RMB’000 RMB’000
Land and buildings – Not later than one year 2,167 2,167 2,167 2,167 – Later than one year but not later than five years 8,667 7,739 6,772 6,289 – Later than five years 4,887 3,648 2,448 1,848
15,721 13,554 11,387 10,304
24. Related parties transactions
Parties are considered to be related if one party has the ability, directly or indirectly, to control the party or exercise significant influence over the party in making financial and operating decisions. Parties are also considered to be related if they are subject to common control or common significant influence.
In addition to the related party transactions disclosed elsewhere in the Financial Information, the Group had the following related party transactions during the Relevant Periods:
For the year For the six months ended 31 December ended 30 June 2001 2002 2003 2003 2004 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Transactions with associates: Revenue from provision of freight services 11,506 18,461 35,409 12,690 26,679 Revenue from provision of other logistic services 3,487 989 1,991 1,196 2,130 Transportation services cost paid 9,990 15,367 31,511 11,072 17,466
Transaction with a shareholder: Transportation services cost paid 14,289 3,820–––
These transactions are entered into at terms agreed with these related parties in the ordinary course of business.
−90− APPENDIX III ACCOUNTANTS’ REPORT ON THE EAS PRC GROUP
25. Particulars of principal subsidiaries and associates
The following table includes the particular of principal subsidiaries and associates of the Eas PRC Group, as of the date of this report which in the opinion of the Directors, were significant to the results of the Eas PRC Group or formed a substantial portion of net asset of the Eas PRC Group. To give details of other subsidiaries and associates would result in particular of excessive length.
Country/ place of incorporation/ establishment and Attributable date of Issued and fully equity interest incorporation/ paid-up Directly Indirectly Principal Auditors of the latest Name establishment share capital held held activities published account
(a) Subsidiaries
#EAS International Logistics Shanghai, PRC Registered capital 75.00% 25.00% Warehousing, Shanghai Qiuxin (Shanghai) Co., Ltd. 13 August 1998 of US$6,000,000 depot and cargo Certified Public services Accountant
^#EAS International (Beijing) Beijing, PRC Registered capital 80.00% – Warehousing N/A Logistics 20 June 1997 of Co., Ltd. RMB30,000,000
†Shenzhen EAS International Shenzhen, PRC Registered capital 100.00% – Air and marine Beijing Jing Du Transportation Ltd. 30 October 1993 of US$1,000,000 transportation Certified Public Accountants Co., Ltd.
^@EAS International (Shanghai, Shanghai, PRC Registered capital 80.00% – Trucking Shanghai Zhong Hui Songjiang) Logistics Co., Ltd. 29 November 2001 of RMB2,500,000 Certified Public Accountants Co., Ltd.
#EAS International Logistics Qingdao, PRC Registered capital 60.00% 40.00% Distribution, N/A (Qingdao) Limited Company 13 March 2003 of US$200,000 warehousing, depot and international trade
*EAS International Hong Kong 100,000 100.00% – Freight Deloitte Touche Transportation (HK) Limited 16 November 1993 ordinary shares of forwarding and Tohmatsu HK$1 each logistics services
EAS Transportation (M) Sdn. Malaysia 1,500,000 69.00% – Forwarding, Peter Chong & Co. Bhd. 23 October 1996 ordinary shares of packing, Chartered RM1 each hauling and Accountants transport agency
EAS International Shipping Singapore 350,000 60.00% – Marine freight K.S. Ng & Co, Pte Ltd. 9 November 1993 ordinary shares of transport Certified Public S$1 each agencies Accountants
−91− APPENDIX III ACCOUNTANTS’ REPORT ON THE EAS PRC GROUP
Country/ place of incorporation/ establishment and Attributable date of Issued and fully equity interest incorporation/ paid-up Directly Indirectly Principal Auditors of the latest Name establishment share capital held held activities published account
(b) Associates
#Huahan (Tianjin) Container Co., Tianjin, PRC Registered capital 30.00% – Freight Tianjin Xingang Ltd. 16 November 1993 of US$7,524,500 forwarding, Certified Public shipping Accountants Ltd. agency and container services
#Dalian Hantong Logistics Co., Dalian, PRC Registered capital 50.00% – Warehousing and Dalian Hengping Ltd. 13 October 1994 of US$2,720,000 container United Accounting maintenance Services
Eas System (M) Sdn. Bhd. Malaysia 10,000 48.95% – Customs Peter Chong & Co. 2 October 1997 ordinary shares of brokerage Chartered RM1 each Accountants
East Asia Shipping International Madrid 20,000 ordinary 50.00% – Transportation RSM Audihispana Espana, S.A. 21 February 1995 shares of forwarding and PTA1,000 each materials handing * The financial year end of all subsidiaries/associates is 31 December except that of this subsidiary has been changed from 25 December to 31 December since 26 December 2003.
# Sino-foreign equity joint venture enterprise.
† Wholly foreign-owned enterprise.
@ Domestic joint venture enterprise.
^ English translation of name only.
26. Subsequent event
On 29 September 2004, Eas PRC declared profit distribution of RMB158 million.
27. Ultimate holding company
As at the date of this report, the directors regard Huatong Industrial Development Co., Ltd. established in the PRC, as being the ultimate holding company.
III. SUBSEQUENT ACCOUNTS
No audited accounts of Eas PRC or any of its subsidiaries have been prepared in respect of any period subsequent to 30 June 2004 up to the date of this report.
Yours faithfully, PricewaterhouseCoopers Certified Public Accountants Hong Kong
−92− APPENDIX IV FINANCIAL INFORMATION OF THE GROUP
1. FINANCIAL SUMMARY
Set out below is a summary of the published audited consolidated results of the Group for each of the last three financial years ended 31 December 2003, the audited net asset values of the Group as at 31 December 2001, 31 December 2002 and 31 December 2003, the unaudited consolidated results of the Group for the six months ended 30 June 2004 and the unaudited net asset value of the Group as at 30 June 2004:
Six months ended Year ended Year ended Year ended 30 June 31 December 31 December 31 December 2004 2003 2002 2001 As restated As restated HK$’000 HK$’000 HK$’000 HK$’000
Turnover 2,631,849 4,204,466 5,156,162 5,036,408
Operating profit 694,359 436,564 678,896 527,285 Share of results of associated companies 224,241 135,758 108,838 (272,780)
Profit before taxation 918,600 572,322 787,734 254,505 Taxation (152,364) (111,192) (175,988) (83,165)
Profit after taxation 766,236 461,130 611,746 171,340 Minority interests (68,266) (66,389) (12,075) (23,910)
Profit attributable to the Shareholders 697,970 394,741 599,671 147,430
Earnings per share (HK cents) 58.44 33.44 51.50 12.85
30 June 31 December 31 December 31 December 2004 2003 2002 2001 As restated As restated HK$’000 HK$’000 HK$’000 HK$’000
Total assets 31,717,863 30,836,996 31,879,629 35,264,433 Total liabilities and minority interests (11,298,689) (10,954,437) (12,083,199) (14,448,274)
Shareholders’ funds 20,419,174 19,882,559 19,796,430 20,816,159
Net asset value per share (HK$) 17.08 16.69 16.91 18.01
−93− APPENDIX IV FINANCIAL INFORMATION OF THE GROUP
2. AUDITED CONSOLIDATED FINANCIAL STATEMENTS OF THE GROUP
Set out below is the audited consolidated financial statements of the Group for the year ended 31 December 2003 as extracted from the Company’s 2003 annual report. For the purpose of this Appendix IV, the following expressions correspond with the definitions of this document respectively set opposite them:
“share” or “ordinary shares” Shares of the Company “shareholders” Shareholders
−94− APPENDIX IV FINANCIAL INFORMATION OF THE GROUP
Consolidated Profit and Loss Account For the year ended 31 December 2003
As restated 2003 2002 Note HK$’000 HK$’000 Turnover 2 4,204,466 5,156,162
Cost of sales (1,441,512) (2,387,768)
Direct operating expenses (1,603,609) (1,389,164)
Gross profit 1,159,345 1,379,230
Other revenues 2 37,436 55,915
Other income 52,005 39,697
Provision in respect of stock of completed properties held for sale (69,346) (266,000)
Revaluation deficit on investment properties and other leasehold land and buildings (290,236) (13,941)
Administrative expenses (278,002) (298,875)
Operating profit before finance costs 3 611,202 896,026
Finance costs 4 (174,638) (217,130)
Operating profit 436,564 678,896
Share of results of associated companies Share of profits less losses 246,567 108,838 Provision for decline in carrying value (110,809) –
135,758 108,838
Profit before taxation 572,322 787,734
Taxation 5 (111,192) (175,988)
Profit after taxation 461,130 611,746
Minority interests (66,389) (12,075)
Profit attributable to shareholders 6 394,741 599,671
Earnings per share 8 33.44 cents 51.50 cents
Ð 95 Ð APPENDIX IV FINANCIAL INFORMATION OF THE GROUP
Consolidated Balance Sheet As at 31 December 2003
As restated 2003 2002 Note HK$’000 HK$’000 (Negative goodwill)/goodwill 11 (42,604) 45,004 Fixed assets 12 20,960,492 20,890,174 Associated companies 14 4,621,841 5,080,824 Other non-current assets 15 1,495,763 1,589,987 Current assets Stock of completed properties held for sale 16 345,202 1,363,328 Properties under development for sale 17 999,777 591,273 Accounts receivable, prepayments and deposits 18 790,724 862,038 Tax recoverable 48,561 30,764 Tax reserve certificates 19,926 – Trading securities 19 3,252 2,043 Pledged bank deposits 33 74,003 70,450 Cash and bank balances 1,520,059 1,353,744 3,801,504 4,273,640 Current liabilities Accounts payable, deposits received and accrued charges 20 1,333,956 1,415,574 Taxation 60,150 109,533 Short-term bank loans and current portion of long-term liabilities 27 804,751 1,335,481 Unsecured bank overdrafts 1,921 2,949 2,200,778 2,863,537
Net current assets 1,600,726 1,410,103
Total assets less current liabilities 28,636,218 29,016,092
Financed by: Share capital 21 1,191,527 1,170,551 Share premium 23 3,628,591 3,478,011 Other reserves 24 9,209,944 9,386,344 Retained profits 25 5,673,768 5,621,058 Proposed final dividend 25 178,729 140,466
Shareholders’ funds 19,882,559 19,796,430 Minority interests and loans 26 2,375,499 2,527,566
22,258,058 22,323,996 Long-term liabilities 27 5,403,213 5,719,091 Deferred taxation 28 974,947 973,005
28,636,218 29,016,092
Ð 96 Ð APPENDIX IV FINANCIAL INFORMATION OF THE GROUP
Balance Sheet As at 31 December 2003
2003 2002 Note HK$’000 HK$’000 Fixed assets 12 1,464 1,753
Subsidiaries 13 27,881,490 28,230,796
Current assets Dividends receivable 370,000 360,000 Accounts receivable, prepayments and deposits 4,540 3,031 Tax recoverable 276 423 Cash and bank balances 119,446 308,423
494,262 671,877
Current liabilities Accounts payable and accrued charges 14,948 13,856 Short-term bank loans and current portion of long-term liabilities 27 472,222 650,000
487,170 663,856
Net current assets 7,092 8,021
Total assets less current liabilities 27,890,046 28,240,570
Financed by:
Share capital 21 1,191,527 1,170,551
Share premium 23 3,628,591 3,478,011
Other reserves 24(f) 17,801,176 17,801,176
Retained profits 25 490,023 450,366
Proposed final dividend 25 178,729 140,466
Shareholders’ funds 23,290,046 23,040,570
Long-term liabilities 27 4,600,000 5,200,000
27,890,046 28,240,570
Ð 97 Ð APPENDIX IV FINANCIAL INFORMATION OF THE GROUP
Consolidated Cash Flow Statement For the year ended 31 December 2003
As restated 2003 2002 Note HK$’000 HK$’000 Operating activities Net cash generated from operations 29(a) 1,893,830 2,718,641 Interest paid (264,093) (285,204) Hong Kong profits tax paid (84,223) (41,332) PRC and overseas tax paid (116,440) (74,109)
Net cash from operating activities 1,429,074 2,317,996
Investing activities Purchase of fixed assets, excluding interest capitalised (918,898) (354,826) Purchase of a subsidiary 29(d) – (74,397) Purchase of additional interest in subsidiaries (110,000) – Additional investments in associated companies (9,217) (32,176) Repayment of loans from/(additional loans to) associated companies 584,738 (281,981) Purchase of long-term investments (155) (2,576) Purchase of business (1,817) – Increase in long-term receivables (30,068) – Interest received 26,118 30,849 Dividends received from associated companies 25,009 125,325 Dividends received from listed and unlisted investments 11,418 27,727 (Loans to)/repayment of loans from investee companies (220) 1,300 Proceeds from sale of trading securities – 1,660 Proceeds from sale of fixed assets 159,767 151,131 Proceeds from sale of long-term investments 18,573 –
Net cash used in investing activities (244,752) (407,964)
Net cash inflow before financing 1,184,322 1,910,032
Ð 98 Ð APPENDIX IV FINANCIAL INFORMATION OF THE GROUP
As restated 2003 2002 Note HK$’000 HK$’000 Financing activities 29(b) Proceeds from issue of shares 37,609 752 Consideration and expenses for purchase of shares for cancellation – (1,251) Repayment of bank loans (2,402,270) (7,281,010) Redemption of convertible bonds – (1,993,282) Drawdown of bank loans 1,545,681 6,683,486 Dividends paid (161,038) (227,526) Capital injection from minority shareholders 474 45,124 Dividends paid to minority shareholders in subsidiaries (4,017) (200) Decrease in loans from minority shareholders (29,865) (6,500)
Net cash used in financing (1,013,426) (2,780,407)
Increase/(decrease) in cash and cash equivalents 170,896 (870,375)
Cash and cash equivalents at 1 January 1,421,245 2,291,620
Cash and cash equivalents at 31 December 1,592,141 1,421,245
Analysis of balances of cash and cash equivalents
Pledged bank deposits 74,003 70,450 Cash and bank balances 1,520,059 1,353,744 Unsecured bank overdrafts (1,921) (2,949)
1,592,141 1,421,245
Ð 99 Ð APPENDIX IV FINANCIAL INFORMATION OF THE GROUP
Consolidated Statement of Changes in Equity For the year ended 31 December 2003
As restated 2003 2002 Note HK$’000 HK$’000 Total equity as at 1 January, as previously reported 21,000,570 21,897,390 Effect of adopting revised SSAP 12 1(l) (1,204,140) (1,081,231)
Total equity as at 1 January, as restated 19,796,430 20,816,159
Revaluation deficit on properties charged to revaluation reserves 24 (16,282) (1,121,393) Impairment loss 24 (91,345) – Revaluation deficit on non-trading securities 24 (112,296) (194,863) Exchange differences arising on translation of the accounts of the PRC and overseas subsidiaries and associated companies 24 26,418 47,684 Provision for net deferred tax assets/(liabilities) credited/(charged) to revaluation reserves 24 8,322 (95,770)
Net losses not recognised in the profit and loss account (185,183) (1,364,342)
Profit for the year 25 394,741 599,671 Relevant portion of properties revaluation reserves realised in the profit and loss account on disposal of properties 24 – (27,033) Dividends 25 (294,985) (349,362) Issue of share capital 21, 23 171,556 122,588 Purchase of shares for cancellation 21, 23 – (1,251)
Total equity as at 31 December 19,882,559 19,796,430
Ð 100 Ð APPENDIX IV FINANCIAL INFORMATION OF THE GROUP
Notes To The Accounts 31 December 2003
1PRINCIPAL ACCOUNTING POLICIES
The principal accounting policies adopted in the preparation of these consolidated accounts are set out below:
(a) Basis of preparation The accounts have been prepared under the historical cost convention as modified by the revaluation of investment properties, warehouses, logistics centres, freehold land and buildings and investments in securities, in accordance with accounting principles generally accepted in Hong Kong and comply with accounting standards issued by the Hong Kong Society of Accountants (“HKSA”).
In the current year, the Group adopted the revised Statement of Standard Accounting Practice (“SSAP”) 12 “Income Taxes” issued by the HKSA which is effective for accounting periods commencing on or after 1 January 2003.
The changes to the Group’s accounting policies and the effect of adopting this new policy are set out below.
(b) Consolidation The consolidated accounts include the accounts of the Company and its subsidiaries made up to 31 December.
Subsidiaries are those entities in which the Company, directly and indirectly, controls more than one half of the voting power; has the power to govern the financial and operating policies; to appoint or remove the majority of the members of the board of directors; or to cast majority of votes at the meetings of the board of directors.
The results of subsidiaries acquired or disposed of during the year are included in the consolidated profit and loss account from the effective date of acquisition or up to the effective date of disposal, as appropriate.
All significant intercompany transactions and balances within the Group are eliminated on consolidation.
The gain or loss on the disposal of a subsidiary represents the difference between the proceeds of the sale and the Group’s share of its net assets together with any unamortised goodwill or negative goodwill or goodwill/negative goodwill taken to reserves which was not previously charged to or recognised in the consolidated profit and loss account and any related accumulated exchange fluctuation reserve.
Ð 101 Ð APPENDIX IV FINANCIAL INFORMATION OF THE GROUP
1PRINCIPAL ACCOUNTING POLICIES (CONTINUED) (b) Consolidation (Continued) Minority interests represent the interests of outside shareholders in the operating results and net assets of subsidiaries.
In the Company’s balance sheet, the investments in subsidiaries are stated at cost less provision for impairment losses. The results of subsidiaries are accounted for by the Company on the basis of dividends received and receivable.
(c) Associated companies An associated company is a company, not being a subsidiary, in which an equity interest is held for the long-term and significant influence is exercised in its management.
The consolidated profit and loss account includes the Group’s share of the post acquisition results of associated companies for the year and the consolidated balance sheet includes the Group’s share of the net assets of the associated companies and also goodwill/ negative goodwill on acquisition (net of accumulated amortisation).
Equity accounting is discontinued when the carrying amount of the investment in an associated company reaches zero, unless the Group has incurred obligations or guaranteed obligations in respect of the associated company.
(d) Equity joint ventures in the PRC Equity joint ventures are Sino-foreign joint ventures in respect of which the partners’ capital contribution ratios are defined in the joint venture contracts and the partners’ profit sharing ratios are in proportion to the capital contribution ratios.
The Group’s investments in equity joint ventures are accounted for as long-term investments, associated companies or subsidiaries depending on the Group’s equity or controlling interest therein.
(e) Wholly foreign owned enterprises in the PRC Interests in wholly foreign owned enterprises are accounted for as subsidiaries.
Ð 102 Ð APPENDIX IV FINANCIAL INFORMATION OF THE GROUP
1PRINCIPAL ACCOUNTING POLICIES (CONTINUED) (f) Goodwill/negative goodwill Goodwill represents the excess of purchase consideration over the fair values ascribed to the net assets of the subsidiaries, associated companies and businesses acquired at the date of acquisition.
Goodwill on acquisitions occurring on or after 1 January 2001 is amortised using the straight-line method over its estimated useful life of not more than twenty years.
Goodwill on acquisitions that occurred prior to 1 January 2001 was written off against reserves.
Negative goodwill represents the excess of the fair value of the Group’s share of the net assets acquired over the cost of acquisition.
For acquisitions after 1 January 2001, negative goodwill is presented in the same balance sheet classification as goodwill. To the extent that negative goodwill relates to expectations of future losses and expenses that are identified in the Group’s plan for the acquisition and can be measured reliably, but which do not represent identifiable liabilities at the date of acquisition, that portion of negative goodwill is recognised in the consolidated profit and loss account when the future losses and expenses are recognised. Any remaining negative goodwill, not exceeding the fair values of the non-monetary assets acquired, is recognised in the consolidated profit and loss account over the remaining weighted average useful life of those assets; negative goodwill in excess of the fair values of those non-monetary assets is recognised in the consolidated profit and loss account immediately.
For acquisitions prior to 1 January 2001, negative goodwill was taken directly to reserves on acquisition.
Where an indication of impairment exists, the carrying value of the goodwill, including goodwill previously written off against reserves, is assessed and written down to its recoverable amount.
The gain or loss on disposal of an entity includes the unamortised balance of goodwill or negative goodwill relating to the entity disposed of or, for pre 1 January 2001 acquisitions, the related goodwill or negative goodwill written off against reserves to the extent it has not previously been realised in the consolidated profit and loss account.
Ð 103 Ð APPENDIX IV FINANCIAL INFORMATION OF THE GROUP
1PRINCIPAL ACCOUNTING POLICIES (CONTINUED) (g) Investments in securities (i) Non-trading securities Investments which are held for non-trading purposes are stated at fair value at the balance sheet date. Changes in the fair value of individual securities are credited or debited to the non-trading securities revaluation reserve until the security is sold, or is determined to be impaired. Upon disposal, the cumulative gain or loss representing the difference between the net sales proceeds and the carrying amount of the relevant security, together with any surplus/deficit transferred from the non- trading securities revaluation reserve, is dealt with in the profit and loss account.
Individual investments are reviewed regularly to determine whether they are impaired. When an investment is considered to be impaired, the cumulative loss recorded in the revaluation reserve is taken to the profit and loss account. Transfers from non- trading securities revaluation reserve to the profit and loss account as a result of impairments are written back in the profit and loss account when the circumstances and events leading to the impairment cease to exist.
(ii) Trading securities Trading securities are carried at fair value. At each balance sheet date, the net unrealised gains and losses arising from the changes in fair value of trading securities are recognised in the profit and loss account. Profits or losses on disposal of trading securities, representing the difference between the net sales proceeds and the carrying amounts, are recognised in the profit and loss account as they arise.
(h) Properties and other fixed assets (i) Investment properties Investment properties, including hotel properties, are interests in land and buildings in respect of which construction work and development have been completed and are held for their investment potential, any rental income being negotiated at arm’s length.
Investment properties are stated at annual professional valuation at the balance sheet date. Changes in the value of investment properties are dealt with as movements in the investment properties revaluation reserve. If the total of this reserve is insufficient to cover a deficit on revaluation on a portfolio basis, the excess of the deficit is charged to the profit and loss account. Any subsequent revaluation surplus is credited to the profit and loss account to the extent of the deficit previously charged. Investment properties are not depreciated except where the unexpired term of the lease is 20 years or less, in which case depreciation is provided on the carrying value over the remaining term of the lease.
Ð 104 Ð APPENDIX IV FINANCIAL INFORMATION OF THE GROUP
1PRINCIPAL ACCOUNTING POLICIES (CONTINUED) (h) Properties and other fixed assets (Continued) (i) Investment properties (Continued) The gain or loss on disposal of an investment property, representing the difference between the net sales proceeds and the carrying amount of the relevant assets together with any revaluation reserve balance remaining attributable to the relevant asset, is recognised in the profit and loss account.
In prior years, the changes in the valuation of hotel properties of the Group are dealt with in the revaluation reserves on an individual basis. During the year, the directors have determined that all changes in valuation of the hotel properties should be dealt with in the revaluation reserves on a portfolio basis. The change in the accounting policy does not have material impact on the Group’s prior years and current year accounts.
(ii) Freehold and other leasehold land and buildings Freehold land and buildings and both warehouses and logistics centres classified as other leasehold land and buildings are stated at valuation, being the open market value at the date of valuation, less subsequent aggregate depreciation and accumulated impairment losses. Changes in the value of freehold land and buildings, warehouses and logistics centres arising from revaluation are dealt with as movements in the freehold land and buildings revaluation reserve and other properties revaluation reserve, respectively. If the reserve is insufficient to cover a deficit on revaluation on an individual basis, the excess of the deficit on revaluation is charged to the profit and loss account. Any subsequent revaluation surplus is credited to the profit and loss account on an individual basis to the extent of the deficit previously charged.
No depreciation is provided on freehold land. Depreciation on buildings situated on freehold land is calculated to write off their valuation less residual value on a straight-line basis over their expected useful lives to the Group. The principal annual rate used for this purpose is 2.5%.
Depreciation on both warehouses and logistics centres which are classified as other leasehold land and buildings is calculated to write off their valuation less residual value on a straight-line basis over their expected remaining useful lives to the Group ranging from ten to twenty-nine years.
Staff quarters are stated at cost less aggregate depreciation and accumulated impairment losses. Cost represents the purchase price of the staff quarters and other costs incurred to bring them into existing use.
Ð 105 Ð APPENDIX IV FINANCIAL INFORMATION OF THE GROUP
1PRINCIPAL ACCOUNTING POLICIES (CONTINUED) (h) Properties and other fixed assets (Continued) (ii) Freehold and other leasehold land and buildings (Continued) Depreciation on staff quarters is calculated to write off their cost on a straight-line basis over their expected useful lives to the Group. The principal annual rate used for this purpose is 5%.
The gain or loss on disposal of freehold and other leasehold land and buildings is the difference between the net sales proceeds and the carrying amount of the relevant asset, and is recognised in the profit and loss account. Any revaluation reserve balance remaining attributable to the relevant asset is transferred to retained profits and is shown as a movement in reserves.
(iii) Properties held for/under development Properties held for/under development for long-term purposes are stated at cost less accumulated impairment losses.
Properties under development for sale are included in current assets and are stated at the lower of cost and net realisable value, if presale of properties has not commenced.
Properties under development for sale are included in current assets and are stated at cost plus attributable profits recognised on the basis set out in note 1(t)(i) less sales instalments received and receivable and provision for any foreseeable losses, if presale of properties has commenced.
Cost of properties in the course of development comprises land cost, fees for land use rights and development costs including attributable interest and professional charges capitalised during the development period. Where properties, previously held as investment properties, are subject to redevelopment, they are valued at the date redevelopment commenced. Cost of properties under development includes the carrying value of the properties at the date when redevelopment commences. The properties under development revaluation reserve is transferred to the investment properties revaluation reserve or completed properties revaluation reserve upon completion of redevelopment. If sales of the properties commence before redevelopment is completed, the relevant portion of the revaluation reserve realised in respect of previous valuations is released from the properties under development revaluation reserve to the profit and loss account.
Ð 106 Ð APPENDIX IV FINANCIAL INFORMATION OF THE GROUP
1PRINCIPAL ACCOUNTING POLICIES (CONTINUED) (h) Properties and other fixed assets (Continued) (iii) Properties held for/under development (Continued) Net realisable value is determined by reference to sales proceeds of properties sold in the ordinary course of business less all estimated selling expenses after the balance sheet date, or by management estimates based on prevailing market conditions.
No depreciation is provided on properties held for/under development.
(iv) Stock of completed properties held for sale Stock of completed properties held for sale are included in current assets and are stated at the lower of cost and net realisable value. Cost comprises land and development costs and is determined by apportionment of the total land and development costs attributable to the unsold properties.
Upon the disposal of stock of completed properties held for sale, the relevant portion of the revaluation reserve realised in respect of previous valuations is released from the completed properties revaluation reserve to the profit and loss account.
(v) Other fixed assets Other fixed assets are stated at cost less aggregate depreciation and accumulated impairment losses. Cost represents the purchase price of the asset and other costs incurred to bring the asset into existing use.
Depreciation on other fixed assets is calculated to write off their cost on a straight- line basis over their expected useful lives to the Group. The principal annual rates used for this purpose are:
Leasehold improvements 15% Warehouse operating equipment 5% to 20% Motor vehicles, furniture, fixtures and office equipment 15% to 20%
The gain or loss on disposal of other fixed assets is the difference between the net sales proceeds and the carrying amount of the relevant assets and is recognised in the profit and loss account.
Ð 107 Ð APPENDIX IV FINANCIAL INFORMATION OF THE GROUP
1PRINCIPAL ACCOUNTING POLICIES (CONTINUED) (h) Properties and other fixed assets (Continued) (vi) Cost of restoring and improving fixed assets Costs incurred in restoring fixed assets to their normal working condition are charged to the profit and loss account. Improvements are capitalised and depreciated over their expected useful lives to the Group.
(vii) Impairment of assets At each balance sheet date, both internal and external sources of information are considered to assess whether there is any indication that assets included in freehold and other leasehold land and buildings, properties held for/under development for long-term purposes and other fixed assets are impaired. If any such indication exists, the recoverable amount of the asset is estimated and where relevant, an impairment loss is recognised to reduce the asset to its recoverable amount. Such impairment losses are recognised in the profit and loss account except where the asset is carried at valuation and the impairment loss does not exceed the revaluation surplus for that same asset, in which case it is treated as a revaluation decrease.
(i) Accounts receivable Provision is made against accounts receivable to the extent they are considered to be doubtful. Accounts receivable in the balance sheet are stated net of such provision.
(j) Convertible bonds Convertible bonds are stated at the aggregate of the net proceeds from the issue plus finance costs provided.
The net proceeds represent the amount received on the issue of the convertible bonds after deduction of direct issue costs. Direct issue costs are amortised to the profit and loss account on a straight-line basis over the period from the date of issue to the date on which the bondholders can exercise their redemption option (the “Bondholders’ Redemption Date”). If any of the convertible bonds are purchased and cancelled, redeemed or converted prior to the Bondholders’ Redemption Date, any remaining unamortised costs attributable to such convertible bonds will be written off immediately to the profit and loss account.
Finance costs represent the premium that is to be paid to the bondholders upon redemption on or before the Bondholders’ Redemption Date. The estimated premium is provided for at a constant rate over the period when the bondholders’ redemption option is outstanding and is charged to the profit and loss account. If any of the convertible bonds are purchased and cancelled or converted prior to the Bondholders’ Redemption Date, any provision of such redemption premium in previous years in respect of the convertible bonds purchased or converted will be taken to the profit and loss account.
Ð 108 Ð APPENDIX IV FINANCIAL INFORMATION OF THE GROUP
1PRINCIPAL ACCOUNTING POLICIES (CONTINUED) (j) Convertible bonds (Continued) The gain or loss on purchase of convertible bonds, representing the difference between the consideration paid and the nominal value of the convertible bonds purchased, is recognised in the profit and loss account.
(k) Borrowing costs Borrowing costs incurred on assets under active development that take a substantial period of time to be ready for their intended use or sale are capitalised into the carrying value of properties held for/under development. The capitalisation rate is based on attributable cost of the specific borrowings.
All other borrowing costs are charged to the profit and loss account in the year in which they are incurred.
(l) Deferred taxation Deferred taxation is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the accounts. Taxation rates enacted or substantively enacted by the balance sheet date are used to determine deferred taxation.
Deferred tax assets are recognised to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised.
Deferred taxation is provided on temporary differences arising on investments in subsidiaries and associated companies except where the timing of the reversal of the temporary difference can be controlled and it is probable that temporary difference will not reverse in the foreseeable future.
In prior years, deferred taxation was accounted for at the current taxation rate in respect of timing differences between profit as computed for taxation purposes and profit as stated in the accounts to the extent that a liability or an asset was expected to be payable or recoverable in the foreseeable future. The adoption of the revised SSAP 12 represents a change in accounting policy and pursuant to SSAP 2 “Net Profit or Loss for the Period, Fundamental Errors and Changes in Accounting Policies”, revised SSAP 12 has been applied retrospectively so that the comparatives presented have been restated to conform to the changed policy.
Ð 109 Ð APPENDIX IV FINANCIAL INFORMATION OF THE GROUP
1PRINCIPAL ACCOUNTING POLICIES (CONTINUED) (l) Deferred taxation (Continued) As a result of the retrospective application of revised SSAP 12, an additional provision of HK$1,204,140,000 has been made for net deferred tax liabilities attributable to the Group as at 31 December 2002, of which HK$860,045,000 and HK$344,095,000 have been charged against reserves and retained profits, respectively. Accordingly, associated companies, other non-current assets and minority interests have been reduced by HK$310,294,000, HK$212,651,000 and HK$289,057,000, respectively and deferred taxation has been increased by HK$970,252,000. The previously reported profit attributable to shareholders for the year ended 31 December 2002 has also been reduced by HK$60,639,000.
(m) Employee benefits (i) Employee leave entitlements Employee entitlements to annual leave and long service leave are recognised when they accrue to employees. A provision is made for the estimated liability for annual leave and long service leave as a result of services rendered by employees up to the balance sheet date.
Employee entitlements to sick leave and maternity or paternity leave are not recognised until the time of leave.
(ii) Profit sharing and bonus plans The expected cost of profit sharing and bonus payments are recognised as a liability when the Group has a present legal or constructive obligation as a result of services rendered by employees and a reliable estimate of the obligation can be made.
(iii) Retirement benefit costs The Group’s contributions to the mandatory provident fund scheme and the defined contribution retirement schemes are expensed as incurred. Contributions to the defined contribution retirement scheme which is operated in Hong Kong are reduced by contributions forfeited by those employees who leave the scheme prior to vesting fully in the contributions. The assets of all these schemes are held separately and independently from those of the Group.
(iv) Share options The nominal income received from the grantees as consideration for the grant is recognised as income upon acceptance by the grantees. No employee benefits cost is recognised when options are granted. When the options are exercised, equity is increased by the amount of the proceeds received.
Ð 110 Ð APPENDIX IV FINANCIAL INFORMATION OF THE GROUP
1PRINCIPAL ACCOUNTING POLICIES (CONTINUED) (n) Operating leases Leases where substantially all the risks and rewards of ownership of assets remain with the leasing company are accounted for as operating leases. Payments made under operating leases net of any incentives received from the leasing company are charged to the profit and loss account on a straight-line basis over the lease periods.
(o) Translation of foreign currencies Transactions in foreign currencies are translated at exchange rates ruling at the transaction dates. Monetary assets and liabilities expressed in foreign currencies at the balance sheet date are translated at rates of exchange ruling at the balance sheet date. Exchange differences arising in these cases are dealt with in the profit and loss account.
The balance sheets of subsidiaries and associated companies expressed in foreign currencies are translated at the rates of exchange ruling at the balance sheet date whilst the profit and loss accounts are translated at average rates. Exchange differences are dealt with as a movement in reserves.
(p) Cash and cash equivalents Cash and cash equivalents are carried in the balance sheet at cost. For the purposes of the consolidated cash flow statement, cash and cash equivalents comprise cash on hand and deposits held at call with banks less bank overdrafts.
(q) Contingent liabilities and contingent assets A contingent liability is a possible obligation that arises from past events and whose existence will only be confirmed by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Group. It can also be a present obligation arising from past events that is not recognised because it is not probable that outflow of economic resource will be required or the amount of obligation cannot be measured reliably.
A contingent liability is not recognised but is disclosed in the notes to the accounts. When a change in the probability of an outflow occurs so that outflow is probable, they will then be recognised as a provision.
A contingent asset is a possible asset that arises from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain events not wholly within the control of the Group.
Contingent assets are not recognised but are disclosed in the notes to the accounts when an inflow of economic benefits is probable. When inflow is virtually certain, an asset is recognised.
Ð 111 Ð APPENDIX IV FINANCIAL INFORMATION OF THE GROUP
1PRINCIPAL ACCOUNTING POLICIES (CONTINUED) (r) Provisions Provisions are recognised when the Group has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources will be required to settle the obligation, and a reliable estimate of the amount can be made. Where the Group expects a provision to be reimbursed, the reimbursement is recognised as a separate asset but only when the reimbursement is virtually certain.
(s) Segment reporting In accordance with the Group’s internal financial reporting, the Group has determined that business segments be presented as the primary reporting format and geographical as the secondary reporting format.
Segment assets consist primarily of fixed assets, stock of completed properties held for sale, properties under development for sale, receivables and operating cash, and mainly exclude associated companies, other non-current assets, tax recoverable, tax reserve certificates and trading securities. Segment liabilities comprise operating liabilities and exclude items such as taxation, deferred taxation and minority interests and loans. Capital expenditure comprises additions to fixed assets including additions resulting from acquisitions through purchases of subsidiaries.
In respect of geographical segment reporting, turnover is based on the country of operations. Segment assets and capital expenditure are where the assets are located.
(t) Revenue and profit recognition (i) The recognition of revenue and profits from the sale of properties under development in advance of completion commences when a legally binding contract of sale has been executed. The revenues and profits recognised in a year are a proportion of the total revenues and profits expected on completion, the proportion used being the percentage of the construction costs incurred at the end of the year to the estimated total construction costs on completion (with due allowances for contingencies). The profit so recognised is restricted to the amount of instalments received.
Where purchasers fail to pay the balances of the purchase price on completion and the Group exercises its right to resell the property, sales deposits received in advance of completion are forfeited and credited to operating profits; any profits recognised so far are reversed.
(ii) Revenue in respect of sale of completed properties and investment properties is recognised upon completion of sale agreements.
Ð 112 Ð APPENDIX IV FINANCIAL INFORMATION OF THE GROUP
1PRINCIPAL ACCOUNTING POLICIES (CONTINUED) (t) Revenue and profit recognition (Continued) (iii)Rental revenue and other revenues incidental to the letting of properties are recognised on a straight-line basis over the periods of the respective leases.
(iv) Revenue from general storage and other ancillary services is recognised when the services are rendered. Revenue from leased storage is recognised on a straight-line basis over the periods of the respective leases.
(v) Income on development consultancy and project management is recognised on a pro- rata basis according to the progress of the projects.
(vi) Income from property management is recognised on an accrual basis.
(vii) Hotel revenue from rooms rental, food and beverage sales and other ancillary services is recognised when the services are rendered.
(viii)Dividend income is recognised when the right to receive payment is established.
(ix) Interest income is recognised on a time proportion basis, taking into account the principal amounts outstanding and the interest rates applicable.
Ð 113 Ð APPENDIX IV FINANCIAL INFORMATION OF THE GROUP
2PRINCIPAL ACTIVITIES AND SEGMENTAL ANALYSIS OF OPERATIONS
(a) The principal activities of the Group are disclosed in the Report of the Directors. Revenues recognised during the year are as follows:
2003 2002 HK$’000 HK$’000
Turnover Proceeds from sale of properties – completed properties – PRC 150,654 299,057 – Hong Kong 877,117 2,294,771 1,027,771 2,593,828 – properties under development for sale in the PRC 356,478 12,496 – property held for development in the PRC – 25,120 – investment properties – PRC 89,286 64,811 – Hong Kong 60,480 37,223 149,766 102,034
1,534,015 2,733,478 Rental income 788,023 828,774 Hotel revenue 174,628 231,974 Storage and services income – warehouse 358,928 399,094 – logistics 1,307,786 918,495 1,666,714 1,317,589 Development consultancy, project management and property management fees 41,086 44,347
4,204,466 5,156,162 Other revenues Dividend income from: – listed investments 62 61 – unlisted investments 11,356 27,666 11,418 27,727 Interest income 26,018 28,188
37,436 55,915
Total revenues 4,241,902 5,212,077
Ð 114 Ð APPENDIX IV FINANCIAL INFORMATION OF THE GROUP
2PRINCIPAL ACTIVITIES AND SEGMENTAL ANALYSIS OF OPERATIONS (CONTINUED) (b) An analysis of the Group’s turnover and contribution to operating profit for the year by principal activities and markets is as follows:
Turnover Operating profit 2003 2002 2003 2002 HK$’000 HK$’000 HK$’000 HK$’000
Principal activities: Property rental – PRC 470,541 456,033 270,451 271,459 – Hong Kong 317,482 372,741 (4,107) 184,141 788,023 828,774 266,344 455,600
Property sales – PRC 596,418 401,484 88,893 70,060 – Hong Kong 937,597 2,331,994 (150,283) (210,271) 1,534,015 2,733,478 (61,390) (140,211)
Hotel operations 174,628 231,974 56,163 90,169
Logistics and warehouse operations – warehouse 358,928 399,094 82,988 162,526 – logistics 1,307,786 918,495 44,383 35,005 1,666,714 1,317,589 127,371 197,531
Infrastructure – – (614) (300)
Project, property management and others 41,086 44,347 48,690 76,107
4,204,466 5,156,162 436,564 678,896
Principal markets: PRC 1,342,449 1,127,025 409,671 422,241 Hong Kong 2,012,608 3,517,120 13,090 245,438 United Kingdom 595,608 333,410 10,275 3,508 Others 253,801 178,607 3,528 7,709
4,204,466 5,156,162 436,564 678,896
Ð 115 Ð APPENDIX IV FINANCIAL INFORMATION OF THE GROUP
2PRINCIPAL ACTIVITIES AND SEGMENTAL ANALYSIS OF OPERATIONS (CONTINUED) (c) Primary reporting format – business segments
2003 Hong Logistics PRC Kong Overseas and Property Property Property Warehouse Infrastructure Others Eliminations Consolidated HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
Revenue Turnover 1,241,587 1,255,079 – 1,666,714 – 41,086 – 4,204,466 Inter-segment revenue 447 – – – – 306,862 (307,309) – Inter-segment interest income – – – – – 266,872 (266,872) –
1,242,034 1,255,079 – 1,666,714 – 614,820 (574,181) 4,204,466
Results Segment results before provision and revaluation deficit on properties 510,919 176,636 2,106 265,962 (614) 245,211 (266,872) 933,348 Provision in respect of stock of completed properties held for sale – (69,346) –––––(69,346) Revaluation deficit on properties (40,378) (158,375) – (91,483) – – – (290,236)
Segment results 470,541 (51,085) 2,106 174,479 (614) 245,211 (266,872) 573,766 Dividend income – 8,077 3,341 ––––11,418 Interest income 4,211 10,009 – 1,599 4,497 5,702 – 26,018 Interest expenses (59,245) (121,391) – (48,707) (4,497) (207,670) 266,872 (174,638)
Operating profit/(loss) 415,507 (154,390) 5,447 127,371 (614) 43,243 – 436,564 Share of results of associated companies – share of profits less losses 28,133 53,918 17,170 (2,056) 149,402 – – 246,567 – provision for decline in carrying value – (110,809) –––––(110,809) 28,133 (56,891) 17,170 (2,056) 149,402 – – 135,758
Profit/(loss) before taxation 443,640 (211,281) 22,617 125,315 148,788 43,243 – 572,322 Taxation (57,839) (21,357) 3,586 (33,874) 381 (2,089) – (111,192)
Profit/(loss) after taxation 385,801 (232,638) 26,203 91,441 149,169 41,154 – 461,130 Minority interests (86,140) 19,900 – 812 – (961) – (66,389)
Profit/(loss) attributable to shareholders 299,661 (212,738) 26,203 92,253 149,169 40,193 – 394,741
Ð 116 Ð APPENDIX IV FINANCIAL INFORMATION OF THE GROUP
2PRINCIPAL ACTIVITIES AND SEGMENTAL ANALYSIS OF OPERATIONS (CONTINUED) (c) Primary reporting format – business segments (Continued)
2003 Hong Logistics PRC Kong Overseas and Property Property Property Warehouse Infrastructure Others Eliminations Consolidated HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
Segment assets 9,588,907 10,379,353 2,787 4,240,320 196,053 17,025,395 (16,785,162) 24,647,653 Associated companies 288,682 2,640,707 821,974 15,433 855,045 – – 4,621,841 Other non-current assets 470 877,015 594,923 2,662 – 20,693 – 1,495,763 Tax recoverable 17,967 2,457 – – – 28,137 – 48,561 Tax reserve certificates – 19,926 –––––19,926 Trading securities – 3,111 141 ––––3,252
Total assets 9,896,026 13,922,569 1,419,825 4,258,415 1,051,098 17,074,225 (16,785,162) 30,836,996
Segment liabilities 2,449,808 10,376,924 80,783 2,683,172 524,636 8,213,680 (16,785,162) 7,543,841 Taxation and deferred taxation 964,629 (34,272) – 96,995 – 7,745 – 1,035,097 Minority interests and loans 2,041,305 255,528 – 74,270 – 4,396 – 2,375,499
Total liabilities 5,455,742 10,598,180 80,783 2,854,437 524,636 8,225,821 (16,785,162) 10,954,437
Capital expenditure 50,888 784,777 – 138,100 – 1,138 – 974,903 Depreciation 4,421 1,046 – 59,391 – 3,264 – 68,122 Amortisation of goodwill – – – 2,429 – – – 2,429 Amortisation of negative goodwill – – – (4,465) – – – (4,465) Provision in respect of stock of completed properties held for sale – 69,346 –––––69,346
Ð 117 Ð APPENDIX IV FINANCIAL INFORMATION OF THE GROUP
2PRINCIPAL ACTIVITIES AND SEGMENTAL ANALYSIS OF OPERATIONS (CONTINUED) (c) Primary reporting format – business segments (Continued)
2002, as restated Hong Logistics PRC Kong Overseas and Property Property Property Warehouse Infrastructure Others Eliminations Consolidated HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
Revenue Turnover 1,089,491 2,704,735 – 1,317,589 – 44,347 – 5,156,162 Inter-segment revenue – – – – – 386,809 (386,809) – Inter-segment interest income – – – – – 360,295 (360,295) –
1,089,491 2,704,735 – 1,317,589 – 791,451 (747,104) 5,156,162
Results Segment results 519,608 135,756 (5,795) 254,505 (300) 296,632 (360,295) 840,111 Dividend income – 6,926 20,796 ––5–27,727 Interest income 4,357 11,191 – 1,352 4,164 7,124 – 28,188 Interest expenses (92,277) (180,003) – (58,326) (4,164) (242,655) 360,295 (217,130)
Operating profit/(loss) 431,688 (26,130) 15,001 197,531 (300) 61,106 – 678,896 Share of results of associated companies 18,970 (41,159) 25,920 (2,689) 107,796 – – 108,838
Profit/(loss) before taxation 450,658 (67,289) 40,921 194,842 107,496 61,106 – 787,734 Taxation (124,115) (13,974) (8,981) (25,869) (6,012) 2,963 – (175,988)
Profit/(loss) after taxation 326,543 (81,263) 31,940 168,973 101,484 64,069 – 611,746 Minority interests (89,035) 81,813 – (10,234) – 5,381 – (12,075)
Profit attributable to shareholders 237,508 550 31,940 158,739 101,484 69,450 – 599,671
Ð 118 Ð APPENDIX IV FINANCIAL INFORMATION OF THE GROUP
2PRINCIPAL ACTIVITIES AND SEGMENTAL ANALYSIS OF OPERATIONS (CONTINUED) (c) Primary reporting format – business segments (Continued)
2002, as restated Hong Logistics PRC Kong Overseas and Property Property Property Warehouse Infrastructure Others Eliminations Consolidated HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
Segment assets 9,629,416 10,757,016 11,035 4,200,388 534,467 17,913,431 (17,869,742) 25,176,011 Associated companies 278,598 3,259,567 812,252 7,529 722,878 – – 5,080,824 Other non-current assets 470 942,060 603,832 21,209 – 22,416 – 1,589,987 Tax recoverable – 2,457 – – – 28,307 – 30,764 Trading securities – 1,895 148 ––––2,043
Total assets 9,908,484 14,962,995 1,427,267 4,229,126 1,257,345 17,964,154 (17,869,742) 31,879,629
Segment liabilities 2,754,243 10,986,297 112,135 2,576,473 520,052 9,393,637 (17,869,742) 8,473,095 Taxation and deferred taxation 999,341 (11,569) – 88,220 – 6,546 – 1,082,538 Minority interests and loans 1,989,173 275,529 – 263,414 – (550) – 2,527,566
Total liabilities 5,742,757 11,250,257 112,135 2,928,107 520,052 9,399,633 (17,869,742) 12,083,199
Capital expenditure 4,886 209,930 – 220,512 – 5,024 – 440,352 Depreciation 4,071 1,069 – 48,258 – 3,583 – 56,981 Amortisation of goodwill – – – 1,754 – – – 1,754 Amortisation of negative goodwill – – – (21) – – – (21) Provision in respect of stock of completed properties held for sale – 266,000 –––––266,000
Ð 119 Ð APPENDIX IV FINANCIAL INFORMATION OF THE GROUP
2PRINCIPAL ACTIVITIES AND SEGMENTAL ANALYSIS OF OPERATIONS (CONTINUED) (d) Secondary reporting format – geographical segments
2003 Segment Segment Segment Capital revenue results assets expenditure HK$’000 HK$’000 HK$’000 HK$’000
PRC 1,342,449 466,027 9,913,574 139,813 Hong Kong 2,012,608 94,656 14,284,130 808,432 United Kingdom 595,608 9,831 277,318 6,497 Others 253,801 3,252 172,631 20,161
4,204,466 573,766 24,647,653 974,903
2002 Segment Segment Segment Capital revenue results assets expenditure HK$’000 HK$’000 HK$’000 HK$’000
PRC 1,127,025 509,964 9,827,743 128,636 Hong Kong 3,517,120 338,493 14,971,833 239,853 United Kingdom 333,410 3,523 227,338 39,807 Others 178,607 (11,869) 149,097 32,056
5,156,162 840,111 25,176,011 440,352
Ð 120 Ð APPENDIX IV FINANCIAL INFORMATION OF THE GROUP
3OPERATING PROFIT BEFORE FINANCE COSTS
2003 2002 HK$’000 HK$’000
Operating profit before finance costs is stated after crediting and charging the following: Crediting Gross rental income from investment properties other than hotel properties – PRC 470,541 456,033 – Hong Kong 317,482 372,741 788,023 828,774
Less: outgoings in respect of investment properties other than hotel properties – PRC (55,243) (53,179) – Hong Kong (35,425) (42,436) (90,668) (95,615)
Net rental income from investment properties other than hotel properties – PRC 415,298 402,854 – Hong Kong 282,057 330,305 697,355 733,159
Interest income 26,118 30,849 Less: amount capitalised in properties under development (100) (2,661) 26,018 28,188 Gain on sale of investment properties – excess of sales proceeds over book value – (21,657) – Transfer from investment properties revaluation reserve – 24,709 – 3,052 Realised gain on disposal of trading securities – 636 Unrealised gain on trading securities 1,209 – Amortisation of negative goodwill 4,465 21
Charging Loss on sale of investment properties 20,926 –
Cost of sale of completed properties and sale/presale of properties under development 1,270,819 2,288,786
Auditors’ remuneration 4,406 4,264 Non-audit service fees paid and payable to auditors 1,225 2,309 Depreciation of fixed assets 68,515 57,348 Less: amount capitalised in properties under development (393) (367) 68,122 56,981 Amortisation of goodwill 2,429 1,754 Unrealised loss on trading securities – 897 Operating lease charges – land and buildings 32,912 22,785 Staff costs 418,223 375,049
Ð 121 Ð APPENDIX IV FINANCIAL INFORMATION OF THE GROUP
4FINANCE COSTS
2003 2002 HK$’000 HK$’000
Bank loans and overdrafts wholly repayable within five years 130,811 194,582 Convertible bonds – 39,665 Interest rate swaps 121,117 65,520 Others 12,165 17,912 264,093 317,679 Less: amount capitalised in properties under development (89,455) (100,549)
Total finance costs expensed during the year 174,638 217,130
The capitalisation rate applied to funds borrowed and used for the development of properties held for sale/under development is between 3% and 7% per annum.
5TAXATION
Hong Kong profits tax has been provided at the rate of 17.5% (2002: 16%) on the estimated assessable profit for the year. In 2003, the government enacted a change in the profits tax rate from 16% to 17.5% for the fiscal year 2003/2004. Taxation on PRC and overseas profits has been calculated on the estimated assessable profit for the year at the rates of taxation prevailing in the PRC and the overseas countries in which the Group operates, respectively.
Ð 122 Ð APPENDIX IV FINANCIAL INFORMATION OF THE GROUP
5TAXATION (CONTINUED) The amount of taxation charged to the consolidated profit and loss account represents:
As restated 2003 2002 HK$’000 HK$’000
PRC taxation – Current 72,608 108,577 – Overprovision in prior years (375) (706) – Deferred (note 28) (22,140) 9,093 50,093 116,964 Hong Kong profits tax – Current 39,439 68,444 – Overprovision in prior years (3,396) (1,434) – Deferred (note 28) 10,909 (32,243) 46,952 34,767 Overseas taxation – Current 5,442 2,173 – Overprovision in prior years (162) – – Deferred (note 28) (923) – 4,357 2,173 Share of taxation attributable to associated companies – Current 18,532 24,066 – Deferred (8,742) (1,982) 9,790 22,084
111,192 175,988
The taxation on the Group’s profit before taxation differs from the theoretical amount that would arise using the taxation rate of Hong Kong as follows:
2003 2002 HK$’000 HK$’000
Profit before taxation 572,322 787,734
Calculated at Hong Kong profits tax rate of 17.5% (2002: 16%) 100,156 126,037 Tax effect of different taxation rates in other countries 63,316 77,454 Tax effect of net income/expenses that are not taxable/deductible in determining taxable profit (57,124) (87,862) Tax effect on utilisation of previously unrecognised tax losses (32,150) (5,956) Tax effect on unrecognised tax losses 40,927 68,455 Overprovision of taxation in prior years (3,933) (2,140)
Taxation charge 111,192 175,988
Ð 123 Ð APPENDIX IV FINANCIAL INFORMATION OF THE GROUP
6PROFIT ATTRIBUTABLE TO SHAREHOLDERS
The profit attributable to shareholders dealt with in the accounts of the Company is HK$372,905,000 (2002: HK$575,475,000).
7DIVIDENDS
2003 2002 HK$’000 HK$’000
Interim, paid, of HK$0.13 (2002: HK$0.18) per ordinary share (note (a)) 154,519 210,675
Final, proposed, of HK$0.15 (2002: HK$0.12) per ordinary share (note (b)) 178,729 140,466
(a) Amounts shown in respect of the interim dividend for the year ended 31 December 2003 reflect the cash dividend of HK$0.13 (2002: HK$0.18) per ordinary share. A scrip dividend alternative to the interim dividend was also offered, with the result that only approximately HK$137,129,000 (2002: HK$208,277,000) of the interim dividend was paid in cash.
(b) At a meeting held on 9 March 2004, the directors proposed a final dividend of HK$0.15 per ordinary share. This proposed dividend is not reflected as a dividend payable in these accounts, but will be reflected as an appropriation of retained profits for the year ending 31 December 2004.
8EARNINGS PER SHARE
The calculation of basic earnings per share is based on the Group’s profit attributable to shareholders of HK$394,741,000 (2002: HK$599,671,000) and the weighted average number of 1,180,548,013 shares (2002: 1,164,439,012 shares) in issue during the year.
There was no dilution arising from the outstanding share options granted by the Company in 1997, 1999 and 2001. The dilution from the outstanding share options granted by the Company in 2000 and 2002 were immaterial. Accordingly, diluted earnings per share had not been shown.
Ð 124 Ð APPENDIX IV FINANCIAL INFORMATION OF THE GROUP
9RETIREMENT BENEFIT COSTS
Pursuant to the Mandatory Provident Fund Schemes Ordinance (Chapter 485 of the Laws of Hong Kong) (the “MPF Ordinance”), companies within the Group in Hong Kong have enrolled all employees in Hong Kong aged between 18 and 65 into a mandatory provident fund scheme (the “MPF Scheme”) from 1 December 2000.
The MPF Scheme is a master trust scheme established under a trust arrangement and governed by laws in Hong Kong. The assets of the MPF Scheme are held separately from the assets of the employer, the trustees and other service providers. Contributions are made to the MPF Scheme by the employers at 5% of the employees’ relevant income as defined in the MPF Ordinance up to a maximum of HK$1,000 per employee per month (the “MPF Contribution”). The employees also contribute a corresponding amount to the MPF Scheme from 31 December 2000 if their relevant income is HK$5,000 per month (HK$4,000 prior to 1 February 2003) or more. The MPF Contributions are fully and immediately vested in the employees as accrued benefits once they are paid to the approved trustees of the MPF Scheme. Investment income or profit derived from the investment of accrued benefits (after taking into account any loss arising from such investment) is also immediately vested in the employees.
Certain companies within the Group are also participants of the Kerry Trading Co. Limited, Provident Fund Scheme (the “Fund”) which is a defined contribution scheme as defined in the Occupational Retirement Schemes Ordinance (Chapter 426 of the Laws of Hong Kong). The Fund is for certain salaried persons (the “Fund Members”) under the employment of the companies participating in the Fund. The assets of the Fund are managed by the trustees of the Fund. Contributions are made to the Fund by companies participating in the Fund at 10% of the Fund Members’ monthly basic salaries up to a maximum of HK$5,000 per Fund Member per month (the “Basic Contribution”) less the MPF Contribution if the Basic Contribution is higher than the MPF Contribution. Fund Members are entitled to 100% of the employers’ contributions to the Fund plus investment earnings upon leaving employment after completing ten years of service or more, or upon retirement after attaining the retirement age after any number of years of service, or upon retirement due to ill health. Fund Members are also entitled to the employers’ contributions to the Fund plus investment earnings calculated at a reduced scale of between 20% and 90% after completing a period of service of at least two but less than ten years. The unvested benefits of employees terminating employment forfeited in accordance with the terms of the Fund can be utilised by the companies participating in the Fund to reduce future levels of contributions.
The Group also made defined contributions to pension plans as required by the relevant municipality or provincial governments in the PRC. The rates of contributions for the relevant periods ranged from 8% to 23% of the staff’s salary. For overseas subsidiaries, the Group made contributions to defined contribution pension schemes in accordance with the schemes set up by the overseas subsidiaries and/or under statutory requirements.
Ð 125 Ð APPENDIX IV FINANCIAL INFORMATION OF THE GROUP
9RETIREMENT BENEFIT COSTS (CONTINUED) The amounts of unvested benefits utilised by the Group during the year to reduce contributions to the Fund, the amount of unvested benefits available for future reduction of employers’ contributions as at 31 December 2003 and the total amount contributed by the Group to the above schemes during the year were as follows:
2003 2002 HK$’000 HK$’000
Unvested benefits utilised to reduce contributions during the year 550 972
Unvested benefits available as at 31 December 88 26
Total contributions during the year 18,969 17,111
10 EMOLUMENTS OF DIRECTORS AND HIGHEST PAID INDIVIDUALS
(a) Directors The aggregate amounts of emoluments payable to directors of the Company during the year were as follows:
2003 2002 HK$’000 HK$’000
Fees Independent non-executive directors 681 750
For management Basic salaries, housing allowances, other allowances and other benefits in kind 10,437 13,590 Discretionary bonuses 7,730 5,875 Directors’ pensions 215 240 Share options exercised 5,826 –
24,208 19,705
24,889 20,455
Ð 126 Ð APPENDIX IV FINANCIAL INFORMATION OF THE GROUP
10 EMOLUMENTS OF DIRECTORS AND HIGHEST PAID INDIVIDUALS (CONTINUED) (a) Directors (Continued) The emoluments of the directors fell within the following bands:
Number of directors Emolument bands 2003 2002
HK$ Nil – HK$1,000,000 HK$ Nil – HK$250,000 4 3 HK$250,001 – HK$1,000,000 1 1 54
HK$3,000,001 – HK$3,500,000 – 1 HK$4,000,001 – HK$4,500,000 – 1 HK$4,500,001 – HK$5,000,000 1 – HK$5,000,001 – HK$5,500,000 1 1 HK$5,500,001 – HK$6,000,000 – 1 HK$6,000,001 – HK$6,500,000 1 – HK$7,000,001 – HK$7,500,000 1 –
98
No directors have waived emoluments in respect of the years ended 31 December 2003 and 2002.
Pursuant to the terms of the share option scheme adopted by the Company on 27 March 1997, following the adjustment events arising from the changes in the Company’s issued share capital on 22 October 2002, in December 2002 and on 30 May 2003, the Company adjusted the respective exercise prices per option share of the unexercised options and the respective number of option shares comprising thereunder with effect from 30 May 2003. The respective exercise prices have been adjusted from HK$15.30 to HK$15.12, from HK$9.88 to HK$9.77, from HK$6.87 to HK$6.79, from HK$11.88 to HK$11.74 and from HK$7.02 to HK$6.94 in respect of the unexercised options granted on 11 April 1997, 27 November 1999, 1 June 2000, 2 March 2001 and 16 April 2002, respectively, with additional corresponding option shares of 77,612, 28,956, 37,010, 1,227 and 36,722 granted to five directors of the Company.
Ð 127 Ð APPENDIX IV FINANCIAL INFORMATION OF THE GROUP
10 EMOLUMENTS OF DIRECTORS AND HIGHEST PAID INDIVIDUALS (CONTINUED) (b) Highest paid individuals The aggregate amounts of emoluments payable to the five highest paid individuals of the Group during the year, of whom four (2002: four) are directors of the Company were as follows:
2003 2002 HK$’000 HK$’000
Basic salaries, housing allowances, other allowances and other benefits in kind 12,132 15,012 Discretionary bonuses 9,120 6,770 Pensions contributions 275 300 Share options exercised 4,941 –
26,468 22,082
The emoluments of the five highest paid individuals of the Group during the year, of whom four (2002: four) are directors of the Company, fell within the following bands:
Number of individuals Emolument bands 2003 2002
HK$3,000,001 – HK$3,500,000 1 2 HK$4,000,001 – HK$4,500,000 – 1 HK$4,500,001 – HK$5,000,000 1 – HK$5,000,001 – HK$5,500,000 1 1 HK$5,500,001 – HK$6,000,000 – 1 HK$6,000,001 – HK$6,500,000 1 – HK$7,000,001 – HK$7,500,000 1 –
55
Ð 128 Ð APPENDIX IV FINANCIAL INFORMATION OF THE GROUP
11 (NEGATIVE GOODWILL)/GOODWILL
Negative Goodwill goodwill Total HK$’000 HK$’000 HK$’000
At 1 January 2002 5,698 (414) 5,284 Arising from purchase of a subsidiary 41,453 – 41,453 Amortisation (1,754) 21 (1,733)
At 31 December 2002 45,397 (393) 45,004
At 1 January 2003 45,397 (393) 45,004 Arising from purchase of business 1,817 – 1,817 Arising from purchase of additional interest in subsidiaries – (91,461) (91,461) Amortisation (2,429) 4,465 2,036
At 31 December 2003 44,785 (87,389) (42,604)
2003 2002 HK$’000 HK$’000
At 31 December Cost (42,614) 47,030 Accumulated amortisation 10 (2,026)
Net book amount (42,604) 45,004
Ð 129 Ð APPENDIX IV FINANCIAL INFORMATION OF THE GROUP
12 FIXED ASSETS
Group Motor Investment Other leasehold vehicles, properties land and buildings Properties furniture, other Warehouses Freehold held Warehouse fixtures than hotel Hotel and logistics Staff land and for/under Leasehold operating and office properties properties centre quarters buildings development improvements equipment equipment Total HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
Cost or valuation At 1 January 2003 16,565,146 953,000 489,890 3,650 14,864 2,619,766 10,726 254,153 250,476 21,161,671 Exchange adjustment 251 ––(17) 5,468 (2,920) (20) 17,079 13,926 33,767 Additions, at cost 9,993 12,337 –––906,505 8 15,366 30,694 974,903 Adjustment on revaluation (302,768) (12,337) (17,789) – 7,494 ––––(325,400) Disposals (160,532) ––(3,285) –––(13,063) (14,182) (191,062) Reclassification 51,400 (51,400) 182,158 176 32,952 (497,364) ––(176) (282,254)
At 31 December 2003 16,163,490 901,600 654,259 524 60,778 3,025,987 10,714 273,535 280,738 21,371,625
At cost –––524 – 3,025,987 10,714 273,535 280,738 3,591,498 At professional valuation 16,163,490 901,600 654,259 – 60,778 ––––17,780,127
At 31 December 2003 16,163,490 901,600 654,259 524 60,778 3,025,987 10,714 273,535 280,738 21,371,625
Aggregate depreciation and accumulated impairment losses At 1 January 2003 –––1,545 ––6,224 126,750 136,978 271,497 Exchange adjustment –––(7) 173 – (7) 8,393 4,723 13,275 Charge for the year ––15,215 138 1,001 – 1,282 20,989 29,890 68,515 Adjustment on revaluation ––(15,215) – (1,174) ––––(16,389) Impairment loss –––––91,345 –––91,345 Disposals –––(1,509) –––(7,562) (8,039) (17,110) Reclassification –––57 ––––(57) –
At 31 December 2003 –––224 – 91,345 7,499 148,570 163,495 411,133
Net book value as at 31 December 2003 16,163,490 901,600 654,259 300 60,778 2,934,642 3,215 124,965 117,243 20,960,492
Net book value as at 31 December 2002 16,565,146 953,000 489,890 2,105 14,864 2,619,766 4,502 127,403 113,498 20,890,174
Ð 130 Ð APPENDIX IV FINANCIAL INFORMATION OF THE GROUP
12 FIXED ASSETS (CONTINUED)
Company Motor vehicles, furniture, fixtures Leasehold and office improvements equipment Total HK$’000 HK$’000 HK$’000
Cost At 1 January 2003 196 2,990 3,186 Additions, at cost – 798 798 Disposals – (826) (826)
At 31 December 2003 196 2,962 3,158
Aggregate depreciation At 1 January 2003 58 1,375 1,433 Charge for the year 30 430 460 Disposals – (199) (199)
At 31 December 2003 88 1,606 1,694
Net book value as at 31 December 2003 108 1,356 1,464
Net book value as at 31 December 2002 138 1,615 1,753
Ð 131 Ð APPENDIX IV FINANCIAL INFORMATION OF THE GROUP
12 FIXED ASSETS (CONTINUED) (a) The Group’s interests in investment properties, freehold and other leasehold land and buildings and properties held for/under development at their net book values are analysed as follows:
Group 2003 2002 HK$’000 HK$’000
In PRC, held on: Leases of between 10 to 50 years 8,179,664 8,197,623
In Hong Kong, held on: Leases of over 50 years 7,337,641 6,978,464 Leases of between 10 to 50 years 5,136,986 5,436,390
Overseas freehold land and buildings and properties under development 60,778 32,294
20,715,069 20,644,771
(b) As at 31 December 2003, properties with an aggregate net book value of HK$1,260,150,000 (2002: HK$4,548,431,000) were pledged as security for bank loan facilities granted to the Group (note 33).
(c) All investment properties, warehouses and logistics centre in the PRC and Hong Kong were valued by DTZ Debenham Tie Leung Limited and Chesterton Petty Limited. Freehold land and buildings in Australia and Thailand were valued by Rushton Group and DTZ Debenham Tie Leung Limited, respectively. They are independent professional valuers and the valuation was on an open market value basis as at 31 December 2003.
(d) The carrying amount of the warehouses and logistics centre classified as other leasehold land and buildings would have been HK$532,588,000 (2002: HK$355,471,000) had they been stated in the accounts at cost less aggregate depreciation and accumulated impairment loss.
(e) The carrying amount of freehold land and buildings would have been HK$51,312,000 (2002: HK$11,280,000) had they been stated in the accounts at cost less aggregate depreciation and accumulated impairment loss.
Ð 132 Ð APPENDIX IV FINANCIAL INFORMATION OF THE GROUP
13 SUBSIDIARIES
Company 2003 2002 HK$’000 HK$’000
Unlisted shares, at cost (note (a)) 18,643,700 18,643,700 Amounts due from subsidiaries (note (b)) 9,237,790 9,587,096
27,881,490 28,230,796
(a) Details of subsidiaries are set out in note 36 to the accounts.
(b) The amounts due from subsidiaries are unsecured, not repayable within twelve months from the balance sheet date and interest-free except for an amount of HK$6,588,154,000 (2002: HK$6,914,133,000) which bears interest at prevailing market rates.
14 ASSOCIATED COMPANIES
Group As restated 2003 2002 HK$’000 HK$’000
Share of net assets other than negative goodwill (note (a)) 717,997 771,648 Negative goodwill (note (b)) (22,383) (23,924) Amounts due from associated companies (note (c)) 3,960,869 4,478,247 Amounts due to associated companies (note (d)) (34,642) (145,147)
4,621,841 5,080,824
(a) Details of associated companies are set out in note 37 to the accounts.
(b) Negative goodwill
2003 2002 HK$’000 HK$’000
At 1 January 23,924 27,380 Amortisation (1,541) (3,456)
At 31 December 22,383 23,924
Ð 133 Ð APPENDIX IV FINANCIAL INFORMATION OF THE GROUP
14 ASSOCIATED COMPANIES (CONTINUED) (c) The amounts due from associated companies are unsecured, not repayable within twelve months from the balance sheet date and interest-free except for amounts totalling HK$1,144,351,000 (2002: HK$1,299,414,000) which bears interest at prevailing market rates.
(d) The amounts due to associated companies are unsecured, interest-free and not repayable within twelve months from the balance sheet date.
15 OTHER NON-CURRENT ASSETS
Group As restated 2003 2002 HK$’000 HK$’000
Long-term investments Non-trading securities: Unlisted investments, at fair value 1,205,099 1,321,576 Amounts due from investee companies (note (a)) 2,886 2,666
1,207,985 1,324,242 Club debentures, at cost 9,967 9,817
1,217,952 1,334,059
Long-term receivables (note (b)) 277,811 255,928
1,495,763 1,589,987
(a) The amounts due from investee companies are unsecured, interest-free and not repayable within twelve months from the balance sheet date.
(b) Amount represents non-current portion of second mortgage loans to buyers of certain properties developed by the Group.
16 STOCK OF COMPLETED PROPERTIES HELD FOR SALE – GROUP
As at 31 December 2003, the carrying amount of stock of completed properties held for sale that was carried at net realisable value amounted to HK$301,194,000 (2002: HK$1,249,181,000).
Ð 134 Ð APPENDIX IV FINANCIAL INFORMATION OF THE GROUP
17 PROPERTIES UNDER DEVELOPMENT FOR SALE
Group 2003 2002 HK$’000 HK$’000
Cost plus attributable profits less foreseeable losses 1,375,997 604,433 Less: sales instalments received and receivable (376,220) (13,160)
999,777 591,273
As at 31 December 2003, properties under development for sale with an aggregate net book value of HK$199,364,000 (2002: Nil) were pledged as security for bank loan facilities granted to the Group (note 33).
18 ACCOUNTS RECEIVABLE, PREPAYMENTS AND DEPOSITS
Included in accounts receivable, prepayments and deposits are trade receivables. The Group maintains defined credit policies and applies credit policies appropriate to the particular business circumstances concerned. The ageing analysis of the trade receivables as at 31 December 2003 was as follows:
Group 2003 2002 HK$’000 HK$’000
0-1 month 137,410 132,360 2-3 months 130,200 115,376 Over 3 months 20,538 9,937
288,148 257,673
19 TRADING SECURITIES
Group 2003 2002 HK$’000 HK$’000
Equity securities: Listed in Hong Kong 3,111 1,895 Listed outside Hong Kong 141 148
Market value of listed investments 3,252 2,043
Ð 135 Ð APPENDIX IV FINANCIAL INFORMATION OF THE GROUP
20 ACCOUNTS PAYABLE, DEPOSITS RECEIVED AND ACCRUED CHARGES
Included in accounts payable, deposits received and accrued charges are trade payables. The ageing analysis of trade payables as at 31 December 2003 was as follows:
Group 2003 2002 HK$’000 HK$’000
0-1 month 140,587 116,008 2-3 months 33,418 13,756 Over 3 months 19,171 8,994
193,176 138,758
21 SHARE CAPITAL
Authorised Ordinary shares of HK$1 each No. of shares HK$’000
At 31 December 2002 and 2003 10,000,000,000 10,000,000
Issued and fully paid Ordinary shares of HK$1 each 2003 2002 No. of shares HK$’000 No. of shares HK$’000
At 1 January 1,170,550,794 1,170,551 1,155,727,489 1,155,727 Issue of scrip dividend shares (notes (a) and (b)) 15,538,757 15,539 14,941,805 14,942 Issue of new shares as a result of exercise of share options (note (c)) 5,437,176 5,437 108,000 108 Purchase of shares for cancellation ––(226,500) (226)
At 31 December 1,191,526,727 1,191,527 1,170,550,794 1,170,551
(a) On 15 April 2003, the Company approved a final dividend on its issued ordinary shares for the year ended 31 December 2002. The Company offered to its shareholders a scrip dividend alternative under which the shareholders could elect to receive new ordinary shares in lieu of a cash dividend. A total of 13,925,576 ordinary shares of HK$1 each were issued on 30 May 2003 under this scheme.
Ð 136 Ð APPENDIX IV FINANCIAL INFORMATION OF THE GROUP
21 SHARE CAPITAL (CONTINUED) (b) On 8 September 2003, the Company declared an interim dividend on its issued ordinary shares for the year ended 31 December 2003. The Company offered to its shareholders a scrip dividend alternative under which the shareholders could elect to receive new ordinary shares in lieu of a cash dividend. A total of 1,613,181 ordinary shares of HK$1 each were issued on 11 November 2003 under this scheme.
(c) During the year, a total of 5,437,176 option shares were exercised at exercise prices of HK$6.79, HK$6.94 and HK$9.77, respectively, per share. Details of movement in share options during the year are set out in note 22.
(d) Proceeds received in respect of the shares issued were used as additional working capital for the Group.
22 SHARE OPTIONS
On 17 April 2002, the shareholders of the Company approved the termination (to the effect that no further options shall be offered) of the executive share option scheme adopted by the Company on 27 March 1997 (the “1997 Share Option Scheme”) and the adoption of a new share option scheme (the “2002 Share Option Scheme”).
1997 Share Option Scheme Under the 1997 Share Option Scheme, the directors of the Company were authorised, at their discretion, to invite executive directors and key employees of the Company or its subsidiaries to subscribe for shares in the Company subject to terms and conditions stipulated therein. The exercise price for any particular option was determined by the Board of Directors of the Company in its absolute discretion subject to the compliance with the requirements for share option schemes under the Listing Rules.
Pursuant to the terms of the 1997 Share Option Scheme, the Company adjusted the respective exercise prices per option share of the unexercised options and the respective number of option shares comprised thereunder on 30 May 2003 following the adjustment events arising from the changes in the Company’s issued share capital on 22 October 2002, in December 2002 and on 30 May 2003.
The 1997 Share Option Scheme was terminated on 17 April 2002 such that no further options shall be offered but the options which had been granted during its life shall continue to be valid and exercisable in accordance with their terms of issue and in all other respects its provisions shall remain in full force and effect.
Ð 137 Ð APPENDIX IV FINANCIAL INFORMATION OF THE GROUP
22 SHARE OPTIONS (CONTINUED) 2002 Share Option Scheme The 2002 Share Option Scheme was adopted by the Company on 17 April 2002. Under the 2002 Share Option Scheme, the directors of the Company may, at their discretion, grant options to executives and key employees in the service of any member of the Group and other persons who may make a contribution to the Group subject to terms and conditions stipulated therein. The exercise price for any particular option shall be such price as the Board of Directors of the Company may in its absolute discretion determine at the time of grant of the relevant option subject to the compliance with the requirements for share option schemes under the Listing Rules.
No option has been granted under the 2002 Share Option Scheme. The 2002 Share Option Scheme will expire on 16 April 2012.
Details of the movement of the share options under the 1997 Share Option Scheme during the year were as follows:
2003 2002 Number Number
At 1 January 31,828,769 27,701,286 Granted during the year – 4,760,000 Additional number of option shares granted for the adjustment during the year 371,014 413,460 Exercised during the year (note (a)) (5,437,176) (108,000) Lapsed during the year (459,100) (937,977)
At 31 December (note (b)) 26,303,507 31,828,769
Ð 138 Ð APPENDIX IV FINANCIAL INFORMATION OF THE GROUP
22 SHARE OPTIONS (CONTINUED) (a) Details of share options exercised during the year were as follows:
2003 Number of share options Market value exercised at the following exercise price per share per share at Proceeds HK$6.79 HK$6.94 HK$9.77 Total exercise date received Exercise period HK$ HK$
June 2003 63,355 ––63,355 9.25 430,180
July 2003 68,636 15,345 – 83,981 9.05 572,533
August 2003 258,387 10,230 – 268,617 9.25 to 10.45 1,825,444
September 2003 3,500,423 295,117 – 3,795,540 10.00 to 11.40 25,815,984
October 2003 943,761 50,000 – 993,761 10.40 to 11.20 6,755,137
November 2003 – 20,461 – 20,461 10.40 141,999
December 2003 ––211,461 211,461 9.80 2,065,974
4,834,562 391,153 211,461 5,437,176 37,607,251
2002 Number of share options Market value exercised per share at Proceeds at HK$6.96 exercise date received Exercise period per share HK$ HK$
June 2002 48,000 8.10 to 8.20 334,080
July 2002 60,000 7.90 to 8.30 417,600
108,000 751,680
Ð 139 Ð APPENDIX IV FINANCIAL INFORMATION OF THE GROUP
22 SHARE OPTIONS (CONTINUED) (b) Terms of share options at balance sheet date were as follows:
2003 2002 Exercise Exercise price price Exercise period HK$ Number HK$ Number
11 April 1999 to 26 March 2007 15.12 11,481,428 15.30 11,460,743
27 May 2000 to 26 March 2007 9.77 2,849,446 9.88 2,984,984
27 May 2001 to 26 March 2007 9.77 2,849,415 9.88 2,985,020
1 June 2001 to 31 May 2010 6.79 706,770 6.87 2,824,000
1 June 2002 to 31 May 2010 6.79 1,238,000 6.87 2,824,000
1 June 2003 to 31 May 2010 6.79 1,712,957 6.87 2,761,148
2 March 2002 to 1 March 2011 11.74 378,000 11.88 420,000
2 March 2003 to 1 March 2011 11.74 378,000 11.88 420,000
2 March 2004 to 1 March 2011 11.74 369,058 11.88 395,340
16 April 2003 to 15 April 2012 6.94 1,992,547 7.02 2,376,750
16 April 2004 to 15 April 2012 6.94 2,347,886 7.02 2,376,784
26,303,507 31,828,769
(c) No share options were cancelled during the year (2002: Nil).
23 SHARE PREMIUM
2003 2002 HK$’000 HK$’000
At 1 January 3,478,011 3,371,498 Arising from scrip dividend (notes 21(a) and (b)) 118,408 106,894 Arising from exercise of share options (note 21(c)) 32,172 644 Application on purchase of shares for cancellation – (1,025)
At 31 December 3,628,591 3,478,011
Ð 140 Ð APPENDIX IV FINANCIAL INFORMATION OF THE GROUP
24 OTHER RESERVES
Group Investment Share properties of post (other than Freehold Properties acquisition hotel Hotel Other land and under revaluation Non-trading properties) properties properties buildings development reserve of securities revaluation revaluation revaluation revaluation revaluation associated revaluation Others reserve reserve reserve reserve reserve companies reserve (note (a)) Total HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
At 1 January 2002, as previously reported 1,661,656 76,481 550,240 – 95,619 40,543 1,360,336 7,786,976 11,571,851 Effect of adopting revised SSAP 12 (448,496) (59,918) (32,912) ––(40,543) (215,906) – (797,775)
At 1 January 2002, as restated 1,213,160 16,563 517,328 – 95,619 – 1,144,430 7,786,976 10,774,076 On revaluation of properties (note (b)) (1,079,930) – (45,238) 3,775 ––––(1,121,393) Arising from valuation of non-trading securities (note (c)) ––––––(194,863) – (194,863) Transfer to profit and loss account on disposal of properties (27,033) –––––––(27,033) Transfer from retained profits –––––––3,643 3,643 Exchange differences arising from investments in the PRC and overseas subsidiaries/associated companies –––––––47,684 47,684 Deferred taxation (charged)/credited directly to reserves (106,197) 1,699 5,473 –––3,255 – (95,770)
At 31 December 2002 – 18,262 477,563 3,775 95,619 – 952,822 7,838,303 9,386,344
Company and subsidiaries – 18,262 477,563 3,775 95,619 – 952,822 7,824,483 9,372,524 Associated companies –––––––13,820 13,820
At 31 December 2002 – 18,262 477,563 3,775 95,619 – 952,822 7,838,303 9,386,344
Ð 141 Ð APPENDIX IV FINANCIAL INFORMATION OF THE GROUP
24 OTHER RESERVES (CONTINUED)
Group Investment Share properties of post (other than Freehold Properties acquisition hotel Hotel Other land and under revaluation Non-trading properties) properties properties buildings development reserve of securities revaluation revaluation revaluation revaluation revaluation associated revaluation Others reserve reserve reserve reserve reserve companies reserve (note (a)) Total HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
At 1 January 2003, as previously reported 554,693 76,481 505,002 3,775 95,619 7,043 1,165,473 7,838,303 10,246,389 Effect of adopting revised SSAP 12 (554,693) (58,219) (27,439) ––(7,043) (212,651) – (860,045)
At 1 January 2003, as restated – 18,262 477,563 3,775 95,619 – 952,822 7,838,303 9,386,344
On revaluation of properties (note (b)) – (8,790) (14,414) 6,922 ––––(16,282) Impairment loss (note 1(h)(vii)) ––––(91,345) –––(91,345) Arising from valuation of non-trading securities (note (c)) ––––––(112,296) – (112,296) Transfer from retained profits –––––––8,783 8,783 Exchange differences arising from investments in the PRC and overseas subsidiaries/associated companies –––––––26,418 26,418 Deferred taxation (charged)/credited directly to reserves – (9,472) 3,271 –––14,523 – 8,322
At 31 December 2003 ––466,420 10,697 4,274 – 855,049 7,873,504 9,209,944
Company and subsidiaries ––466,420 10,697 4,274 – 855,049 7,850,899 9,187,339 Associated companies –––––––22,605 22,605
At 31 December 2003 ––466,420 10,697 4,274 – 855,049 7,873,504 9,209,944
Ð 142 Ð APPENDIX IV FINANCIAL INFORMATION OF THE GROUP
24 OTHER RESERVES (CONTINUED) (a) Others
Group Enterprise expansion Capital Capital Exchange and general redemption reserve fluctuation reserve funds reserve (note (d)) reserve (note (e)) (note (g)) Total HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
At 1 January 2002 7,975,089 (210,722) 14,967 7,642 7,786,976 Transfer from retained profits ––3,417 226 3,643 Exchange differences arising from investments in the PRC and overseas subsidiaries/associated companies – 47,168 516 – 47,684
At 31 December 2002 7,975,089 (163,554) 18,900 7,868 7,838,303
Company and subsidiaries 7,975,089 (163,836) 5,362 7,868 7,824,483 Associated companies – 282 13,538 – 13,820
At 31 December 2002 7,975,089 (163,554) 18,900 7,868 7,838,303
At 1 January 2003 7,975,089 (163,554) 18,900 7,868 7,838,303 Transfer from retained profits ––8,783 – 8,783 Exchange differences arising from investments in the PRC and overseas subsidiaries/associated companies – 26,318 100 – 26,418
At 31 December 2003 7,975,089 (137,236) 27,783 7,868 7,873,504
Company and subsidiaries 7,975,089 (137,481) 5,423 7,868 7,850,899 Associated companies – 245 22,360 – 22,605
At 31 December 2003 7,975,089 (137,236) 27,783 7,868 7,873,504
(b) These represent surplus/(deficit) arising from revaluation of properties at the balance sheet date. The accounting policies in respect of revaluation of properties are set out in note 1(h)(i) to (ii) to the accounts.
(c) This represents the deficit arising from valuation of the Group’s non-trading securities at the balance sheet date. The accounting policy in respect of valuation of non-trading securities is set out in note 1(g)(i) to the accounts.
Ð 143 Ð APPENDIX IV FINANCIAL INFORMATION OF THE GROUP
24 OTHER RESERVES (CONTINUED) (d) Capital reserve of the Group arose from the Group’s reorganisation in preparation for its listing on the Stock Exchange of Hong Kong in August 1996, adjusted by the excess or deficit of the fair values of the net assets of subsidiaries and associated companies subsequently acquired over the cost of investment at the date of acquisition before 1 January 2001 (note 1(f)).
(e) Enterprise expansion and general reserve funds represent funds set up by a subsidiary and associated companies established and operating in the PRC. According to the PRC Foreign Enterprise Accounting Standards, upon approval, the enterprise expansion reserve fund may be used for increasing capital while the general reserve fund may be used for making up losses and increasing capital.
(f) Other reserves
Company Capital redemption Contributed reserves surplus (note (g)) Total HK$’000 HK$’000 HK$’000
At 1 January 2002 17,793,308 7,642 17,800,950 Transfer from retained profits – 226 226
At 31 December 2002 17,793,308 7,868 17,801,176
At 1 January 2003 and 31 December 2003 17,793,308 7,868 17,801,176
(i) The contributed surplus of the Company arose when the Company issued shares in exchange for the shares of companies being acquired, and represents the difference between the nominal value of the Company’s shares issued and the value of net assets of the companies acquired. Under the Companies Act 1981 of Bermuda (as amended), the contributed surplus is distributable to the shareholders. At Group level, the contributed surplus is reclassified into its components of reserves of the underlying subsidiaries.
(ii) As at 31 December 2003, the reserves of the Company available for distribution amounted to approximately HK$18,469,928,000 (2002: HK$18,392,008,000).
(g) The capital redemption reserve arose from the purchase of the Company’s shares for cancellation during 1998 and 2002 and represents a transfer from the Company’s retained profits equivalent to the nominal value of the shares purchased for cancellation.
Ð 144 Ð APPENDIX IV FINANCIAL INFORMATION OF THE GROUP
25 RETAINED PROFITS
Group Company 2003 2002 2003 2002 HK$’000 HK$’000 HK$’000 HK$’000
At 1 January, as previously reported 6,105,619 5,798,314 590,832 364,945 Effect of adopting revised SSAP 12 (344,095) (283,456) ––
At 1 January, as restated 5,761,524 5,514,858 590,832 364,945 Transfer to other reserves (8,783) (3,643) – (226) Profit for the year 394,741 599,671 372,905 575,475 2002/2001 final dividend paid (140,466) (138,687) (140,466) (138,687) 2003/2002 interim dividend paid (154,519) (210,675) (154,519) (210,675)
At 31 December 5,852,497 5,761,524 668,752 590,832 2003/2002 final dividend proposed (178,729) (140,466) (178,729) (140,466)
5,673,768 5,621,058 490,023 450,366
Company and subsidiaries 5,675,894 5,588,209 490,023 450,366 Associated companies (2,126) 32,849 ––
5,673,768 5,621,058 490,023 450,366
26 MINORITY INTERESTS AND LOANS
Group 2003 2002 HK$’000 HK$’000
Share of equity 419,609 323,811 Loans from minority shareholders 1,955,890 2,203,755
2,375,499 2,527,566
The loans from minority shareholders represent proportionate funding from the minority shareholders of joint venture projects, including an amount of approximately HK$610,296,000 (2002: HK$654,042,000) received from a subsidiary of Shangri-La Asia Limited, a related company whose shares are listed on the Stock Exchange of Hong Kong. These loans are unsecured, subordinated to the bank loans of the relevant subsidiaries, have no fixed terms of repayment, and interest-free except for an amount of HK$264,103,000 (2002: HK$298,681,000) which bears interest at prevailing market rates.
Ð 145 Ð APPENDIX IV FINANCIAL INFORMATION OF THE GROUP
27 LONG-TERM LIABILITIES
Group Company 2003 2002 2003 2002 HK$’000 HK$’000 HK$’000 HK$’000
Bank loans – unsecured 6,033,808 6,407,773 5,072,222 5,850,000 Bank loans – secured (note 33) 174,156 646,799 ––
Total bank loans (note (a)) 6,207,964 7,054,572 5,072,222 5,850,000
Short-term bank loans and current portion of long-term liabilities (note (a)) (804,751) (1,335,481) (472,222) (650,000)
5,403,213 5,719,091 4,600,000 5,200,000
(a) At 31 December 2003, the Group’s bank loans were repayable as follows:
Group Company 2003 2002 2003 2002 HK$’000 HK$’000 HK$’000 HK$’000
Within one year 804,751 1,335,481 472,222 650,000 In the second to fifth year In the second year 315,822 870,279 – 450,000 In the third year 650,244 26,178 450,000 – In the fourth year 4,208,933 270,634 4,150,000 250,000 In the fifth year 224,292 4,552,000 – 4,500,000
5,399,291 5,719,091 4,600,000 5,200,000 Over five years 3,922 –––
6,207,964 7,054,572 5,072,222 5,850,000
(b) As at 31 December 2003, the Group had total available cash resources of approximately HK$8.2 billion (2002: HK$7.6 billion) comprising net cash and bank balances (including pledged bank deposits) of approximately HK$1.6 billion (2002: HK$1.4 billion) and undrawn bank loan facilities of approximately HK$6.6 billion (2002: HK$6.2 billion).
(c) Convertible bonds During the year ended 31 December 2002, bondholders holding guaranteed redeemable convertible bonds issued by Kerry Properties Capital Limited (“KPCL”), a wholly owned subsidiary of the Company, with a principal amount of US$196,780,000 exercised their option to require KPCL to redeem the bonds and the Group redeemed these bonds on 25 March 2002 at a redemption price of 129.712%. KPCL also exercised its option to redeem the remaining bonds with a principal amount of US$400,000 on 27 June 2002 at a redemption price of 100%. All the bonds had been duly redeemed as at 31 December 2002.
Ð 146 Ð APPENDIX IV FINANCIAL INFORMATION OF THE GROUP
28 DEFERRED TAXATION
Group As restated 2003 2002 HK$’000 HK$’000
At 1 January 973,005 840,087 Purchase of a subsidiary (note 29(c)) – 2,156 Deferred taxation credited to profit and loss account (note 5) (12,154) (23,150) Deferred taxation charged directly to reserves 6,201 99,025 Deferred taxation charged directly to minority interests 7,895 54,887
At 31 December 974,947 973,005
Deferred income tax assets are recognised for tax loss carried forward to the extent that realisation of the related tax benefit through the future taxable profits is probable. The Group has unrecognised tax losses of HK$1,521,909,000 (2002: HK$1,391,100,000) to be carried forward for offset against future taxable income.
The movement in deferred tax assets and liabilities during the year was as follows:
Group Accelerated depreciation Presale of Revaluation allowances properties Tax losses Total HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
At 1 January 2002, as previously stated ––51,119 – 51,119 Effect of adopting revised SSAP 12 821,181 142,670 – (174,883) 788,968
At 1 January 2002, as restated 821,181 142,670 51,119 (174,883) 840,087 Purchase of a subsidiary – 2,156 ––2,156 Deferred taxation charged/(credited) to profit and loss account 53,098 (38,124) (50,522) 12,398 (23,150) Deferred taxation charged directly to reserves 63,133 35,892 ––99,025 Deferred taxation charged directly to minority interests 54,887 –––54,887
At 31 December 2002 992,299 142,594 597 (162,485) 973,005
Ð 147 Ð APPENDIX IV FINANCIAL INFORMATION OF THE GROUP
28 DEFERRED TAXATION (CONTINUED)
Group Accelerated depreciation Presale of Revaluation allowances properties Tax losses Total HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
At 1 January 2003, as previously stated – 2,156 597 – 2,753 Effect of adopting revised SSAP 12 992,299 140,438 – (162,485) 970,252
At 1 January 2003, as restated 992,299 142,594 597 (162,485) 973,005 Deferred taxation charged/(credited) to profit and loss account 6,869 (8,989) (597) (9,437) (12,154) Deferred taxation charged directly to reserves 6,201 –––6,201 Deferred taxation charged directly to minority interests 7,895 –––7,895
At 31 December 2003 1,013,264 133,605 – (171,922) 974,947
29 NOTES TO THE CONSOLIDATED CASH FLOW STATEMENT
(a) Reconciliation of profit before taxation to net cash generated from operations
Group 2003 2002 HK$’000 HK$’000
Profit before taxation 572,322 787,734 Amortisation of goodwill 2,429 1,754 Amortisation of negative goodwill (4,465) (21) Depreciation 68,122 56,981 Dividend income from listed and unlisted investments (11,418) (27,727) Finance costs 174,638 217,130 Interest income (26,018) (28,188) Loss on sale of fixed assets 24,345 1,366 Gain on sale of trading securities – (636) Unrealised (gain)/loss on valuation of trading securities (1,209) 897 Provision in respect of stock of completed properties held for sale 69,346 266,000 Revaluation deficit on investment properties and other leasehold land and buildings 290,236 13,941 Share of results of associated companies (135,758) (108,838)
Operating profit before working capital changes 1,022,570 1,180,393 Decrease in stock of completed properties held for sale, properties under development for sale and accounts receivable, prepayments and deposits 918,681 1,606,786 Decrease in accounts payable, deposits received and accrued charges (47,421) (68,538)
Net cash generated from operations 1,893,830 2,718,641
Ð 148 Ð APPENDIX IV FINANCIAL INFORMATION OF THE GROUP
29 NOTES TO THE CONSOLIDATED CASH FLOW STATEMENT (CONTINUED) (b) Analysis of changes in financing during the year
Share capital Long-term borrowings Minority interests (including share premium) (including current portion) and loans 2003 2002 2003 2002 2003 2002 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
At 1 January 4,648,562 4,527,225 7,054,572 9,607,071 2,527,566 2,488,235
Non-cash movement: Issue of scrip dividend 133,947 121,836 –––– Share of profit ––––66,389 12,075 Share of revaluation reserves ––––21,264 37,733 Release of revaluation reserve on disposal of properties –––––2,324 Share of deferred taxation ––––(7,895) (54,887) Exchange adjustment ––9,981 3,469 3,079 (667) Loans of subsidiaries acquired –––2,363 –– Purchase of subsidiaries –––––4,329 Purchase of additional interest in subsidiaries ––––(201,496) – Provision of premium and amortisation of issue cost of convertible bonds –––32,475 –– 133,947 121,836 9,981 38,307 (118,659) 907 Purchase of shares for cancellation – (1,251) –––– Proceeds from issue of shares 37,609 752 –––– Repayment of bank loans ––(2,402,270) (7,281,010) –– Redemption of convertible bonds –––(1,993,282) –– Drawdown of bank loans ––1,545,681 6,683,486 –– Capital injection from minority shareholders ––––474 45,124 Decrease in loans from minority shareholders ––––(29,865) (6,500) Dividends paid to minority shareholders in subsidiaries ––––(4,017) (200)
At 31 December 4,820,118 4,648,562 6,207,964 7,054,572 2,375,499 2,527,566
Ð 149 Ð APPENDIX IV FINANCIAL INFORMATION OF THE GROUP
29 NOTES TO THE CONSOLIDATED CASH FLOW STATEMENT (CONTINUED) (c) Purchase of a subsidiary
2003 2002 HK$’000 HK$’000
Net assets acquired: Fixed assets – 33,631 Other investments – 1 Accounts and other receivables – 82,573 Cash and bank balances – 10,772 Accounts and other payables – (72,444) Taxation – (1,969) Bank loans – (2,363) Deferred taxation – (2,156)
– 48,045 Less: Minority interests – (4,329)
– 43,716 Goodwill – 41,453
– 85,169
Satisfied by: Cash – 85,169
(d) Analysis of the net outflow in respect of the purchase of a subsidiary
2003 2002 HK$’000 HK$’000
Cash consideration – 85,169 Cash and bank balances acquired – (10,772)
Net cash outflow in respect of the purchase of a subsidiary – 74,397
Ð 150 Ð APPENDIX IV FINANCIAL INFORMATION OF THE GROUP
30 RELATED PARTY TRANSACTIONS
Significant related party transactions, in addition to those connected transactions (where applicable) disclosed in the Report of the Directors, which were carried out in the normal course of the Group’s business during the year were as follows:
Group 2003 2002 HK$’000 HK$’000
(Income)/expenses Rental and storage income (note (a)) (5,278) (4,149) Project management and consultancy fees income (note (b)) (592) (2,307) Administration and management service fees – income (note (c)) (910) (793) – expense (note (d)) 485 259 Rent and related service charges (note (d)) 344 315 Marketing, consultancy and administrative management fees expense (note (e)) 9,753 10,240 Insurance premiums expense (note (f)) 11,285 18,524
(a) This represents rental and storage income arising from the leasing of commercial, residential, carparks and warehouse storage space to various subsidiaries and associated companies of Kerry Group Limited, the ultimate holding company of the Company, and other related parties at market rates.
(b) The Group provided project management, project consultancy, leasing, renovation, refurbishment and maintenance services to various subsidiaries of Kerry Group Limited and other related parties. The fees are determined on a cost reimbursement basis or with reference to relevant industry practice.
(c) The Group provided management services to certain subsidiaries and associated companies of Kerry Group Limited. In consideration for these services, the Group received fees, which have been determined on a cost reimbursement basis.
(d) Kerry Trading Co. Limited (“Kerry Trading”), a fellow subsidiary of the Company, provided administration and management services to certain members of the Group. In consideration for these services, members of the Group paid Kerry Trading a fee, which has been determined on a cost reimbursement basis. In addition, the Company reimbursed rent and related service charges to Kerry Trading for the use of office space, which has been determined on a cost reimbursement basis. Such fees are subject to review on an annual basis.
Ð 151 Ð APPENDIX IV FINANCIAL INFORMATION OF THE GROUP
30 RELATED PARTY TRANSACTIONS (CONTINUED) (e) This represents payment of services fee to Shangri-La International Hotel Management Limited, a subsidiary of Shangri-La Asia Limited, a related company of the Group, which provided marketing, consultancy and administrative management services to a member of the Group. The service fees payable during the year were determined at either a fixed amount or a certain percentage of the gross operating revenue of the relevant company in accordance with the agreement for the provision of the above services.
(f) This represents payment of insurance premiums at market rates to Jerneh Insurance (HK) Limited and Taishan Insurance Brokers Limited, related companies of the Group.
31 COMMITMENTS
(a) At 31 December 2003, the Group had capital commitments in respect of committed investments and construction in progress not provided for in these accounts as follows:
Group 2003 2002 HK$’000 HK$’000
Contracted but not provided for 688,596 1,137,474 Authorised but not contracted for 83,760 1,275
772,356 1,138,749
(b) At 31 December 2003, the Group had future aggregate minimum lease payments under non-cancellable operating leases in respect of land and buildings as follows:
Group 2003 2002 HK$’000 HK$’000
Within one year 36,782 29,076 In the second to fifth year, inclusive 81,283 84,780 Over five years 88,279 100,880
206,344 214,736
Ð 152 Ð APPENDIX IV FINANCIAL INFORMATION OF THE GROUP
31 COMMITMENTS (CONTINUED) (c) At 31 December 2003, the Group had future aggregate minimum lease rental receivable under non-cancellable operating leases in respect of land and buildings as follows:
Group 2003 2002 HK$’000 HK$’000
Within one year 702,816 728,958 In the second to fifth year, inclusive 502,452 616,931 Over five years 566,185 610,817
1,771,453 1,956,706
(d) As at 31 December 2003, the Group had interest rate swap contracts with principal sums of HK$3,760,000,000 (2002: HK$3,760,000,000). The remaining life of these contracts was within 1-2 years (2002: 2-3 years) at fixed rates of 3.620% to 5.510% (2002: 3.620% to 5.510%).
32 CONTINGENT LIABILITIES
(a) Banking facilities
Group Company 2003 2002 2003 2002 HK$’000 HK$’000 HK$’000 HK$’000
Guarantees for banking and other facilities of certain subsidiaries, associated companies and investee companies (notes (i) and (ii)) 789,061 912,431 1,355,659 1,674,063
Guarantees to certain banks for mortgage facilities granted to first buyers of certain properties in the PRC (note (iii)) 210,041 83,569 10,380 34,944
999,102 996,000 1,366,039 1,709,007
Ð 153 Ð APPENDIX IV FINANCIAL INFORMATION OF THE GROUP
32 CONTINGENT LIABILITIES (CONTINUED) (a) Banking facilities (Continued) (i) The Group has executed guarantees for banking and other facilities granted to certain associated companies and investee companies. The utilised amount of such facilities covered by the Group’s guarantees which also represented the financial exposure of the Group at the balance sheet date amounted to approximately HK$789,061,000 (2002: HK$912,431,000). The total amount of such facilities covered by the Group’s guarantees amounted to approximately HK$1,406,842,000 (2002: HK$1,609,938,000).
(ii) The Company has executed guarantees to banks for facilities granted to certain subsidiaries, associated companies and investee companies. The utilised amount of such facilities covered by the Company’s guarantees which also represented the financial exposure of the Company at the balance sheet date amounted to approximately HK$1,355,659,000 (2002: HK$1,674,063,000). The total amount of such facilities covered by the Company’s guarantees amounted to approximately HK$2,203,428,000 (2002: HK$2,437,299,000).
(iii)The Group and the Company have executed guarantees to certain banks for mortgage facilities granted to first buyers of certain properties developed by the Group in the PRC. The utilised amount of such facilities covered by the Group’s and the Company’s guarantees which also represented the financial exposure of the Group and the Company at the balance sheet date amounted to approximately HK$210,041,000 (2002: HK$83,569,000) and HK$10,380,000 (2002: HK$34,944,000), respectively. The total amount of such facilities covered by the Group’s and the Company’s guarantees amounted to approximately HK$1,416,925,000 (2002: HK$384,246,000) and HK$62,737,000 (2002: HK$275,780,000), respectively.
(b) Guarantees and undertakings (i) A wholly owned subsidiary of the Company, through its associated company, has a 20% interest in a company which is engaged in the development of a site in the Olympic Mass Transit Railway Station Development. Another wholly owned subsidiary of the Company, through its associated company, has a 32.5% interest in another company which is engaged in the development of an adjacent site. The companies developing the sites (the “Developers”) were each granted exclusive rights to develop the relevant sites pursuant to separate development agreements (the “Development Agreements”) entered into by each of the Developers and MTR Corporation Limited (“MTRC”).
Ð 154 Ð APPENDIX IV FINANCIAL INFORMATION OF THE GROUP
32 CONTINGENT LIABILITIES (CONTINUED) (b) Guarantees and undertakings (Continued) Pursuant to two deeds of guarantee in relation to each of the above developments, the Company has provided several guarantees in favour of MTRC for the due and punctual performance and observance by each of the Developers of 20% and 32.5%, respectively, of the Developer’s obligations, liabilities, stipulations, acts and duties under or in connection with the respective Development Agreements and the due and punctual payment of 20% and 32.5%, respectively, of all monies and liabilities due, owing or payable to MTRC from or by each of the Developers under or in connection with the respective Development Agreements.
In consideration of MTRC entering into and agreeing to the terms of the sale and purchase agreement (the “S & P Agreement”) and certain trust arrangements (the “Trust Arrangements”) in relation to the sale of an office development developed by the Developer in which the Group has a 20% interest, the Company has agreed to provide several guarantees and indemnities to indemnify MTRC against 20% of all claims, demands, cost, damages, losses, expenses and/or liabilities which the MTRC may incur or suffer and which are in any way connected with or result from the entering into and/or the observance and/or performance of the S & P Agreement and/or the carrying out by MTRC of the Trust Arrangements. The Company has also guaranteed the payment on demand of 20% of the full amount of such costs, losses, expenses or liabilities.
(ii) The Group has a 15% effective interest in Western Harbour Tunnel Company Limited (“WHTCL”) which acquired a 30-year franchise from the Government of the Hong Kong Special Administrative Region (the “Government”) to build and operate the Western Harbour Crossing (the “Crossing”). Pursuant to a deed of guarantee dated 2 September 1993 as amended by a deed of novation dated 27 June 1995, a second deed of novation dated 12 October 1998 and a third deed of novation dated 30 May 2000 (the “Guarantee”), the Company together with the other beneficial shareholders of WHTCL have jointly and severally undertaken to the Government that if the aggregate of all costs incurred by WHTCL up to the operating date of the Crossing and all maintenance and repair costs incurred by WHTCL after the operating date of the Crossing but before the issuance of the maintenance certificate exceeds HK$7,534,000,000 then they will pay to WHTCL such excess amount.
Ð 155 Ð APPENDIX IV FINANCIAL INFORMATION OF THE GROUP
32 CONTINGENT LIABILITIES (CONTINUED) (b) Guarantees and undertakings (Continued) Pursuant to a shareholders agreement dated 30 December 1992 as amended by a cross-indemnity deed dated 20 December 1993, a supplemental deed dated 8 September 1994, a second supplemental deed dated 12 October 1998 and a third supplemental deed dated 23 May 2000 in respect of WHTCL, the Company together with the other beneficial shareholders have agreed that in relation to any claim made or asserted under the Guarantee, as between themselves, the total of all liabilities in respect of such claim and of all costs, charges and expenses suffered or incurred by any of them resulting therefrom or attributable thereto shall be shared by them in proportion to their respective ultimate ownership of the issued capital of WHTCL.
(iii)A wholly owned subsidiary of the Company, through its associated company, has a 40% interest in a company (the “Hang Hau Developer”) which is engaged in the development of a site at the Hang Hau Mass Transit Railway Station Development. The Hang Hau Developer was granted exclusive rights to develop the site pursuant to a development agreement (the “Hang Hau Development Agreement”) entered into by the Hang Hau Developer with, amongst others, MTRC.
Pursuant to a deed of guarantee in relation to the above development, the Company has provided several guarantees in favour of MTRC for the due and punctual performance and observance by the Hang Hau Developer of 40% of its obligations, liabilities, stipulations, acts and duties under or in connection with the Hang Hau Development Agreement and the due and punctual payment of 40% of all monies and liabilities due, owing or payable to MTRC from the Hang Hau Developer under or in connection with the Hang Hau Development Agreement.
(iv) The Group has 38.2% interest in a company (the “Seller”) which, pursuant to a sale and purchase agreement (the “Mortgage S&P Agreement”), has sold certain loans (the “Loans”) to The Hong Kong Mortgage Corporation Limited (the “HKMC”). Pursuant to a support agreement (the “Support Agreement”) entered into by the Company with, amongst others, the HKMC, the Company has severally undertaken (i) if the Seller fails to repurchase any Loans in accordance with the Mortgage S&P Agreement, to, or to procure a third party approved by the HKMC to, complete repurchase of such Loans; and (ii) if the Seller fails to pay when due any amount in full in respect of the Loans required to be paid by it to the HKMC, to pay on behalf of the Seller on a several basis an amount equal to 38.2% of the amount that the Seller has failed to pay to the HKMC.
Ð 156 Ð APPENDIX IV FINANCIAL INFORMATION OF THE GROUP
32 CONTINGENT LIABILITIES (CONTINUED) (b) Guarantees and undertakings (Continued) The Company has also severally undertaken with the HKMC that it shall indemnify and keep indemnified the HKMC, its directors, officers and employees and its successors and assignees from and against 38.2% of all liabilities, losses, damages, actions, proceedings, demands, claims, costs and expenses which may be brought against, suffered or incurred by such indemnified person by reason of any breach of the Seller’s undertakings, representations and warranties in the Mortgage S&P Agreement and the Support Agreement or of any breach of the Company’s representations, warranties and undertakings in the Support Agreement.
(v) The Group has a 50% interest in a company (“Party 1”) which owns a piece of land in Cheung Sha Wan while another company (“Party 2”) owns an adjacent piece of land. Party 1 and Party 2 are negotiating the joint redevelopment of the two pieces of land. Prior to the joint redevelopment, the parties need to surrender the existing two pieces of land to the Government in exchange for the grant of a new lot for commercial/residential development with public car park facilities (the “Proposed Land Exchange”). The Proposed Land Exchange involves the grant of a street and its associated footpaths as part of the new lot and requires the permanent closure of the above-mentioned street and its associated footpaths.
Pursuant to an undertaking (the “Undertaking”) dated 24 May 2002, in consideration of the Government entering into and continuing the negotiations with Party 1 and Party 2 on the Proposed Land Exchange, the Company and other parties, including the holding companies of the shareholders of Party 1 and Party 2, have jointly and severally undertaken, covenanted and agreed that they shall indemnify and keep indemnified the Government and any of its officers from and against all and any actions (including judicial reviews), liabilities, demands, claims, expenses, costs and losses arising directly or indirectly out of or in connection with the gazetting of the permanent closure of the above-mentioned street and its associated footpaths under the Roads (Works, Use and Compensation) Ordinance and the authorisation of such closure.
Pursuant to a deed of cross indemnity and a collateral deed of cross indemnity, both dated 24 May 2002, the Group’s liabilities under the Undertaking shall be several and shall be determined based on its share of interest in the joint redevelopment.
Ð 157 Ð APPENDIX IV FINANCIAL INFORMATION OF THE GROUP
33 PLEDGE OF ASSETS – GROUP
At 31 December 2003, the Group’s total bank loans of HK$6,207,964,000 (2002: HK$7,054,572,000) included an aggregate amount of HK$6,033,808,000 (2002: HK$6,407,773,000) which is unsecured and an aggregate amount of HK$174,156,000 (2002: HK$646,799,000) which is secured by the following:
(i) legal charges over certain fixed assets (note 12(b)) and properties under development for sale (note 17);
(ii) charges on all assets, including bank balances amounting to HK$74,003,000 (2002: HK$70,450,000), of certain subsidiaries. Such bank balances can be used for payment of construction and other operating costs or for repayment of outstanding bank loans of the respective subsidiaries; and
(iii) assignments of insurance proceeds of certain properties.
34 ULTIMATE HOLDING COMPANY
The directors regard Kerry Group Limited, a company incorporated in the Cook Islands, as being the ultimate holding company.
35 APPROVAL OF ACCOUNTS
The accounts were approved by the board of directors on 9 March 2004.
Ð 158 Ð APPENDIX IV FINANCIAL INFORMATION OF THE GROUP
36 GROUP STRUCTURE – SUBSIDIARIES
At 31 December 2003, the Company held interests in the following subsidiaries:
Principal activities and place of operation (if Place of different from place of Particulars of Indirect interest incorporation/ incorporation/ issued capital/ held unless Name establishment establishment) registered capital denoted with ∆
Aberporth Resources British Virgin Islands Dormant US$1 100% Limited
Able Plus British Virgin Islands Investment holding US$1 100% Holdings Limited
* Amble Aim Sdn. Bhd. Malaysia Investment holding RM2 100%
Ansellman Limited British Virgin Islands Investment holding US$1 100%
Architectural Design Hong Kong Provision of architectural HK$2 100% and Management services Services Limited
Auto Plaza Limited Hong Kong Investment holding, Ordinary HK$4,998 100% property investment Non-voting and carpark operation deferred HK$2
Balkis Limited British Virgin Islands Investment holding US$10,000 100%
Baron Development British Virgin Islands Investment holding US$1 100% Limited
Barriedale Limited British Virgin Islands Investment holding US$10,000 100%
Barrowdale Limited British Virgin Islands Investment holding US$1,000 100%
Beaverton Limited British Virgin Islands Investment holding US$1 100%
λ^* Beihai Kerry Property The People’s Property ownership RMB1,708,616 100% Development Ltd. Republic of China
µ^ Beijing Jia Ao Real The People’s Property investment US$77,967,600 71.25% Estate Development Republic of China Co., Ltd.
µ^ Beijing Kerry Centre The People’s Hotel ownership US$33,000,000 71.25% Hotel Co., Ltd. Republic of China
Ð 159 Ð APPENDIX IV FINANCIAL INFORMATION OF THE GROUP
36 GROUP STRUCTURE – SUBSIDIARIES (CONTINUED)
Principal activities and place of operation (if Place of different from place of Particulars of Indirect interest incorporation/ incorporation/ issued capital/ held unless Name establishment establishment) registered capital denoted with ∆
λ^* Beijing Kerry The People’s Operation of US$2,100,000 100% Datalinks Limited Republic of China internet data centre
Belminton Inc. British Virgin Islands Investment holding US$1,000 100%
Bestford Resources Limited British Virgin Islands Investment holding HK$1 100%
Bethan Company Limited Hong Kong Dormant HK$2 100%
Betterise Limited Hong Kong Dormant HK$2 100% (formerly known as Kerry Warehouse (Yuen Long 2) Limited)
Big Sky Resources Limited British Virgin Islands Investment holding US$100 100%
Burgo Inc British Virgin Islands Dormant US$1,000 100%
Busyhigh Limited Samoa Investment holding HK$1 100%
Calistock Limited British Virgin Islands Investment holding US$1 100% in Hong Kong
Capabletech Limited British Virgin Islands Investment holding US$1 100%
Cashel Assets Limited British Virgin Islands Investment holding US$1 100% in Hong Kong
Catren Company Limited Hong Kong Carpark ownership Voting class “A” 100% HK$9,998 Non-voting class “B” HK$2
Chance Brilliant Limited British Virgin Islands Investment holding US$1 100%
Charlicks New Guinea Ltd. Papua New Guinea Dormant PGK54,000 99.99%
Chipelli Investments Hong Kong Property investment HK$100,000 80% Limited
Ð 160 Ð APPENDIX IV FINANCIAL INFORMATION OF THE GROUP
36 GROUP STRUCTURE – SUBSIDIARIES (CONTINUED)
Principal activities and place of operation (if Place of different from place of Particulars of Indirect interest incorporation/ incorporation/ issued capital/ held unless Name establishment establishment) registered capital denoted with ∆
Clavering Services British Virgin Islands Investment holding US$1,000 100% Limited in Hong Kong
Close Encounters Limited British Virgin Islands Investment holding HK$10,000 100%
Comphor Company British Virgin Islands Investment holding US$10 100% Limited
Cremorne Investments British Virgin Islands Investment holding US$100 100% Limited
Darcey Investments British Virgin Islands Investment holding US$100 100% Limited
Dec Limited British Virgin Islands Investment holding US$10,000 100%
Denleigh Limited British Virgin Islands Investment holding US$1 100%
Denver Rose British Virgin Islands Investment holding US$1 100% Investments Limited in Hong Kong
Errol Company Ltd. British Virgin Islands Investment holding US$1 100%
Ever Asset Group Limited British Virgin Islands Investment holding US$1 100%
Fair Page Limited Hong Kong Property investment HK$2 100%
Garden Streams Limited British Virgin Islands Investment holding US$1 100% in Hong Kong
Goldash Holdings Limited British Virgin Islands Investment holding US$1 100%
Golden Explorer Group British Virgin Islands Investment holding US$1 100% Limited
Harvard Developments British Virgin Islands Dormant US$12 75% Limited
Hong Kong Shanghai Samoa Investment holding HK$8,000,000 55% Development Co Ltd.
Ð 161 Ð APPENDIX IV FINANCIAL INFORMATION OF THE GROUP
36 GROUP STRUCTURE – SUBSIDIARIES (CONTINUED)
Principal activities and place of operation (if Place of different from place of Particulars of Indirect interest incorporation/ incorporation/ issued capital/ held unless Name establishment establishment) registered capital denoted with ∆
ibe-Datalinks (Beijing) Samoa Investment holding HK$1 100% Limited
ibe-Tech Investments British Virgin Islands Investment holding US$1 100% ∆ Limited
ibe-Tech Limited Hong Kong Dormant HK$2 100%
ISA Investments Limited British Virgin Islands Investment holding US$1 100%
Insightful Investments British Virgin Islands Dormant US$1 100% Limited
Intelligain Investments British Virgin Islands Investment holding US$1 100% Limited
Intelliocean Investments British Virgin Islands Investment holding US$1 100% Limited
International Enterprise Hong Kong Investment holding Ordinary HK$10 100% Co. Limited Non-voting deferred HK$10,000
Interseed Company Hong Kong Property trading HK$2 100% Limited
Irrewarra Holdings Limited British Virgin Islands Investment holding US$1 100%
Julian Holdings Limited British Virgin Islands Investment holding US$1 100%
KLN Container Line British Virgin Islands Freight forwarding HK$1,200,000 100% Limited business
^* KLN Siam Holdings Thailand Investment holding Common Baht49,000 49% # Limited Preference Baht51,000
Kanya Corp. British Virgin Islands Investment holding US$1,000 100%
Kerry Beijing Samoa Investment holding HK$1,000,000 75% (Guang Hua) Ltd
Ð 162 Ð APPENDIX IV FINANCIAL INFORMATION OF THE GROUP
36 GROUP STRUCTURE – SUBSIDIARIES (CONTINUED)
Principal activities and place of operation (if Place of different from place of Particulars of Indirect interest incorporation/ incorporation/ issued capital/ held unless Name establishment establishment) registered capital denoted with ∆
Kerry Beijing Samoa Investment holding HK$1 100% (Shibalidian) Development Ltd.
Kerry Beijing (Shibalidian) Samoa Investment holding US$1 100% Housing Ltd.
λ^ Kerry Cao Jia Yan The People’s Property development US$13,400,000 100% Properties (Shanghai) Republic of China Co., Ltd.
Kerry Cargo Centre Hong Kong Warehouse ownership HK$2 100% Limited
λ^* Kerry Centre Real Estate The People’s Property investment HK$142,000,000 100% (Shenzhen) Co. Ltd. Republic of China
Kerry Chemquest British Virgin Islands Investment holding US$1,000 100% Investments Ltd.
Kerry Cold Store Hong Kong Warehouse operation HK$20 100% (Hong Kong) Limited (formerly known as Kerry BCI Warehouse Limited)
Kerry D.G. Warehouse Hong Kong Warehouse ownership HK$20,000,000 100% (Kowloon Bay) Limited
λ^ Kerry Development The People’s Property trading US$40,000,000 100% (Shanghai) Co., Ltd. Republic of China
λ^* Kerry Development The People’s Property ownership HK$40,000,000 100% (Shenzhen) Co., Ltd. Republic of China
Kerry Distribution Hong Kong Provision of HK$500,000 100% (Hong Kong) Limited distribution services
^* Kerry Distribution Thailand Provision of Baht20,000,000 60% # (Thailand) Limited distribution services
Ð 163 Ð APPENDIX IV FINANCIAL INFORMATION OF THE GROUP
36 GROUP STRUCTURE – SUBSIDIARIES (CONTINUED)
Principal activities and place of operation (if Place of different from place of Particulars of Indirect interest incorporation/ incorporation/ issued capital/ held unless Name establishment establishment) registered capital denoted with ∆
Kerry Estate Management British Virgin Islands Investment holding HK$10,000 100% ∆ Limited
Kerry Facilities Hong Kong Building management HK$2 100% Management (Hong Kong) Limited
* Kerry Freight (Australia) Australia Freight forwarding A$2 100% Pty Ltd
Kerry Freight Hong Kong Freight forwarding Ordinary HK$10,000 100% (Hong Kong) Limited business Non-voting deferred HK$2,750,000
^ Kerry Freight (Korea) Inc. Korea Freight forwarding Won500,000,000 50.999%
^* Kerry Freight (Thailand) Thailand Freight forwarding Baht11,500,000 49% # Limited
* Kerry Freight (USA) Inc. Delaware, U.S.A. Freight forwarding US$1 100%
Kerry Freight International British Virgin Islands Dormant US$1 100% (Taiwan) Limited (formerly known as Siemens Holdings Limited)
Kerry Freight Hong Kong Freight forwarding HK$2 100% International Limited
Kerry Freight Services British Virgin Islands Investment holding HK$1 100% (China) Limited
Kerry Freight Services British Virgin Islands Investment holding US$1 100% (Europe) Limited
Kerry Freight Services British Virgin Islands Investment holding US$1 100% (HKSAR) Limited
Kerry Freight Services British Virgin Islands Investment holding HK$1 100% (Korea) Limited
Ð 164 Ð APPENDIX IV FINANCIAL INFORMATION OF THE GROUP
36 GROUP STRUCTURE – SUBSIDIARIES (CONTINUED)
Principal activities and place of operation (if Place of different from place of Particulars of Indirect interest incorporation/ incorporation/ issued capital/ held unless Name establishment establishment) registered capital denoted with ∆
Kerry Freight Services British Virgin Islands Investment holding US$1 100% (Philippines) Limited
Kerry Freight Services British Virgin Islands Investment holding HK$10,000 100% (Taiwan) Limited (formerly known as Sedan Chair Limited)
Kerry Freight Services British Virgin Islands Investment holding HK$1 100% (Thailand) Limited
Kerry Freight Services British Virgin Islands Investment holding US$1 100% (U.K.) Limited
Kerry Freight Services British Virgin Islands Investment holding HK$1 100% (USA) Limited
Kerry Freight Services British Virgin Islands Investment holding HK$1 100% Limited
Kerry Fuzhou (Gutian) Ltd. Samoa Investment holding HK$6,000,000 100%
Kerry Global Freight British Virgin Islands Freight forwarding HK$100,000 70% Limited and agency business and customs brokerage
Kerry Guangxi Samoa Investment holding HK$1,500,000 100% (Beihai) Ltd
Kerry Infrastructure British Virgin Islands Investment holding HK$10,000 100% (China) Limited
Kerry Infrastructure British Virgin Islands Investment holding HK$595,026,381 100% ∆ Limited
* Kerry Logistics (Australia) Australia Operation of logistics A$2,000,000 100% Pty Ltd services, rail terminal and container depot
Ð 165 Ð APPENDIX IV FINANCIAL INFORMATION OF THE GROUP
36 GROUP STRUCTURE – SUBSIDIARIES (CONTINUED)
Principal activities and place of operation (if Place of different from place of Particulars of Indirect interest incorporation/ incorporation/ issued capital/ held unless Name establishment establishment) registered capital denoted with ∆
Kerry Logistics Samoa Investment holding US$1 100% (Beijing) Ltd.
Kerry Logistics (China) British Virgin Islands Investment holding US$1 100% Limited
Kerry Logistics (Futian FTZ) Samoa Dormant HK$1 100% Investments Ltd. (formerly known as Kerry Warehouse (Shanghai) Ltd.)
Kerry Logistics (HKSAR) British Virgin Islands Investment holding US$1 100% Limited
Kerry Logistics Hong Kong Operation of logistics HK$10,000,000 100% (Hong Kong) Limited business
^* Kerry Logistics Korea Dormant Won100,000,000 100% (Korea) Inc.
λ^* Kerry Logistics The People’s Operation of logistics HK$32,000,000 100% (Shanghai Republic of China business Waigaoqiao) Co., Ltd.
Kerry Logistics Samoa Investment holding HK$1 100% (Shenzhen Futian) Investments Ltd.
Kerry Logistics Samoa Investment holding HK$1 100% (Shenzhen Yantian) Ltd.
λ^* Kerry Logistics The People’s Operation of logistics – 100% (Shenzhen) Co., Ltd. Republic of China business
^* Kerry Logistics Thailand Operation of logistics Baht135,000,000 60% # (Thailand) Limited business
λ^* Kerry Logistics The People’s Operation of logistics HK$1,600,000 100% (Tianjin) Co., Ltd. Republic of China business
Ð 166 Ð APPENDIX IV FINANCIAL INFORMATION OF THE GROUP
36 GROUP STRUCTURE – SUBSIDIARIES (CONTINUED)
Principal activities and place of operation (if Place of different from place of Particulars of Indirect interest incorporation/ incorporation/ issued capital/ held unless Name establishment establishment) registered capital denoted with ∆
Kerry Logistics (Tianjin) Samoa Investment holding HK$10,000 100% Investments Ltd.
Kerry Logistics (UK) United Kingdom Sea and air freight forwarding £20,000 91% Limited (formerly known as Trident International Limited)
Kerry Logistics Samoa Investment holding HK$1 100% (Waigaoqiao) Ltd.
* Kerry Logistics Holdings Australia Investment holding A$100 100% (Australia) Pty Ltd
Kerry Logistics Limited British Virgin Islands Investment holding HK$42,430,000 100%
Kerry Logistics Bermuda Investment holding HK$500,000 100% ∆ Network Limited in Hong Kong
Kerry Logistics Services British Virgin Islands Investment holding HK$1 100% (Australia) Limited
Kerry Logistics Services British Virgin Islands Investment holding HK$1 100% (Korea) Limited
Kerry Logistics Services British Virgin Islands Investment holding HK$1 100% (Thailand) Limited
Kerry Logistics Services British Virgin Islands Investment holding US$2 100% Limited
Kerry Logistics Shanghai Samoa Investment holding HK$1 100% Corporation
Kerry Overseas Project Liberia Project management US$100 100% Management Limited in Asia (Jia Li Hai Wai Xiang Mu Guan Li Limited)
Ð 167 Ð APPENDIX IV FINANCIAL INFORMATION OF THE GROUP
36 GROUP STRUCTURE – SUBSIDIARIES (CONTINUED)
Principal activities and place of operation (if Place of different from place of Particulars of Indirect interest incorporation/ incorporation/ issued capital/ held unless Name establishment establishment) registered capital denoted with ∆
Kerry Project Management Hong Kong Project management HK$300,000 100% (H.K.) Limited
Kerry Project Services Hong Kong Project management HK$2 100% Limited
Kerry Properties British Virgin Islands Investment holding HK$1 100% (Australia) Limited
Kerry Properties British Virgin Islands Investment holding HK$4,554,642,958 100% ∆ (China) Limited
Kerry Properties Hong Kong Investment holding Ordinary HK$1,000 100% (H.K.) Limited Non-voting deferred HK$200,000,000
Kerry Properties British Virgin Islands Investment holding HK$413,179 100% ∆ (Hong Kong) Limited
Kerry Properties British Virgin Islands Investment holding US$1 100% (Philippines) Limited
Kerry Properties Samoa Investment holding HK$1 100% (Shenzhen Central District) Ltd.
λ^* Kerry Properties The People’s Property trading and HK$112,082,975 100% (Shenzhen) Co., Ltd. Republic of China development
Kerry Properties Australia Investment holding A$1 100% (Sydney) Pty Ltd
Kerry Properties Beijing British Virgin Islands Investment holding US$1 100% (Shibalidian) Holdings Company Limited (formerly known as Sophonica International Corp.)
Ð 168 Ð APPENDIX IV FINANCIAL INFORMATION OF THE GROUP
36 GROUP STRUCTURE – SUBSIDIARIES (CONTINUED)
Principal activities and place of operation (if Place of different from place of Particulars of Indirect interest incorporation/ incorporation/ issued capital/ held unless Name establishment establishment) registered capital denoted with ∆
Kerry Properties Beijing Samoa Dormant HK$1 100% Kerry Centre Ltd.
Kerry Properties British Virgin Islands Dormant US$10,000 100% Capital Limited
λ^ Kerry Properties The People’s Real estate management US$350,000 100% Development Republic of China Management (Shanghai) Co., Ltd.
Kerry Properties British Virgin Islands Dormant US$10,000 100% Finance Limited
Kerry Properties British Virgin Islands Investment holding HK$1 100% ∆ International Limited
Kerry Properties British Virgin Islands Provision of nominee HK$1,000 100% Nominees Limited services
Kerry Properties Hong Kong Investment holding HK$5,000,000 100% Shenzhen Kerry Centre Limited
Kerry Properties British Virgin Islands Group financing HK$4,670,665,187 100% ∆ Treasury Limited
Kerry Property Hong Kong Property management HK$20 100% Management Services Limited
Kerry Real Estate Hong Kong Estate agency HK$2 100% Agency Limited
λ^* Kerry Real Estate The People’s Real estate management HK$3,000,000 100% Management Republic of China (Shenzhen) Ltd.
Kerry Real Estate Samoa Dormant HK$1 100% Services (Beijing) Ltd.
Ð 169 Ð APPENDIX IV FINANCIAL INFORMATION OF THE GROUP
36 GROUP STRUCTURE – SUBSIDIARIES (CONTINUED)
Principal activities and place of operation (if Place of different from place of Particulars of Indirect interest incorporation/ incorporation/ issued capital/ held unless Name establishment establishment) registered capital denoted with ∆
Kerry Real Estate Samoa Investment holding HK$1 100% Services (Fuzhou) Ltd.
Kerry Real Estate Samoa Investment holding HK$1 100% Services (Shanghai) Ltd.
Kerry Real Estate Services Samoa Investment holding HK$1 100% (Shenzhen) Ltd.
Kerry Records Hong Kong Documents storage HK$2 100% Management Services Limited (formerly known as ibe-Datalinks (H.K.) Limited)
Kerry Residences Hong Kong Dormant HK$2 100% Limited (formerly known as Rhosilli Company Limited)
Kerry Shanghai Samoa Investment holding US$2 100% (Cao Jia Yan) Ltd.
Kerry Shanghai Samoa Dormant HK$1 100% (Caohejing) Ltd.
Kerry Shanghai Samoa Dormant HK$1 100% (Heng Shan) Ltd.
Kerry Shanghai Samoa Investment holding HK$6,000,000 60% (Hongkou) Ltd.
Kerry Shanghai Samoa Investment holding HK$1,000,000 75% (Jingan Beili) Ltd
Kerry Shanghai Samoa Investment holding HK$1,000,000 100% Development Ltd
Kerry Suzhou Samoa Investment holding HK$1,000,000 100% (Gucheng) Ltd
Ð 170 Ð APPENDIX IV FINANCIAL INFORMATION OF THE GROUP
36 GROUP STRUCTURE – SUBSIDIARIES (CONTINUED)
Principal activities and place of operation (if Place of different from place of Particulars of Indirect interest incorporation/ incorporation/ issued capital/ held unless Name establishment establishment) registered capital denoted with ∆
Kerry TC Warehouse 1 British Virgin Islands Warehouse US$1 100% (Block A) Limited ownership in (formerly known as Hong Kong Kerry BCI Warehouse (Tsuen Wan) Limited)
Kerry TC Warehouse 1 British Virgin Islands Warehouse US$1 100% (Block B) Limited ownership in (formerly known as Hong Kong Kerry BCI Cold Store (Tsuen Wan) Limited)
Kerry TC Warehouse 2 Hong Kong Warehouse HK$10,000 100% Limited (formerly ownership known as Kerry BCI Cold Store (Kwai Chung) Limited)
Kerry TC Warehouse British Virgin Islands Investment holding HK$10,000,000 100% Holdings Limited (formerly known as Kerry BCI Warehouse Holdings Limited)
Kerry Warehouse Hong Kong Warehouse ownership HK$10,000,000 100% (Chai Wan) Limited
Kerry Warehouse Hong Kong Warehouse ownership HK$2 100% (Fanling 1) Limited
Kerry Warehouse Hong Kong Warehouse ownership HK$2 100% (Fanling 2) Limited
Kerry Warehouse British Virgin Islands Investment holding HK$1 100% (HKSAR) Limited
Kerry Warehouse Hong Kong Warehouse operation HK$25,000,000 100% (Hong Kong) Limited
Kerry Warehouse Hong Kong Warehouse ownership HK$30,000 100% (Kwai Chung) Limited
Ð 171 Ð APPENDIX IV FINANCIAL INFORMATION OF THE GROUP
36 GROUP STRUCTURE – SUBSIDIARIES (CONTINUED)
Principal activities and place of operation (if Place of different from place of Particulars of Indirect interest incorporation/ incorporation/ issued capital/ held unless Name establishment establishment) registered capital denoted with ∆
Kerry Warehouse Hong Kong Warehouse ownership HK$10,000,000 100% (Shatin) Limited
Kerry Warehouse Hong Kong Warehouse ownership HK$5,000,000 100% (Sheung Shui) Limited
Kerry Warehouse Hong Kong Warehouse ownership HK$2 100% (Tsuen Wan) Limited
Kerry Warehouse Hong Kong Warehouse ownership HK$2 100% (Yuen Long 1) Limited
Kerry Warehouse Limited British Virgin Islands Investment holding US$1 100%
KerryFlex Supply Chain Hong Kong Provision of agency and HK$5,000,000 100% Solutions Limited distribution services (formerly known as LINC Group Holdings Limited)
Kildare Limited Hong Kong Property trading HK$2 100%
Kimberley Inc. British Virgin Islands Investment holding US$1,000 100%
La Corte Investments British Virgin Islands Investment holding US$1 100% Limited
Licotar Company Limited Hong Kong Dormant HK$2 100%
^* Logistics (Thailand) Thailand Investment holding Common Baht49,000 49% # Limited Preference Baht51,000
Longstone Holdings British Virgin Islands Investment holding US$100 100% Limited
Lynart Group Limited British Virgin Islands Dormant HK$10,000 100%
Ð 172 Ð APPENDIX IV FINANCIAL INFORMATION OF THE GROUP
36 GROUP STRUCTURE – SUBSIDIARIES (CONTINUED)
Principal activities and place of operation (if Place of different from place of Particulars of Indirect interest incorporation/ incorporation/ issued capital/ held unless Name establishment establishment) registered capital denoted with ∆
Mable Road Company Hong Kong Property investment Ordinary HK$10 100% Limited Non-voting deferred HK$10,000
Madigan Company Hong Kong Property trading HK$2 100% Limited
Magnifair Company Hong Kong Dormant HK$10,000 100% Limited
Mainco Management Hong Kong Building management HK$10,000 100% Limited
Maple Crest Development British Virgin Islands Investment holding and US$120 75% Limited properly trading in Hong Kong
Marrakesh Limited British Virgin Islands Investment holding US$1 100%
Mazlo Holdings Limited British Virgin Islands Investment holding US$1 100%
Merlin Limited Samoa Investment holding in the HK$1,000,000 100% People’s Republic of China
Mid-Levels Portfolio British Virgin Islands Investment holding US$1 100% (Aigburth) Holdings Limited
Mid-Levels Portfolio Cook Islands Property investment US$9 100% (Aigburth) Limited in Hong Kong
Mid-Levels Portfolio British Virgin Islands Investment holding US$1 100% (Branksome) Holdings Limited
Mid-Levels Portfolio Hong Kong Property investment HK$1,000 100% (Branksome) Limited and development
Mid-Levels Portfolio British Virgin Islands Investment holding US$1 100% (Century Tower II) Holdings Limited
Ð 173 Ð APPENDIX IV FINANCIAL INFORMATION OF THE GROUP
36 GROUP STRUCTURE – SUBSIDIARIES (CONTINUED)
Principal activities and place of operation (if Place of different from place of Particulars of Indirect interest incorporation/ incorporation/ issued capital/ held unless Name establishment establishment) registered capital denoted with ∆
Mid-Levels Portfolio British Virgin Islands Investment holding US$1 100% (Gladdon) Holdings Limited
Mid-Levels Portfolio Hong Kong Property investment HK$1,000 100% (Gladdon) Limited
Mid-Levels Portfolio British Virgin Islands Investment holding US$1 100% (May Tower I) Holdings Limited
Mid-Levels Portfolio Hong Kong Dormant HK$100 100% (May Tower I) Limited
Mid-Levels Portfolio British Virgin Islands Investment holding US$1 100% (Tavistock) Holdings Limited
Mid-Levels Portfolio Hong Kong Property investment HK$1,000 100% (Tavistock) Limited
Mid-Levels Portfolio British Virgin Islands Investment holding US$100 100% (Tregunter Towers 1 & 2) Holdings Limited
Mid-Levels Portfolio British Virgin Islands Property investment US$1 100% (Tregunter Towers in Hong Kong 1 & 2) Limited
Mid-Levels Portfolio British Virgin Islands Investment holding US$1 100% (Valverde) Holdings Limited
Mid-Levels Portfolio Hong Kong Property investment HK$1,000 100% (Valverde) Limited and trading
Mid-Levels Portfolio British Virgin Islands Investment holding US$1 100% Holdings Limited
Ð 174 Ð APPENDIX IV FINANCIAL INFORMATION OF THE GROUP
36 GROUP STRUCTURE – SUBSIDIARIES (CONTINUED)
Principal activities and place of operation (if Place of different from place of Particulars of Indirect interest incorporation/ incorporation/ issued capital/ held unless Name establishment establishment) registered capital denoted with ∆
Mighty Gold British Virgin Islands Investment holding US$1 100% Investments Limited
Muman Holdings Limited British Virgin Islands Dormant US$1 100%
NMC 6 Limited British Virgin Islands Property investment Ordinary US$1 100% in Hong Kong
NMC 7 Limited British Virgin Islands Property investment Ordinary US$1 100% in Hong Kong
NMC 8 Limited British Virgin Islands Property investment Ordinary US$1 100% in Hong Kong
NMC 9 Limited British Virgin Islands Property investment Ordinary US$1 100% in Hong Kong
Nettlefold Limited British Virgin Islands Investment holding US$10,000 100%
Newtonmore Investments British Virgin Islands Investment holding HK$1 100% Limited
Nite Lites Limited British Virgin Islands Investment holding HK$10,000 100%
Norbiton Group Limited British Virgin Islands Investment holding HK$10,000 100%
Norminster Limited Hong Kong Investment holding HK$1,000 100%
Norwarth Investments British Virgin Islands Provision of management US$1 100% Limited services
Ocean City Investments British Virgin Islands Investment holding US$1 75% Limited
Olsen Holdings Limited British Virgin Islands Investment holding US$1 100%
Omisoka Holdings Limited British Virgin Islands Investment holding US$1 100%
Pacific Worth Group British Virgin Islands Investment holding US$1 100% Limited
Ð 175 Ð APPENDIX IV FINANCIAL INFORMATION OF THE GROUP
36 GROUP STRUCTURE – SUBSIDIARIES (CONTINUED)
Principal activities and place of operation (if Place of different from place of Particulars of Indirect interest incorporation/ incorporation/ issued capital/ held unless Name establishment establishment) registered capital denoted with ∆
Pembrooke Development British Virgin Islands Investment holding HK$10,000 100% Investments Limited in Hong Kong
Pettico Limited Hong Kong Provision of HK$20 100% finance services
Pirton Resources Limited British Virgin Islands Investment holding US$1 100%
Pola Company Limited British Virgin Islands Investment holding US$1,000 100%
Ponnelle Limited British Virgin Islands Investment holding US$1 100%
Port Destiny Limited Hong Kong Property trading HK$2 100%
Princeton Investment Hong Kong Property development HK$2 100% Company Limited
Prismatic Limited Hong Kong Property development HK$20 100%
Quintoll Limited British Virgin Islands Investment holding US$1 100%
Rayhay Company Limited Hong Kong Provision of finance services HK$2 100%
Renmark Limited British Virgin Islands Investment holding US$1 100%
Rightful Investments British Virgin Islands Investment holding US$1 100% Limited
λ^* Risenland Development The People’s Property development HK$44,000,000 100% (Fuzhou) Co., Ltd. Republic of China
Rodder Holdings Limited British Virgin Islands Investment holding US$1 100% in Hong Kong
Roving Spirit Limited British Virgin Islands Investment holding HK$10,000 100%
Sageman Limited British Virgin Islands Investment holding US$1 100%
Scene View Limited British Virgin Islands Investment holding US$1 100%
Senworld Investment Hong Kong Property investment HK$2 100% Limited
Ð 176 Ð APPENDIX IV FINANCIAL INFORMATION OF THE GROUP
36 GROUP STRUCTURE – SUBSIDIARIES (CONTINUED)
Principal activities and place of operation (if Place of different from place of Particulars of Indirect interest incorporation/ incorporation/ issued capital/ held unless Name establishment establishment) registered capital denoted with ∆
Shabu Inc. British Virgin Islands Investment holding US$1 100%
µ^ Shanghai Gang Hu The People’s Property investment US$155,300,000 54.45% Properties Co., Ltd. Republic of China and development
µ^ Shanghai Kerry Real The People’s Property investment US$12,000,000 55.20% Estate Development Republic of China Co., Ltd.
µ^ Shanghai Xin Ci Hou The People’s Property investment US$60,000,000 74.25% Properties Co., Ltd. Republic of China
µ^* Shenzhen Kerry Yantian The People’s Operation of logistics RMB88,000,000 55% Port Logistics Company Republic of China business Limited
Shine Concept British Virgin Islands Investment holding US$1 100% Investments Limited
Silverstone Assets Limited British Virgin Islands Investment holding US$100,000 100% in Hong Kong
Sky Wealth Investments British Virgin Islands Investment holding US$1 100% Limited
Southwark Profits Limited British Virgin Islands Investment holding US$100 100%
Spring Champion Limited British Virgin Islands Investment holding US$1 100%
Taskan Limited Hong Kong Property development HK$2 100%
Tellico Investment Limited Liberia Investment holding US$1 100%
Tellson International British Virgin Islands Investment holding US$1 100% Limited
Templepatrick Limited Hong Kong Financing HK$100 100%
Terowie Holdings Limited British Virgin Islands Investment holding HK$10,000 100%
Ð 177 Ð APPENDIX IV FINANCIAL INFORMATION OF THE GROUP
36 GROUP STRUCTURE – SUBSIDIARIES (CONTINUED)
Principal activities and place of operation (if Place of different from place of Particulars of Indirect interest incorporation/ incorporation/ issued capital/ held unless Name establishment establishment) registered capital denoted with ∆
Toccate Company Hong Kong Financing Ordinary HK$10 100% Limited Non-voting deferred HK$1,000,000
Torres Investments Limited British Virgin Islands Investment holding HK$10,000 100%
Travel Aim Investment B.V. Netherlands Investment holding NLG40,000 100%
Trebanos Investment Hong Kong Dormant HK$2 100% Company Limited
* Trident International United Kingdom Dormant £1 91% Limited
Twindale Limited British Virgin Islands Investment holding US$1 100%
Ubagan Limited Hong Kong Dormant HK$10,000 100%
Upsmart Investments Hong Kong Lease holding HK$2 100% Limited
Viola Developments British Virgin Islands Investment holding US$1 100% Limited
Washers Limited British Virgin Islands Investment holding HK$10,000 100%
Win House Industries Hong Kong Investment holding and HK$1,000,000 100% Limited provision of construction work
Win House/Kai Tai Hong Kong Provision of construction HK$100 75% (Joint Venture) work Company Limited
Wing Tak Cheung Limited Hong Kong Property development HK$10,000 100%
Wing Tsing Financial British Virgin Islands Group financing in US$1 100% Services Limited Hong Kong
Wirabay Limited British Virgin Islands Provision of trustee services US$1 100% #
Ð 178 Ð APPENDIX IV FINANCIAL INFORMATION OF THE GROUP
36 GROUP STRUCTURE – SUBSIDIARIES (CONTINUED)
Principal activities and place of operation (if Place of different from place of Particulars of Indirect interest incorporation/ incorporation/ issued capital/ held unless Name establishment establishment) registered capital denoted with ∆
Wiseside Investment Hong Kong Property investment HK$2 75% Company Limited
Woody Company Limited Hong Kong Property investment HK$2 100%
Wymer Limited British Virgin Islands Investment holding US$5,000 100%
Yanawa Limited British Virgin Islands Investment holding US$1 100%
Ying He Company Hong Kong Investment holding Ordinary HK$10 100% Limited Non-voting deferred HK$21,000,000
λ^* Yu Quan Property The People’s Republic Real estate management HK$500,000 100% Management of China (Fuzhou) Ltd.
Zinnerman Limited British Virgin Islands Investment holding US$1 100%
* companies not audited by PricewaterhouseCoopers
^ English translation of name only
# deemed subsidiary
∆ direct interest
λ wholly foreign-owned enterprise
µ sino-foreign equity joint venture enterprise
Ð 179 Ð APPENDIX IV FINANCIAL INFORMATION OF THE GROUP
37 GROUP STRUCTURE – ASSOCIATED COMPANIES
At 31 December 2003, the Company held interests in the following associated companies:
Principal activities and place of operation Particulars of (if different class of Place of from place of issued shares/ incorporation/ incorporation/ registered Interest held Name establishment establishment) capital indirectly
Adwood Company Limited Hong Kong Investment holding 10 shares of 30% HK$10 each
*± Ariel Investments Limited Hong Kong Investment holding 1,000,000 shares 45% of HK$1 each
± Asia Airfreight Services Hong Kong Provision of air cargo 10,000 shares 15% β Limited services of HK$1 each
± Asia Airfreight Terminal Hong Kong Air cargo handling 360,000,000 15% β Company Limited terminal operation shares of HK$1 each
Bay Tower Properties British Virgin Islands Investment holding 1,000 shares of 33.33% Limited US$1 each
µ^* Beijing BHL Logistics The People’s Land resettlement US$20,000,000 20% Limited Republic of China
* Benefit Bright (B.V.I.) British Virgin Islands Investment holding 1,000 shares of 32.50% Limited in Hong Kong US$1 each
* Benefit Bright Limited Hong Kong Property investment 2 shares of 32.50% and trading HK$1 each
Brisbane Trading Hong Kong Property development 100,000 ordinary 50% Company Limited and trading shares of HK$10 each 108,376,196 non-voting deferred shares of HK$1 each
* Capital Fun Limited Hong Kong Provision of nominee 2 shares of 20% services HK$1 each
* Cardiff Investments Limited Hong Kong Investment holding 100,000 shares 30% of HK$1 each
Ð 180 Ð APPENDIX IV FINANCIAL INFORMATION OF THE GROUP
7 3 GROUP STRUCTURE – ASSOCIATED COMPANIES (CONTINUED)
Principal activities and place of operation Particulars of (if different class of Place of from place of issued shares/ incorporation/ incorporation/ registered Interest held Name establishment establishment) capital indirectly
* Cavalcade Holdings Limited British Virgin Islands Investment holding 100 shares of 45% US$1 each
Cheerjoy Development Hong Kong Property development 2 shares of 35% Limited HK$1 each
µ^ Chiwan Container The People’s Port terminal operation US$44,000,000 25% Terminal Co., Ltd. Republic of China
Cushion Company Limited Hong Kong Dormant 10,000 shares 33.33% of HK$1 each
EDSA Parking Services, Inc. Philippines Carpark operations 2,500 shares of 39.12% Pesos 100 each
EDSA Properties Philippines Property development, 4,215,222,612 39.12% Holdings Inc. investment holding shares of and real estate Peso 1 each management
EPHI Logistics Holdings, Philippines Investment holding 15,000 shares 40%∆ Inc. of Pesos 100 each
* Enterprico Investment Hong Kong Loan financing 100,000 ordinary 45% Limited shares of HK$1 each
*± Grand Creator British Virgin Islands Investment holding 10 shares of 40% Investment (BVI) Limited US$1 each
*± Grand Creator Hong Kong Property development 2 shares of 40% Investment Limited and trading HK$1 each
*± Hang Hau Station Hong Kong Project management 2 shares of 40% (Project Management) HK$1 each Limited
*± Hang Hau Station Hong Kong Dormant 2 shares of 40% Construction Limited HK$1 each
Ð 181 Ð APPENDIX IV FINANCIAL INFORMATION OF THE GROUP
7 3 GROUP STRUCTURE – ASSOCIATED COMPANIES (CONTINUED)
Principal activities and place of operation Particulars of (if different class of Place of from place of issued shares/ incorporation/ incorporation/ registered Interest held Name establishment establishment) capital indirectly
* Harvest Sun (B.V.I.) British Virgin Islands Investment holding 100 shares of 20% Limited in Hong Kong US$1 each
* Harvest Sun Limited Hong Kong Property investment and 2 shares of 20% trading HK$1 each
Hilaire Inc. British Virgin Islands Investment holding 900 shares of 33.33% US$1 each
± Hong Kong Tunnels and Hong Kong Tunnel management 1,000,000 shares 15% β Highways Management of HK$1 each Company Limited
*± Jacksons Landing Australia Property development 400 ordinary 25% Development Pty. shares of Limited A$1 each
*± Jacksons Landing Estate Australia Property management 10 ordinary 25% Management Pty shares of Limited A$1 each
µ^* Kerry BHL Logistics The People’s Provision of US$2,650,000 50% Limited Republic of China logistics services
Kerry Freight Philippines Freight forwarding 20,000 shares 20.40% Philippines, Inc. business of Pesos 100 each
* Kerry Hung Kai Warehouse Hong Kong Warehouse operation 5,000,000 shares 50% (Cheung Sha Wan) Limited of HK$1 each
Kerry Rhenus Logistics British Virgin Islands Operation of logistics 100,000 shares 50% (Far East) Limited business of HK$1 each
* Kosco Limited British Virgin Islands Provision of nominee 1 share of US$1 32.50% services
* KUMM International Samoa Investment holding 7,000,000 shares 25% Co., Ltd. of US$1 each
Ð 182 Ð APPENDIX IV FINANCIAL INFORMATION OF THE GROUP
7 3 GROUP STRUCTURE – ASSOCIATED COMPANIES (CONTINUED)
Principal activities and place of operation Particulars of (if different class of Place of from place of issued shares/ incorporation/ incorporation/ registered Interest held Name establishment establishment) capital indirectly
* Olympian City 1 (Project Hong Kong Project management 2 shares of 20% Management) Limited HK$1 each
* Olympian City 1 Hong Kong Leasing and estate 2 shares of 20% Management management HK$1 each Company Limited
* Olympian City 2 (Project Hong Kong Project management 2 shares of 32.50% Management) Limited HK$1 each
* Olympian City 2 Hong Kong Provision of 1,000 shares of 38.20% Finance Company Limited finance services HK$1 each
* Olympian City 2 Hong Kong Leasing and estate 1,000 shares of 32.50% Management Company management HK$1 each Limited
Point Perfect Investments British Virgin Islands Investment holding 10 shares 35% Limited of US$1 each
Portstewart Limited Hong Kong Provision of finance 2 shares 50% services of HK$1 each
*± Reca Limited British Virgin Islands Provision of nominee 1 share of US$1 40% services
*± Residence Oasis Finance Hong Kong Provision of finance 2 shares of 40% Company Limited services HK$1 each
µ^* Shanghai Kerry CHJ The People’s Republic Operation of logistics HK$14,040,000 50% Logistics Limited of China business
Shangri-La Plaza Philippines Operation of shopping 1,229,500,000 30.80% Corporation mall and other related preferred shares activities of Peso 1 each 235,000,000 common shares of Peso 1 each
Ð 183 Ð APPENDIX IV FINANCIAL INFORMATION OF THE GROUP
7 3 GROUP STRUCTURE – ASSOCIATED COMPANIES (CONTINUED)
Principal activities and place of operation Particulars of (if different class of Place of from place of issued shares/ incorporation/ incorporation/ registered Interest held Name establishment establishment) capital indirectly
λ* Tianjin Jialing Union The People’s Property holding US$6,900,000 25% Industries Co., Ltd. Republic of China
± Time Rank Limited Hong Kong Property trading 2 shares of 50% HK$1 each
* Top Spring Development Hong Kong Investment holding 22,000,000 shares 25% (Beijing) Limited of HK$1 each
* Twin Luck Worldwide Ltd. British Virgin Islands Investment holding 2 shares of 50% US$1 each
± Western Harbour Tunnel Hong Kong Tunnel operation 40,000,000 shares 15% β Company Limited and management of HK$10 each
* Win Chanford Enterprises Hong Kong Property investment 1,000,000 ordinary 45% Limited shares of HK$1 each
* Wolver Hollow Company Hong Kong Warehouse 10,000 shares 50% Limited ownership of HK$1 each
*± Wu Wing International Hong Kong Property trading 30,000,000 45% Company, Limited and investment shares of HK$1 each
* companies not audited by PricewaterhouseCoopers
^ English translation of name only
β deemed associated company
λ wholly foreign-owned enterprise
µ sino-foreign equity joint venture enterprise
± companies having a financial accounting period which is not coterminous with the Group
∆ being the interest fully controlled by the Group
Ð 184 Ð APPENDIX IV FINANCIAL INFORMATION OF THE GROUP
3. UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS OF THE GROUP
Set out below is the unaudited consolidated financial statements of the Group for the six months ended 30 June 2004 as extracted from the Company’s 2004 interim report.
CONSOLIDATED PROFIT AND LOSS ACCOUNT
Unaudited Six months ended 30 June 2004 2003 Notes HK$’000 HK$’000
Turnover 2 2,631,849 1,814,468 Cost of sales (747,491) (545,501) Direct operating expenses (1,005,766) (719,114)
Gross profit 878,592 549,853 Other revenues 16,846 14,368 Other income 2,695 20,165 Provision in respect of stock of completed properties held for sale – (69,346) Revaluation deficit on properties – (962,458) Administrative expenses (142,132) (126,103)
Operating profit/(loss) before finance costs 756,001 (573,521) Finance costs (61,642) (95,550)
Operating profit/(loss) 2,3 694,359 (669,071) Share of results of associates – share of profits less losses 224,241 115,700 – provision for decline in carrying value – (136,585) 224,241 (20,885)
Profit/(loss) before taxation 918,600 (689,956) Taxation 4 (152,364) 73,267
Profit/(loss) after taxation 766,236 (616,689) Minority interests (68,266) 25,627
Profit/(loss) attributable to shareholders 697,970 (591,062) Transfer to reserves 5 (80) (8,783)
697,890 (599,845)
Interim dividend 239,031 153,990
Earnings/(loss) per share 6 58.44 cents (50.39) cents
Interim dividend per share 20 cents 13 cents
Ð 185 Ð APPENDIX IV FINANCIAL INFORMATION OF THE GROUP
CONSOLIDATED BALANCE SHEET
Unaudited Audited 30 June 31 December 2004 2003 Notes HK$’000 HK$’000 Fixed assets 21,377,953 20,960,492 Associates 4,386,154 4,621,841 Other non-current assets 1,430,922 1,495,763 Negative goodwill (13,073) (42,604)
Current assets Stock of completed properties held for sale 166,554 345,202 Properties under development for sale 741,682 999,777 Accounts receivable, prepayments and deposits 7 1,252,486 790,724 Tax recoverable 43,142 48,561 Tax reserve certificates 21,873 19,926 Trading securities 3,023 3,252 Pledged bank deposits 47,058 74,003 Cash and bank balances 2,260,089 1,520,059 4,535,907 3,801,504
Current liabilities Accounts payable, deposits received and accrued charges 8 1,493,665 1,333,956 Taxation 113,853 60,150 Short-term bank loans and current portion of long-term liabilities 9 664,325 804,751 Unsecured bank overdrafts – 1,921 2,271,843 2,200,778
Net current assets 2,264,064 1,600,726
Total assets less current liabilities 29,446,020 28,636,218
Financed by: Share capital 1,195,157 1,191,527 Share premium 3,655,078 3,628,591 Other reserves 9,197,731 9,209,944 Retained profits 6,132,177 5,673,768 Proposed dividend 239,031 178,729
Shareholders’ funds 20,419,174 19,882,559 Minority interests and loans 2,335,971 2,375,499
22,755,145 22,258,058 Long-term liabilities 9 5,678,469 5,403,213 Deferred taxation 1,012,406 974,947
29,446,020 28,636,218
FINANCIAL HIGHLIGHTS
30 June 31 December 2004 2003 HK$M HK$M
Shareholders’ equity 20,419 19,883 Net borrowings 4,036 4,616 Net asset value per share HK$17.08 HK$16.69 Gearing 20% 23% Issued shares (in millions) 1,195 1,192
Ð 186 Ð APPENDIX IV FINANCIAL INFORMATION OF THE GROUP
CONSOLIDATED CASH FLOW STATEMENT
Unaudited Six months ended 30 June 2004 2003 HK$’000 HK$’000
Operating activities Net cash generated from operations 939,695 854,030 Interest paid (111,194) (137,235) Profits tax paid (36,312) (63,626) Net cash from operating activities 792,189 653,169
Investing activities Purchase of fixed assets, excluding interest capitalised (223,256) (782,149) Purchase of a subsidiary (net of cash and cash equivalents acquired) (106,656) – Purchase of additional interest in subsidiaries – (110,000) Additional investments in associates (34,401) (7,070) Repayment of loans from associates 460,867 280,360 Purchase of long-term investments – (1,655) Repayment of loans from/(loans to) investee companies 364 (700) Decrease/(increase) in long-term receivables 57,835 (23,983) Interest received 12,934 10,566 Dividends received from associates 15,018 6,482 Dividends received from unlisted investments 3,859 3,750 Dividends received from listed investments 66 56 Proceeds from sale of fixed assets 54,827 35,684 Proceeds from sale of an associate 4,336 – Proceeds from sale of long-term investments – 18,573 Net cash generated from/(used in) investing activities 245,793 (570,086)
Net cash inflow before financing 1,037,982 83,083
Financing activities Proceeds from issue of shares 26,355 430 Repayment of bank loans (2,499,356) (1,345,456) Drawdown of bank loans 2,486,789 1,205,410 Capital injection from minority shareholders 1,941 474 Dividends paid (175,418) (23,909) Dividends paid to minority shareholders in subsidiaries (1,368) (2,264) Decrease in loans from minority shareholders (161,919) (14,247) Net cash used in financing (322,976) (179,562)
Increase/(decrease) in cash and cash equivalents 715,006 (96,479) Cash and cash equivalents at 1 January 1,592,141 1,421,245
Cash and cash equivalents at 30 June 2,307,147 1,324,766
Analysis of balances of cash and cash equivalents
Pledged bank deposits 47,058 35,154 Cash and bank balances 2,260,089 1,289,612
2,307,147 1,324,766
Ð 187 Ð APPENDIX IV FINANCIAL INFORMATION OF THE GROUP
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Unaudited Six months ended 30 June 2004 2003 HK$’000 HK$’000
Total equity as at 1 January 19,882,559 19,796,430
Revaluation deficit on properties charged to revaluation reserves – (124,049) Deferred tax charged to revaluation reserves (457) – Revaluation deficit on non-trading securities (5,326) (120,619) Exchange differences arising on translation of the accounts of the PRC and overseas subsidiaries and associates (6,510) 29,894
Net losses not recognised in the profit and loss account (12,293) (214,774)
Profit/(loss) attributable to shareholders 697,970 (591,062) Dividends (179,179) (140,466) Issue of share capital 30,117 116,987
Total equity as at 30 June 20,419,174 18,967,115
Ð 188 Ð APPENDIX IV FINANCIAL INFORMATION OF THE GROUP
NOTES TO THE ACCOUNTS
1. Principal Accounting Policies
These unaudited consolidated interim accounts are prepared in accordance with Hong Kong Statement of Standard Accounting Practice 25 – “Interim financial reporting” issued by the Hong Kong Society of Accountants and Appendix 16 to the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the “Listing Rules”).
These condensed interim accounts should be read in conjunction with the 2003 annual financial statements. The accounting policies and methods of computation used in the preparation of these condensed interim accounts are consistent with those used in the annual accounts for the year ended 31 December 2003.
2. Principal Activities and Segmental Analysis of Operations
An analysis of the Group’s turnover and contribution to operating profit/(loss) for the period by principal activities and markets is as follows:
Turnover Operating profit/(loss) Six months ended 30 June Six months ended 30 June 2004 2003 2004 2003 HK$’000 HK$’000 HK$’000 HK$’000
Principal activities: Property rental – PRC 242,895 237,932 180,604 (133,424) – Hong Kong 149,943 172,090 54,737 (468,016) 392,838 410,022 235,341 (601,440)
Property sales – PRC 422,449 203,779 79,762 33,296 – Hong Kong 590,845 377,766 141,987 (105,843) 1,013,294 581,545 221,749 (72,547)
Hotel operations 124,274 61,543 51,462 (26,273)
Logistics and warehouse operations – warehouse 200,769 179,899 108,282 (19,983) – logistics 880,195 560,921 49,315 15,690 1,080,964 740,820 157,597 (4,293)
Infrastructure – – (236) (247)
Project, property management and others 20,479 20,538 28,446 35,729
2,631,849 1,814,468 694,359 (669,071)
Principal markets: PRC 870,637 536,503 316,397 (131,902) Hong Kong 1,233,558 909,635 360,416 (535,613) United Kingdom 330,120 255,580 6,812 641 Others 197,534 112,750 10,734 (2,197)
2,631,849 1,814,468 694,359 (669,071)
Ð 189 Ð APPENDIX IV FINANCIAL INFORMATION OF THE GROUP
An analysis of the Group’s revenue and results for the period by business segments is as follows:
Six months ended 30 June 2004 HK$’000 Logistics PRC Hong Kong Overseas and Property Property Property Warehouse Infrastructure Others Eliminations Consolidated
REVENUE Turnover 789,618 740,788 – 1,080,964 – 20,479 – 2,631,849 Inter-segment revenue 225 – – – – 107,022 (107,247) – Inter-segment interest income – – – – – 138,296 (138,296) –
789,843 740,788 – 1,080,964 – 265,797 (245,543) 2,631,849
RESULT Segment results 327,834 253,525 (4,465) 179,132 (236) 121,661 (138,296) 739,155 Dividend income – 892 3,033 – – – – 3,925 Interest income 2,958 4,527 – 458 2,255 2,723 – 12,921 Interest expenses (18,964) (62,220) – (21,993) (2,255) (94,506) 138,296 (61,642)
Operating profit/(loss) 311,828 196,724 (1,432) 157,597 (236) 29,878 – 694,359 Share of results of associates 9,895 96,762 16,041 84,267 17,276 – – 224,241
Profit before taxation 321,723 293,486 14,609 241,864 17,040 29,878 – 918,600 Taxation (75,707) (40,004) (4,024) (28,855) (3,337) (437) – (152,364)
Profit after taxation 246,016 253,482 10,585 213,009 13,703 29,441 – 766,236 Minority interests (54,022) (6,030) – (8,215) – 1 – (68,266)
Profit attributable to shareholders 191,994 247,452 10,585 204,794 13,703 29,442 – 697,970
Ð 190 Ð APPENDIX IV FINANCIAL INFORMATION OF THE GROUP
2. Principal Activities and Segmental Analysis of Operations (continued)
Six months ended 30 June 2003 HK$’000 Logistics PRC Hong Kong Overseas and Property Property Property Warehouse Infrastructure Others Eliminations Consolidated
REVENUE Turnover 503,254 549,856 – 740,820 – 20,538 – 1,814,468 Inter-segment revenue – – – – – 129,285 (129,285) – Inter-segment interest income – – – – – 140,993 (140,993) –
503,254 549,856 – 740,820 – 290,816 (270,278) 1,814,468
RESULT Segment results before provision and revaluation deficit on properties 231,626 82,819 (2,449) 129,038 (247) 144,121 (140,993) 443,915 Provision in respect of stock of completed properties held for sale – (69,346) – – – – – (69,346) Revaluation deficit on properties (328,125) (527,581) – (106,752) – – – (962,458)
Segment results (96,499) (514,108) (2,449) 22,286 (247) 144,121 (140,993) (587,889) Dividend income – 3,806 – – – – – 3,806 Interest income 1,648 4,897 – 173 2,221 1,623 – 10,562 Interest expenses (31,550) (68,454) – (26,752) (2,221) (107,566) 140,993 (95,550)
Operating (loss)/profit (126,401) (573,859) (2,449) (4,293) (247) 38,178 – (669,071) Share of results of associates – share of profits less losses 11,696 26,100 19,436 (982) 59,450 – – 115,700 – provision for decline in carrying value – (136,585) – – – – – (136,585) 11,696 (110,485) 19,436 (982) 59,450 – – (20,885)
(Loss)/profit before taxation (114,705) (684,344) 16,987 (5,275) 59,203 38,178 – (689,956) Taxation 73,037 1,583 (1,035) 3,409 (3,692) (35) – 73,267
(Loss)/profit after taxation (41,668) (682,761) 15,952 (1,866) 55,511 38,143 – (616,689) Minority interests 8,892 17,005 – (270) – – – 25,627
(Loss)/profit attributable to shareholders (32,776) (665,756) 15,952 (2,136) 55,511 38,143 – (591,062)
Ð 191 Ð APPENDIX IV FINANCIAL INFORMATION OF THE GROUP
3. Operating Profit/(Loss) Six months ended 30 June 2004 2003 HK$’000 HK$’000
Operating profit/(loss) is stated after crediting/charging the following:
Crediting Dividend income from listed and unlisted investments 3,925 3,806 Interest income 12,921 10,562 Gain/(loss) on sale of properties – Investment properties (3,381) (7,824) – Properties under development and completed properties for sale 269,184 43,868 265,803 36,044 Amortisation of negative goodwill 2,270 2,158
Charging Depreciation 38,713 32,892 Amortisation of goodwill 1,637 1,195
Total finance costs incurred 111,194 137,235 Less: amount capitalised in properties under development (49,552) (41,685) Total finance costs expensed during the period 61,642 95,550
4. Taxation Six months ended 30 June 2004 2003 HK$’000 HK$’000
The taxation (charge)/credit comprises:
PRC taxation Current (49,962) (27,881) Overprovision in prior years 1,380 375 Deferred (23,015) 97,450 (71,597) 69,944 Hong Kong profits tax Current (43,038) (20,367) Overprovision in prior years 2,032 4,401 Deferred (7,879) 23,991 (48,885) 8,025
Overseas taxation Current (3,899) (612) Deferred 887 – (3,012) (612)
Share of taxation attributable to associates Current (28,870) (14,196) Deferred – 10,106 (28,870) (4,090)
(152,364) 73,267
Hong Kong profits tax has been provided at the rate of 17.5% (2003: 17.5%) on the estimated assessable profit for the period. Taxation on PRC and overseas profits has been calculated on the estimated assessable profit for the period at the rates of taxation prevailing in the PRC and the overseas countries in which the Group operates, respectively.
Ð 192 Ð APPENDIX IV FINANCIAL INFORMATION OF THE GROUP
5. Transfer to Reserves
Six months ended 30 June 2004 2003 HK$’000 HK$’000
Transfer to: Enterprise expansion reserve (80) (61) Share of surplus and capital reserves of associates – (8,722)
(80) (8,783)
6. Earnings/(Loss) per Share
The calculation of basic earnings/(loss) per share is based on the Group’s profit attributable to shareholders of HK$697,970,000 (2003: loss of HK$591,062,000) and the weighted average number of 1,194,366,901 shares (2003: 1,173,021,525 shares) in issue during the period.
There was no dilution arising from the outstanding share options granted by the Company in 1997. For the six months ended 30 June 2004, the dilution from the outstanding share options granted by the Company in 1999, 2000, 2001 and 2002 was immaterial (2003: the relevant share options were anti-dilutive). Accordingly, diluted earnings/(loss) per share had not been shown.
7. Accounts Receivable, Prepayments and Deposits
Included in accounts receivable, prepayments and deposits are trade receivables. The Group maintains a defined credit policy. The ageing analysis of trade receivables as at 30 June 2004 was as follows:
30 June 31 December 2004 2003 HK$’000 HK$’000
0–1 month 296,008 137,410 2–3 months 129,071 130,200 Over 3 months 20,836 20,538
445,915 288,148
8. Accounts Payable, Deposits Received and Accrued Charges
Included in accounts payable, deposits received and accrued charges are trade payables. The ageing analysis of trade payables as at 30 June 2004 was as follows:
30 June 31 December 2004 2003 HK$’000 HK$’000
0–1 month 131,076 140,587 2–3 months 25,734 33,418 Over 3 months 38,552 19,171
195,362 193,176
Ð 193 Ð APPENDIX IV FINANCIAL INFORMATION OF THE GROUP
9. Long-Term Liabilities
30 June 31 December 2004 2003 HK$’000 HK$’000
Bank loans – unsecured 6,036,265 6,033,808 Bank loans – secured 306,529 174,156 Total bank loans (note (i)) 6,342,794 6,207,964 Short-term bank loans and current portion of long-term liabilities (664,325) (804,751)
5,678,469 5,403,213
(i) At 30 June 2004, the Group’s bank loans were repayable as follows:
30 June 31 December 2004 2003 HK$’000 HK$’000
Within one year 664,325 804,751 In the second to fifth year In the second year 674,435 315,822 In the third year 4,345,046 650,244 In the fourth year 382,994 4,208,933 In the fifth year 274,086 224,292 5,676,561 5,399,291 Over five years 1,908 3,922
6,342,794 6,207,964
10. Contingent Liabilities
30 June 31 December 2004 2003 HK$’000 HK$’000
Banking facilities
Guarantees for banking and other facilities of certain associates and investee companies (note (i)) 480,438 789,061
Guarantees to certain banks for mortgage facilities granted to first buyers of certain properties in the PRC (note (ii)) 390,991 210,041
871,429 999,102
(i) The Group has executed guarantees for banking and other facilities granted to certain associates and investee companies. The utilised amount of such facilities covered by the Group’s guarantees which also represented the financial exposure of the Group at the balance sheet date amounted to approximately HK$480,438,000 (31 December 2003: HK$789,061,000). The total amount of such facilities covered by the Group’s guarantees amounted to approximately HK$530,723,000 (31 December 2003: HK$1,406,842,000).
Ð 194 Ð APPENDIX IV FINANCIAL INFORMATION OF THE GROUP
10. Contingent Liabilities (continued)
(ii) The Group has executed guarantees to certain banks for mortgage facilities granted to first buyers of certain properties developed by the Group in the PRC. The utilised amount of such facilities covered by the Group’s guarantees which also represented the financial exposure of the Group at the balance sheet date amounted to approximately HK$390,991,000 (31 December 2003: HK$210,041,000). The total amount of such facilities covered by the Group’s guarantees amounted to approximately HK$1,271,838,000 (31 December 2003: HK$1,416,925,000).
Apart from the above, there are no material changes in contingent liabilities of the Group since 31 December 2003.
11. Pledge of Assets
At 30 June 2004, the Group’s total bank loans of HK$6,342,794,000 (31 December 2003: HK$6,207,964,000) included an aggregate amount of HK$6,036,265,000 (31 December 2003: HK$6,033,808,000) which is unsecured and an aggregate amount of HK$306,529,000 (31 December 2003: HK$174,156,000) which is secured by the following:
(i) legal charges over certain properties with an aggregate net book value of HK$1,560,018,000 (31 December 2003: HK$1,459,514,000);
(ii) charges on all assets, including bank balances amounting to HK$47,058,000 (31 December 2003: HK$74,003,000), of certain subsidiaries; and
(iii) assignments of insurance proceeds of certain properties.
Ð 195 Ð APPENDIX V UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP
1. UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP
(A) Unaudited Pro Forma Statement of Assets and Liabilities of the Enlarged Group as at 30 June 2004
The following unaudited pro forma statement of assets and liabilities of the Enlarged Group at 30 June 2004 is based on the unaudited consolidated balance sheet of the Group as set out in the published interim report as of 30 June 2004, the audited balance sheet of Eas HK and the audited consolidated balance sheet of Eas PRC Group as at 30 June 2004 as set out in the Accountants’ Reports in Appendices II and III to this circular respectively. The unaudited balance sheet of Treasure Lake is not included in the preparation of the unaudited pro forma statement of assets and liabilities of the Enlarged Group as Treasure Lake did not have any assets and liabilities material to the Enlarged Group as at 30 June 2004. This unaudited pro forma statement of assets and liabilities has been prepared to illustrate the effect of the Acquisition on the assets and liabilities of the Group, as if the Acquisition had taken place on 30 June 2004. It has been prepared for illustrative purpose only and, because of its nature, may not give a true picture of the financial position of the Enlarged Group as at 30 June 2004, or at any future date.
Eas PRC Pro forma adjustments Unaudited Group Restructure Acquisition Pro Forma The Group (Note (i)) Eas HK adjustment (Note (ii)) adjustment (Note (iii)) Total HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 (Unaudited) (Audited) (Audited)
Fixed assets 21,377,953 295,894 – (14,983) (b) 68,319 (b) 21,727,183 Associates 4,386,154 55,299 160,843 – (160,843) (c) 4,441,453 Other non-current assets 1,430,922 8,993 – (2,722) (b) – 1,437,193 Goodwill/(negative goodwill) (13,073) 3,906 – (3,906) (b) 122,343 (b) 109,270 Deferred tax assets – 29,280 – (21,114) (b) – 8,166
Current assets Stock of completed properties held for sale 166,554 – – – – 166,554 Properties under development for sale 741,682 – – – – 741,682 Accounts receivable, prepayments and deposits 1,252,486 598,303 – (108,837) (b) – 1,741,952 Tax recoverable 43,142 – 44 – – 43,186 Tax reserve certificates 21,873 – – – – 21,873 Trading securities 3,023 – – – – 3,023 Pledged bank deposits 47,058 – – – – 47,058 Cash and bank balances 2,260,089 269,876 1 (4,838) (b) (358,491) (a) 2,166,637 4,535,907 868,179 45 (113,675) (358,491) 4,931,965
− 196 − APPENDIX V UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP
Eas PRC Pro forma adjustments Unaudited Group Restructure Acquisition Pro Forma The Group (Note (i)) Eas HK adjustment (Note (ii)) adjustment (Note (iii)) Total HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 (Unaudited) (Audited) (Audited)
Current liabilities Accounts payable, deposits received and accrued charges 1,493,665 450,838 44 (56,007) (b) – 1,888,540 Taxation 113,853 13,560 – (81) (b) – 127,332 Short-term bank loans and current portion of long- term liabilities 664,325 108,556 – – – 772,881 Dividend payable to Huatong – 1,122 – 46,274 (a) – 47,396 2,271,843 574,076 44 (9,814) – 2,836,149
Net current assets 2,264,064 294,103 1 (103,861) (358,491) 2,095,816
Long-term liabilities (5,678,469) (197,792) – – – (5,876,261) Deferred taxation (1,012,406) (1,002) – – (22,545) (b) (1,035,953) Minority interests and loans (2,335,971) (18,083) – 6,806 (b) (140,445) (2,487,693) Amount due to immediate holding company – – (142,732) – 142,732 (c) –
Net assets attributable to shareholders 20,419,174 470,598 18,112 (139,780) (348,930) 20,419,174
Notes:
(i) Extracted from the accountants’ report on the Eas PRC Group and translated to Hong Kong Dollars at an exchange rate of 1.06 as appropriate.
(ii) To record the Restructuring of the Eas PRC Group which will involve transferring various companies, assets and liabilities that are not directly connected or have no business synergy with the logistics businesses that Kerry Logistics aims to acquire out of the Eas PRC Group (before Restructuring) to Huatong, transferring from Huatong a motor vehicle with net book value of RMB146,000 as at 30 June 2004 relating to the logistics businesses that Kerry Logistics aims to acquire to the Eas PRC Group, and the declaration of a dividend by Eas PRC to Huatong.
The amounts shown in the adjustment reflect the above transfers based on the net book values of the assets and liabilities being transferred as at 30 June 2004.
(a) According to the Restructuring Agreement, the board of directors of Eas PRC, subsequent to 30 June 2004, has declared a dividend of approximately RMB158,499,000 and will declare a dividend of approximately RMB35,108,000 payable to Huatong. The distribution of the dividends in aggregate of approximately RMB193,607,000 (equivalent to approximately HK$182,648,000) will be settled partly by the net transfer out of assets from Eas PRC to Huatong under the Restructuring based on the book value of the net assets from the unaudited management accounts prepared under PRC GAAP as at 30 November 2004. As at 30 June 2004, the book value of the net assets to be transferred out, based on the unaudited management accounts prepared under PRC GAAP was HK$136,374,000. The remaining dividend payable of HK$46,274,000 would be paid in cash.
− 197 − APPENDIX V UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP
(b) The net carrying value of the assets and liabilities to be transferred, as shown in the pro forma adjustment, amounted to RMB99,116,000 (equivalent to approximately HK$93,506,000) as extracted from Section II note 1 to the accountants’ report of Eas PRC Group. This differs from the unaudited PRC GAAP book value of HK$136,374,000 by HK$42,868,000 which represents primarily provisions on doubtful debts and deferred tax assets recognised thereon as required under HK GAAP.
(iii) (a) To record the investment in effective 70% equity interest in Eas PRC, which will be settled in cash amounting to RMB380,000,000 (equivalent to about HK$358,491,000).
(b) The Acquisition will result in goodwill amounting to HK$122,343,000. This is calculated based on the consideration of HK$358,491,000, and share of fair value of assets and liabilities of the Eas PRC Group at 30 June 2004 acquired by the Group as adjusted for the Restructuring and the revaluation on the land and buildings of Eas PRC Group based on the independent professional valuation as at 30 June 2004. Goodwill arising from the Acquisition will be subject to annual impairment test under the new Hong Kong Financial Reporting Standard 3 which will take effect from 1 January 2005.
The final amount of goodwill, which may be different to the one presented above, to be recorded by the Group on completion will be determined by the final consideration amount and the Group’s interest in the fair value of the identifiable assets and liabilities of Eas PRC Group on the date of completion.
(c) As at 30 June 2004, Eas HK held 50% interest in Eas PRC. Its investment in 50% interest Eas PRC at cost of HK$160,843,000 and amount due to its immediate holding company of HK$142,732,000, which on completion of the Acquisition are both in respect of transactions entirely within the Target Group, and thus are eliminated in the pro forma financial information.
− 198 − APPENDIX V UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP
(B) Letter on Pro Forma Statement of Assets and Liabilities of the Enlarged Group
The following is the text of a letter from PricewaterhouseCoopers, the reporting accountants, prepared for the purpose of incorporation in this circular in respect of the unaudited pro forma statement of assets and liabilities of the Enlarged Group.
29 December 2004
The Directors Kerry Properties Limited
Dear Sirs
We report on the unaudited pro forma financial information of Kerry Properties Limited (the “Company”) and its subsidiaries (hereinafter collectively referred to as the “Group”) set out on pages 196 to 198 under the heading of “Unaudited pro forma statement of assets and liabilities of the Enlarged Group as at 30 June 2004” in Appendix V to the Company’s circular dated 29 December 2004 in connection with the proposed acquisition of Treasure Lake Shares and Eas PRC Shares. 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 acquisition of the entire issued share capital of Treasure Lake Limited and a 20% equity interest in Eas International Transportation Ltd. resulting in the formation of an enlarged group (the “Enlarged Group”) might have affected the relevant financial information of the Group as at 30 June 2004.
RESPONSIBILITIES
It is the responsibility of the directors of the Company to prepare the unaudited pro forma financial information in accordance with paragraph 4.29 of the Rules Governing the Listing of Securities on the Stock Exchange of Hong Kong Limited (“the Listing Rules”).
It is our responsibility to form an opinion, as required by paragraph 4.29 of the Listing Rules, on the unaudited pro forma financial information and to report our opinion to you. We do not accept any responsibility for any reports previously given by us on any financial information used in the compilation of the unaudited pro forma financial information beyond that owed to those to whom those reports were addressed by us at the dates of their issue.
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BASIS OF OPINION
We conducted our work with reference to the Statements of Investment Circular Reporting Standards and Bulletin 1998/8 “Reporting on pro forma financial information pursuant to the Listing Rules” issued by the Auditing Practices Board in the United Kingdom, where applicable. Our work, which involved no independent examination of any of the underlying financial information, consisted primarily of comparing the unadjusted financial information with the source documents, considering the evidence supporting the adjustments and discussing the unaudited pro forma financial information with the directors of the Company.
Our work does not constitute an audit or review in accordance with Statements of Auditing Standards issued by the Hong Kong Institute of Certified Public Accountants, and accordingly, we do not express any such assurance on the unaudited pro forma financial information.
The unaudited pro forma financial information has been prepared on the bases set out in Section 1(A) of Appendix V of the Circular for illustrative purpose only and, because of its nature, it may not be indicative of the financial position of the Group as at 30 June 2004, or at 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 4.29 of the Listing Rules.
Yours faithfully PricewaterhouseCoopers Certified Public Accountants Hong Kong
− 200 − APPENDIX V UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP
2. INDEBTEDNESS
Borrowings
At the close of business on 31 October 2004, being the latest practicable date for the purpose of this statement of indebtedness prior to the printing of this circular, the Enlarged Group had outstanding borrowings of approximately HK$6,029 million comprising bank loans of approximately HK$6,027 million and overdrafts of approximately HK$2 million. Bank loans amounting to approximately HK$4,213 million were unsecured. Bank loans amounting to approximately HK$1,399 million and bank overdrafts of approximately HK$2 million were proportionately guaranteed by companies within the Group and minority shareholders of certain subsidiaries of the Group whilst bank loans amounting to approximately HK$415 million to the Enlarged Group were secured by legal charges over certain properties and fixed deposits, floating charges on certain accounts receivable of Eas PRC, all assets of a subsidiary of the Company and an assignment of insurance proceeds. In addition, certain of the Company’s subsidiaries have proportionate unsecured advances from minority shareholders of approximately HK$1,785 million.
Contingent Liabilities
Banking Facilities
The Enlarged Group has provided guarantees for banking and other facilities granted to associates, investee companies and the set-up office of a project undertaken by the Group. The Enlarged Group’s financial exposure represented by the Enlarged Group’s portion of the utilised amount of such facilities at 31 October 2004 amounted to approximately HK$623 million. The total amount of such facilities covered by the Enlarged Group’s guarantees amounted to approximately HK$668 million.
The Enlarged Group has also provided guarantees to certain banks for mortgage facilities granted to first buyers of certain properties developed by the Enlarged Group in the PRC. The Enlarged Group’s financial exposure represented by the Enlarged Group’s portion of the utilised amount of such facilities as at 31 October 2004 amounted to approximately HK$401 million. The total amount of such facilities covered by the Enlarged Group’s guarantees amounted to approximately HK$1,245 million.
The Enlarged Group has provided guarantees for banking facilities granted to and being utilised by third party companies amounting to approximately HK$74 million as at 31 October 2004.
Guarantees and Undertakings
Save as disclosed in the annual report of the Group for the year ended 31 December 2003 and the accountants’ reports on Treasure Lake, Eas HK and the Eas PRC Group, the Enlarged Group did not have any material guarantees and undertakings as at 31 October 2004.
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Pending Litigations
Other than those disclosed in Note 21 of the Accountants’ Report on the Eas PRC Group as set out in Appendix III to this circular and under the heading “Litigation” in Appendix VII to this circular, the Directors are not aware of any significant pending litigations that the Enlarged Group was involved in as at 31 October 2004.
Save as aforesaid and apart from intra-group liabilities, the Enlarged Group did not have any debt securities, any other outstanding loan capital, any other borrowings or indebtedness in the nature of borrowing of the Group including bank overdrafts and liabilities under acceptances (other than normal trade bills) or other similar indebtedness, debentures, mortgages, charges, loans, acceptance credits, hire purchase commitments, guarantees or other material contingent liabilities at the close of business on 31 October 2004.
The Directors have confirmed that there has not been any material adverse change in the indebtedness or contingent liabilities of the Enlarged Group since 31 October 2004.
For the purpose of the above statement of indebtedness, foreign currency amounts have been translated into Hong Kong dollars at the rates of exchange prevailing at the close of business on 31 October 2004.
3. WORKING CAPITAL
The Directors are of the opinion that the Enlarged Group will have sufficient working capital for its present requirements.
4. MATERIAL CHANGE
The Directors are not aware as at the Latest Practicable Date of any material adverse change in the financial or trading position or prospect of the Enlarged Group since 31 December 2003, the date to which the latest published audited financial statements of the Group were made up.
5. MANAGEMENT DISCUSSION AND ANALYSIS
The Group put in a strong performance during the first six months of 2004. As stated in the Company’s 2004 interim report, the unaudited turnover of the Group for the six months ended 30 June 2004 was HK$2,632 million (compared to HK$1,814 million recorded for the six months ended 30 June 2003) which comprised largely of proceeds from the sale of properties, rental income, revenue from hotel operations, warehouse rental and logistics services. The increase in turnover during the period was mainly due to the launching of Enterprise Square 3 for sale, continuing sales of Arcadia Court in Shenzhen, the improved performance of Beijing Kerry Centre Hotel after SARS, growth in logistics revenue and the contribution from the newly acquired Siam Seaport Terminal & Warehouses Co., Ltd. in the Logistics Network Division.
As Hong Kong’s economy continues to recover and demand for quality housing in the PRC and the demand for logistics services continues to increase as the economy prospers, the Group is optimistic that it will be able to maintain its profitability during the second half of 2004.
− 202 − APPENDIX VI PROPERTY VALUATION REPORT
The following is the text of a letter, summary of values and valuation certificates, prepared for the purpose of incorporation in this circular, received from DTZ Debenham Tie Leung Limited, an independent valuer, in connection with its valuations as at 30 June 2004 and 31 October 2004 respectively of the property interests of the Target Group.
10th Floor Jardine House 1 Connaught Place Central Hong Kong
29 December 2004
The Board of Directors Kerry Properties Limited 13-14/F., Cityplaza 3 14 Taikoo Wan Road Taikoo Shing Hong Kong
Dear Sirs,
We refer to your instructions for us to value the interests in the properties held by Eas International Transportation Ltd. (referred to as “Eas PRC”) or its subsidiaries and associates (together referred to as the “Eas PRC Group”). We confirm that we have carried out inspection, made relevant enquiries and obtained such further information as we consider necessary for the purpose of providing you (“Kerry Properties Limited”) with our opinion of the values of such property interests as at 30 June 2004 and 31 October 2004 respectively (each a “Date of Valuation”).
Unless otherwise stated, our valuation of each of the property interests represents its open market value which we would define as intended to mean “an opinion of the best price at which the sale of an interest in property would have been completed unconditionally for cash consideration on the Date of Valuation, assuming:
(a) a willing seller;
(b) that, prior to the Date of Valuation, there had been a reasonable period (having regard to the nature of the property and the state of the market) for the proper marketing of the interest, for the agreement of the price and terms and for the completion of the sale;
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(c) that the state of the market, level of values and other circumstances were, on any earlier assumed date of exchange of contracts, the same as on the Date of Valuation;
(d) that no account is taken of any additional bid by a prospective purchaser with a special interest; and
(e) that both parties to the transaction had acted knowledgeably, prudently and without compulsion”.
Unless otherwise stated, our valuations have been made on the assumption that the Eas PRC Group sells the property interests on the open market without the benefit of deferred term contracts, leasebacks, joint ventures, management agreements or any similar arrangements which could serve to affect the values of the property interests. In addition, no forced sale situation in any manner is assumed in our valuations.
In valuing the property interests in Hong Kong which are held under Government Leases expiring before 30 June 1997, we have taken account of the provisions contained in Annex III of the Joint Declaration of the Government of the United Kingdom and the Government of People’s Republic of China on the Question of Hong Kong and the New Territories Leases (Extension) Ordinance 1988 that such leases have been extended without premium until 30 June 2047 and that a rent of three per cent of the rateable value for the time being of each of such properties is charged per annum from the date of extension.
We have relied on the information given by the Eas PRC Group and the advice provided by Kerry Properties Limited’s legal advisers on the laws of the People’s Republic of China (the “PRC”), Fangda Partners, PRC Lawyers, regarding the title to each of the property interests in the PRC and the interests of the Eas PRC Group in the properties in the PRC. The status of titles and grant of major approvals and licences, in accordance with the information provided by the Eas PRC Group are set out in the notes in the valuation certificate.
In valuing the property interests in Group I, we have adopted, wherever appropriate (i) the direct comparison approach by making reference to comparable sales evidence as available in the relevant market; (ii) by investment approach of valuation by considering the capitalized rental derived from the existing tenancies with due provision for the reversionary income potential of the property interests; (iii) the Depreciated Replacement Costs (“DRC”) approach. A DRC approach requires an estimate of the open market value of the land in its existing use and an estimate of the new replacement cost of the buildings and structures, from which deductions are made to allow for the age, condition and functional obsolescence. The value is subject to adequate potential profitability of the undertaking.
We have assigned no commercial value to the property interests without complete title document in Group II as per the guidance of the Stock Exchange of Hong Kong Limited.
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We have also assigned no commercial value to the property interests sold to the staff of the Eas PRC Group in Group III because the title will be transferred to the respective staff. The purchase considerations are to be paid by the staff to the Eas PRC Group within 5 years.
The property interests in Group IV, V and VI, which are leased to the Eas PRC Group in the PRC, Hong Kong and overseas countries respectively, have no commercial value due to prohibition against assignment or lack of substantial profit rent.
In respect of the property interests owned by the Eas PRC Group in the PRC, we have been provided with extracts of documents in relation to the titles to the property interests. However, we have not inspected the original documents to ascertain any amendments which may not appear on the copies handed to us.
In the course of our valuation, we have relied to a very considerable extent on the information given by the Eas PRC Group and the advice provided by the legal adviser on PRC law and have accepted advice given to us on such matters as planning approvals or statutory notices, easements, tenure, completion date of buildings, identification of buildings, development schemes, site and floor plans, site and floor areas, number of parking spaces, particulars of occupancy, lettings, rental incomes and revenue, terms of joint venture agreements or development agreements, total construction costs and professional fees, construction costs and professional fees expended, estimated outstanding construction costs and professional fees, interest attributable to the Eas PRC Group and all other relevant matters.
Dimensions, measurements and areas included in the valuation certificates are based on information provided to us and are therefore only approximations. We have no reason to doubt the truth and accuracy of the information provided to us by the Eas PRC Group which is material to the valuations. We were also advised by the Eas PRC Group that no material facts have been omitted from the information provided.
We have inspected the exterior and, wherever possible, the interior of all the property interests owned by the Eas PRC Group. However, we have not carried out investigations on site to determine the suitability of the soil conditions and the services etc. for any development. Our valuations are prepared on the assumption that these aspects are satisfactory and that no extraordinary expenses or delays will be incurred during the construction period. Moreover, no structural survey has been made, but in the course of our inspection, we did not note any serious defects. We are not, however, able to report whether the properties are free of rot, infestation or any other structural defects. No tests were carried out to any of the services. Unless otherwise stated, we have not been able to carry out detailed on-site measurements to verify the site and floor areas of the properties and we have assumed that the areas shown on the documents handed to us are correct.
No allowance has been made in our valuations of the property interests for any charges, mortgages or amounts owing on the property interests nor for any expenses or taxation which may be incurred in effecting a sale. Unless otherwise stated, it is assumed that the properties are free from encumbrances, restrictions and outgoings of any onerous nature which could affect their values.
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Unless otherwise stated, all sums stated in our valuation certificates are in Renminbi (RMB) which is the lawful currency of the PRC.
Our valuations are summarized below and the valuation certificates are attached.
Yours faithfully, for and on behalf of DTZ Debenham Tie Leung Limited Chiu Kam Kuen Registered Professional Surveyor China Real Estate Appraiser F.H.K.I.S., F.R.I.C.S., F.H.K.F.A. Executive Director
Note: Mr. Chiu Kam Kuen is a Registered Professional Surveyor who has about 19 years’ experience in valuation of properties in Hong Kong and about 12 years’ experience in valuation of properties in the PRC.
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SUMMARY OF VALUATIONS
Each property is assigned a property number in this circular for identification purpose. The properties setting out below are thus not listed in numerical order due to different grouping of property interests.
GroupI–Property interests held for Owner-occupation by the Eas PRC Group with complete title document in the PRC
Capital value in existing state attributable to Capital value in Interest the Eas PRC Capital value in existing state as attributable Group as at existing state as at 31 October to the Eas 31 October Property at 30 June 2004 2004 PRC Group 2004 RMB RMB % RMB
4. No. 21 Xiao Yun Road, 125,092,000 125,092,000 100 125,092,000 Chaoyang District, Beijing
9. House No. 200, 2,116,000 2,116,000 100 2,116,000 No. 8 Xiangyang South Road, Shunyi District, Beijing
11.4. Carpark No. 11 110,000 110,000 100 110,000 on Basement, No. 9 Chaoyang Park West Road, Chaoyang District, Beijing
58. Unit 13F, Level 13, 472,000 472,000 100 472,000 No. 22 Gonghe Road, Kaiyuan District, Xiamen, Fujian Province
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Capital value in existing state attributable to Capital value in Interest the Eas PRC Capital value in existing state as attributable Group as at existing state as at 31 October to the Eas 31 October Property at 30 June 2004 2004 PRC Group 2004 RMB RMB % RMB
68. Block 1, 417,000 417,000 100 417,000 Nos. 55 & 56 (Left Front Portion) Yanghe 1st Village, Jiangbei District, Chongqing
70a. 4 Blocks of Buildings 30,711,000 30,711,000 100 30,711,000 situated at No. 48 Hebei Road, Tanggu District, Tianjin
83. Unit 1A, 7,820,000 7,820,000 100 7,820,000 Tairan Block 213, Che Gong Miao Industrial Zone, Futian District, Shenzhen, Guangdong Province
86. Units 101, 201, 301, 996,000 996,000 100 996,000 501 and 601, Block 17, Beili Garden, Shuibei 2nd Road, Luohu District, Shenzhen, Guangdong Province
93. No. 18 Tianzhu Road, 45,000,000 45,000,000 100 45,000,000 Area A, Beijing Tianzhu Airport Industrial Zone, Shunyi District, Beijing
Sub-total: 212,734,000 212,734,000 212,734,000
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Each property is assigned a property number in this circular for identification purpose. The properties setting out below are thus not listed in numerical order due to different grouping of property interests.
Group II – Property interests held for Owner-occupation by the Eas PRC Group without complete title document in the PRC
Capital value in existing state attributable to Capital value in Interest the Eas PRC Capital value in existing state as attributable Group as at existing state as at 31 October to the Eas 31 October Property at 30 June 2004 2004 PRC Group 2004 RMB RMB % RMB
1. Unit E, No. 10, Note 1 Note 1 100 Note 1 Level 10, Block J, No. 8 Beichen East Road, Chaoyang District, Beijing
7. Type D on Level 7, Note 1 Note 1 100 Note 1 Type D on Level 12 and Carpark No. D26, Maple Court, Citichamp Palace, Northwest of Madian Bridge, Haidian District, Beijing
10. House No. 3, Note 1 Note 1 100 Note 1 Woodlands Villa, Outer North Gate, Shunyi District, Beijing
11. House No. 93, Note 1 Note 1 100 Note 1 Woodlands Villa, Outer North Gate, Shunyi District, Beijing
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Capital value in existing state attributable to Capital value in Interest the Eas PRC Capital value in existing state as attributable Group as at existing state as at 31 October to the Eas 31 October Property at 30 June 2004 2004 PRC Group 2004 RMB RMB % RMB
11.1. Unit 1545, Level 4, Note 1 Note 1 100 Note 1 5th Gate, Construction Section West 1, Phase 1, Green Lake Garden, Mianzidian Road, North of Nongzhan South Road, Chaoyang District, Beijing
11.2. Unit 1345, Phase 1, Note 1 Note 1 100 Note 1 Green Lake Garden, Lower Group, West Zone of Chaoyang Company Chaoyang District, Beijing
11.3. Unit 1563, Level 6, Note 1 Note 1 100 Note 1 5th Gate, Construction Section West 1, Phase 1, Green Lake Garden, Mianzidian Road, North of Nongzhan South Road, Chaoyang District, Beijing
12. No. 54 Wuwu Road, Note 1 Note 1 100 Note 1 Zhongshan District, Dalian, Liaoning Province
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Capital value in existing state attributable to Capital value in Interest the Eas PRC Capital value in existing state as attributable Group as at existing state as at 31 October to the Eas 31 October Property at 30 June 2004 2004 PRC Group 2004 RMB RMB % RMB
12a. Level 1, Note 1 Note 1 100 Note 1 No. 80 Xinghe Street, Zhongshan District, Dalian, Liaoning Province
14. Unit 11-6-10, Levels 1 to 3, Note 1 Note 1 100 Note 1 No. 29 Fushun Street, Taikai, Dalian, Liaoning Province
17. Unit 503, 4th Gate, Note 1 Note 1 100 Note 1 Block 2, Linsheng Lane, Jintang Highway, Hedong District, Tianjin
18. Unit 504, 4th Gate, Note 1 Note 1 100 Note 1 Block 2, Linsheng Lane, Jintang Highway, Hedong District, Tianjin
18a. Unit 203, 4th Gate, Note 1 Note 1 100 Note 1 Block 2, Linsheng Lane, Jintang Highway, Hedong District, Tianjin
−211− APPENDIX VI PROPERTY VALUATION REPORT
Capital value in existing state attributable to Capital value in Interest the Eas PRC Capital value in existing state as attributable Group as at existing state as at 31 October to the Eas 31 October Property at 30 June 2004 2004 PRC Group 2004 RMB RMB % RMB
20. Unit 602, 3rd Gate, Note 1 Note 1 100 Note 1 Block 5, Xiaode Lane, Weiguo Road, Hedong District, Tianjin
29. Room 101, Unit 1, Note 1 Note 1 100 Note 1 Block 9, Tianzhu Sub-District, Shunyi District, Beijing
29a. Blocks 1 to 24, Note 2 Note 2 100 Note 2 Jinmi East Road (formerly known as Tianzhu Village), Shunyi District, Beijing
57. Unit 603, Note 1 Note 1 100 Note 1 No. 4 Rongfangli, Lianhua New Village, Siming District, Xiamen, Fujian Province
59. Room 409, Note 1 Note 1 100 Note 1 Level 4, Block 1, Xinqiao Building, Heping North Road, Haikou, Hainan Province
60. Unit C, Level 22, Note 1 Note 1 100 Note 1 Dihao Plaza, No. 2 Longkun North Road, Haikou, Hainan Province
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Capital value in existing state attributable to Capital value in Interest the Eas PRC Capital value in existing state as attributable Group as at existing state as at 31 October to the Eas 31 October Property at 30 June 2004 2004 PRC Group 2004 RMB RMB % RMB
61. Level 18, Block B, Note 2 Note 2 100 Note 2 Wuhan International Building (formerly known as Asia Plaza), Dandong Road, Jianghan District, Wuhan, Hubei Province
62. Block 1, Note 1 Note 1 100 Note 1 No. 64 Biaoshan Road, Taidong District, Qingdao, Shandong Province
63. South No. 1, Note 1 Note 1 100 Note 1 Ancillary Commercial Unit, Exhibition Hall, New Era Sub-District, Development District, Qingdao, Shandong Province
64. Portion of Levels 1 and 2, Note 1 Note 1 100 Note 1 No. 8 Shandong Road, Shinan District, Qingdao, Shandong Province
65. Room 502, Unit 3, Note 1 Note 1 100 Note 1 Block 4, No. 7 Taiwan Road, Shinan District, Qingdao, Shandong Province
− 213 − APPENDIX VI PROPERTY VALUATION REPORT
Capital value in existing state attributable to Capital value in Interest the Eas PRC Capital value in existing state as attributable Group as at existing state as at 31 October to the Eas 31 October Property at 30 June 2004 2004 PRC Group 2004 RMB RMB % RMB
66. Units1&3,Level1, Note 1 Note 1 100 Note 1 Nanyi Building, No. 2 Lingshiquan Road, Section 4 of Renmen South Road, Wuhou District, Chengdu, Sichuan Province
67. Units 1-1, 1-2 & 1-4, Note 1 Note 1 100 Note 1 No. 58 Yanghe 1st Village, Jiangbei District, Chongqing
69. Block No. 8, Note 1 Note 1 100 Note 1 Commercial Street, Xinying South District, Kunmin, Yunnan Province
74. Unit 9-2-202, Note 1 Note 1 100 Note 1 Changchun Lane, Tanggu District, Tianjin
84. Unit 505, Block B, Note 2 Note 2 100 Note 2 Xinzhou Garden Building, Xinzhou Road, Futian District, Shenzhen, Guangdong Province
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Capital value in existing state attributable to Capital value in Interest the Eas PRC Capital value in existing state as attributable Group as at existing state as at 31 October to the Eas 31 October Property at 30 June 2004 2004 PRC Group 2004 RMB RMB % RMB
85. Unit 506, Block B, Note 2 Note 2 100 Note 2 Xinzhou Garden Building, Xinzhou Road, Futian District, Shenzhen, Guangdong Province
88. Units 2-1, 4-1, 5-1 Note 1 Note 1 100 Note 1 and 6-1, No. 15-4, Block No. 4, Xinghuo Street, Xigang District, Dalian, Liaoning Province
89. Units 1-3, 3-3, 4-3, 5-3 Note 1 Note 1 100 Note 1 & 7-3 of No. 17-4 and Unit 4-3 of No. 17-3, Block No. 3, Xinghuo Street, Xigang District, Dalian, Liaoning Province
90. Rooms1&2of Note 2 Note 2 100 Note 2 Levels 1 to 6, Unit 2, Block 24, No. 8 Minyun Alley, Zhongshan District, Dalian, Liaoning Province
Sub-total: Notes1&2 Notes1&2 Notes1&2
Notes:
(1) As the property has not obtained complete title document, we have not assigned any value to the property.
(2) As the property cannot be freely transferred, we have not assigned any value to the property.
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Group III – Residential units sold to the staff of the Eas PRC Group but title not yet changed in the PRC
Capital value in existing state attributable to Capital value in Interest the Eas PRC Capital value in existing state as attributable Group as at existing state as at 31 October to the Eas 31 October Property at 30 June 2004 2004 PRC Group 2004 RMB RMB % RMB
26 residential properties sold As the properties As the properties N/A As the properties to the staff of the Eas PRC have been sold, have been sold, have been sold, Group in Beijing, Tianjin, we have not we have not we have not Shanghai and Shenzhen assigned value to assigned value to assigned any the properties. the properties. value to the properties.
Sub-total: No commercial No commercial No commercial value value value
Group IV – Property leased by the Eas PRC Group in the PRC
Capital value in existing state attributable to Capital value in Interest the Eas PRC Capital value in existing state as attributable Group as at existing state as at 31 October to the Eas 31 October Property at 30 June 2004 2004 PRC Group 2004 RMB RMB % RMB
Various properties leased by No commercial No commercial N/A No commercial the Eas PRC Group in 28 value value value Provinces/Municipalities/ Autonomous Regions in the PRC
Sub-total: No commercial No commercial No commercial value value value
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Group V – Property leased by the Eas PRC Group in Hong Kong
Capital value in existing state attributable to Capital value in Interest the Eas PRC Capital value in existing state as attributable Group as at existing state as at 31 October to the Eas 31 October Property at 30 June 2004 2004 PRC Group 2004 RMB RMB % RMB
1. The whole of 22nd Floor, No commercial No commercial N/A No commercial Shanghai Industrial value value value Investment Building, Nos. 48-62 Hennessy Road, Hong Kong
2. Unit 11, 5th Floor, No commercial No commercial N/A No commercial Commercial Building of value value value Airport Freight Forwarding Centre, Chek Lap Kok Airport, Chek Lap Kok, Lantau Island, New Territories, Hong Kong
3. Unit Nos. 1809-1817, No commercial No commercial N/A No commercial Level 18, Tower 1, value value value Metroplaza, Kwai Chung, New Territories, Hong Kong
4. D.D. 99 Lot 769, No commercial No commercial N/A No commercial Mai Po, San Tin, value value value New Territories, Hong Kong
5. Loading & Unloading No commercial No commercial N/A No commercial Platform and First Floor, value value value Block D, Nos. 52-62 Tsing Yi Road, Tsing Yi Island, New Territories, Hong Kong
Sub-total: No commercial No commercial No commercial value value value
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Group VI − Property leased by the Eas PRC Group in overseas countries
Capital value in existing state attributable to Capital value in Interest the Eas PRC Capital value in existing state as attributable Group as at existing state as at 31 October to the Eas 31 October Property at 30 June 2004 2004 PRC Group 2004 RMB RMB % RMB
1. A business/office No commercial No commercial N/A No commercial premise at Lot B6B-2, value value value Malaysia Airlines Advanced Cargo Centre, KLIA, Free Commercial Zone, Kuala Lumpur International Airport, 43900 Sepang, Selangor, Malaysia
2. The business premise at No commercial No commercial N/A No commercial Lot No. B-4, No. 99, value value value Jalan Batu Maung, Dis3plex Free Commercial Zone, Air Freight Forwarders Warehousing Cargo Complex, 11960 Penang, Malaysia
3. 4th Floor, No commercial No commercial N/A No commercial Centro Carga Aerea value value value Madrid-Barajas Edificio Servicios Generales Oficina 416 Aeropuerto De Barajas 28042 Madrid Spain
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Capital value in existing state attributable to Capital value in Interest the Eas PRC Capital value in existing state as attributable Group as at existing state as at 31 October to the Eas 31 October Property at 30 June 2004 2004 PRC Group 2004 RMB RMB % RMB
4. No. 9 Airline Road, No commercial No commercial N/A No commercial Unit #05-02 Cargo value value value Agents Building D, Singapore Changi Airport, 819827 Singapore
5. No. 9 Airline Road, No commercial No commercial N/A No commercial Unit #01-27 Cargo value value value Agents Building D, Singapore Changi Airport, 819827 Singapore
6. Centre De Carrega No commercial No commercial N/A No commercial Aeria value value value Barcelona Edifici De Serveis Generals – Of. B306 Aeroport De Barcelona – El Prat 08820 El Pray De Llobregat Barcelona Spain
Sub-total No commercial No commercial No commercial value value value
Grand Total: 212,734,000 212,734,000 Grand Total: 212,734,000
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VALUATION CERTIFICATE
GroupI–Property interests held for Owner-occupation by the Eas PRC Group with completed title document in the PRC
Capital value in existing state as at Particulars of 30 June 2004 and Property Description and tenure occupancy 31 October 2004
4. No. 21 Xiao Yun The property comprises one The property is RMB125,092,000 Road, 9-storey and one 4-storey office currently occupied Chaoyang District, building erected upon a plot of by the Eas PRC Beijing site having a site area of Group as office use. approximately 4,163.6 sq.m. (44,817 sq.ft.).
The property has a total gross floor area of approximately 13,899.1 sq.m. (149,610 sq.ft.) completed in 1994 and 1995 respectively.
The land use rights of the property have been granted for a term expiring on 17 July 2044 for office use.
Notes:
(1) According to Certificate for the Use of State-owned Land No. (2000) 10157 dated 9 April 2001, the land use rights of the property comprising a site area of 4,163.6 sq.m. have been granted to Eas International Transportation Ltd. ( ) for a term expiring on 17 July 2044 for office use.
(2) According to Building Ownership Certificate No. 10113 dated 9 April 2001, the building ownership rights of the property comprising a 9-storey and a 4-storey office buildings having a total gross floor area of 13,899.1 sq.m. are held by Eas International Transportation Ltd. ( ). The details are summarized as follows:
Block no. Usage Gross floor area (sq.m.) (sq.ft.)
1 Office 11,918.80 128,294.00 2 Office 1,980.30 21,316.00
Grand total: 13,899.10 149,610.00
(3) According to Business Licence No. 000046 ( ) dated 13 September 2004, Eas International Transportation Ltd. ( ) was registered on 27 February 1985 with current registered capital of RMB150,000,000 (actual paid amount: RMB150,000,000) and the valid operation period is currently from 27 February 1985 to 26 February 2015.
(4) The opinion of Kerry Properties Limited’s legal adviser, Fangda Partners, on PRC law, states that:
(i) Eas International Transportation Ltd. ( ) has obtained Business Licence No. 000046 ( ) dated 13 September 2004 and was registered on 27 February 1985 as a Sino-Foreign Joint Venture with current registered capital of RMB150,000,000 (actual paid amount: RMB150,000,000) and the valid operation period is currently from 27 February 1985 to 26 February 2015.
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(ii) The property is located at No. 21 Xiao Yun Road, Chaoyang District, Beijing, which comprises a site area of 4,163.6 sq.m. and a total gross floor area of 13,899.1 sq.m..
(iii) Eas International Transportation Ltd. ( ) has obtained Certificate for the Use of State-owned Land No. (2000) 10157 and Building Ownership Certificate No. 10113 and is the sole legal owner to the land use rights and building ownership rights of the property. The land use rights of the property have been granted to Eas International Transportation Ltd. ( ) for a term expiring on 17 July 2044 for office use.
(iv) Eas International Transportation Ltd. ( ) has duly settled all the land premium.
(v) Eas International Transportation Ltd. ( ) is entitled to freely transfer, lease and mortgage the property during the term of the land use rights of the property at no extra land premium payable to the government.
(vi) The property is subject to mortgage in favour of Bank of China Banking Department for a term from 18 August 2003 to 18 August 2008 for a loan of RMB150,000,000. Prior written consent shall be obtained from the mortgagee bank before Eas International Transportation Ltd. ( ) transfers or uses the property as contribution in kind or disposes of the property by any other means.
(5) Based on the PRC legal opinion and the information provided by the Eas PRC Group, we have prepared our valuation on the following assumptions:
(i) Eas International Transportation Ltd. ( ) is in possession of a proper legal title to the property and is entitled to transfer the property with the residual term of its land use right at no extra land premium or other onerous payment payable to the government;
(ii) All land premium and other costs of ancillary utilities services have been settled in full;
(iii) The design and construction of the development are in compliance with the local planning regulations and have been approved by the relevant authorities; and
(iv) The property may be freely disposed of to any parties.
(6) In accordance with the opinion of the PRC legal opinion and the information provided by the Eas PRC Group, the status of title and grant of major approvals and licenses are as follows:
Certificate for the Use of State-owned Land Yes Building Ownership Certificate Yes Business Licence Yes
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Capital value in existing state as at Particulars of 30 June 2004 and Property Description and tenure occupancy 31 October 2004
9. House No. 200, The property comprises a The property is RMB2,116,000 No. 8 Xiangyang 2-storey house with basement. currently occupied South Road, by the Eas PRC Shunyi District, The property has a gross floor Group as villa use. Beijing area of approximately 352.59 sq.m. (3,795 sq.ft.) completed in 1996.
The land use rights of the property have been granted for a term expiring on 16 June 2063 for villa use.
Notes:
(1) According to Certificate for the Use of State-owned Land No. (2000) 0200173, the land use rights of the property comprising a site area of 511.33 sq.m. have been granted to Eas International Transportation Ltd. ( ) for a term expiring on 16 June 2063 for villa use.
(2) According to Building Ownership Certificate No. 0200173 dated 8 July 2000, the building ownership rights of the property comprising a 2-storey house with basement having a total gross floor area of 352.59 sq.m. are held by Eas International Transportation Ltd. ( ).
(3) According to Business Licence No. 000046 ( ) dated 13 September 2004, Eas International Transportation Ltd. ( ) was registered on 27 February 1985 with current registered capital of RMB150,000,000 (actual paid amount: RMB150,000,000) and the valid operation period is currently from 27 February 1985 to 26 February 2015.
(4) The opinion of Kerry Properties Limited’s legal adviser, Fangda Partners, on PRC law, states that:
(i) Eas International Transportation Ltd. ( ) has obtained Business Licence No. 000046 ( ) dated 13 September 2004 and was registered on 27 February 1985 as a Sino-Foreign Joint Venture with current registered capital of RMB150,000,000 (actual paid amount: RMB150,000,000) and the valid operation period is currently from 27 February 1985 to 26 February 2015.
(ii) The property is located at House No. 200, No. 8 Xiangyang South Road, Shunyi District, Beijing, which comprises a gross floor area of 352.59 sq.m..
(iii) Eas International Transportation Ltd. ( ) has obtained Certificate for the Use of State-owned Land No. (2000) 0200173 and Building Ownership Certificate No. 0200173 and is the sole legal owner to the land use rights and building ownership rights of the property. The land use rights of the property have been granted to Eas International Transportation Ltd. ( ) for a term expiring on 16 June 2063 for villa use.
(iv) Eas International Transportation Ltd. ( ) has duly settled all the land premium.
(v) Eas International Transportation Ltd. ( ) is entitled to freely transfer, lease and mortgage the property during the term of the land use rights of the property at no extra land premium payable to the government.
(5) Based on the PRC legal opinion and the information provided by the Eas PRC Group, we have prepared our valuation on the following assumptions:
(i) Eas International Transportation Ltd. ( ) is in possession of a proper legal title to the property and is entitled to transfer the property with the residual term of its land use right at no extra land premium or other onerous payment payable to the government;
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(ii) All land premium and other costs of ancillary utilities services have been settled in full;
(iii) The design and construction of the development are in compliance with the local planning regulations and have been approved by the relevant authorities; and
(iv) The property may be freely disposed of to any parties.
(6) In accordance with the opinion of the PRC legal opinion and the information provided by the Eas PRC Group, the status of title and grant of major approvals and licenses are as follows:
Certificate for the Use of State-owned Land Yes Building Ownership Certificate Yes Business Licence Yes
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Capital value in existing state as at Particulars of 30 June 2004 and Property Description and tenure occupancy 31 October 2004
11.4. Carpark No. 11 The property comprises a carpark The property is RMB110,000 on Basement, on the basement of a 9-storey currently occupied No. 9 Chaoyang residential building. by the Eas PRC Park West Road, Group as car park Chaoyang District, The property has a gross floor use. Beijing area of approximately 23.61 sq.m. (254 sq.ft.) completed in 1998.
The land use rights of the property have been granted for a term expiring on 14 April 2064 for car park use.
Notes:
(1) According to Certificate for the Use of State-owned Land No. (2001) 1990016 dated 23 September 2004, the land use rights of the property have been granted to Eas International Transportation Ltd. ( ) for a term expiring on 14 April 2064 for car park use.
(2) According to Building Ownership Certificate No. 1990016 dated 24 October 2001, the building ownership rights of the property having a gross floor area of 23.61 sq.m. are held by Eas International Transportation Ltd. ( ).
(3) According to Business Licence No. 000046 ( ) dated 13 September 2004, Eas International Transportation Ltd. ( ) was registered on 27 February 1985 with current registered capital of RMB150,000,000 (actual paid amount: RMB150,000,000) and the valid operation period is currently from 27 February 1985 to 26 February 2015.
(4) The opinion of Kerry Properties Limited’s legal adviser, Fangda Partners, on PRC law, states that:
(i) Eas International Transportation Ltd. ( ) has obtained Business Licence No. 000046 ( ) dated 13 September 2004 and was registered on 27 February 1985 as a Sino-Foreign Joint Venture with current registered capital of RMB150,000,000 (actual paid amount: RMB150,000,000) and the valid operation period is currently from 27 February 1985 to 26 February 2015.
(ii) The property is located at Carpark No. 11 on Basement, No. 9 Chaoyang Park West Road, Chaoyang District, Beijing, which comprises a gross floor area of 23.61 sq.m..
(iii) Eas International Transportation Ltd. ( ) has obtained Certificate for the Use of State-owned Land No. (2001) 1990016 and Building Ownership Certificate No. 1990016 and is the sole legal owner to the land use rights and building ownership rights of the property. The land use rights of the property have been granted to Eas International Transportation Ltd. ( ) for a term expiring on 14 April 2064 for car park use.
(iv) Eas International Transportation Ltd. ( ) has duly settled all the land premium.
(v) Eas International Transportation Ltd. ( ) is entitled to freely transfer, lease and mortgage the property during the term of the land use rights of the property at no extra land premium payable to the government.
(5) Based on the PRC legal opinion and the information provided by the Eas PRC Group, we have prepared our valuation on the following assumptions:
(i) Eas International Transportation Ltd. ( ) is in possession of a proper legal title to the property and is entitled to transfer the property with the residual term of its land use right at no extra land premium or other onerous payment payable to the government;
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(ii) All land premium and other costs of ancillary utilities services have been settled in full;
(iii) The design and construction of the development are in compliance with the local planning regulations and have been approved by the relevant authorities; and
(iv) The property may be freely disposed of to any parties.
(6) In accordance with the opinion of the PRC legal opinion and the information provided by the Eas PRC Group, the status of title and grant of major approvals and licenses are as follows:
Certificate for the Use of State-owned Land Yes Building Ownership Certificate Yes Business Licence Yes
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Capital value in existing state as at Particulars of 30 June 2004 and Property Description and tenure occupancy 31 October 2004
58. Unit 13F, The property comprises a The property is RMB472,000 Level 13, residential unit on Level 13 of a currently occupied by No. 22 Gonghe 22-storey residential building. the Eas PRC Group as Road, residential use. Kaiyuan District, The property has a gross floor Xiamen, area of approximately 109.7 Fujian Province sq.m. (1,180 sq.ft.) completed in 1998.
The land use rights of the property have been granted for a term expiring on 21 April 2063 for residential use.
Notes:
(1) According to Real Estate Title Certificate No. 00145992 dated 29 March 2001, the land use rights and building ownership rights of a residential unit comprising a gross floor area of 109.7 sq.m. are held by Eas International Transportation Ltd. ( ) for a term expiring on 21 April 2063 for residential use.
(2) According to Business Licence No. 000046 ( ) dated 13 September 2004, Eas International Transportation Ltd. ( ) was registered on 27 February 1985 with current registered capital of RMB150,000,000 (actual paid amount: RMB150,000,000) and the valid operation period is currently from 27 February 1985 to 26 February 2015.
(3) The opinion of Kerry Properties Limited’s legal adviser, Fangda Partners, on PRC law, states that:
(i) Eas International Transportation Ltd. ( ) has obtained Business Licence No. 000046 ( ) dated 13 September 2004 and was registered on 27 February 1985 as a Sino-Foreign Joint Venture with current registered capital of RMB150,000,000 (actual paid amount: RMB150,000,000) and the valid operation period is currently from 27 February 1985 to 26 February 2015.
(ii) The property is located at Unit 13F, Level 13, No. 22 Gonghe Road, Kaiyuan District, Xiamen, which comprises a gross floor area of 109.7 sq.m..
(iii) Eas International Transportation Ltd. ( ) has obtained Real Estate Title Certificate No. 00145992 and is the sole legal owner to the land use rights and building ownership rights of the property. The land use rights of the property have been granted to Eas International Transportation Ltd. ( ) for a term expiring on 21 April 2063 for residential use.
(iv) Eas International Transportation Ltd. ( ) has duly settled all the land premium.
(v) Eas International Transportation Ltd. ( ) is entitled to freely transfer, lease and mortgage the property during the term of the land use rights of the property at no extra land premium payable to the government.
(4) Based on the PRC legal opinion and the information provided by the Eas PRC Group, we have prepared our valuation on the following assumptions:
(i) Eas International Transportation Ltd. ( ) is in possession of a proper legal title to the property and is entitled to transfer the property with the residual term of its land use right at no extra land premium or other onerous payment payable to the government;
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(ii) All land premium and other costs of ancillary utilities services have been settled in full;
(iii) The design and construction of the development are in compliance with the local planning regulations and have been approved by the relevant authorities; and
(iv) The property may be freely disposed of to any parties.
(5) In accordance with the opinion of the PRC legal opinion and the information provided by the Eas PRC Group, the status of title and grant of major approvals and licenses are as follows:
Real Estate Title Certificate Yes Business Licence Yes
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Capital value in existing state as at Particulars of 30 June 2004 and Property Description and tenure occupancy 31 October 2004
68. Block 1, The property comprises a The property is RMB417,000 Nos. 55 & 56 2-storey office building erected currently occupied (Left Front upon a plot of rectangle-shaped by the Eas PRC Portion) Yanghe site having a site area of Group. 1st Village, approximately 96.72 sq.m. (1,041 Jiangbei District, sq.ft.). Chongqing The property has a total gross floor area of approximately 185 sq.m. (1,991 sq.ft.) completed in 1990s.
The land use rights of the property have been granted for a term of 50 years for residential use.
Notes:
(1) According to Certificate for the Use of State-owned Land No. (1996) 173 dated 17 September 1996, the land use rights of the property comprising a site area of 96.72 sq.m. have been granted to Eas International Transportation Ltd. Chongqing Branch ( ) for a term of 50 years for residential use.
(2) According to Building Ownership Certificate No. 12193 dated 22 April 1995, the building ownership rights of the property comprising a 2-storey building having a total gross floor area of 185 sq.m. is held by Eas International Transportation Ltd. Chongqing Branch ( ).
(3) According to Business Licence No. 01143 ( ) dated 21 May 2003, Eas International Transportation Ltd. Chongqing Branch ( ) was registered on 27 February 1985 and the valid operation period is currently from 27 February 1985 to 22 January 2005.
(4) The opinion of Kerry Properties Limited’s legal adviser, Fangda Partners, on PRC law, states that:
(i) Eas International Transportation Ltd. Chongqing Branch ( ) has obtained Business Licence No. 01143 ( ) dated 21 May 2003 and was registered on 27 February 1985 and the valid operation period is currently from 27 February 1985 to 22 January 2005. Eas International Transportation Ltd. Chongqing Branch ( ) is a branch office of Eas International Transportation Ltd. ( ).
(ii) The property is located at Block 1, Nos. 55 & 56 (Left Front Portion) Yanghe 1st Village, Jiangbei District, Chongqing, which comprises a site area of 96.72 sq.m. and a total gross floor area of 185 sq.m..
(iii) Eas International Transportation Ltd. Chongqing Branch ( ) has obtained Certificate for the Use of State-owned Land No. (1996)173 and Building Ownership Certificate No. 12193 and is the sole legal owner to the land use rights and building ownership rights of the property. The land use rights of the property have been granted to Eas International Transportation Ltd. Chongqing Branch ( ) for a term of 50 years for residential use.
(iv) Eas International Transportation Ltd. Chongqing Branch ( ) has duly settled all the land premium.
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(v) Eas International Transportation Ltd. Chongqing Branch ( )is entitled to freely transfer, lease and mortgage the property during the term of the land use rights of the property at no extra land premium payable to the government.
(5) Based on the PRC legal opinion and the information provided by the Eas PRC Group, we have prepared our valuation on the following assumptions:
(i) Eas International Transportation Ltd. Chongqing Branch ( )is in possession of a proper legal title to the property and is entitled to transfer the property with the residual term of its land use right at no extra land premium or other onerous payment payable to the government;
(ii) All land premium and other costs of ancillary utilities services have been settled in full;
(iii) The design and construction of the development are in compliance with the local planning regulations and have been approved by the relevant authorities; and
(iv) The property may be freely disposed of to any parties.
(6) In accordance with the opinion of the PRC legal opinion and the information provided by the Eas PRC Group, the status of title and grant of major approvals and licenses are as follows:
Certificate for the Use of State-owned Land Yes Building Ownership Certificate Yes Business Licence Yes
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Capital value in existing state as at Particulars of 30 June 2004 and Property Description and tenure occupancy 31 October 2004
70a. 4 Blocks of The property comprises a The 2-storey office RMB30,711,000 Buildings 6-storey and 2-storey office building with a gross situated at No. 48 buildings and 2 single-storey floor area of 1,815.85 Hebei Road, ancillary buildings erected upon sq.m. (19,546 sq.ft.) Tanggu District, a plot of rectangle-shaped site is currently occupied Tianjin having a site area of by the Eas PRC approximately 8,108.58 sq.m. Group as office use, (87,281 sq.ft.). whilst the 2 single- storey ancillary The property has a total gross buildings with a gross floor area of approximately floor area of 1,502.39 7,677.68 sq.m. (82,642 sq.ft.) sq.m. (16,171 sq.ft.) completed in 1990s. are currently occupied by the Eas PRC The land use rights of the Group as warehouse property have been granted for a use. term expiring on 11 December 2047 for composite use. The 6-storey office building with a total gross floor area of 4,359.44 sq.m. (46,925 sq.ft.) is currently vacant.
Notes:
(1) According to Certificate for the Use of State-owned Land No. (95) 011 dated 17 January 1998, the land use rights of the property comprising a site area of 8,108.58 sq.m. have been granted to Eas International Transportation Ltd. ( ) for a term expiring on 11 December 2047 for composite use.
(2) According to Building Ownership Certificate No. 0004440 dated 29 December 1997, the building ownership rights of the property comprising a 6-storey and 2-storey office buildings and 2 single-storey ancillary buildings having a total gross floor area of 7,677.68 sq.m. are held by Eas International Transportation Ltd. Tanggu Representative Office ( ) with details as follows:
Block Usage No. of storey Gross floor area (sq.m.) (sq.ft.)
1 Office 6 4,359.44 46,925 2 Office 2 1,815.85 19,546 3 Ancillary 1 787.28 8,474 4 Ancillary 1 715.11 7,697
Grand total: 7,677.68 82,642
(3) According to Business Licence No. 000046 ( ) dated 13 September 2004, Eas International Transportation Ltd. ( ) was registered on 27 February 1985 with current registered capital of RMB150,000,000 (actual paid amount: RMB150,000,000) and the valid operation period is currently from 27 February 1985 to 26 February 2015.
(4) According to Registration Certificate No. 00127 ( ) dated 25 April 2003, the valid operation period of Eas International Transportation Ltd. Tanggu Representative Office ( ) is currently from 17 October 1994 to 26 February 2007.
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(5) The opinion of Kerry Properties Limited’s legal adviser, Fangda Partners, on PRC law, states that:
(i) Eas International Transportation Ltd. Tanggu Representative Office ( ) has obtained the Registration Certificate No. 00127 ( ) dated 25 April 2003 and the valid operation period is currently from 17 October 1994 to 26 February 2007. Eas International Transportation Ltd. Tanggu Representative Office ( ) is a representative office of Eas International Transportation Ltd. ( ).
(ii) The property is located at No. 48 Hebei Road, Tanggu District, Tianjin, which comprises a site area of 8,108.58 sq.m. and a total gross floor area of 7,677.68 sq.m..
(iii) Eas PRC Group has obtained Certificate for the Use of State-owned Land No. (95)011 and Building Ownership Certificate No. 0004440 and is the sole legal owner to the land use rights and building ownership rights of the property. The land use rights of the property have been granted to Eas PRC Group for a term expiring on 11 December 2047 for composite use.
(iv) Eas PRC Group has duly settled all the land premium.
(v) Eas PRC Group is entitled to freely transfer, lease and mortgage the property during the term of the land use rights of the property at no extra land premium payable to the government.
(6) Based on the PRC legal opinion and the information provided by the Eas PRC Group, we have prepared our valuation on the following assumptions:
(i) Eas PRC Group is in possession of a proper legal title to the property and is entitled to transfer the property with the residual term of its land use right at no extra land premium or other onerous payment payable to the government;
(ii) All land premium and other costs of ancillary utilities services have been settled in full;
(iii) The design and construction of the development are in compliance with the local planning regulations and have been approved by the relevant authorities; and
(iv) The property may be freely disposed of to any parties.
(7) In accordance with the opinion of the PRC legal opinion and the information provided by the Eas PRC Group, the status of title and grant of major approvals and licenses are as follows:
Certificate for the Use of State-owned Land Yes Building Ownership Right Certificate Yes Registration Certificate Yes Business Licence Yes
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Capital value in existing state as at Particulars of 30 June 2004 and Property Description and tenure occupancy 31 October 2004
83. Unit 1A, The property comprises an The property is RMB7,820,000 Tairan Block 213, industrial unit on Level 1 of a currently vacant. Che Gong Miao 7-storey industrial building. Industrial Zone, Futian District, The property has a gross floor Shenzhen, area of approximately 1,818.72 Guangdong sq.m. (19,577 sq.ft.) completed Province in 1996.
The land use rights of the property have been granted for a term expiring on 16 November 2038 for industrial and warehouse uses.
Notes:
(1) According to Real Estate Title Certificate No. 3000031372 dated 5 April 1999, the land use rights and building ownership rights of the property, comprising a gross floor area of 1,818.72 sq.m. have been granted to Shenzhen Eas International Transportation Ltd. ( ) for a term expiring on 16 November 2038 for industrial and warehouse uses.
(2) According to Business Licence No. 105062 ( ) dated 19 May 2004, Shenzhen Eas International Transportation Ltd. ( ) was registered on 30 October 1993 with current registered capital of US$1,000,000 (actual paid amount: US$1,000,000) and the valid operation period is currently from 30 October 1993 to 30 April 2006.
(3) The opinion of Kerry Properties Limited’s legal adviser, Fangda Partners, on PRC law, states that:
(i) Shenzhen Eas International Transportation Ltd. ( ) has obtained the Business Licence No. 105062 ( ) dated 19 May 2004 and was registered on 30 October 1993 with current registered capital of US$1,000,000 (actual paid amount: US$1,000,000) and the valid operation period is currently from 30 October 1993 to 30 April 2006. Eas International Transportation Ltd. ( ) is the sole shareholder of Shenzhen Eas International Transportation Ltd. ( ).
(ii) The property is located at Unit 1A, Tairan Block 213, Che Gong Miao Industrial Zone, Futian District, Shenzhen, which comprises a gross floor area of 1,818.72 sq.m..
(iii) Shenzhen Eas International Transportation Ltd. ( ) has obtained Real Estate Title Certificate No. 3000031372 and is the sole legal owner to the land use rights and building ownership rights of the property. The land use rights of the property have been granted to Shenzhen Eas International Transportation Ltd. ( ) for a term expiring on 16 November 2038 for industrial and warehouse uses.
(iv) Shenzhen Eas International Transportation Ltd. ( ) has duly settled all the land premium.
(v) Shenzhen Eas International Transportation Ltd. ( ) is entitled to freely transfer, lease and mortgage the property during the term of the land use rights of the property at no extra land premium payable to the government.
(vi) The property is subject to mortgage in favour of Shenzhen Development Bank Co., Ltd. Huaqiao City Branch for a term from 29 August 2003 to 29 August 2004 for a loan of RMB5,000,000. Prior written consent shall be obtained from the mortgagee bank before Shenzhen Eas International Transportation Ltd. ( ) transfers or uses the property as contribution in kind or disposes of the property by any other means.
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(4) Based on the PRC legal opinion and the information provided by the Eas PRC Group, we have prepared our valuation on the following assumptions:
(i) Shenzhen Eas International Transportation Ltd. ( ) is in possession of a proper legal title to the property and is entitled to transfer the property with the residual term of its land use right at no extra land premium or other onerous payment payable to the government;
(ii) All land premium and other costs of ancillary utilities services have been settled in full;
(iii) The design and construction of the development are in compliance with the local planning regulations and have been approved by the relevant authorities; and
(iv) The property may be freely disposed of to any parties.
(5) In accordance with the opinion of the PRC legal opinion and the information provided by the Eas PRC Group, the status of title and grant of major approvals and licenses are as follows:
Real Estate Title Certificate Yes Business Licence Yes
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Capital value in existing state as at Particulars of 30 June 2004 and Property Description and tenure occupancy 31 October 2004
86. Units 101, 201, The property comprises 5 The property is RMB996,000 301, 501 and 601, residential units on Levels 1, 2, currently occupied Block 17, 3, 5 and 6 of a 6-storey by the Eas PRC Beili Garden residential building. Group as staff Shuibei 2nd Road, quarters. Luohu District, The property has a total gross Shenzhen, floor area of approximately Guangdong 354.55 sq.m. (3,816 sq.ft.) Province completed in 1989.
The land use rights of the property have been granted for a term expiring on 21 December 2034 for residential use.
Notes:
(1) According to 5 Real Estate Title Certificates dated 16 November 1999, the land use rights and building ownership rights of the property, comprising a total gross floor area of 354.55 sq.m. have been granted to Shenzhen Eas International Transportation Ltd. ( ) for a term expiring on 21 December 2034 for residential use. The details are summarized as follows:
Unit no./ Gross floor No. Certificate no. Block no. area (sq.m.)
1 2000042114 101/17 70.91 2 2000042118 201/17 70.91 3 2000042119 301/17 70.91 4 2000042121 501/17 70.91 5 2000042122 601/17 70.91
Grand total: 354.55
(2) According to Business Licence No. 105062 ( ) dated 19 May 2004, Shenzhen Eas International Transportation Ltd. ( ) was registered on 30 October 1993 with current registered capital of US$1,000,000 (actual paid amount: US$1,000,000) and the valid operation period is currently from 30 October 1993 to 30 April 2006.
(3) The opinion of Kerry Properties Limited’s legal adviser, Fangda Partners, on PRC law, states that:
(i) Shenzhen Eas International Transportation Ltd. ( ) has obtained the Business Licence No. 105062 ( ) dated 19 May 2004 and was registered on 30 October 1993 with current registered capital of US$1,000,000 (actual paid amount: US$1,000,000) and the valid operation period is currently from 30 October 1993 to 30 April 2006. Eas International Transportation Ltd. ( ) is the sole shareholder of Shenzhen Eas International Transportation Ltd. ( ).
(ii) The property comprises Units 101, 201, 301, 501 and 601 of Block 17, Belin Garden, Shuibei 2nd Road, Luohu District, Shenzhen, with a total gross floor area of 354.55 sq.m..
(iii) Shenzhen Eas International Transportation Ltd. ( ) has obtained 5 Real Estate Title Certificates Nos. 2000042114, 2000042118, 2000042119, 2000042121 and 2000042122 and is the sole legal owner to the land use rights and building ownership rights of the property. The land use rights of the property have been granted to Shenzhen Eas International Transportation Ltd. ( ) for a term expiring on 21 December 2034 for residential use.
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(iv) Shenzhen Eas International Transportation Ltd. ( ) has duly settled all the land premium.
(v) Shenzhen Eas International Transportation Ltd. ( ) is entitled to freely transfer, lease and mortgage the property during the term of the land use rights of the property at no extra land premium payable to the government.
(vi) The property is subject to mortgage in favour of Shenzhen Development Bank Co., Ltd. Huaqiao City Branch. Prior written consent shall be obtained from the mortgagee bank before Shenzhen Eas International Transportation Ltd. ( ) transfers or uses the property as contribution in kind or disposes of the property by any other means.
(4) Based on the PRC legal opinion and the information provided by the Eas PRC Group, we have prepared our valuation on the following assumptions:
(i) Shenzhen Eas International Transportation Ltd. ( ) is in possession of a proper legal title to the property and is entitled to transfer the property with the residual term of its land use right at no extra land premium or other onerous payment payable to the government;
(ii) All land premium and other costs of ancillary utilities services have been settled in full;
(iii) The design and construction of the development are in compliance with the local planning regulations and have been approved by the relevant authorities; and
(iv) The property may be freely disposed of to any parties.
(5) In accordance with the opinion of the PRC legal opinion and the information provided by the Eas PRC Group, the status of title and grant of major approvals and licenses are as follows:
Real Estate Title Certificates Yes Business Licence Yes
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Capital value in existing state as at Particulars of 30 June 2004 and Property Description and tenure occupancy 31 October 2004
93. No. 18 The property is planned to The completed portion RMB45,000,000 Tianzhu Road, comprise a 5-storey (including a is currently occupied (Please see note 3) Area A, basement) warehouse building by the Eas PRC Beijing Tianzhu and an office building erected Group as warehouse Airport Industrial upon a rectangular-shaped plot of use. Zone, site having a site area of Shunyi District, approximately 35,654 sq.m. Beijing (383,780 sq.ft.).
The permitted total gross floor area of the property is approximately 23,658.82 sq.m. (254,664 sq.ft.) (Please see note 3).
Only the warehouse building with a gross floor area of 18,078.86 sq.m. was completed in 2004.
The planned office building has not been developed as at the date of valuation yet.
The land use rights of the property have been granted for a term expiring on 20 March 2047 for warehouse use.
Notes:
(1) According to Certificate for the Use of State-owned Land No. (2002) 0004 dated 13 January 2002, the land use rights of the property have been granted to Eas International Transportation Ltd. ( ) for a term expiring on 20 March 2047 for warehouse use.
(2) According to Planning Permit for Construction Works No.2000-0073 issued to Eas International Transportation Ltd. ( ) on 30 October 2000, the design scheme of the property comprising a total gross floor area of 23,658.82 sq.m. has been approved.
(3) According to a Completion Compliance Record, portion of the property with a gross floor area of 18,078.86 sq.m. was completed in 2004. We have taken into account the land with a site area of 35,654 sq.m. and the completed building portion with a gross floor area of 18,078.86 sq.m. only in our valuation.
(4) According to Business Licence No. 000046 ( ) dated 13 September 2004, Eas International Transportation Ltd. ( ) was registered on 27 February 1985 with current registered capital of RMB150,000,000 (actual paid amount: RMB150,000,000) and the valid operation period is currently from 27 February 1985 to 26 February 2015.
(5) As advised, the total development costs of the property incurred up to 30 June 2004 was approximately RMB43,748,000. We have taken into account such costs in our valuation.
(6) The opinion of Kerry Properties Limited’s legal adviser, Fangda Partners, on PRC law, states that:
(i) Eas International Transportation Ltd. ( ) has obtained Business Licence No. 000046 ( ) dated 13 September 2004 and was registered on 27 February 1985 as a Sino-Foreign Joint Venture with current registered capital of RMB150,000,000 (actual paid amount: RMB150,000,000) and the valid operation period is currently from 27 February 1985 to 26 February 2015.
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(ii) The property is located at No. 18 Tianzhu Road, Area A, Beijing Tianzhu Airport Industrial Zone Shunyi District, Beijing, which comprises a site area of 35,654 sq.m..
(iii) Eas International Transportation Ltd. ( ) has obtained the land use rights of the property with a site area of 35,654 sq.m..
(iv) According to the Completion Compliance Record, the construction of warehouse building with gross floor area of 18,078.86 sq.m. complied with the relevant regulation. Eas International Transportation Ltd. ( ) is under application for the Building Ownership Certificate. Upon obtaining the Building Ownership Certificate, the property can be transferred, leased or mortgaged to a third party.
(7) Based on the PRC legal opinion and the information provided by the Eas PRC Group, we have prepared our valuation on the following assumptions:
(i) Eas International Transportation Ltd. is in possession of a proper legal title to the property and is entitled to transfer the property with the residual term of its land use right at no extra land premium or other onerous payment payable to the government;
(ii) All land premium and other costs of ancillary utilities services have been settled in full;
(iii) The design and construction of the development are in compliance with the local planning regulations and have been approved by the relevant authorities; and
(iv) The property may be freely disposed of to any parties.
(8) In accordance with the opinion of the PRC legal opinion and the information provided by the Eas PRC Group, the status of title and grant of major approvals and licenses are as follows:
Certificate for the Use of State-owned Land Yes Planning Permit for Construction Works Yes Building Ownership Certificate No Business Licence Yes
− 237 − APPENDIX VI PROPERTY VALUATION REPORT
Group II – Property interests held for Owner-occupation by the Eas PRC Group without complete title document in the PRC
Capital value in existing state as at Particulars of 30 June 2004 and Property Description and tenure occupancy 31 October 2004
1. Unit E, No. 10, The property comprises a The property is As the property has Level 10, Block J, residential unit on Level 10 of a currently occupied not obtained complete No. 8 Beichen 15-storey composite building. by the Eas PRC title document, we East Road, Group as residential have not assigned Chaoyang District, The property has a total gross use. value to the property. Beijing, floor area of approximately 107.92 sq.m. (1,162 sq.ft.) completed in 1990s.
The land use rights of the property have been granted for a term of 70 years from 30 September 1993 to 1 October 2063 for residential use.
Notes:
(1) According to Sales and Purchase Agreement No. J-144 dated 6 April 1994, the land use rights and the building ownership rights of the property, comprising a gross floor area of 107.92 sq.m. have been transferred to Eas International Transportation Ltd. ( ) for US$145,692 in total.
(2) According to Business Licence No. 000046 ( ) dated 13 September 2004, Eas International Transportation Ltd. ( ) was registered on 27 February 1985 with current registered capital of RMB150,000,000 (actual paid amount: RMB150,000,000) and the valid operation period is currently from 27 February 1985 to 26 February 2015.
(3) The opinion of Kerry Properties Limited’s legal adviser, Fangda Partners, on PRC law, states that:
(i) Eas International Transportation Ltd. ( ) has obtained Business Licence No. 000046 ( ) dated 13 September 2004 and was registered on 27 February 1985 as a Sino-Foreign Joint Venture with current registered capital of RMB150,000,000 (actual paid amount: RMB150,000,000) and the valid operation period is currently from 27 February 1985 to 26 February 2015.
(ii) The property is located at Unit E, No. 10, Level 10, Block J, No. 8 Beichen East Road, Beijing, which comprises a total gross floor area of 107.92 sq.m..
(iii) Eas International Transportation Ltd. ( ) has not obtained the Real Estate Title Certificates and does not possess the proper legal title of the property.
(4) In accordance with the opinion of the PRC legal opinion and the information provided by the Eas PRC Group, the status of title and grant of major approvals and licenses are as follows:
Real Estate Title Certificate No Sales and Purchase Agreement Yes Business Licence Yes
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Capital value in existing state as at Particulars of 30 June 2004 and Property Description and tenure occupancy 31 October 2004
7. Type D on Level 7, The property comprises two The property is As the property has Type D on Level 12 residential units on Levels 7 and currently occupied not obtained complete and Carpark No. D26, 12 of a 24-storey composite by the Eas PRC title document, we Maple Court, building. Group as residential have not assigned Citichamp Palace, use. value to the property. Northwest of The property has a total gross Madian Bridge, floor area of approximately Haidian District, 289.04 sq.m. (3,111 sq.ft.) Beijing completed in 1990s.
The land use rights of the property have been granted for a term of 70 years from 30 June 1994 to 29 June 2064 for residential use.
Notes:
(1) According to Commodity Housing Pre-sale Contracts Nos. 017372 and 017374 both dated 28 January 1997, the land use rights and the building ownership rights of the property, comprising a total gross floor area of 289.04 sq.m. have been transferred to Eas International Transportation Ltd. ( ) for US$401,703 in total. The details are summarized as follows:
Purchase Gross floor Gross floor No. Agreement no. Type/Level price area area (US$) (sq.m.) (sq.ft.)
1 017372 D/7 197,848 144.52 1,555 2 017374 D/12 203,855 144.52 1,555
Grand total: 401,703 289.04 3,111
(2) According to Appendix 4 of Supplemental Agreement to the Sales and Purchase Agreement No. 017374 dated 28 January 1997, Carpark No. D26 is currently leased to Eas International Transportation Ltd. ( ) at a total rent of US$22,000.
(3) According to Business Licence No. 000046 ( ) dated 13 September 2004, Eas International Transportation Ltd. ( ) was registered on 27 February 1985 with current registered capital of RMB150,000,000 (actual paid amount: RMB150,000,000) and the valid operation period is currently from 27 February 1985 to 26 February 2015.
(4) The opinion of Kerry Properties Limited’s legal adviser, Fangda Partners, on PRC law, states that:
(i) Eas International Transportation Ltd. ( ) has obtained Business Licence No. 000046 ( ) dated 13 September 2004 and was registered on 27 February 1985 as a Sino-Foreign Joint Venture with current registered capital of RMB150,000,000 (actual paid amount: RMB150,000,000) and the valid operation period is currently from 27 February 1985 to 26 February 2015.
(ii) The property is located at Type D on Level 7, Type D on Level 12 and Carpark No. D26, Maple Court, Citichamp Palace, Northwest of Madian Bridge, Haidian District, Beijing, which comprises a total gross floor area of 289.04 sq.m..
(iii) Carpark No. D26 is currently leased to Eas International Transportation Ltd. ( ) at a total rent of US$22,000.
(iv) Eas International Transportation Ltd. ( ) has not obtained the Real Estate Title Certificates and does not possess the proper legal title of the property.
(5) In accordance with the opinion of the PRC legal opinion and the information provided by the Eas PRC Group, the status of title and grant of major approvals and licenses are as follows:
Real Estate Title Certificates No Commodity Housing Pre-sale Contracts Yes Business Licence Yes
− 239 − APPENDIX VI PROPERTY VALUATION REPORT
Capital value in existing state as at Particulars of 30 June 2004 and Property Description and tenure occupancy 31 October 2004
10. House No. 3, The property comprises a The property is As the property has Woodlands Villa, 2-storey house. currently occupied not obtained complete Outer North Gate, by the Eas PRC title document, we Shunyi District, The property has a gross floor Group as villa use. have not assigned Beijing area of approximately 297.75 value to the property. sq.m. (3,204 sq.ft.) completed in 1990s.
The land use rights of the property have been granted for a term of 70 years from 30 July 1994 to 29 July 2064 for villa use.
Notes:
(1) According to Commodity Housing Pre-sale Contract dated 27 September 1996, the land use rights and the building ownership rights of the property, comprising a total gross floor area of approximately 297.75 sq.m. have been transferred to Eas International Transportation Ltd. ( ) for US$390,000 in total.
(2) According to Business Licence No. 000046 ( ) dated 13 September 2004, Eas International Transportation Ltd. ( ) was registered on 27 February 1985 with current registered capital of RMB150,000,000 (actual paid amount: RMB150,000,000) and the valid operation period is currently from 27 February 1985 to 26 February 2015.
(3) The opinion of Kerry Properties Limited’s legal adviser, Fangda Partners, on PRC law, states that:
(i) Eas International Transportation Ltd. ( ) has obtained Business Licence No. 000046 ( ) dated 13 September 2004 and was registered on 27 February 1985 as a Sino-Foreign Joint Venture with current registered capital of RMB150,000,000 (actual paid amount: RMB150,000,000) and the valid operation period is currently from 27 February 1985 to 26 February 2015.
(ii) The property is located at House No. 3, Woodlands Villa, Outer North Gate, Shunyi District, Beijing, which comprises a total gross floor area of 297.75 sq.m..
(iii) Eas International Transportation Ltd. ( ) has not obtained the Real Estate Title Certificate and does not possess the proper legal title of the property.
(4) In accordance with the opinion of the PRC legal opinion and the information provided by the Eas PRC Group, the status of title and grant of major approvals and licenses are as follows:
Real Estate Title Certificate No Commodity Housing Pre-sale Contract Yes Business Licence Yes
− 240 − APPENDIX VI PROPERTY VALUATION REPORT
Capital value in existing state as at Particulars of 30 June 2004 and Property Description and tenure occupancy 31 October 2004
11. House No. 93, The property comprises a The property is As the property has Woodlands Villa, 2-storey house. currently occupied not obtained complete Outer North Gate, by the Eas PRC title document, we Shunyi District, The property has a gross floor Group as villa use. have not assigned Beijing area of approximately 465 sq.m. value to the property. (5,005 sq.ft.) completed in 1990s.
The land use rights of the property have been granted for a term of 70 years from 30 July 1994 to 29 July 2064 for villa use.
Notes:
(1) According to Commodity Housing Pre-sale Contract No. 012033 dated 27 September 1996, the land use rights and the building ownership rights of the property, comprising a total gross floor area of 465 sq.m. have been transferred to Eas International Transportation Ltd. ( ) for US$568,000 in total.
(2) According to Business Licence No. 000046 ( ) dated 13 September 2004, Eas International Transportation Ltd. ( ) was registered on 27 February 1985 with current registered capital of RMB150,000,000 (actual paid amount: RMB150,000,000) and the valid operation period is currently from 27 February 1985 to 26 February 2015.
(3) The opinion of Kerry Properties Limited’s legal adviser, Fangda Partners, on PRC law, states that:
(i) Eas International Transportation Ltd. ( ) has obtained Business Licence No. 000046 ( ) dated 13 September 2004 and was registered on 27 February 1985 as a Sino-Foreign Joint Venture with current registered capital of RMB150,000,000 (actual paid amount: RMB150,000,000) and the valid operation period is currently from 27 February 1985 to 26 February 2015.
(ii) The property is located at House No. 93, Woodlands Villa, Outer North Gate, Shunyi District, Beijing, which comprises a total gross floor area of 465 sq.m..
(iii) Eas International Transportation Ltd. ( ) has not obtained the Real Estate Title Certificate and does not possess the proper legal title of the property.
(4) In accordance with the opinion of the PRC legal opinion and the information provided by the Eas PRC Group, the status of title and grant of major approvals and licenses are as follows:
Real Estate Title Certificate No Commodity Housing Pre-sale Contract Yes Business Licence Yes
− 241 − APPENDIX VI PROPERTY VALUATION REPORT
Capital value in existing state as at Particulars of 30 June 2004 and Property Description and tenure occupancy 31 October 2004
11.1. Unit 1545, The property comprises a The property is As the property has Level 4, residential unit on Level 4 of a currently occupied not obtained complete 5th Gate, 6-storey composite building. by the Eas PRC title document, we Construction Group as residential have not assigned Section West 1, The property has a gross floor use. value to the property. Phase 1, area of approximately 129.01 Green Lake sq.m. (1,389 sq.ft.) completed in Garden, 1990s. Mianzidian Road, North of Nongzhan The land use rights of the South Road, property have been granted for a Chaoyang District, term of 70 years from 15 April Beijing 1994 to 14 April 2064 for residential use.
Notes:
(1) According to Commodity Housing Pre-sale Contract No. 019647 dated 1 July 1997, the land use rights and the building ownership rights of the property, comprising a total gross floor area of 129.01 sq.m. have been transferred to Eas International Transportation Ltd. ( ) for US$210,673.33 in total.
(2) According to Business Licence No. 000046 ( ) dated 13 September 2004, Eas International Transportation Ltd. ( ) was registered on 27 February 1985 with current registered capital of RMB150,000,000 (actual paid amount: RMB150,000,000) and the valid operation period is currently from 27 February 1985 to 26 February 2015.
(3) The opinion of Kerry Properties Limited’s legal adviser, Fangda Partners, on PRC law, states that:
(i) Eas International Transportation Ltd. ( ) has obtained Business Licence No. 000046 ( ) dated 13 September 2004 and was registered on 27 February 1985 as a Sino-Foreign Joint Venture with current registered capital of RMB150,000,000 (actual paid amount: RMB150,000,000) and the valid operation period is currently from 27 February 1985 to 26 February 2015.
(ii) The property is located at Unit 1545, Level 4, 5th Gate, Construction Section West 1, Phase 1, Green Lake Garden, Mianzidian Road, North of Nongzhan South Road, Chaoyang District, Beijing, which comprises a total gross floor area of 129.01 sq.m..
(iii) Eas International Transportation Ltd. ( ) has not obtained the Real Estate Title Certificate and does not possess the proper legal title of the property.
(4) In accordance with the opinion of the PRC legal opinion and the information provided by the Eas PRC Group, the status of title and grant of major approvals and licenses are as follows:
Real Estate Title Certificate No Commodity Housing Pre-sale Contract Yes Business Licence Yes
− 242 − APPENDIX VI PROPERTY VALUATION REPORT
Capital value in existing state as at Particulars of 30 June 2004 and Property Description and tenure occupancy 31 October 2004
11.2. Unit 1345, The property comprises a The property is As the property has Phase 1, residential unit of a 6-storey currently occupied not obtained complete Green Lake composite building. by the Eas PRC title document, we Garden, Group as residential have not assigned Lower Group, The property has a gross floor use. value to the property. West Zone of area of approximately 129.01 Chaoyang sq.m. (1,389 sq.ft.) completed in Company 1990s. Chaoyang District, Beijing The land use rights of the property have been granted for a term of 70 years from 15 April 1994 to 15 April 2064 for residential use.
Notes:
(1) According to Commodity Housing Pre-sale Contract No. 010826 dated 30 April 1997, the land use rights and the building ownership rights of the property, comprising a total gross floor area of 129.01 sq.m. have been transferred to Eas International Transportation Ltd. ( ) for US$206,416 in total.
(2) According to Business Licence No. 000046 ( ) dated 13 September 2004, Eas International Transportation Ltd. ( ) was registered on 27 February 1985 with current registered capital of RMB150,000,000 (actual paid amount: RMB150,000,000) and the valid operation period is currently from 27 February 1985 to 26 February 2015.
(3) The opinion of Kerry Properties Limited’s legal adviser, Fangda Partners, on PRC law, states that:
(i) Eas International Transportation Ltd. ( ) has obtained Business Licence No. 000046 ( ) dated 13 September 2004 and was registered on 27 February 1985 as a Sino-Foreign Joint Venture with current registered capital of RMB150,000,000 (actual paid amount: RMB150,000,000) and the valid operation period is currently from 27 February 1985 to 26 February 2015.
(ii) The property is located at Unit 1345, Phase 1, Green Lake Garden, Lower Group, West Zone of Chaoyang Company Chaoyang District, Beijing, which comprises a total gross floor area of 129.01 sq.m..
(iii) Eas International Transportation Ltd. ( ) has not obtained the Real Estate Title Certificate and does not possess the proper legal title of the property.
(4) In accordance with the opinion of the PRC legal opinion and the information provided by the Eas PRC Group, the status of title and grant of major approvals and licenses are as follows:
Real Estate Title Certificate No Commodity Housing Pre-sale Contract Yes Business Licence Yes
− 243 − APPENDIX VI PROPERTY VALUATION REPORT
Capital value in existing state as at Particulars of 30 June 2004 and Property Description and tenure occupancy 31 October 2004
11.3. Unit 1563, The property comprises a The property is As the property has Level 6, residential unit on Level 6 of a currently occupied not obtained complete 5th Gate, 6-storey composite building. by the Eas PRC title document, we Construction Group as residential have not assigned Section West 1, The property has a gross floor use. value to the property. Phase 1, area of approximately 129.01 Green Lake sq.m. (1,389 sq.ft.) completed in Garden, 1990s. Mianzidian Road, North of Nongzhan The land use rights of the South Road, property have been granted for a Chaoyang District, term of 70 years from 15 April Beijing 1994 to 14 April 2064 for residential use.
Notes:
(1) According to Commodity Housing Pre-sale Contract No. 019644 dated 1 July 1997, the land use rights and the building ownership rights of the property, comprising a total gross floor area of 129.01 sq.m. have been transferred to Eas International Transportation Ltd. ( ) for US$206,416 in total.
(2) According to Business Licence No. 000046 ( ) dated 13 September 2004, Eas International Transportation Ltd. ( ) was registered on 27 February 1985 with current registered capital of RMB150,000,000 (actual paid amount: RMB150,000,000) and the valid operation period is currently from 27 February 1985 to 26 February 2015.
(3) The opinion of Kerry Properties Limited’s legal adviser, Fangda Partners, on PRC law, states that:
(i) Eas International Transportation Ltd. ( ) has obtained Business Licence No. 000046 ( ) dated 13 September 2004 and was registered on 27 February 1985 as a Sino-Foreign Joint Venture with current registered capital of RMB150,000,000 (actual paid amount: RMB150,000,000) and the valid operation period is currently from 27 February 1985 to 26 February 2015.
(ii) The property is located at Unit 1563, Level 6, 5th Gate, Construction Section West 1, Phase 1, Green Lake Garden, Mianzidian Road, North of Nongzhan South Road, Chaoyang District, Beijing, which comprises a total gross floor area of 129.01 sq.m..
(iii) Eas International Transportation Ltd. ( ) has not obtained the Real Estate Title Certificate and does not possess the proper legal title of the property.
(4) In accordance with the opinion of the PRC legal opinion and the information provided by the Eas PRC Group, the status of title and grant of major approvals and licenses are as follows:
Real Estate Title Certificate No Commodity Housing Pre-sale Contract Yes Business Licence Yes
− 244 − APPENDIX VI PROPERTY VALUATION REPORT
Capital value in existing state as at Particulars of 30 June 2004 and Property Description and tenure occupancy 31 October 2004
12. No. 54 The property comprises a The property is As the property has Wuwu Road, 7-storey office building erected currently occupied not obtained complete Zhongshan upon a plot of land. by the Eas PRC title document, we District, Group as office use. have not assigned Dalian, The property has a total gross value to the property. Liaoning Province floor area of approximately 1,809.92 sq.m. (19,482 sq.ft.) completed in 1990s.
The land use rights of the property is unspecified.
Notes:
(1) According to Building Ownership Certificate No. 2000130390 dated 17 May 1999, the building ownership rights of the property comprising a 7-storey office building having a total gross floor area of 1,809.92 sq.m. are held by Eas International Transportation Ltd. Dalian Branch ( ).
(2) According to Business Licence No. 00002 ( ) dated 9 August 2004, Eas International Transportation Ltd. Dalian Branch ( ) was registered on 13 August 1987 and the valid operation period is currently from 13 August 1987 to 25 February 2015.
(3) The opinion of Kerry Properties Limited’s legal adviser, Fangda Partners, on PRC law, states that:
(i) Eas International Transportation Ltd. Dalian Branch ( ) has obtained the Business Licence No. 00002 ( ) dated 9 August 2004 and was registered on 13 August 1987 and the valid operation period is currently from 13 August 1987 to 25 February 2015. Eas International Transportation Ltd. Dalian Branch ( ) is a branch office of Eas International Transportation Ltd. ( ).
(ii) The property is located at No. 54 Wuwu Road, Zhongshan District, Dalian, which comprises a total gross floor area of 1,809.92 sq.m..
(iii) The building ownership rights of the property have been obtained.
(iv) The land use rights of the property have not been registered. The rights to the property would be affected. Although this would not affect the usage, it would encounter legal obstacles when the property is transferred or mortgaged.
(4) In accordance with the opinion of the PRC legal opinion and the information provided by the Eas PRC Group, the status of title and grant of major approvals and licenses are as follows:
Certificate for the Use of State-owned Land No Building Ownership Certificate Yes Business Licence Yes
− 245 − APPENDIX VI PROPERTY VALUATION REPORT
Capital value in existing state as at Particulars of 30 June 2004 and Property Description and tenure occupancy 31 October 2004
12a. Level 1, No. 80 The property comprises an office The property is As the property has Xinghe Street, unit on Level 1 of an 8-storey currently vacant. not obtained complete Zhongshan commercial building. title document, we District, have not assigned Dalian, The property has a gross floor value to the property. Liaoning Province area of approximately 270 sq.m. (2,906 sq.ft.) completed in 1990s.
The land use rights of the property is unspecified.
Notes:
(1) According to Building Ownership Certificate No. 2000130390 dated 3 March 2000, the building ownership rights of the property comprising a gross floor area of 270 sq.m. are held by Eas International Transportation Ltd. Dalian Branch ( ).
(2) According to Business Licence No. 00002 ( ) dated 9 August 2004, Eas International Transportation Ltd. Dalian Branch ( ) was registered on 13 August 1987 and the valid operation period is currently from 13 August 1987 to 25 February 2015.
(3) The opinion of Kerry Properties Limited’s legal adviser, Fangda Partners, on PRC law, states that:
(i) Eas International Transportation Ltd. Dalian Branch ( ) has obtained the Business Licence No. 00002 ( ) dated 9 August 2004 and was registered on 13 August 1987 and the valid operation period is currently from 13 August 1987 to 25 February 2015. Eas International Transportation Ltd. Dalian Branch ( ) is a branch office of Eas International Transportation Ltd. ( ).
(ii) The property is located at Level 1, No. 80 Xinghe Street, Zhongshan District, Dalian, which comprises a gross floor area of 270 sq.m..
(iii) The building ownership rights of the property have been obtained.
(iv) The land use rights of the property have not been registered. The rights to the property would be affected. Although this would not affect the usage, it would encounter legal obstacles when the property is transferred or mortgaged.
(4) In accordance with the opinion of the PRC legal opinion and the information provided by the Eas PRC Group, the status of title and grant of major approvals and licenses are as follows:
Certificate for the Use of State-owned Land No Building Ownership Certificate Yes Business Licence Yes
− 246 − APPENDIX VI PROPERTY VALUATION REPORT
Capital value in existing state as at Particulars of 30 June 2004 and Property Description and tenure occupancy 31 October 2004
14. Unit 11-6-10, The property comprises a Portion of the right As the property has Levels 1 to 3, commercial unit on Levels 1 to 3 hall on level 1 of the not obtained complete No. 29 Fushun of a 3-storey commercial property with a gross title document, we Street, building. floor area of 150 have not assigned Taikai, sq.m. (1,245 sq.ft.) is value to the property. Dalian, The property has a total gross currently vacant. Liaoning Province floor area of approximately 528.34 sq.m. (5,687 sq.ft.) The remaining portion completed in 1990s. of the property is currently occupied by The land use rights of the the Eas PRC Group as property is unspecified. office use.
Notes:
(1) According to Building Ownership Certificate No. 140057 dated 4 September 2002, the building ownership rights of the property comprising a gross floor area of 528.34 sq.m. are held by Eas International Transportation Ltd. Dalian Branch ( ).
(2) According to Business Licence No. 00002 ( ) dated 9 August 2004, Eas International Transportation Ltd. Dalian Branch ( ) was registered on 13 August 1987 and the valid operation period is currently from 13 August 1987 to 25 February 2015.
(3) The opinion of Kerry Properties Limited’s legal adviser, Fangda Partners, on PRC law, states that:
(i) Eas International Transportation Ltd. Dalian Branch ( ) has obtained the Business Licence No. 00002 ( ) dated 9 August 2004 and was registered on 13 August 1987 and the valid operation period is currently from 13 August 1987 to 25 February 2015. Eas International Transportation Ltd. Dalian Branch ( ) is a branch office of Eas International Transportation Ltd. ( ).
(ii) The property is located at Unit 11-6-10, Levels 1 to 3, No. 29 Fushun Street, Taikai, Dalian, which comprises a total gross floor area of 528.34 sq.m..
(iii) The building ownership rights of the property have been obtained.
(iv) The land use rights of the property have not been registered. The rights to the property would be affected. Although this would not affect the usage, it would encounter legal obstacles when the property is transferred or mortgaged.
(4) In accordance with the opinion of the PRC legal opinion and the information provided by the Eas PRC Group, the status of title and grant of major approvals and licenses are as follows:
Certificate for the Use of State-owned Land No Building Ownership Certificate Yes Business Licence Yes
− 247 − APPENDIX VI PROPERTY VALUATION REPORT
Capital value in existing state as at Particulars of 30 June 2004 and Property Description and tenure occupancy 31 October 2004
17. Unit 503, The property comprises a The property is As the property has 4th Gate, residential unit on Level 5 of a currently occupied not obtained complete Block 2, 6-storey residential building. by the Eas PRC title document, we Linsheng Lane, Group as residential have not assigned Jintang Highway, The property has a gross floor use. value to the property. Hedong District, area of approximately 64.94 Tianjin sq.m. (699 sq.ft.) completed in 1990s.
The land use rights of the property is unspecified.
Notes:
(1) According to Building Ownership Certificate No. 2748 dated 13 November 1995, the building ownership rights of unit 503 comprising a total gross floor area of 64.94 sq.m. are held by Eas International Transportation Ltd. Tanggu Representative Office ( ).
(2) According to Registration Certificate No. 00127 ( ) dated 25 April 2003, the valid operation period of Eas International Transportation Ltd. Tanggu Representative Office ( ) is currently from 17 October 1994 to 26 February 2007.
(3) The opinion of Kerry Properties Limited’s legal adviser, Fangda Partners, on PRC law, states that:
(i) Eas International Transportation Ltd. Tanggu Representative Office ( ) has obtained the Registration Certificate No. 00127 ( ) dated 25 April 2003 and the valid operation period is currently from 17 October 1994 to 26 February 2007. Eas International Transportation Ltd. Tanggu Representative Office ( ) is a representative office of Eas International Transportation Ltd. ( ).
(ii) The property is located at Unit 503, 4th Gate, Block 2, Linsheng Lane, Jintang Highway, Hedong District, Tianjin, which comprises a gross floor area of 64.94 sq.m..
(iii) The building ownership rights of the property have been obtained.
(iv) The land use rights of the property have not been registered. The rights to the property would be affected. Although this would not affect the usage, it would encounter legal obstacles when the property is transferred or mortgaged.
(4) In accordance with the opinion of the PRC legal opinion and the information provided by the Eas PRC Group, the status of title and grant of major approvals and licenses are as follows:
Certificate for the Use of State-owned Land No Building Ownership Certificate Yes Registration Certificate Yes
− 248 − APPENDIX VI PROPERTY VALUATION REPORT
Capital value in existing state as at Particulars of 30 June 2004 and Property Description and tenure occupancy 31 October 2004
18. Unit 504, The property comprises a The property is As the property has 4th Gate, residential unit on Level 5 of a currently occupied not obtained complete Block 2, 6-storey residential building. by the Eas PRC title document, we Linsheng Lane, Group as residential have not assigned Jintang Highway, The property has a gross floor use. value to the property. Hedong District, area of approximately 64.94 Tianjin sq.m. (699 sq.ft.) completed in 1990s.
The land use rights of the property is unspecified.
Notes:
(1) According to Building Ownership Certificate No. 2748 dated 13 November 1995, the building ownership rights of unit 504 comprising a total gross floor area of 64.94 sq.m. are held by Eas International Transportation Ltd. Tanggu Representative Office ( ).
(2) According to Registration Certificate No. 00127 ( ) dated 25 April 2003, the valid operation period of Eas International Transportation Ltd. Tanggu Representative Office ( ) is currently from 17 October 1994 to 26 February 2007.
(3) The opinion of Kerry Properties Limited’s legal adviser, Fangda Partners, on PRC law, states that:
(i) Eas International Transportation Ltd. Tanggu Representative Office ( ) has obtained the Registration Certificate No. 00127 ( ) dated 25 April 2003 and the valid operation period is currently from 17 October 1994 to 26 February 2007. Eas International Transportation Ltd. Tanggu Representative Office ( ) is a representative office of Eas International Transportation Ltd. ( ).
(ii) The property is located at Unit 504, 4th Gate, Block 2, Linsheng Lane, Jintang Highway, Hedong District, Tianjin, which comprises a gross floor area of 64.94 sq.m..
(iii) The building ownership rights of the property have been obtained.
(iv) The land use rights of the property have not been registered. The rights to the property would be affected. Although this would not affect the usage, it would encounter legal obstacles when the property is transferred or mortgaged.
(4) In accordance with the opinion of the PRC legal opinion and the information provided by the Eas PRC Group, the status of title and grant of major approvals and licenses are as follows:
Certificate for the Use of State-owned Land No Building Ownership Certificate Yes Registration Certificate Yes
− 249 − APPENDIX VI PROPERTY VALUATION REPORT
Capital value in existing state as at Particulars of 30 June 2004 and Property Description and tenure occupancy 31 October 2004
18a. Unit 203, The property comprises a The property is As the property has 4th Gate, residential unit on Level 2 of a currently occupied not obtained complete Block 2, 6-storey residential building. by the Eas PRC title document, we Linsheng Lane, Group as residential have not assigned Jintang Highway, The property has a gross floor use. value to the property. Hedong District, area of approximately 64.94 Tianjin sq.m. (699 sq.ft.) completed in 1990s.
The land use rights of the property is unspecified.
Notes:
(1) According to Building Ownership Certificate No. 2748 dated 13 November 1995, the building ownership rights of unit 203 comprising a total gross floor area of 64.94 sq.m. are held by Eas International Transportation Ltd. Tanggu Representative Office ( ).
(2) According to Registration Certificate No. 00127 ( ) dated 25 April 2003, the valid operation period of Eas International Transportation Ltd. Tanggu Representative Office ( ) is currently from 17 October 1994 to 26 February 2007.
(3) The opinion of Kerry Properties Limited’s legal adviser, Fangda Partners, on PRC law, states that:
(i) Eas International Transportation Ltd. Tanggu Representative Office ( ) has obtained the Registration Certificate No. 00127 ( ) dated 25 April 2003 and the valid operation period is currently from 17 October 1994 to 26 February 2007. Eas International Transportation Ltd. Tanggu Representative Office ( ) is a representative office of Eas International Transportation Ltd. ( ).
(ii) The property is located at Unit 203, 4th Gate, Block 2, Linsheng Lane, Jintang Highway, Hedong District, Tianjin, which comprises a gross floor area of 64.94 sq.m..
(iii) The building ownership rights of the property have been obtained.
(iv) The land use rights of the property have not been registered. The rights to the property would be affected. Although this would not affect the usage, it would encounter legal obstacles when the property is transferred or mortgaged.
(4) In accordance with the opinion of the PRC legal opinion and the information provided by the Eas PRC Group, the status of title and grant of major approvals and licenses are as follows:
Certificate for the Use of State-owned Land No Building Ownership Certificate Yes Registration Certificate Yes
− 250 − APPENDIX VI PROPERTY VALUATION REPORT
Capital value in existing state as at Particulars of 30 June 2004 and Property Description and tenure occupancy 31 October 2004
20. Unit 602, The property comprises a The property is As the property has 3rd Gate, residential unit on Level 6 of a currently occupied not obtained complete Block 5, 6-storey residential building. by the Eas PRC title document, we Xiaode Lane, Group as residential have not assigned Weiguo Road, The property has a gross floor use. value to the property. Hedong District, area of approximately 44.94 Tianjin sq.m. (484 sq.ft.) completed in 1990s.
The land use rights of the property is unspecified.
Notes:
(1) According to Building Ownership Certificate No. 3416 dated 21 July 1997, the building ownership rights of the property comprising a gross floor area of 44.94 sq.m. are held by Eas International Transportation Ltd. Tianjin Branch ( ).
(2) According to Business Licence No. 00017 ( ) dated 14 October 2004, Eas International Transportation Ltd. Tianjin Branch ( ) was registered on 27 February 1985 and the valid operation period is currently from 27 February 1985 to 26 October 2008.
(3) The opinion of Kerry Properties Limited’s legal adviser, Fangda Partners, on PRC law, states that:
(i) Eas International Transportation Ltd. Tianjin Branch ( ) has obtained the Business Licence No. 00017 ( ) dated 14 October 2004 and was registered on 27 February 1985 and the valid operation period is currently from 27 February 1985 to 26 October 2008. Eas International Transportation Ltd. Tianjin Branch ( ) is a branch office of Eas International Transportation Ltd. ( ).
(ii) The property is located at Unit 602, 3rd Gate, Block 5, Xiaode Lane, Weiguo Road, Hedong District, Tianjin, which comprises a gross floor area of 44.94 sq.m..
(iii) The building ownership rights of the property have been obtained.
(iv) The land use rights of the property have not been registered. The rights to the property would be affected. Although this would not affect the usage, it would encounter legal obstacles when the property is transferred or mortgaged.
(4) In accordance with the opinion of the PRC legal opinion and the information provided by the Eas PRC Group, the status of title and grant of major approvals and licenses are as follows:
Certificate for the Use of State-owned Land No Building Ownership Certificate Yes Business Licence Yes
− 251 − APPENDIX VI PROPERTY VALUATION REPORT
Capital value in existing state as at Particulars of 30 June 2004 and Property Description and tenure occupancy 31 October 2004
29. Room 101, Unit 1, The property comprises a The property is As the property has Block 9, residential unit on Level 1 of a currently occupied not obtained complete Tianzhu 6-storey residential building. by the Eas PRC title document, we Sub-District, Group as residential have not assigned Shunyi District, The property has a gross floor use. value to the property. Beijing area of approximately 108.8 sq.m. (1,171 sq.ft.) completed in 1990s.
The land use rights of the property is unspecified.
Notes:
(1) According to Building Ownership Certificate No. 00912 dated 1 June 1996, the building ownership rights of the property comprising a gross floor area of 108.8 sq.m. are held by Eas International Transportation Ltd. ( ).
(2) According to Business Licence No. 000046 ( ) dated 13 September 2004, Eas International Transportation Ltd. ( ) was registered on 27 February 1985 with current registered capital of RMB150,000,000 (actual paid amount: RMB150,000,000) and the valid operation period is currently from 27 February 1985 to 26 February 2015.
(3) The opinion of Kerry Properties Limited’s legal adviser, Fangda Partners, on PRC law, states that:
(i) Eas International Transportation Ltd. ( ) has obtained Business Licence No. 000046 ( ) dated 13 September 2004 and was registered on 27 February 1985 as a Sino-Foreign Joint Venture with current registered capital of RMB150,000,000 (actual paid amount: RMB150,000,000) and the valid operation period is currently from 27 February 1985 to 26 February 2015.
(ii) The property is located at Room 101, Unit 1, Block 9, Tianzhu Sub-District, Shunyi District, Beijing, which comprises a gross floor area of 108.8 sq.m..
(iii) The building ownership rights of the property have been obtained.
(iv) The land use rights of the property have not been registered.
(4) In accordance with the opinion of the PRC legal opinion and the information provided by the Eas PRC Group, the status of title and grant of major approvals and licenses are as follows:
Certificate for the Use of State-owned Land No Building Ownership Certificate Yes Business Licence Yes
− 252 − APPENDIX VI PROPERTY VALUATION REPORT
Capital value in existing state as at Particulars of 30 June 2004 and Property Description and tenure occupancy 31 October 2004
29a. Blocks 1 to 24, The property comprises 24 The property is As the property Jinmi East Road blocks of buildings erected upon currently occupied comprises an (formerly known a plot of site having a site area by the Eas PRC allocated land and the as Tianzhu Village), of approximately 15,415.9 sq.m. Group as warehouse Eas PRC Group is not Shunyi District, (165,937 sq.ft.). and ancillary uses. entitled to freely Beijing transfer the property, The property has a total gross we have not assigned floor area of approximately value to the property. 4,402.9 sq.m. (47,393 sq.ft.) completed in the period from 1970s to 1992.
The land use rights of the property have been allocated for public transport use for an unspecified term.
Notes:
(1) According to Certificate for the Use of State-owned Land No. (93) 0005, the land use rights of the property comprising a site area of 15,415.9 sq.m. have been allocated to Eas International Transportation Ltd. ( ) for public transport use.
(2) According to Building Ownership Certificate dated 20 May 1993, the building ownership rights of the property comprising 24 blocks of buildings having a total gross floor area of 4,402.9 sq.m. are held by Eas International Transportation Ltd. ( ). The details are summarized as follows:
Year of No. completion No. of storey Gross floor area (sq.m.)
1 1991 1 116.5 2 1991 1 668.8 3 1970s 1 177.7 4 1970s 1 177.7 5 1970s 1 180.0 6 1970s 1 239.9 7 1970s 1 26.8 8 1970s 1 84.0 9 1970s 1 95.7 10 1970s 2 687.5 11 1992 1 394.9 12 1992 1 24.7 13 1992 1 235.1 14 1992 1 85.8 15 1970s 1 240.2 16 1970s 1 20.0 17 1970s 1 77.8 18 1992 1 84.4 19 1970s 1 177.7 20 1970s 1 177.7 21 1970s 1 177.8 22 1970s 1 171.1 23 1992 1 44.6 24 1970s 1 36.5
Grand total: 4,402.9
− 253 − APPENDIX VI PROPERTY VALUATION REPORT
(3) According to Business Licence No. 000046 ( ) dated 13 September 2004, Eas International Transportation Ltd. ( ) was registered on 27 February 1985 with current registered capital of RMB150,000,000 (actual paid amount: RMB150,000,000) and the valid operation period is currently from 27 February 1985 to 26 February 2015.
(4) The opinion of Kerry Properties Limited’s legal adviser, Fangda Partners, on PRC law, states that:
(i) Eas International Transportation Ltd. ( ) has obtained Business Licence No. 000046 ( ) dated 13 September 2004 and was registered on 27 February 1985 as a Sino-Foreign Joint Venture with current registered capital of RMB150,000,000 (actual paid amount: RMB150,000,000) and the valid operation period is currently from 27 February 1985 to 26 February 2015.
(ii) The property is located at Blocks 1 to 24 Jinmi East Road (formerly known as Tianzhu Village), Shunyi District, Beijing, which comprises a total gross floor area of 4,402.9 sq.m..
(iii) The building ownership certificate of the property has been obtained.
(iv) The land use rights of the property were obtained by allocation.
(v) Eas International Transportation Ltd. ( ) cannot freely transfer, lease and mortgage the property to a third party.
(5) In accordance with the opinion of the PRC legal opinion and the information provided by the Eas PRC Group, the status of title and grant of major approvals and licenses are as follows:
Certificate for the Use of State-owned Land Yes Building Ownership Certificate Yes Business Licence Yes
− 254 − APPENDIX VI PROPERTY VALUATION REPORT
Capital value in existing state as at Particulars of 30 June 2004 and Property Description and tenure occupancy 31 October 2004
57. Unit 603, The property comprises a The property is As the property has No. 4 Rongfangli, residential unit on Level 6 of a currently occupied not obtained complete Lianhua New 6-storey composite building. by the Eas PRC title document, we Village, Group as residential have not assigned Siming District, The property has a gross floor use. value to the property. Xiamen, area of approximately 76.43 Fujian Province sq.m. (822.69 sq.ft.) completed in 1980s.
The land use rights of the property have been granted for a term of 50 years from 14 May 1987 to 13 May 2037 for residential use.
Notes:
(1) According to Building Ownership Certificate No. 006341 dated July 1992, the building ownership rights of the property comprising a residential unit having a gross floor area of 76.43 sq.m. are held by Eas Express Aircargo System China Ltd. Xiamen Branch ( ).
(2) According to board minutes of Eas Express Aircargo System China Limited dated 7 May 1992, Eas Express Aircargo System China Ltd. ( ) has been renamed as China Eas International Transportation Ltd. ( ).
(3) According to Business Licence No. 0158 ( ) dated 11 February 2003, Eas International Transportation Ltd. Xiamen Branch ( ) was registered on 27 June 1988 and the operation period is currently from 27 February 2002 to 27 February 2006.
(4) The opinion of Kerry Properties Limited’s legal adviser, Fangda Partners, on PRC law, states that:
(i) Eas International Transportation Ltd. Xiamen Branch ( ) has obtained the Business Licence No. 0158 ( ) dated 11 February 2003 and was registered on 27 June 1988 and the operation period is currently from 27 February 2002 to 27 February 2006. Eas International Transportation Ltd. Xiamen Branch ( ) is a branch office of Eas International Transportation Ltd. ( ).
(ii) The property is located at Unit 603, No. 4 Rongfangli, Lianhua New Village, Siming District, Xiamen, Fujian Province, which comprises a gross floor area of 76.43 sq.m..
(iii) The building ownership rights of the property have been obtained.
(iv) The land use rights of the property have not been registered. The rights to the property would be affected. Although this would not affect the usage, it would encounter legal obstacles when the property is transferred or mortgaged.
(5) In accordance with the opinion of the PRC legal opinion and the information provided by the Eas PRC Group, the status of title and grant of major approvals and licenses are as follows:
Certificate for the Use of State-owned Land No Building Ownership Certificate Yes Business Licence Yes
− 255 − APPENDIX VI PROPERTY VALUATION REPORT
Capital value in existing state as at Particulars of 30 June 2004 and Property Description and tenure occupancy 31 October 2004
59. Room 409, The property comprises a The property is As the property has Level 4, Block 1, residential unit on Level 4 of a currently occupied not obtained complete Xinqiao Building, residential building. by the Eas PRC title document, we Heping North Group as residential have not assigned Road, The property has a gross floor use. value to the property. Haikou, area of approximately 79.46 Hainan Province sq.m. (855 sq.ft.) completed in 1990s.
The land use rights of the property is unspecified.
Notes:
(1) According to Building Ownership Certificate No. 5573 dated 6 February 1990, the building ownership rights of the property comprising a gross floor area of 79.46 sq.m. are held by Eas Express Aircargo System China Ltd. Hainan Branch ( ).
(2) According to board minutes of Eas Express Aircargo System China Limited dated 7 May 1992, Eas Express Aircargo System China Ltd. ( ) has been renamed as China Eas International Transportation Ltd. ( ).
(3) According to Business Licence No. 00203 ( ) dated 22 October 2004, Eas International Transportation Ltd. Hainan Branch ( ) was registered on 1 January 1988 and the valid operation period is currently from 1 January 1988 to 26 February 2015.
(4) The opinion of Kerry Properties Limited’s legal adviser, Fangda Partners, on PRC law, states that:
(i) Eas International Transportation Ltd. Hainan Branch ( ) has obtained the Business Licence No. 00203 ( ) dated 22 October 2004 and was registered on 1 January 1988 and the valid operation period is currently from 1 January 1988 to 26 February 2015. Eas International Transportation Ltd. Hainan Branch ( ) is a branch office of Eas International Transportation Ltd. ( ).
(ii) The property is located at Room 409, Level 4, Block 1, Xinqiao Building, Heping North Road, Haikou, which comprises a gross floor area of 79.46 sq.m..
(iii) The building ownership rights of the property have been obtained.
(iv) The land use rights of the property have not been registered. The rights to the property would be affected. Although this would not affect the usage, it would encounter legal obstacles when the property is transferred or mortgaged.
(5) In accordance with the opinion of the PRC legal opinion and the information provided by the Eas PRC Group, the status of title and grant of major approvals and licenses are as follows:
Certificate for the Use of State-owned Land No Building Ownership Certificate Yes Business Licence Yes
− 256 − APPENDIX VI PROPERTY VALUATION REPORT
Capital value in existing state as at Particulars of 30 June 2004 and Property Description and tenure occupancy 31 October 2004
60. Unit C, Level 22, The property comprises an office The property is As the property has Dihao Plaza, unit on Level 22 of a commercial currently occupied not obtained complete No. 2 Longkun building. by the Eas PRC title document, we North Road, Group as office use. have not assigned Haikou, The property has a gross floor value to the property. Hainan Province area of approximately 335.86 sq.m. (3,615 sq.ft.) completed in 1990s.
The land use rights of the property is unspecified.
Notes:
(1) According to Building Ownership Certificate No. 34616 dated 10 March 1998, the building ownership rights of the property comprising a gross floor area of 335.86 sq.m. are held by Eas International Transportation Ltd. Hainan Branch ( ).
(2) According to Business Licence No. 00203 ( ) dated 22 October 2004, Eas International Transportation Ltd. Hainan Branch ( ) was registered on 1 January 1988 and the valid operation period is currently from 1 January 1988 to 26 February 2015.
(3) The opinion of Kerry Properties Limited’s legal adviser, Fangda Partners, on PRC law, states that:
(i) Eas International Transportation Ltd. Hainan Branch ( ) has obtained the Business Licence No. 00203 ( ) dated 22 October 2004 and was registered on 1 January 1988 and the valid operation period is currently from 1 January 1988 to 26 February 2015. Eas International Transportation Ltd. Hainan Branch ( ) is a branch office of Eas International Transportation Ltd. ( ).
(ii) The property is located at Unit C, Level 22, Dihao Plaza, No. 2 Longkun North Road, Haikou, which comprises a gross floor area of 335.86 sq.m..
(iii) The building ownership rights of the property has been obtained.
(iv) The land use rights of the property have not been registered under the name of Eas PRC Group. The rights to the property would be affected. Although this would not affect the usage, it would encounter legal obstacles when the property is transferred or mortgaged.
(4) In accordance with the opinion of the PRC legal opinion and the information provided by the Eas PRC Group, the status of title and grant of major approvals and licenses are as follows:
Certificate for the Use of State-owned Land No Building Ownership Certificate Yes Business Licence Yes
− 257 − APPENDIX VI PROPERTY VALUATION REPORT
Capital value in existing state as at Particulars of 30 June 2004 and Property Description and tenure occupancy 31 October 2004
61. Level 18, Block B, The property comprises an office The property is As the property Wuhan unit on the entire Level 18 of a currently leased for a comprises an International 23-storey commercial building. term from 5 March allocated land and the Building (formerly 2004 to 4 March 2007 Eas PRC Group is not known as Asia The property has a gross floor to a third party at a entitled to freely Plaza), area of approximately 742.83 monthly rent of transfer the property, Dandong Road, sq.m. (7,996 sq.ft.) completed in RMB19,313, we have not assigned Jianghan District, 1990s. exclusive of utility value to the property. Wuhan, charges and Hubei Province The land use rights of the management fees, as property have been allocated for office use. residential use for an unspecified term.
Notes:
(1) According to Certificate for the Use of State-owned Land No. (2004) 83514 dated 17 September 2004, the land use rights of the property have been allocated to Eas International Transportation Ltd. Hubei Branch ( ) for residential use.
(2) According to Building Ownership Certificate No. 200406119 dated 10 August 2004, the building ownership rights of the property comprising a gross floor area of 742.83 sq.m. are held by Eas International Transportation Ltd. Hubei Branch ( ).
(3) According to Business Licence No. 000015 ( ) dated 22 March 2004, Eas International Transportation Ltd. Hubei Branch ( ) was registered on 1 March 1999 and the valid operation period is currently from 1 March 2004 to 26 February 2015.
(4) The opinion of Kerry Properties Limited’s legal adviser, Fangda Partners, on PRC law, states that:
(i) Eas International Transportation Ltd. Hubei Branch ( ) has obtained the Business Licence No. 000015 ( ) dated 22 March 2004 and was registered on 1 March 1999 and the valid operation period is currently from 1 March 2004 to 26 February 2015. Eas International Transportation Ltd. Hubei Branch ( ) is a branch office of Eas International Transportation Ltd. ( ).
(ii) The property is located at Level 18, Block B, Wuhan International Building, Dandong Road, Jianghan District, Wuhan, which comprises a gross floor area of 742.83 sq.m..
(iii) The building ownership rights of the property have been obtained.
(iv) The land use rights of the property were obtained by allocation.
(v) Eas International Transportation Ltd. Hubei Branch ( ) cannot freely transfer, lease and mortgage the property to a third party.
(5) In accordance with the opinion of the PRC legal opinion and the information provided by the Eas PRC Group, the status of title and grant of major approvals and licenses are as follows:
Certificate for the Use of State-owned Land Yes Building Ownership Right Certificate Yes Business Licence Yes
− 258 − APPENDIX VI PROPERTY VALUATION REPORT
Capital value in existing state as at Particulars of 30 June 2004 and Property Description and tenure occupancy 31 October 2004
62. Block 1, The property comprises a The property is As the property has No. 64 Biaoshan 3-storey commercial building currently leased to a not obtained complete Road, erected upon a plot of rectangle- third party for a term title document, we Taidong District, shaped site. from 28 October 2003 have not assigned Qingdao, to 28 October 2008 at value to the property. Shandong Province The property has a total gross an annual rental of floor area of approximately RMB170,000, 470.68 sq.m. (5,066 sq.ft.) exclusive of utility completed in 1990s. charges and management fees as The land use rights of the an entertainment property is unspecified. complex use.
Notes:
(1) According to Building Ownership Certificate No. 2962 dated 27 October 1992, the building ownership rights of the property comprising a total gross floor area of 470.68 sq.m. are held by Eas Express Aircargo System Ltd. Qingdao Branch ( ).
(2) According to board minutes of Eas Express Aircargo System China Limited dated 7 May 1992, Eas Express Aircargo System China Ltd. ( ) has been renamed as China Eas International Transportation Ltd. ( ).
(3) According to Business Licence No. 00004 ( ) dated 28 April 2004, Eas International Transportation Ltd. Qingdao Branch ( ) was registered on 18 January 1988 and the valid operation period is currently from 16 February 1988 to 26 February 2015.
(4) The opinion of Kerry Properties Limited’s legal adviser, Fangda Partners, on PRC law, states that:
(i) Eas International Transportation Ltd. Qingdao Branch ( ) has obtained the Business Licence No. 00004 ( ) dated 28 April 2004 and was registered on 18 January 1988 and the valid operation period is currently from 16 February 1988 to 26 February 2015. Eas International Transportation Ltd. Qingdao Branch ( ) is a branch office of Eas International Transportation Ltd. ( ).
(ii) The property is located at Block 1, No. 64 Biaoshan Road, Taidong District, Qingdao, which comprises a total gross floor area of 470.68 sq.m..
(iii) The building ownership rights of the property have been obtained.
(iv) The land use rights of the property have not been registered. The rights to the property would be affected. Although this would not affect the usage, it would encounter legal obstacles when the property is transferred or mortgaged.
(5) In accordance with the opinion of the PRC legal opinion and the information provided by the Eas PRC Group, the status of title and grant of major approvals and licenses are as follows:
Certificate for the Use of State-owned Land No Building Ownership Certificate Yes Business Licence Yes
− 259 − APPENDIX VI PROPERTY VALUATION REPORT
Capital value in existing state as at Particulars of 30 June 2004 and Property Description and tenure occupancy 31 October 2004
63. South No. 1, The property comprises a The property is As the property has Ancillary commercial unit of a 3-storey currently occupied not obtained complete Commercial Unit, composite building. by the Eas PRC title document, we Exhibition Hall, Group as commercial have not assigned New Era The property has a gross floor use. value to the property. Sub-District, area of approximately 123 sq.m. Development (1,324 sq.ft.) completed in 1990s. District, Qingdao, The land use rights of the Shandong Province property is unspecified.
Notes:
(1) According to Building Ownership Certificate No. 85 dated 12 August 1998, the building ownership rights of the property comprising a gross floor area of 123 sq.m. are held by Eas International Transportation Ltd. Qingdao Branch ( ).
(2) According to Business Licence No. 00004 ( ) dated 28 April 2004, Eas International Transportation Ltd. Qingdao Branch ( ) was registered on 18 January 1988 and the valid operation period is currently from 16 February 1988 to 26 February 2015.
(3) The opinion of Kerry Properties Limited’s legal adviser, Fangda Partners, on PRC law, states that:
(i) Eas International Transportation Ltd. Qingdao Branch ( ) has obtained the Business Licence No. 00004 ( ) dated 28 April 2004 and was registered on 18 January 1988 and the valid operation period is currently from 16 February 1988 to 26 February 2015. Eas International Transportation Ltd. Qingdao Branch ( ) is a branch office of Eas International Transportation Ltd. ( ).
(ii) The property is located at South No. 1, Ancillary Commercial Unit, Exhibition Hall, New Era Sub-District, Development District, Qingdao, which comprises a gross floor area of 123 sq.m..
(iii) The building ownership rights of the property have been obtained.
(iv) The land use rights of the property have not been registered. The rights to the property would be affected. Although this would not affect the usage, it would encounter legal obstacles when the property is transferred or mortgaged.
(4) In accordance with the opinion of the PRC legal opinion and the information provided by the Eas PRC Group, the status of title and grant of major approvals and licenses are as follows:
Certificate for the Use of State-owned Land No Building Ownership Certificate Yes Business Licence Yes
− 260 − APPENDIX VI PROPERTY VALUATION REPORT
Capital value in existing state as at Particulars of 30 June 2004 and Property Description and tenure occupancy 31 October 2004
64. Portion of The property comprises portion Level 1 of the As the property has Levels 1 and 2, of levels 1 and 2 of a 15-storey property with a gross not obtained complete No. 8 Shandong office building erected upon a floor area of 200 title document, we Road, plot of rectangle-shaped site sq.m. (2,153 sq.ft.) is have not assigned Shinan District, having a site area of leased to a third party value to the property. Qingdao, approximately 3,684 sq.m. for a term from 1 Shandong Province (39,655 sq.ft.). March 2004 to 28 February 2005 at an The property has a gross floor annual rental of area of approximately 2,122.82 RMB136,000 sq.m. (22,850 sq.ft.) completed exclusive of utility in 1990s. charges and management fees as The land use rights of the whole office use. building have been granted for a term due to expire on 27 The remaining portion November 2045 for research use. of the property is currently occupied by the Eas PRC Group as office use.
Notes:
(1) According to a Contract entered into between Eas International Transportation Ltd. Qingdao Branch ( ) (Party A) and Jinan Military Zone Taishan Group Qingdao Company ( ) (Party B) on 9 May 1997, Party A agreed to invest an amount of RMB9,140,806 in return for the possession of the property with a gross floor area of 2,122.82 sq.m. (22,850 sq.ft.).
(2) According to Business Licence No. 00004 ( ) dated 28 April 2004, Eas International Transportation Ltd. Qingdao Branch ( ) was registered on 18 January 1988 and the valid operation period is currently from 16 February 1988 to 26 February 2015.
(3) The opinion of Kerry Properties Limited’s legal adviser, Fangda Partners, on PRC law, states that:
(i) Eas International Transportation Ltd. Qingdao Branch ( ) has obtained the Business Licence No. 00004 ( ) dated 28 April 2004 and was registered on 18 January 1988 and the valid operation period is currently from 16 February 1988 to 26 February 2015. Eas International Transportation Ltd. Qingdao Branch ( ) is a branch office of Eas International Transportation Ltd. ( ).
(ii) The property is located at Portion of Levels 1 and 2, No. 8 Shandong Road, Shinan District, Qingdao, which comprises a gross floor area of 2,122.82 sq.m..
(iii) Eas International Transportation Ltd. Qingdao Branch ( ) has not obtained the Real Estate Title Certificate and does not possess the proper legal title of the property.
(4) In accordance with the opinion of the PRC legal opinion and the information provided by the Eas PRC Group, the status of title and grant of major approvals and licenses are as follows:
Real Estate Title Certificate No Business Licence Yes
− 261 − APPENDIX VI PROPERTY VALUATION REPORT
Capital value in existing state as at Particulars of 30 June 2004 and Property Description and tenure occupancy 31 October 2004
65. Room 502, Unit 3, The property comprises a The property is As the property has Block 4, residential unit on Level 5 of a currently leased to a not obtained complete No. 7 Taiwan 6-storey residential building. third party for a term title document, we Road, from 16 February have not assigned Shinan District, The property has a gross floor 2004 to 15 February value to the property. Qingdao, area of approximately 91.63 2005 at an annual Shandong Province sq.m. (986 sq.ft.) completed in rental of RMB14,000, 1990s. exclusive of utility charges and The land use rights of the management fees as property is unspecified. residential use.
Notes:
(1) According to Building Ownership Certificate No. 1383 dated 26 February 2000, the building ownership rights of the property comprising a gross floor area of 91.63 sq.m. are held by Eas International Transportation Ltd. Qingdao Branch ( ).
(2) According to Business Licence No. 00004 ( ) dated 28 April 2004, Eas International Transportation Ltd. Qingdao Branch ( ) was registered on 18 January 1988 and the valid operation period is currently from 16 February 1988 to 26 February 2015.
(3) The opinion of Kerry Properties Limited’s legal adviser, Fangda Partners, on PRC law, states that:
(i) Eas International Transportation Ltd. Qingdao Branch ( ) has obtained the Business Licence No. 00004 ( ) dated 28 April 2004 and was registered on 18 January 1988 and the valid operation period is currently from 16 February 1988 to 26 February 2015. Eas International Transportation Ltd. Qingdao Branch ( ) is a branch office of Eas International Transportation Ltd. ( ).
(ii) The property is located at Room 502, Unit 3, Block 4, No. 7 Taiwan Road, Shinan District, Qingdao, which comprises a gross floor area of 91.63 sq.m..
(iii) The building ownership rights of the property have been obtained.
(iv) The land use rights of the property have not been registered. The rights to the property would be affected. Although this would not affect the usage, it would encounter legal obstacles when the property is transferred or mortgaged.
(4) In accordance with the opinion of the PRC legal opinion and the information provided by the Eas PRC Group, the status of title and grant of major approvals and licenses are as follows:
Certificate for the Use of State-owned Land No Building Ownership Right Certificate Yes Business Licence Yes
− 262 − APPENDIX VI PROPERTY VALUATION REPORT
Capital value in existing state as at Particulars of 30 June 2004 and Property Description and tenure occupancy 31 October 2004
66. Units1&3, The property comprises two The property is As the property has Level 1, office units on Level 1 of a 10- currently vacant. not obtained complete Nanyi Building, storey (including a basement) title document, we No. 2 Lingshiquan office building. have not assigned Road, value to the property. Section 4 of The property has a gross floor Renmen South area of approximately 267.5 Road, sq.m. (2,879 sq.ft.) completed in Wuhou District, 1990s. Chengdu, Sichuan Province The land use rights of the property is unspecified.
Notes:
(1) According to Building Ownership Certificates No. 0013486 dated 25 December 1995, the building ownership rights of the property having a gross floor area of 267.5 sq.m. are held by Eas International Transportation Ltd. Chengdu Branch ( ).
(2) According to Business Licence No. 00034 ( ) dated 1 November 2004, Eas International Transportation Ltd. Chengdu Branch ( ) was registered on 1 July 1993 and the valid operation period is currently from 27 February 2003 to 26 February 2015.
(3) The opinion of Kerry Properties Limited’s legal adviser, Fangda Partners, on PRC law, states that:
(i) Eas International Transportation Ltd. Chengdu Branch ( ) has obtained the Business Licence No. 00034 ( ) dated 1 November 2004 and was registered on 1 July 1993 and the valid operation period is currently from 27 February 2003 to 26 February 2015. Eas International Transportation Ltd. Chengdu Branch ( ) is a branch office of Eas International Transportation Ltd. ( ).
(ii) The property is located at Units1&3,Level 1, Nanyi Building, No. 2 Lingshiquan Road, Section 4 of Renmen South Road, Wuhou District, Chengdu, which comprises a gross floor area of 267.5 sq.m..
(iii) The building ownership rights of the property have been obtained.
(iv) The land use rights of the property have not been registered. The rights to the property would be affected. Although this would not affect the usage, it would encounter legal obstacles when the property is transferred or mortgaged.
(4) In accordance with the opinion of the PRC legal opinion and the information provided by the Eas PRC Group, the status of title and grant of major approvals and licenses are as follows:
Certificate for the Use of State-owned Land No Building Ownership Certificate Yes Business Licence Yes
− 263 − APPENDIX VI PROPERTY VALUATION REPORT
Capital value in existing state as at Particulars of 30 June 2004 and Property Description and tenure occupancy 31 October 2004
67. Units 1-1, 1-2 & The property comprises three Units 1-1 and 1-2 is As the property has 1-4, residential units on Level 1 of a currently leased for a not obtained complete No. 58 Yanghe 1st 11-storey composite building. term of one year at a title document, we Village, monthly rent of have not assigned Jiangbei District, The property has a gross floor RMB3,500 exclusive value to the property. Chongqing area of approximately 255.63 management fee and sq.m. (2,752 sq.ft.) completed in utility charges for 1990s. restaurant use whilst Unit 1-4 is currently The land use rights of the occupied by the Eas property is unspecified. PRC Group as staff quarters and warehouse.
Notes:
(1) According to Building Ownership Certificate No. 100-100907 dated 21 October 2003, the building ownership rights of the property having a gross floor area of 255.63 sq.m. are held by Eas International Transportation Ltd. ( ).
(2) According to Business Licence No. 000046 ( ) dated 13 September 2004, Eas International Transportation Ltd. ( ) was registered on 27 February 1985 with current registered capital of RMB150,000,000 (actual paid amount: RMB150,000,000) and the valid operation period is currently from 27 February 1985 to 26 February 2015.
(3) The opinion of Kerry Properties Limited’s legal adviser, Fangda Partners, on PRC law, states that:
(i) Eas International Transportation Ltd. ( ) has obtained Business Licence No. 000046 ( ) dated 13 September 2004 and was registered on 27 February 1985 as a Sino-Foreign Joint Venture with current registered capital of RMB150,000,000 (actual paid amount: RMB150,000,000) and the valid operation period is currently from 27 February 1985 to 26 February 2015.
(ii) The property is located at Units 1-1, 1-2 and 1-4, No. 58 Yanghe 1st Village, Jiangbei District, Chongqing, which comprises a gross floor area of 255.63 sq.m..
(iii) The building ownership rights of the property have been obtained.
(iv) The land use rights of the property have not been registered. The rights to the property would be affected. Although this would not affect the usage, it would encounter legal obstacles when the property is transferred or mortgaged.
(4) In accordance with the opinion of the PRC legal opinion and the information provided by the Eas PRC Group, the status of title and grant of major approvals and licenses are as follows:
Certificate for the Use of State-owned Land No Building Ownership Certificate Yes Business Licence Yes
− 264 − APPENDIX VI PROPERTY VALUATION REPORT
Capital value in existing state as at Particulars of 30 June 2004 and Property Description and tenure occupancy 31 October 2004
69. Block No. 8, The property comprises a The property is As the property has Commercial Street, 4-storey office and warehouse currently occupied not obtained complete Xinying South building erected upon a plot of by the Eas PRC title document, we District, rectangular shaped site. Group as office and have not assigned Kunmin, warehouse uses. value to the property. Yunnan Province The property has a total gross floor area of approximately 1,083.9 sq.m. (11,667 sq.ft.) completed in 1990s.
The land use rights of the property is unspecified.
Notes:
(1) According to Building Ownership Certificate No. 200121519 dated 21 September 2001, the building ownership rights of the property having a total gross floor area of 1,083.9 sq.m. are held by Eas International Transportation Ltd. Yunnan Branch ( ).
(2) According to Business Licence No. 00043 ( ) dated 11 November 2004, Eas International Transportation Ltd. Yunnan Branch ( ) was registered on 25 March 1993 and the valid operation period is currently from 25 March 1993 to 11 October 2005.
(3) The opinion of Kerry Properties Limited’s legal adviser, Fangda Partners, on PRC law, states that:
(i) Eas International Transportation Ltd. Yunnan Branch ( ) has obtained the Business Licence No. 00043 ( ) dated 11 November 2004 and was registered on 25 March 1993 and the valid operation period is currently from 25 March 1993 to 11 October 2005. Eas International Transportation Ltd. Yunnan Branch ( ) is a branch office of Eas International Transportation Ltd. ( ).
(ii) The property is located at Block No. 8, Commercial Street, Xinying South District, Kunmin, which comprises a total gross floor area of 1,083.9 sq.m..
(iii) The building ownership rights of the property have been obtained.
(iv) The land use rights of the property have not been registered. The rights to the property would be affected. Although this would not affect the usage, it would encounter legal obstacles when the property is transferred or mortgaged.
(4) In accordance with the opinion of the PRC legal opinion and the information provided by the Eas PRC Group, the status of title and grant of major approvals and licenses are as follows:
Certificate for the Use of State-owned Land No Building Ownership Certificate Yes Business Licence Yes
− 265 − APPENDIX VI PROPERTY VALUATION REPORT
Capital value in existing state as at Particulars of 30 June 2004 and Property Description and tenure occupancy 31 October 2004
74. Unit 9-2-202, The property comprises a The property is As the property has Changchun Lane, residential unit on Level 2 of a currently occupied not obtained complete Tanggu District, 6-storey residential building. by the Eas PRC title document, we Tianjin Group as residential have not assigned The property has a gross floor use. value to the property. area of approximately 64 sq.m. (689 sq.ft.) completed in 1990s.
The land use rights of the property is unspecified.
Notes:
(1) According to Building Ownership Certificate No. 00003998 dated 15 April 1997, the building ownership rights of the property having a gross floor area of 64 sq.m. are held by Eas International Transportation Ltd. Tanggu Representative Office ( ).
(2) According to Registration Certificate No. 00127 ( ) dated 25 April 2003, the valid operation period of Eas International Transportation Ltd. Tanggu Representative Office ( ) is currently from 17 October 1994 to 26 February 2007.
(3) The opinion of Kerry Properties Limited’s legal adviser, Fangda Partners, on PRC law, states that:
(i) Eas International Transportation Ltd. Tanggu Representative Office ( ) has obtained the Registration Certificate No. 00127 ( ) dated 25 April 2003 and the valid operation period is currently from 17 October 1994 to 26 February 2007. Eas International Transportation Ltd. Tanggu Representative Office ( ) is a representative office of Eas International Transportation Ltd. ( ).
(ii) The property is located at Unit 9-2-202, Changchun Lane, Tanggu District, Tianjin, which comprises a gross floor area of 64 sq.m..
(iii) The building ownership rights of the property have been obtained.
(iv) The land use rights of the property have not been registered. The rights to the property would be affected. Although this would not affect the usage, it would encounter legal obstacles when the property is transferred or mortgaged.
(4) In accordance with the opinion of the PRC legal opinion and the information provided by the Eas PRC Group, the status of title and grant of major approvals and licenses are as follows:
Certificate for the Use of State-owned Land No Building Ownership Certificate Yes Registration Certificate Yes
− 266 − APPENDIX VI PROPERTY VALUATION REPORT
Capital value in existing state as at Particulars of 30 June 2004 and Property Description and tenure occupancy 31 October 2004
84. Unit 505, Block B, The property comprises a The property is As the property is not Xinzhou Garden residential unit on Level 5 of a currently occupied entitled to freely Building, 30-storey residential building by the Eas PRC transfer, we have not Xinzhou Road, erected on a 3-storey podium. Group as staff assigned value to the Futian District, quarters. property. Shenzhen, The property has a gross floor Guangdong area of approximately 91.92 Province sq.m. (989 sq.ft.) completed in 1996.
The land use rights of the property have been transferred in the nature of Economically Affordable Housing for a term expiring on 17 November 2068 for residential use.
Notes:
(1) According to Real Estate Title Certificate No. 3000042358 dated 1 November 1999, the land use rights and building ownership rights of the property, comprising a gross floor area of 91.92 sq.m. have been transferred in the nature of Economically Affordable Housing to Shenzhen Eas International Transportation Ltd. ( ) for a term expiring on 17 November 2068 for residential use.
(2) According to Business Licence No. 105062 ( ) dated 19 May 2004, Shenzhen Eas International Transportation Ltd. ( ) was registered on 30 October 1993 with current registered capital of US$1,000,000 (actual paid amount: US$1,000,000) and the valid operation period is currently from 30 October 1993 to 30 April 2006.
(3) The opinion of Kerry Properties Limited’s legal adviser, Fangda Partners, on PRC law, states that:
(i) Shenzhen Eas International Transportation Ltd. ( ) has obtained the Business Licence No. 105062 ( ) dated 19 May 2004 and was registered on 30 October 1993 with current registered capital of US$1,000,000 (actual paid amount: US$1,000,000) and the valid operation period is currently from 30 October 1993 to 30 April 2006. Eas International Transportation Ltd. ( ) is the sole shareholder of Shenzhen Eas International Transportation Ltd. ( ).
(ii) The property is located at Unit 505, Block B, Xinzhou Garden Building, Xinzhou Road, Futian District, Shenzhen, which comprises a gross floor area of 91.92 sq.m..
(iii) Shenzhen Eas International Transportation Ltd. ( ) has obtained the building ownership rights and land use rights of the property.
(iv) The property is in the nature of Economically Affordable Housing ( ), which cannot be freely transferred, mortgaged and leased.
(4) In accordance with the opinion of the PRC legal opinion and the information provided by the Eas PRC Group, the status of title and grant of major approvals and licenses are as follows:
Real Estate Title Certificate Yes Business Licence Yes
− 267 − APPENDIX VI PROPERTY VALUATION REPORT
Capital value in existing state as at Particulars of 30 June 2004 and Property Description and tenure occupancy 31 October 2004
85. Unit 506, Block B, The property comprises a The property is As the property is not Xinzhou Garden residential unit on Level 5 of a currently occupied entitled to freely Building, 30-storey residential building by the Eas PRC transfer, we have not Xinzhou Road, erected on a 3-storey podium. Group as staff assigned value to the Futian District, quarters. property. Shenzhen, The property has a gross floor Guangdong area of approximately 108.81 Province sq.m. (1,171 sq.ft.) completed in 1996.
The land use rights of the property have been transferred in the nature of Economically Affordable Housing for a term expiring on 17 November 2068 for residential use.
Notes:
(1) According to Real Estate Title Certificate No. 3000042356 dated 1 November 1999, the land use rights and building ownership rights of the property, comprising a gross floor area of 108.81 sq.m. have been transferred in the nature of Economically Affordable Housing to Shenzhen Eas International Transportation Ltd. ( ) for a term expiring on 17 November 2068 for residential use.
(2) According to Business Licence No. 105062 ( ) dated 19 May 2004, Shenzhen Eas International Transportation Ltd. ( ) was registered on 30 October 1993 with current registered capital of US$1,000,000 (actual paid amount: US$1,000,000) and the valid operation period is currently from 30 October 1993 to 30 April 2006.
(3) The opinion of Kerry Properties Limited’s legal adviser, Fangda Partners, on PRC law, states that:
(i) Shenzhen Eas International Transportation Ltd. ( ) has obtained the Business Licence No. 105062 ( ) dated 19 May 2004 and was registered on 30 October 1993 with current registered capital of US$1,000,000 (actual paid amount: US$1,000,000) and the valid operation period is currently from 30 October 1993 to 30 April 2006. Eas International Transportation Ltd. ( ) is the sole shareholder of Shenzhen Eas International Transportation Ltd. ( ).
(ii) The property is located at Unit 506, Block B, Xinzhou Garden Building, Xinzhou Road, Futian District, Shenzhen, which comprises a gross floor area of 108.81 sq.m..
(iii) Shenzhen Eas International Transportation Ltd. ( ) has obtained the building ownership rights and land use rights of the property.
(iv) The property is in the nature of Economically Affordable Housing ( ), which cannot be freely transferred, mortgaged and leased.
(4) In accordance with the opinion of the PRC legal opinion and the information provided by the Eas PRC Group, the status of title and grant of major approvals and licenses are as follows:
Real Estate Title Certificate Yes Business Licence Yes
− 268 − APPENDIX VI PROPERTY VALUATION REPORT
Capital value in existing state as at Particulars of 30 June 2004 and Property Description and tenure occupancy 31 October 2004
88. Units 2-1, 4-1, 5-1 The property comprises 4 The property is As the property has and 6-1, residential units on Levels 2, 4, 5 currently vacant. not obtained complete No. 15-4, and 6 of a 7-storey residential title document, we Block No. 4, building. have not assigned Xinghuo Street, value to the property. Xigang District, The property has a total gross Dalian, floor area of approximately 363.4 Liaoning Province sq.m. (3,912 sq.ft.) completed in 1990s.
The land use rights of the property have been granted for a term from 19 January 1996 to 24 September 2063 for residential and ancillary facility uses.
Notes:
(1) According to Building Ownership Certificate No. 1998007192 dated 17 August 1998, the building ownership rights of the property having a total gross floor area of 363.4 sq.m. are held by Eas International Transportation Ltd. Dalian Branch ( ).
(2) According to Business Licence No. 00002 ( ) dated 9 August 2004, Eas International Transportation Ltd. Dalian Branch ( ) was registered on 13 August 1987 and the valid operation period is currently from 13 August 1987 to 25 February 2015.
(3) The opinion of Kerry Properties Limited’s legal adviser, Fangda Partners, on PRC law, states that:
(i) Eas International Transportation Ltd. Dalian Branch ( ) has obtained the Business Licence No. 00002 ( ) dated 9 August 2004 and was registered on 13 August 1987 and the valid operation period is currently from 13 August 1987 to 25 February 2015. Eas International Transportation Ltd. Dalian Branch ( ) is a branch office of Eas International Transportation Ltd. ( ).
(ii) The property is located at Units 2-1, 4-1, 5-1 and 6-1, Block No. 4, No. 15-4 Xinghuo Street, Xigang District, Dalian, which comprises a total gross floor area of 363.4 sq.m..
(iii) The building ownership rights of the property have been obtained.
(iv) The land use rights of the property have not been registered. The rights to the property would be affected. Although this would not affect the usage, it would encounter legal obstacles when the property is transferred or mortgaged.
(4) In accordance with the opinion of the PRC legal opinion and the information provided by the Eas PRC Group, the status of title and grant of major approvals and licenses are as follows:
Certificate for the Use of State-owned Land No Building Ownership Certificate Yes Business Licence Yes
− 269 − APPENDIX VI PROPERTY VALUATION REPORT
Capital value in existing state as at Particulars of 30 June 2004 and Property Description and tenure occupancy 31 October 2004
89. Units 1-3, 3-3, The property comprises 6 4-3 of No. 17-3 and As the property has 4-3, 5-3 & 7-3 of residential units on Levels 2, 4, 5 3-3 of No. 17-4 with not obtained complete No. 17-4 and and 6 of a 7-storey residential a total gross floor title document, we Unit 4-3 of building. area of 139.08 sq.m. have not assigned No. 17-3, (1,497 sq.ft.) are value to the property. Block No. 3, The property has a total gross currently vacant, Xinghuo Street, floor area of approximately whilst the remaining 4 Xigang District, 417.24 sq.m. (4,491 sq.ft.) units with a total Dalian, completed in 1990s. gross floor area of Liaoning Province 278.16 sq.m. (2,994 The land use rights of the sq.ft.) are currently property have been granted for a occupied by the Eas term from 19 January 1996 to 24 PRC Group as staff September 2063 for residential quarters. and ancillary facility uses.
Notes:
(1) According to Building Ownership Certificate No. 1998007193 dated 17 August 1998, the building ownership rights of the property having a total gross floor area of 417.24 sq.m. are held by Eas International Transportation Ltd. Dalian Branch ( ).
(2) According to Business Licence No. 00002 ( ) dated 9 August 2004, Eas International Transportation Ltd. Dalian Branch ( ) was registered on 13 August 1987 and the valid operation period is currently from 13 August 1987 to 25 February 2015.
(3) The opinion of Kerry Properties Limited’s legal adviser, Fangda Partners, on PRC law, states that:
(i) Eas International Transportation Ltd. Dalian Branch ( ) has obtained the Business Licence No. 00002 ( ) dated 9 August 2004 and was registered on 13 August 1987 and the valid operation period is currently from 13 August 1987 to 25 February 2015. Eas International Transportation Ltd. Dalian Branch ( ) is a branch office of Eas International Transportation Ltd. ( ).
(ii) The property is located at Units 1-3, 3-3, 4-3, 5-3 & 7-3 of No. 17-4 and Unit 4-3 of No. 17-3, Block No. 3, Xinghuo Street, Xigang District, Dalian, which comprises a total gross floor area of 417.24 sq.m..
(iii) The building ownership rights of the property have been obtained.
(iv) The land use rights of the property have not been registered. The rights to the property would be affected. Although this would not affect the usage, it would encounter legal obstacles when the property is transferred or mortgaged.
(4) In accordance with the opinion of the PRC legal opinion and the information provided by the Eas PRC Group, the status of title and grant of major approvals and licenses are as follows:
Certificate for the Use of State-owned Land No Building Ownership Certificate Yes Business Licence Yes
− 270 − APPENDIX VI PROPERTY VALUATION REPORT
Capital value in existing state as at Particulars of 30 June 2004 and Property Description and tenure occupancy 31 October 2004
90. Rooms1&2of The property comprises 12 Rooms1&2on As the property Levels 1 to 6, residential units on Levels 1 to 6 Level 1 with a total comprises an Unit 2, Block 24, of a 6-storey residential building. gross floor area of allocated land and the No. 8 Minyun 189.58 sq.m. (2,041 Eas PRC Group is not Alley, The property has a total gross sq.ft.) is currently entitled to freely Zhongshan floor area of approximately vacant, whilst the transfer the property, District, 1,137.48 sq.m. (12,244 sq.ft.) remaining 10 rooms we have not assigned Dalian, completed in 1990s. with a total gross value to the property. Liaoning Province floor area of 947.9 The land use rights of the sq.m. (10,203 sq.ft.) property have been allocated for are currently occupied residential use for an unspecified by the Eas PRC term. Group as staff quarters.
Notes:
(1) According to Building Ownership Certificate No. 2001161335 dated 17 December 2001, the building ownership rights of the property having a total gross floor area of 1,137.48 sq.m. are held by Eas International Transportation Ltd. Dalian Branch ( ).
(2) According to Business Licence No. 00002 ( ) dated 9 August 2004, Eas International Transportation Ltd. Dalian Branch ( ) was registered on 13 August 1987 and the valid operation period is currently from 13 August 1987 to 25 February 2015.
(3) The opinion of Kerry Properties Limited’s legal adviser, Fangda Partners, on PRC law, states that:
(i) Eas International Transportation Ltd. Dalian Branch ( ) has obtained the Business Licence No. 00002 ( ) dated 9 August 2004 and was registered on 13 August 1987 and the valid operation period is currently from 13 August 1987 to 25 February 2015. Eas International Transportation Ltd. Dalian Branch ( ) is a branch office of Eas International Transportation Ltd. ( ).
(ii) The property is located at Rooms1&2ofLevels 1 to 6, Unit 2, Block 24, No. 8 Minyun Alley, Zhongshan District, Dalian, Liaoning Province which comprises a total gross floor area of 1,137.48 sq.m..
(iii) The building ownership rights of the property have been obtained.
(iv) The land use rights of the property were obtained by allocation.
(v) Eas International Transportation Ltd. Dalian Branch ( ) cannot freely transfer, lease and mortgage the property to a third party.
(4) In accordance with the opinion of the PRC legal opinion and the information provided by the Eas PRC Group, the status of title and grant of major approvals and licenses are as follows:
Certificate for the Use of State-owned Land No Building Ownership Certificate Yes Business Licence Yes
− 271 − APPENDIX VI PROPERTY VALUATION REPORT
Valuation Certificate
Group III – Residential units sold to the staff of the Eas PRC Group but title not yet changed in the PRC
Capital value in existing state as at Particulars of 30 June 2004 and Property Description and tenure occupancy 31 October 2004
26 residential properties The properties comprise 26 The properties have As the properties sold to the staff of the residential properties completed been sold to the staff were sold, we have Eas PRC Group in between 1980’s to 1990’s of the Eas PRC not assigned value to Beijing, Tianjin, respectively. Group. The purchase the properties. Shanghai and Shenzhen See Note 1 considerations are to be paid by the staff to the Eas PRC Group within 5 years.
Notes:
(1) Details of the properties are as follows:
Property Gross no. Address floor area (sq.m.)
5. Room 202, Unit 2, Level 2, Block 202, Wangjing West Park, 112.94 Chaoyang District, Beijing
19. Units 506-510, Level 5, Unit 3, Block 3, Xiangxie Lane, Diantai 136.51 Road, Heping District, Tianjin
21. Room 403, Unit 2, Block 2, Wangchuanchang 1st Road, Hedong 72.84 District, Tianjin
22. Room 203, Unit 2, Block 2, Wangchuanchang 1st Road, Hedong 72.84 District, Tianjin
23. Room 503, Unit 2, Block 2, Wangchuanchang 1st Road, Hedong 72.84 District, Tianjin
24. No. 6-5-603, Jinyu Lane, Chuxiong Road, Nankai District, Tianjin 98.25
25. Room 403, Level 4, Unit 1, Block 4, Liuyuan Apartment, Dagu 102.14 South Road, Hexi District, Tianjin
26. Rooms 401-404, Unit 2, No. 18 Jiahua Lane, Chenglinzhuang, 73.98 Hedong District, Tianjin
45. Units 1601-1606, No. 1 of Alley 444 Miyun Road, Yangpu District, 395.62 Shanghai
46. Unit 1403, No. 10 of Alley 1310 Dingxi Road, Changning District, 82.20 Shanghai
47. Unit 601, No. 8 of Alley 408 Yishan Road, Xuhui District, Shanghai 82.77
48. Unit 101, No. 64 Pingji 1st Village, Hongshen Road, Minheng 80.55 District, Shanghai
− 272 − APPENDIX VI PROPERTY VALUATION REPORT
Property Gross no. Address floor area (sq.m.)
49. Unit 4, Level 5, Block 1, Dongan Apartment, Alley 645 Changping 77.53 Road, Jinan District, Shanghai
50. Unit 2, Level 25, Block 1, Dongan Apartment, Alley 645 Changping 106.62 Road, Jinan District, Shanghai
51. Unit 5, Level 25, Block 1, Dongan Apartment, Alley 645 Changping 106.62 Road, Jinan District, Shanghai
52. Unit 3, Level 26, Block 1, Dongan Apartment, Alley 645 Changping 83.44 Road, Jinan District, Shanghai
53. Unit 1, Level 5, Block 3, Dongan Apartment, Alley 645 Changping 76.59 Road, Jinan District, Shanghai
54. Unit 3, Level 5, Block 1, Dongan Apartment, Alley 645 Changping 77.53 Road, Jinan District, Shanghai
71b. Room 703, Unit 1, Block 13, Jinsha Lane, Nankai District, Tianjin 55.78
75. Room 301,Unit 1,No. 108 Changcheng Lane, Hexi District, Tianjin 88.50
76. Room 505, Level 5, Block 505, Unit 4, Block 3, Yichang Garden, 43.23 Yichang Road, Heping District, Tianjin
77. Room 302 (also known as Rooms 305-307), Level 3, Unit 4, No. 1 61.34 Shiping Lane, Yuanyang Road, Hongqi Road, Nankai District, Tianjin
78. Unit 405, Level 4, Block 1, No. 12, Dieqiao Apartment, Hedong 52.31 District, Tianjin
80. Room 501, Level 5, Unit 3, Block 7, Lusheng Sub-District, 79.99 Zhongshanmen 2nd Road, Hedong District, Tianjin
81. Room 605, Unit 2, Block 3, No. 2 Longchuan Road, Nankai 63.25 District, Tianjin
86a. Unit 401, Residential Block 17, Suibei 2nd Road, Luohu District, 70.91 Shenzhen
Grand total: 2,427.12
(2) The opinion of Kerry Properties Limited’s legal adviser, Fangda Partners, on PRC law, states that:
According to the documents and information provided by the Eas PRC Group, the sale and purchase contracts of the properties have been entered into between the Eas PRC Group and the staff of the Eas PRC Group. The purchase considerations are to be paid by the staff to the Eas PRC Group within 5 years. Eas PRC Group should register the transfer of the land use rights and building ownership rights of the properties after the staff have fully paid for the properties. However, the land use rights and building ownership rights of the properties belong to the Eas PRC Group of the properties before any registration of title transfer.
− 273 − APPENDIX VI PROPERTY VALUATION REPORT
Group IV – Property leased by the Eas PRC Group in the PRC
Capital value in existing state as at Particulars of 30 June 2004 and Property Description and tenure occupancy 31 October 2004
Various properties leased The properties comprise 171 The properties are No commercial value by the Eas PRC Group premises for use as warehouses, leased and occupied in 28 Provinces/ industrial, offices, residential, by the Eas PRC Municipalities/ commercial, research, operation, Group for Autonomous Regions carpark and production located in warehouses, in the PRC Beijing, Chongqing, Shanghai, industrial, offices, Tianjin, Jiangsu Province, residential, Zhejiang Province, Liaoning commercial, research, Province, Hubei Province, operation, carpark and Jiangxi Province, Hunan production uses. Province, Shandong Province, Heilongjiang Province, Jilin Province, Hebei Province, Gansu Province, Shanxi Province, Henan Province, Qinghai Province, Shaanxi Province, Guangdong Province, Guangxi Province, Fujian Province, Sichuan Province, Guizhou Province, Yunnan, Province, Anhui Province, Xinjiang Autonomous Region and Inner Mongolia Autonomous Region.
The properties are leased by the Eas PRC Group under various tenancy agreements for different terms with the latest tenancy due to expire in February 2028 at a total monthly rent of approximately RMB2,896,001.74.
Notes:
(1) The Eas PRC Group has leased a total of 171 properties in the PRC with a total lease area of approximately 128,218.39 sq.m. as at 31 October 2004.
(2) Details of the properties leased by the Eas PRC Group in the PRC are summarized as follows:
Gross No. Address Usage floor area (sq.m.)
1. No. 58 Huqingping Road, Shanghai, the PRC Office and 4,913.00 warehouse
2. Warehouse I1, I2 & I3, Pudong Logistics Centre Agent Office and 5,569.00 Warehouse, Cargo Avenue, Pudong New Area, Shanghai, warehouse the PRC
− 274 − APPENDIX VI PROPERTY VALUATION REPORT
Gross No. Address Usage floor area (sq.m.)
3. Unit 706(A), Level 7, Xinyin Building, No. 888 Tishan Road, Office 39.27 Xuhui District, Shanghai, the PRC
4. Portion of Level 1-2, No. 18 Huachangxi Road, Operation 200.00 Songjiang Export Processing Zone, Shanghai, the PRC
5. Unit 516, Level 5, Modern Communication Building, No. 201 Office 169.80 Jinqiao Road, Pudong New Area, Shanghai, the PRC
6. Level 5, No. 1000 Qihang Road, Pudong New Area, the PRC Office 2,055.34
7. Unit 218, Level 2, East Podium, Lujiazuixi Road, Office 27.10 Pudong New Area, Shanghai, the PRC
8. Unit 316, Level 3, No. 2015 Yanggaobei Road, Office 10.00 Pudong New Area, Shanghai, the PRC
9. Area 05B-06B & B8-B9, China Air-cargo Hongqiao Warehouse 4,392.00 Warehouse, Hongqiao, Shanghai, the PRC
10. Area 16 & 18, Warehouse C, Express Processing Centre, Warehouse 270.00 Pudong International Airport, Shanghai, the PRC
11. Level 2, No. 31 Nanle Road, Songjiang Export Processing Office 55.00 Area, Shanghai, the PRC
12. Level 26, Passenger Building Main Tower, No. 18 Yangshe Office 685.90 Road, Hongkou District, Shanghai, the PRC
13. South side of Songjiang Export Processing Administration Office and 400.00 Area, Shanghai, the PRC carpark
14. Unit 404 & 405, Level 4, Coal Import & Export Building, Office 110.00 No. 36 Shifuxi Street, Taiyuan, Shanxi Province, the PRC
15. Shop on Level 1, No. 236 Shenglidong Street, Office 109.00 Weifang, Shandong Province, the PRC
16. Unit 1103, 1105 & 1107, Level 11, Yili Building, Office 174.00 No. 80 Chaoyang Street, Yintei, Shandong Province, the PRC
17. Conference Room on Level 3, south side 2 rooms and 309, Office 45.00 Level 3, Business Building, Laishan Airport Hotel, Yintai, Shandong Province, the PRC
18. Unit 18, Block 5, Fulai Development Area, Yintai, Office 120.00 Shandong Province, the PRC
19. A warehouse unit at Custom Administration Warehouse, Warehouse 33.00 Yintai, Shandong Province, the PRC
20. Unit 1719, Weihai International Business Building, Office 49.00 No. 106 Haibinbei Road, Weihai, Shandong Province, the PRC
21. Level 1, Tianhai Cargoes Centre and 2 car parks, Office 416.56 Gaojia Village, Liuting, Qingdao, Shandong Province, the PRC
− 275 − APPENDIX VI PROPERTY VALUATION REPORT
Gross No. Address Usage floor area (sq.m.)
22. Liuting Airport Administration Warehouse, Qingdao, Warehouse 360.00 Shandong Province, the PRC
23. No. 16 Zhonglao Road, Licang, Qingdao, Shandong Province, Warehouse 2,433.43 the PRC
24. Unit 201, Post Office Building Office East Level 1, Office 22.04 No. 222 Yananshan Road, Shinan District, Qingdao, Shandong Province, the PRC
25. Unit 206, Level 2, Liuting Airport Custom Office Building, Office 3.60 Maiotou Village, Liuting Town, Chenyang District, Qingdao, Shandong Province, the PRC
26. The 4th Block on the east side of No. 7 Factory, Warehouse 2,002.00 Hong Kong Industrial Park, Qingdao, Shandong Province, the PRC
27. Unit 2013 & 2014, Level 20, Lixia Building, Office 108.00 109 Jiefang Raod, Jinan, Shandong Province, the PRC
28. Unit 103, Level 1, Custom Airport Office, Jinan, Office 20.00 Shandong Province, the PRC
29. Warehouse at Phase II Project, Gaijiagou, Jiqing Highway, Warehouse 2,000.00 Jinan, Shandong Province, the PRC
30. Area F, Freight Concentration Administration, Jinan, Warehouse 56.00 Shandong Province, the PRC
31. Portion of Level 2 of a Building, No. 48 Shandanan Road, Warehouse 170.00 Jinan, Shandong Province, the PRC and office
32. Unit 211, Block 45, at the side of Zhujia Village Flyover, Office 23.00 Kunming, the PRC
33. Unit 0204, Level 2, Custom Business Building, Kunming, Office 28.67 the PRC
34. Two rooms on the West Side of Level 1 Shop, Office and 61.00 No. 27 Mianfang Sub-District, Gangti Avenue, Baotou, warehouse Inner Mongolia Autonomous Region, the PRC
35. Unit H, I, J,K&L,Level 8 Taida Building, No. 256 Office 741.76 Jiefangnan Road, Tianjin, the PRC
36. Shop Unit 14, Level 1, Phase II, Shengtai Apartment, Office 264.09 No. 82 Dongting Road, Tianjin Development Zone, Tianjin, the PRC
37. Unit 401-402, Level 4, Go Out & Entry Examination Office 63.05 Quarantine Building, Tianjian Airport, Tianjin, the PRC
38. Printing Building at the northeast corner of Industrial Office 2,369.00 Complex, 204 Weiguo Road, Dongli District, Tianjin, the PRC
− 276 − APPENDIX VI PROPERTY VALUATION REPORT
Gross No. Address Usage floor area (sq.m.)
39. Unit 106-104, Area A, Composite Building, Zhaotong Office 54.00 Composite Buidling, Xiaoyuan Road, First Street, Tianjin Economical & Development Area, the PRC
40. Custom Administration Warehouse A4A5, Zone D, Office and 1,100.00 19 Third Avenue, Logistics Area, Tianjin Airport, the PRC warehouse
41. China Leather & Shoe Research Institute, No. 18 Jiangtei Office 600.00 Road, Chaoyang District, Beijing, the PRC
42. Unit 306, Level 3 and 6 car parks, Tianruijia Business Centre, Office 211.00 No. 1 Qianyi Street, Shunyi District, Beijing, the PRC
43. Unit 305, Level 3, Composite Office Building, Beijing, Office 21.60 the PRC
44. East side of lobby, Beijing Asia Hotel, No. 8 Zhongxi Street, Office 30.00 Gongtibei Road, Beijing, the PRC
45. Level 1, Beijing Aerography Composite Building, Office 300.00 No. 44 Zhizhuyuan Road, Haidian District, Beijing, the PRC
46. Shop Unit L218, Level 2, International Trade Commerce City, Operation 40.08 China International Trade Centre, No. 1 Jianguomenwai Avenue, Chaoyang District, Beijing, the PRC
47. Unit 6, Level 1, Eastern Trade West 2 Tower, Dongfang Office 53.00 Square, No. 1 Changan Street, Dongcheng District, Beijing, the PRC
48. An office unit at Sichuan Province Electronic Computer Office 131.00 Research Centre, No. 3 Kexi Road, Sichuan Province, the PRC
49. Unit 201, Shuangliu County Airport Custom Office, Office 57.50 Chengdu, Sichuan Province, the PRC
50. Sichuan Province Electronic Computer Research Centre, Office 307.00 Block A, No. 3 Kexi Road, Chengdu, Sichuan Province, the PRC
51. Units 308 and 310, Level 3, Chengdu Railway Custom Office 45.54 Clearance Building, No. 61 Balizhuang, Chengdu, Sichuan Province, the PRC
52. An unit on Level 4, Liangshanzhou Handicapped Persons Office 97.00 Composite Service Building, 32 Changan Road, Xichang, the PRC
53. A warehouse and an office unit on Level 1, Office 88.00 Custom Building, Fayuan Road, Fucheng District, Mianyang, Sichuan Province, the PRC
54. Unit 105 & 207, Leshan Custom Building, 36 Annan Road, Office 50.00 Leshan, Sichuan Province, the PRC
55. 5 rooms on Level 2 and 1 room on Level 1, No. 7 Dongganxi Office 134.00 Road, Chengguan District, Nanzhou, Gansu Province, the PRC
− 277 − APPENDIX VI PROPERTY VALUATION REPORT
Gross No. Address Usage floor area (sq.m.)
56. Unit 614, Science 7 Technology City, No. 76 Shuncheng Office 47.00 Street, Chuanying, Jilin Province, the PRC
57. A 30 sq.m. room at the back yard, 5 rooms on Office 447.00 Level 3, 6 rooms on Level 2, lobby on Level 1 of a 3-storey building, No. 1927 Zhenyang Street, Changchun, Jilin Province, the PRC
58. Level 1, No. 669 Changjiangxi Road, Hefei, Office and 1,100.00 Anhui Province, the PRC warehouse
59. A shop at right side of Level 1, No. 288 Jiuhua Road, Operation 70.00 Wuhu, Anhui Province, the PRC
60. No. 108 Qibei Road, Donghu District, Nanchang, Office 164.00 Jiangxi Province, the PRC
61. 2 units on North Level 1, Building 4, No. 385 Tongjiang Operation 159.00 Avenue, Xinbei District, Changzhou, Jiangsu Province, the PRC
62. An office unit on North Level 1, 385 Tongjiang Avenue, Office 159.00 Xinbei District, Changzhou, Jiangsu Province, the PRC
63. Factory Block B, Lot 27, Wuxi New Area, Wuxi, Production 2,376.00 Jiangsu Province, the PRC
64. Unit 105, Office Building, Wuxi Export Processing Zone, Office 15.00 Wuxi, Jiangsu Province, the PRC
65. Unit 107, Office Building, Wuxi Export Processing Zone, Office 10.00 Wuxi, Jiangsu Province, the PRC
66. Unit 118, 288 Gaolang Road, Wuxi New Area, Wuxi, Office 28.00 Jiangsu Province, the PRC
67. Factory Block 4, Area A, Lot 100, Changjiangnan Road, Production 3,353.00 Wuxi New Area, Jiangsu Province, the PRC
68. Counter 8, Area C, Level 2, Office Building No. 2, Operation 4.00 Hubin Road, Wuxi, Jiangsu Province, the PRC
69. Unit 116, No. 288 Gaolang Road, Wuxi New Area, Office 28.00 Jiangsu Province, the PRC
70. Unit 106, Custom Direct Point Administration Building, Office 20.00 Old Coal Pier, Jiangyang, Jiangsu Province, the PRC
71. Warehouse 1, Yinbin Road, Wuxi New Area, Warehouse 3,200.00 Jiangsu Province, the PRC
72. Warehouse, 518 Yunhedong Road, Wuxi New Area, Warehouse 2,700.00 Jiangsu Province, the PRC
73. Rear workshop & north portion of production workshop, Office and 4,068.00 2 levels of office building, west of Lot 11055, production Tongyuan Road, Weifeng Ancillary Area, Suzhou Industrial Park, Jiangsu Province, the PRC
− 278 − APPENDIX VI PROPERTY VALUATION REPORT
Gross No. Address Usage floor area (sq.m.)
74. Unit 425, Custom Office Building, Suzhou Industrial Park, Office 71.00 Jiangsu Province, the PRC
75. Unit 217, Logistic Centre Composite Building, Office 20.50 Suzhou Industrial Park, Jiangsu Province, the PRC
76. No. 15-1, Ningnan Industrial Centre Road, Yuhuatei, Office and 2,180.00 Nanjing, Jiangsu Province, the PRC warehouse
77. Unit 403, 405, 407, 408, 410, Custom Building, Office 110.00 Lukou Airport, Nanjing, Jiangsu Province, the PRC
78. Level 1, Administration Warehouse, Lukou Airport, Warehouse 100.00 Nanjing, Jiangsu Province, the PRC
79. Level 4, No. 100 Hujuebei Road, Nanjing, Jiangsu Province, Office 750.00 the PRC
80. No. 1 Guangshan Road, Xuzhou, Jiangsu Province, the PRC Office 160.00
81. Level 1, 20-8, 9 Shiyou New Village, No. 1 Wenhui Road, Operation 77.40 Yangzhou, Jiangsu Province, the PRC
82. 20-7, Shiyou New Village, No. 1 Wenhui Road, Yangzhou, Operation 38.86 Jiangsu Province, the PRC
83. Level 1, Hongqiao Building, No. 36 Qingnin Road, Nantong, Office 440.00 Jiangsu Province, the PRC
84. Level 2, No. 227 Qingfengxi Road, Kunshan, Office and 1,454.00 Jiangsu Province, the PRC industrial
85. Unit 103, Block 3, Taichunhua Apartment, Shanghai Road, Office 124.00 Taicang, Jiangsu Province, the PRC
86. An unit on the west side of Level 1, Block 4 West Section, Office 80.00 Bishuiyuan Sub-District, Qinhuangdao Economical & Development Area, Hebei Province, the PRC
87. No. 8, Block B, Xiulan City Garden, Wuyi Road, Baoding, Office 256.00 Hebei Province, the PRC
88. The First Unit on the East Facing the Street, Block 1, Office 110.00 Dongyuan Sub-District, No. 156 Xingkai Road, Shijiazhuang, Hebei Province, the PRC
89. Units 101 and 106, Level 1, Hebei Zhongji Building, Office 102.50 No. 152 Xingkai Road, Shijiazhuang, Hebei Province, the PRC
90. Zhulinsi, Chengde, Hebei Province, the PRC Office 80.82
91. Unit 4006 and car park 1,2&3onLevel 2, Office 226.00 Fazhan Building, No. 159 Jiankang Road, Jinshui District, Zhenzhou, Henan Province, the PRC
92. Unit 204 & 205, Block 1, No. 28 Shengli Road, Office 52.00 Xining, Qinghai Province, the PRC
− 279 − APPENDIX VI PROPERTY VALUATION REPORT
Gross No. Address Usage floor area (sq.m.)
93. Unit D1-11 & 12, Xiexintianjun Park, Honghuang Road, Commercial 164.00 Yubei District, Chongqing
94. Standard Factory Block 28, Huatai Industrial Area, Office and 1,100.00 No. 788 Xiqi Road, Hangzhou, Zhejiang Province, the PRC production
95. Unit 321, Custom Block 2, Qiaoshan International Airport, Office 20.00 Hangzhou, Zhejiang Province, the PRC
96. Unit 321, Custom Block 2, Qiaoshan International Airport, Office 18.13 Hangzhou, Zhejiang Province, the PRC
97. East side of Science & Technology Building, Youyibei Street, Research 160.71 Jiaxing Economical & Development Area, Jiaxing, Zhejiang Province, the PRC
98. 1549-1553 & 1553-1, 2, 3, Jiefangnan Road, East Area, Office 280.00 Binjiang Garden, Chengnan, Shaoxing, Zhejiang, the PRC
99. No. 151 Tangxi Road, Haishu Section, Nanbo, Office 600.00 Zhejiang Province, the PRC
100. Level 29, Zhongnongxin International Commercial Building, Office 127.53 No. 181 Zhongshan Road, Ningbo, Zhejiang Province, the PRC
101. 107-108 Block 4B, Yuningjia Small Area, Zhanxi Road, Operation 88.00 Wenzhou, Zhejiang Province, the PRC
102. Level 1, No. 36 Gaoxin Road, Xian, Shaanxi Province, Office 281.00 the PRC
103. No. 4, Level 2, Unit 3, Block 39, Ershisuo, Baisha Road, Residential 60.00 Xian, Shaanxi Province, the PRC
104. A counter at Custom Lobby, Level 1 of a warehouse, Office and 140.00 3 office units on Level 6, Yichang Custom Building, warehouse 87 Xiningyi Road, Nanchang, Hubei Province, the PRC
105. 28 Yangsigang Road, Hanyang District, Wuhan, Office 20.00 Hubei Province, the PRC
106. Basement of Experiment Building, Snail Fever Preventorium Warehouse 255.00 Research Centre, Neixisheng, Zhuodaoquan Province Hygiene and Anti-Epidemics Station, Wuchang District, Wuhan, Hubei Province, the PRC
107. 10 Buildings, No. 294 Changqing Road, Wuhan, Office 2,090.00 Hubei Province, the PRC
108. Level 1, Custom Building, Tianhe Airport, Wuhan, Office 145.00 Hubei Province, the PRC
109. Unit C, D,I&J,Block A, Wuhan International Building Office 288.00 Block A, Dandong Road, Jiefang Avenue, Wuhan, Hubei Province, the PRC
− 280 − APPENDIX VI PROPERTY VALUATION REPORT
Gross No. Address Usage floor area (sq.m.)
110. Room 2nd & 3rd, East Side Building, Xiangfan Custom, Office 36.00 No. 186 Chunyuanxi Road, Xiangfan, Hubei Province, the PRC
111. Unit 3-3-11, Composite Building, Sancha Road, Office 110.00 Shashi District, Jingzhou
112. Shop 4,5&6,Office Building Block 1, Retired Cadre Operation 100.00 Activities Centre, No. 1 Gongyuan Road, Huangshi, Hubei Province, the PRC
113. Unit 2111B, 2112, 2113, 2114, 2115 & 2117, Level 1, Office and 164.72 Rear Office Building, Hangfu Building, 228 Renminzhong warehouse Road, Changsha, Hunan Province, the PRC
114. Level 1, Block 12, Jixing Small Area, Heilongjiang, Haerbin, Office 140.00 Heilongjiang Province, the PRC
115. A flat and Level 2 of north side of Old Office Building, Operation 469.00 No. 16 Beijingnan Road, Urumqi, Xinjiang Autonomous Region, the PRC
116. Carpark and a 3-storey industrial building behind Andou Office and 4,530.00 Jianfa Warehouse, No. 2 Fanghu Xiamen, Fujian Province, warehouse the PRC
117. Level 4 of an industrial building behind Andou Jianfa Office and 792.00 Warehouse, No. 2 Fanghu Xiamen, Fujian Province, the PRC warehouse
118. Office Unit 236, Level 2, Export and Import Dispatch Office 39.00 Surveillance Centre, No. 10 Changhong Road, Huli District, Xiamen, Fujian Province, the PRC
119. Office and Temporary Custom Class 2 Surveillance Office and 334.62 Warehouse of No. 1 Air Terminal warehouse
120. Greating Custom Clearance Company, Level 1, Office and 16.00 Examination and Custom Clearance Centre Building, Haicang, operation Xiamen, Fujian Province, the PRC
121. Factory Unit A, Level 3, Storage and Processing Complex Production 1,049.00 Block A (Moufu Building), Xiangyu Free Trade Zone, Xiamen, Guangdong Province, the PRC
122. Unit 4B, Block D, Xiangyu Free Trade Zone, Xiamen, Warehouse 1,337.55 Guangdong Province, the PRC and industrial
123. Unit A, Level 3, Block D, Storage and Processing Composite Warehouse 743.00 Building, Xiangyu Free Trade Zone, Xiamen, Fujian Province, the PRC
124. The whole of Level 5, Warehouse Block B, Xiangyu Taiping Warehouse 2,225.91 Logistic, Xiamen, Guangdong Province, the PRC
125. Unit 1B of No. 19 Xiangxing 1st Road and Unit 1A of Office and 1,818.33 No. 4 Xiangxing 3rd Road, Xiangyu Free Trade Zone, warehouse Huli District, Xiamen, Fujian Province, the PRC
− 281 − APPENDIX VI PROPERTY VALUATION REPORT
Gross No. Address Usage floor area (sq.m.)
126. Factory Unit B, Level 6, Storage and Processing Composite Production 1,080.00 Building, Block A (Moufu Building), Xiangyu Free Trade Zone, Xiamen, Fujian Province, the PRC
127. Unit 5B, Block D, Xiangyu Free Trade Zone, Xiamen, Office and 1,337.55 Fujian Province, the PRC warehouse
128. Unit AB, Level 4, Factory E, No. 25 1st Road, Xiangyu Free Warehouse 1,909.75 Trade Zone, Huli District, Xiamen, Fujian Province, the PRC
129. Unit 3A, Block D, Xiangyu Free Trade Zone, Xiamen, Warehouse, 1,117.42 Fujian Province, the PRC industrial and office
130. Unit B, Level 3, Block 26G (Block F) and Storage Level 2, Office and 1,126.34 Xiangyu Free Trade Zone, Xiamen, Fujian Province, the PRC warehouse
131. Unit 4B, Block F, Xiangyu Free Trade Zone, Xiamen, Industrial 1,126.34 Fujian Province, the PRC and warehouse
132. Unit 5B, Block F, Xiangyu Free Trade Zone, Xiamen, Industrial 1,126.34 Fujian Province, the PRC and warehouse
133. Unit 1A, No. 14 Xiangxing 1st Road, Huli District, Xiamen, Office and 903.41 Fujian Province, the PRC warehouse
134. Units 2A and 3A, No. 29 Xiangxing 1st Road and Warehouse 2,296.68 No. 14 Xiangxing 3rd Road, Xiangyu Free Trade Zone, Huli District, Xiamen, Fujian Province, the PRC
135. Unit 5A, No. 29 Xiangxing 1st Road and No. 14 Xiangxing Warehouse 1,148.34 3rd Road, Xiangyu Free Trade Zone, Huli District, Xiamen, Fujian Province, the PRC
136. Shop 26, Yida Commercial Building, Citong East Road, Office 193.60 Quanzhou, Fujian Province, the PRC
137. Half portion of Levels 1 and 2, Huqian Arcade (West), Operation 1,348.00 No. 163 Huqian, Fufei Road, Gulou District, Fuzhou, Fujian Province, the PRC
138. Unit 1016, Dongshan Plaza, No. 69 Xianlei Central Road, Office 80.25 Dongshan District, Guangzhou, Guangdong Province, the PRC
139. A factory situated at Yongtai Industrial Zone, Guangzhou, Warehouse 720.00 Guangdong Province, the PRC
140. Unit 10, Level 1, Block 4, Nos. 8-16 Shierling Road Industrial 985.00 (Taifokou), Yongping Street, Baiyuan North Avenue, Guangzhou, Guangdong Province, the PRC
141. Block 5, Yongtai Industrial Zone, Tongtai Road, Guangzhou, Warehouse 2,280.00 Guangdong Province, the PRC
− 282 − APPENDIX VI PROPERTY VALUATION REPORT
Gross No. Address Usage floor area (sq.m.)
142. Unit 23E on Level 2 of Composite Business Building and Office and 424.00 No. 11 Warehouse of Agency Services Warehouse inside warehouse Customs Surveillance Zone, Baiyuan International Airport, North Exit West Avenue, Huadu Town Airport, Huadu District, Guangzhou, Guangdong Province, the PRC
143. D1 and West C1, No. 263 Zhongshan Central Avenue, Office and 1,500.00 Tianhe District, Guangzhou, Guangdong Province, the PRC warehouse
144. No. 8 Beizhentou, Taili Village, Taihe Town, Baiyuan District, Office and 8,570.00 Guangzhou, Guangdong Province, the PRC warehouse
145. East of Level 3, Block 212, Tairan 9th Road, Che Gong Miao Industrial 1,401.44 Industrial Zone, Futian District, Shenzhen, Guangdong Province, the PRC
146. Levels 1 and 2, Office Level 3, Staff Quarters on Office Office and 3,500.00 Level 3, West Security Quarter, 25 Carparking Spaces and warehouse Advertisement Place, Warehouse No. 1, Zhonglu Warehouse, Kaiping Street, Huaqiao City Eastern Industrial Zone, Shenzhen, Guangdong Province, the PRC
147. Level 3, Warehouse No. 1, Zhonglu Warehouse, Warehouse 1,700.00 Kaiping Street, Huaqiao City Eastern Industrial Zone, Shenzhen, Guangdong Province, the PRC
148. Portion of Level 4, Warehouse No. 1, Zhonglu Warehouse, Warehouse 2,200.00 Kaiping Street, Huaqiao City Eastern Industrial Zone, Shenzhen, Guangdong Province, the PRC
149. Room 618, Units 230 and 231, Level 2, National Office 588.00 Cargo Village, Shenzhen Airport Logistic Park Zone, Baoan District, Shenzhen, Guangdong Province, the PRC
150. Portion of Level 1 of Office Building, No. 10 Taohua Road, Office 158.50 Futian Free Trade Zone, Futian District, Shenzhen, Guangdong Province, the PRC
151. Room 114, Level 1, National Cargo Village, Shenzhen Airport Warehouse 604.00 Logistic Park Zone, Baoan District, Shenzhen, Guangdong Province, the PRC
152. Level 1 Office of Zhuhai Qiheng Logistic Company Limited, Office 20.00 No. 48 Zone of Zhuhai Free Trade Zone, Zhuhai, Guangdong Province, the PRC
153. Storage Unit 14, Level 2, No. 47 Haizhou Road, Warehouse 714.00 Jiuzhou Warehouse, Zhuhai, Guangdong Province, the PRC
154. Warehouse No. 51, Haizhou Road, Jiuzhou Warehouse, Office and 320.00 Zhuhai, Guangdong Province, the PRC warehouse
155. Storage Unit 6, Level 2, No. 47 Haizhou Road, Warehouse 306.00 Jiuzhou Warehouse, Zhuhai, Guangdong Province, the PRC
156. Storage Unit 8, Level 2, No. 47 Haizhou Road, Warehouse 408.00 Jiuzhou Warehouse, Zhuhai, Guangdong Province, the PRC
− 283 − APPENDIX VI PROPERTY VALUATION REPORT
Gross No. Address Usage floor area (sq.m.)
157. Unit 202, Block 5, No. 51 Jitaihaizhou Road, Zhuhai, Office and 320.00 Guangdong Province, the PRC warehouse
158. Shops 20 and 21, Tianshahe Road, Jiangmen, Office and 241.63 Guangdong Province, the PRC operation
159. Factory and Dormitory Building, Baima Huangjin Industrial Residential 4,740.00 Zone, Dongguan, Guangdong Province, the PRC
160. Factory and Dormitory Building, Baima Huangjin Industrial Warehouse 890.00 Zone, Dongguan, Guangdong Province, the PRC
161. A shop situated at Baima Guantai Road, Dongguan, Commercial 96.00 Guangdong Province, the PRC
162. 2 units of the 14th and 15th shops of South Gate of Land Commercial 78.36 Reclamation and Cultivation Central Hospital, Zhanjian, Guangdong Province, the PRC
163. Levels 1 and 2, No. 4 Xinsong Road, Xinsong South First Office 180.00 Alley, Xinsong Management Zone, Tailiang Town, Shunde, Guangdong Province, the PRC
164. Units 701-703, Level 7, Resources and Training Building, Office 90.00 No. 118 Lunnan Road, Huhhot, Inner Mongolia Autonomous Region, the PRC
165. Portion of Block 11 & 12, Baoshan Road, Guiyang, the PRC Office and 360.00 warehouse
166. 2 rooms on the east side, west side of North Lobby on Level Office and 578.00 1, office on the east side on Level 2, Office Building, operation Nos. 8-12 Antu Street, Heping District, Shenyang, Liaoning Province, the PRC
167. Blocks 18 & 19, Shenti Trading Composite Building, Office 150.98 Bayuquan District, Yingkou, Liaoning Province, the PRC
168. A room, a toilet and portion of corridor on west side of Level Office 30.00 5, West Building, Dongshengli, Zhanqian District, Yingkou, Liaoning Province, the PRC
169. Level 1, Nos. 19-32 Hepan Garden, Nandongli, Taihe District, Office 107.55 Jinzhou, Liaoning Province, the PRC
170. Unit 103, No. 20 Yanjiang Development Area, Dandong, Office 151.00 Liaoning Province, the PRC
171. West side of No. S1 Warehouse (Block 39), Shenyang, Warehouse 1,000.00 Liaoning Province, the PRC
Total: 128,218.39
− 284 − APPENDIX VI PROPERTY VALUATION REPORT
Group V – Properties leased by the Eas PRC Group in Hong Kong
Capital value in existing state as at 30 June 2004 and Property Description and tenancy particulars 31 October 2004
1. The whole of 22nd Floor, The property comprises a total gross floor area of No commercial value Shanghai Industrial approximately 371.61 sq.m. (4,000 sq.ft.) completed Investment Building, in 1977 for office use. Nos. 48-62 Hennessy Road, The property is leased by Eas PRC Group for a term Hong Kong of three years from 16 May 2002 to 15 May 2005 at a monthly rent of HK$39,325.
2. Unit 11, 5th Floor, The property comprises a total gross floor area of No commercial value Commercial Building of approximately 122 sq.m. (1,313 sq.ft.) completed in Airport Freight 1997 for office use. Forwarding Centre, Chek Lap Kok Airport, The property is leased by Eas PRC Group for a term Chek Lap Kok, of one year from 16 December 2003 to 15 Lantau Island, December 2004 at a monthly rent of HK$11,817. New Territories, Hong Kong
3. Unit Nos. 1809-1817, The property comprises a total gross floor area of No commercial value Level 18, Tower 1, approximately 500 sq.m. (5,384 sq.ft.) completed in Metroplaza, 1992 for office use. Kwai Chung, New Territories, The property is leased by Eas PRC Group for a term Hong Kong of two years from 16 April 2003 to April 2005 at a monthly rent of HK$53,840.
4. D.D.99 Lot 769, The property comprises a plot of land with a site No commercial value Mai Po, San Tin, area of approximately 2,125.60 sq.m. (22,880 sq.ft.) New Territories, for open storage use. Hong Kong The property is leased by Eas PRC Group for a term of two years from 15 August 2003 to 14 August 2005 at a monthly rent of HK$37,000.
5. Loading & Unloading The property comprises a total gross floor area of No commercial value Platform and First Floor, approximately 1,697 sq.m. (18,266 sq.ft.) completed Block D, Nos. 52-62 in 2000s for warehouse use. Tsing Yi Road, Tsing Yi Island, The property is leased by Eas PRC Group for a term New Territories, of five years from 1 February 2004 to 31 January Hong Kong 2009 at a monthly rent of HK$155,000 for the period from 1 February 2004 to 31 January 2007 inclusive of a 2-month rent free period and at a monthly rental of HK$162,750 for the period from 1 February 2007 to 31 January 2009.
− 285 − APPENDIX VI PROPERTY VALUATION REPORT
Group VI – Properties leased by the Eas PRC Group in overseas countries
Capital value in existing state as at 30 June 2004 and Property Description and tenancy particulars 31 October 2004
1. A business/office premise The property comprises a business premise with No commercial value at Lot B6B-2, total gross floor area of approximately 186 sq.m. Malaysia Airlines (2,000 sq.ft.) completed between 1980s and 1990s Advanced for warehouse use. Cargo Centre, KLIA, Free Commercial Zone, The property is leased by Eas PRC Group for a term Kuala Lumpur of two years, four months and fifteen days from 15 International Airport, March 2003 to 31 July 2005 at a monthly rent of 43900 Sepang, Selangor, RM9,000. Malaysia
2. The business premise at The property comprises a business premise with No commercial value Lot No. B-4, No. 99, total gross floor area of approximately 357 sq.m. Jalan Batu Maung, (3,844 sq.ft.) completed between 1980s and 1990s Dis3plex Free for logistic business use. Commercial Zone, Air Freight Forwarders The property is leased by Eas PRC Group for a term Warehousing Cargo of two years from 18 December 2003 to 17 Complex, December 2005 at a monthly rent of RM9,610. 11960 Penang, Malaysia
3. 4th Floor, The property comprises an office unit with total No commercial value Centro Carga Aerea gross floor area of approximately 181 sq.m. (1,948 Madrid-Barajas Edificio sq.ft.) completed between 1980s and 1990s for Servicios Generales office use. Oficina 416 Aeropuerto De Barajas The property is leased by Eas PRC Group for a term 28042 Madrid of ten years from 22 September 1997 to 22 Spain September 2007 at a monthly rent of EUR2,982.24.
4. No. 9 Airline Road, The property comprises a business premise with No commercial value Unit #05-02 Cargo total gross floor area of approximately 160 sq.m. Agents Building D, (1,722 sq.ft.) completed between 1980s and 1990s Singapore Changi for warehouse/office uses. Airport, 819827 The property is leased by Eas PRC Group for a term Singapore of two years from 1 October 2003 to 30 September 2005 at a monthly rent of S$15,000.
5. No. 9 Airline Road, The property comprises a business premise with No commercial value Unit #01-27 total gross floor area of approximately 343 sq.m. Cargo Agents (3,692 sq.ft.) completed between 1980s and 1990s Building D, for warehouse/office use. Singapore Changi Airport, The property is leased by Eas PRC Group for a term 819827 of two years from 1 July 2003 to 30 June 2005 at a Singapore monthly rent of S$8,850.
6. Centre De Carrega Aeria The property comprises a business premise with No commercial value Barcelona total gross floor area of approximately 101 sq.m. Edifici De Serveis (1,087 sq.ft.) completed between 1980s and 1990s Generals – for office use. Of. B306 Aeroport De Barcelona – The property is leased by Eas PRC Group for a term El Prat 08820 El Pray De of ten years from 11 January 2001 to 11 January Llobregat 2011 at a monthly rent of EUR1,316.97. Barcelona Spain
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RESPONSIBILITY STATEMENT
This circular includes particulars given in compliance with the Listing Rules for the purpose of giving information with regard to the Company. The Directors collectively and individually accept full responsibility for the accuracy of the information contained in this circular and confirm, having made all reasonable enquiries, that to the best of their knowledge and belief there are no other facts the omission of which would make any statement herein misleading.
DISCLOSURE OF DIRECTORS’ INTERESTS
As at the Latest Practicable Date, the interests of the Directors in the shares, underlying shares and debentures of the Company or any of its associated corporations (within the meaning of Part XV of the SFO) (the “Associated Corporations”) which were (a) required to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short positions which they were taken or deemed to have under such provisions of the SFO); or (b) required, pursuant to Section 352 of the SFO, to be entered in the register referred to therein; or (c) required, pursuant to the Model Code for Securities Transactions by Directors of Listed Companies (the “Model Code”), to be notified to the Company and the Stock Exchange were as follows:
(i) The Company
Percentage of aggregate Number of interests underlying to total ordinary number of Number of ordinary shares shares held ordinary Personal Family Corporate Other under share shares in Name of Director interests interests interests interests options Total issue* %
Mr. ANG Keng Lam+ 2,6211 – – 531,1772 4,701,8773 5,235,675 0.43
Mr. WONG Siu Kong+ – – – – 2,119,7943 2,119,794 0.18
Mr. HO Shut Kan – – – – 1,004,3003 1,004,300 0.08
Mr. MA Wing Kai, William 2,6691 – – – 987,0113 989,680 0.08
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Percentage of aggregate Number of interests underlying to total ordinary number of Number of ordinary shares shares held ordinary Personal Family Corporate Other under share shares in Name of Director interests interests interests interests options Total issue* %
Mr. William Winship FLANZ – – – – – – –
Mr. LAU Ling Fai, Herald – – – – – – –
Mr. Christopher Roger MOSS, O.B.E. –– –– –– –
(ii) Associated Corporations
Percentage of aggregate Number of interests underlying to total Number of ordinary shares ordinary number of Name of shares held ordinary Associated Name of Personal Family Corporate Other under share shares in Corporation Director interests interests interests interests options Total issue %
EDSA Properties Mr. HO Shut 1,5701 – – – – 1,570# 0.00 Holdings Inc. Kan
Kerry Group Mr. ANG – 7,050,0004 – 7,000,0002 6,000,0005 20,050,000 1.40@ Limited Keng Lam
Mr. WONG – – 5,254,3006 – 5,000,0005 10,254,300 0.72@ Siu Kong
Mr. HO Shut 465,0001 – – – 1,000,0005 1,465,000 0.10@ Kan
Mr. MA Wing 710,6201 – – – – 710,620 0.05@ Kai, William
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Percentage of aggregate Number of interests underlying to total Number of ordinary shares ordinary number of Name of shares held ordinary Associated Name of Personal Family Corporate Other under share shares in Corporation Director interests interests interests interests options Total issue %
Kerry Siam Mr. ANG 11 – – – – 1 0.00 Seaport Keng Lam Limited Mr. MA Wing 11 – – – – 1 0.00 (formerly Kai, known as William Siam Seaport Terminal & Warehouses Co., Ltd.)
Notes:
1. This represents interests held by the relevant director as beneficial owner.
2. This represents interests held by the relevant director through a discretionary trust of which the relevant director is a beneficiary.
3. This represents interests in options held by the relevant director as a beneficial owner to subscribe for the relevant underlying ordinary shares in respect of the options granted by the Company under the executive share option scheme adopted by the Company on 27 March 1997.
4. This represents interests held by the relevant director’s spouse.
5. This represents interests in options held by the relevant director as a beneficial owner to subscribe for the relevant underlying ordinary shares in respect of the options granted by Kerry Group Limited.
6. This represents interests held by the relevant director through his controlled corporations.
* The percentage has been adjusted based on the total number of ordinary shares of the Company in issue as at the Latest Practicable Date (i.e. 1,211,116,330 ordinary shares).
# The relevant notification was filed under the repealed Securities (Disclosure of Interests) Ordinance.
@ The percentage has been adjusted based on the total number of ordinary shares of Kerry Group Limited in issue as at the Latest Practicable Date (i.e. 1,433,774,352 ordinary shares).
+ As at the Latest Practicable Date, Mr. Ang Keng Lam and Mr. Wong Siu Kong were directors of Kerry Holdings, which had an interest in the shares of the Company which were required under the provisions of Divisions 2 and 3 of Part XV of the SFO to be disclosed to the Company.
All the interests disclosed in sections (i) and (ii) above represent long positions in the shares of the Company or the Associated Corporations.
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Save as disclosed herein, as at the Latest Practicable Date, none of the Directors or chief executives of the Company had any other interests or short positions in the shares, underlying shares or debentures of the Company or any of its Associated Corporations which were (a) required to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short positions which they were taken or deemed to have under such provisions of the SFO); or (b) required, pursuant to Section 352 of the SFO, to be entered in the register referred to therein; or (c) required, pursuant to the Model Code, to be notified to the Company and the Stock Exchange.
As at the Latest Practicable Date, none of the Directors:
(a) had any direct or indirect interests in any assets which had since 31 December 2003 (being the date to which the latest published audited accounts of the Group were made up) been acquired or disposed of by or leased to any members of the Enlarged Group, or were proposed to be acquired or disposed of by or leased to any members of the Enlarged Group; and
(b) was materially interested in any contracts or arrangements subsisting at the date of this circular which is significant in relation to the business of the Enlarged Group.
PROCEDURES FOR DEMANDING A POLL BY SHAREHOLDERS
Pursuant to the bye-laws of the Company, a resolution put to the vote of a general meeting shall be decided on a show of hands, unless a poll is (before or on the declaration of the result of the show of hands or on the withdrawal of any other demand for a poll) demanded:
(a) by the chairman of the meeting; or
(b) by at least three shareholders present in person or by duly authorised corporate representative or by proxy for the time being entitled to vote at the meeting; or
(c) by any shareholder or shareholders present in person or by duly authorised corporate representative or by proxy and representing not less than one-tenth of the total voting rights of all the shareholders having the right to vote at the meeting; or
(d) by any shareholder or shareholders present in person or by duly authorised corporate representative or by proxy and holding shares in the Company conferring a right to vote at the meeting being shares on which an aggregate sum has been paid up equal to not less than one-tenth of the total sum paid up on all the shares conferring that right.
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MATERIAL CONTRACTS
The following contracts, not being contracts entered into in the ordinary course of business, have been entered into by members of the Enlarged Group within the two years preceding the date of this circular and is or may be material:
(a) the Sale and Purchase Agreement; and
(b) the Restructuring Agreement.
LITIGATION
Malaysian Airline System Berhad (“Malaysian Airline”), together with five other plaintiffs, brought an action in the High Level People’s Court of Beijing on or about 13 March 2002 for damages, costs and interest, against six defendants (including Eas PRC as the second defendant) on a joint and several basis in relation to the alleged damage caused to a Malaysian Airline aircraft on 15 March 2000 in respect of the transportation of certain chemical substance.
Beijing Fulgence Law Firm, the legal counsel representing Eas PRC in the court action, has issued a legal opinion to Kerry Logistics stating that:
(a) according to the plaintiffs’ claim, the damages sought in the amount of US$65,634,736.84 represent the market value of the aircraft at the time when the damage occurred less the resale value of the aircraft after repairs;
(b) a hearing took place in June 2004 but it was adjourned on account of certain evidential and procedural issues to be resolved, and no new hearing date has yet been fixed;
(c) there is a pending appeal on a jurisdictional issue and the court has not yet provided a ruling on appeal; and
(d) in their opinion, the evidence currently put forward by the plaintiffs is seriously deficient and does not prove (i) the course of events leading to the damage, the extent of the damage and the cause of the damage as alleged by the plaintiffs and (ii) the locus standi of the plaintiffs other than Malaysian Airline.
Save as disclosed above, as at the Latest Practicable Date, the Company was not aware of any further development of this legal action. Pursuant to the Sale and Purchase Agreement, Huatong has agreed to indemnify Kerry Logistics and each member of the Target Group in full in respect of all losses, costs, expenses and other responsibilities and liabilities, arising in respect of various litigations against the Target Group, including this court action.
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As at the Latest Practicable Date, save as disclosed above, none of the members of the Enlarged Group was engaged in any litigation or arbitration or claim of material importance and, so far as the Directors were aware, no litigation or arbitration or claim of material importance was pending or threatened by or against any member of the Enlarged Group.
EXPERTS
The following are the qualifications of the experts who have been named in this circular or have given opinions or advice which are contained in this circular:
Name Qualification
PricewaterhouseCoopers Certified Public Accountants
DTZ Debenham Tie Leung property valuer and member of The Hong Kong Limited Institute of Surveyors
Fangda Partners qualified PRC lawyers
Jianda Law Firm qualified PRC lawyers
Beijing Fulgence Law Firm qualified PRC lawyers
Each of PricewaterhouseCoopers, DTZ Debenham Tie Leung Limited, Fangda Partners, Jianda Law Firm and Beijing Fulgence Law Firm has given and has not withdrawn its written consent to the issue of the circular with the inclusion herein of its opinion, letter or valuation report (as the case may be) prepared for the purpose of incorporation in this circular, and the references to its name, opinion, letter or valuation report in the form and context in which they respectively appear.
As at the Latest Practicable Date, none of PricewaterhouseCoopers, DTZ Debenham Tie Leung Limited, Fangda Partners, Jianda Law Firm and Beijing Fulgence Law Firm had any shareholding in any member of the Group or the right (whether legally enforceable or not) to subscribe for or to nominate persons to subscribe for securities in any member of the Group.
As at the Latest Practicable Date, none of PricewaterhouseCoopers, DTZ Debenham Tie Leung Limited, Fangda Partners, Jianda Law Firm and Beijing Fulgence Law Firm had any direct or indirect interests in any assets which have since 31 December 2003 (being the date to which the latest published audited accounts of the Group were made up) been acquired or disposed of by or leased to any members of the Group, or were proposed to be acquired or disposed of by or leased to any members of the Group.
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SERVICE CONTRACTS
As at the Latest Practicable Date, none of the Directors had entered into, or proposed to enter into, a service contract with any member of the Group which does not expire or is not terminable by such member of the Group within one year without payment of compensation, other than statutory compensation.
COMPETING INTERESTS
As at the Latest Practicable Date, the following Directors were considered to have interests in the following businesses (the “Excluded Businesses”), being businesses which competed or were likely to compete, either directly or indirectly, with the businesses of the Group, other than those businesses in which (a) the Group was interested and (b) the Directors’ only interests were as directors appointed to represent the interests of the Group.
As at the Latest Practicable Date:
(a) Mr. Ang Keng Lam was a director of and had interests in shares in the Allgreen Properties Limited (“Allgreen”) group of companies, the businesses of which consisted of property investment and development, property and project management and operation of office premises, retail space and serviced apartments in Singapore. The Directors believe that as the size of these Excluded Businesses is not insignificant when compared with the property businesses of the Group, it is likely that these Excluded Businesses may compete with the property businesses of the Group in the Asia Pacific region. Allgreen was listed on the Singapore Exchange Securities Trading Limited as at the Latest Practicable Date;
(b) Messrs. Ang Keng Lam and Wong Siu Kong were directors of and had interests in shares in the Shangri-La Asia Limited (“SA”) group of companies, the businesses of which consisted of hotel ownership and operation. The Directors believe that as the size of that part of these Excluded Businesses in Beijing, where the Group has hotel businesses, is not insignificant when compared with the hotel businesses of the Group in Beijing, it is likely that these Excluded Businesses may compete with the hotel businesses of the Group in Beijing. SA was listed on the Stock Exchange as at the Latest Practicable Date;
(c) Messrs. Ang Keng Lam and Wong Siu Kong were directors of (but did not have any interests in shares in) the China World Trade Center Ltd. group of companies, the businesses of which consisted of property investment and development and hotel ownership and operation in the PRC. The Directors believe that as the size of these Excluded Businesses is not insignificant when compared with the property and hotel businesses of the Group in the PRC, it is likely that these Excluded Businesses may compete with the property and hotel businesses of the Group in the PRC; and
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(d) the executive Directors were directors of and/or had interests in shares in the Kerry Group Limited group of companies, the businesses of which consisted of property investment and development, hotel ownership and operation, warehouse ownership and operation, port terminal ownership and operation and freight operations. The size of these Excluded Businesses is considered to be insignificant when compared with similar businesses of the Group. On this basis, the Directors do not consider any competition between these Excluded Businesses as specified under this paragraph (d) and similar businesses of the Group to be significant.
The Excluded Businesses are operated and managed by companies (and in the case of Allgreen and SA, by publicly listed companies) with independent management and administration. On this basis, the Directors believe that the Group is capable of carrying on its businesses independently of the Excluded Businesses and at arms length from the Excluded Business.
The Directors, including those interested in the Excluded Businesses, will, as and when required under the bye-laws of the Company, abstain from voting on any resolution of the Board in respect of any contract, arrangement or proposal in which he or any of his associates has a material interest.
DOCUMENTS AVAILABLE FOR INSPECTION
Copies of the following documents are available for inspection during normal business hours on any weekday (except public holidays) at the office of the Company in Hong Kong at 13/F., Cityplaza 3, 14 Taikoo Wan Road, Taikoo Shing, Hong Kong up to and including 12 January 2005.
1. the Company’s memorandum of association and bye-laws;
2. the material contracts referred to in the paragraph headed “Material Contracts” in this appendix;
3. the accountants’ report from PricewaterhouseCoopers on Treasure Lake, the text of which is set out in Appendix I to this circular;
4. the accountants’ report from PricewaterhouseCoopers on Eas HK, the text of which is set out in Appendix II to this circular;
5. the accountants’ report from PricewaterhouseCoopers on the Eas PRC Group, the text of which is set out in Appendix III to this circular;
6. the letter on the pro forma statement of assets and liabilities of the Enlarged Group signed by PricewaterhouseCoopers setting out their opinion in Paragraph 1(B) of Appendix V to this circular;
7. the property valuation report of DTZ Debenham Tie Leung Limited, the text of which is set out in Appendix VI to this circular;
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8. the legal opinion (in Chinese) prepared by Fangda Partners dated 29 December 2004 in respect of the property interest of the Target Group referred to in the property valuation report of DTZ Debenham Tie Leung Limited;
9. the legal opinion (in Chinese) prepared by Jianda Law Firm dated 29 December 2004 in respect of, among other things, the approval by the Ministry of Commerce of the PRC of the transfer of the Eas PRC Shares and that the title of the Eas PRC Shares will only be transferred to Eas HK upon the issue of the amended business licence of Eas PRC;
10. the legal opinion (in Chinese) prepared by Beijing Fulgence Law Firm dated 29 December 2004 in respect of the legal action referred to in the paragraph headed “Litigation” in this appendix;
11. the letter of consents referred to under the section headed “Experts” in this appendix;
12. the statement of adjustments made by PricewaterhouseCoopers in arriving at the figures set out in the accountants’ reports set out in Appendix II to this circular;
13. the annual report of the Company for each of the two years ended 31 December 2003;
14. the interim report of the Company for the six months ended 30 June 2004; and
15. the circulars issued by the Company dated 31 May 2004 and 27 October 2004 respectively.
MISCELLANEOUS
(a) The Qualified Accountant of the Company is Ms. Chang Yin Wa. Ms. Chang is a member of the Hong Kong Institute of Certified Public Accountants and a Fellow of the Association of Chartered Certified Accountants.
(b) The Secretary of the Company is Chow Yin Ping, Anita. Ms. Chow is an associate member of both the Institute of Chartered Secretaries and Administrators and The Hong Kong Institute of Company Secretaries.
(c) The Company’s Hong Kong branch share registrar is Abacus Share Registrars Limited, G/F., Bank of East Asia Harbour View Centre, 56 Gloucester Road, Wanchai, Hong Kong.
(d) This circular has been prepared in both English and Chinese. In the case of any discrepancy, the English text shall prevail.
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