THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

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

If you have sold all your shares in HON PO GROUP (LOBSTER KING) LIMITED, you should at once hand this circular to the purchaser or to the bank, stockbroker or other agent through whom the sale was effected for transmission to the purchaser.

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.

Hon Po Group (Lobster King) Limited (incorporated in the Cayman Islands with limited liability)

MAJOR TRANSACTION ACQUISITION OF PROPERTY

27 May 2002 CONTENTS

Page

Definition ...... 1

Letter from the Board

Introduction ...... 3

The Proposed Acquisition ...... 4

Financing ...... 4

Reasons for the Proposed Acquisition ...... 5

Major Transaction ...... 5

General Information ...... 5

Appendix I Ð Financial Information of the Group ...... 6

Appendix II Ð Property Valuation ...... 36

Appendix III Ð General Information ...... 40

Ð i Ð DEFINITION

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

“Agreement” The Sales and Purchase Agreement dated 3 May 2002, entered into between Jing Hua (as Purchaser) and an independent third party (as Vendor) in relation to the Proposed Acquisition

“Board” The board of directors of the Company

“Company” Hon Po Group (Lobster King) Limited, an exempted company with limited liability incorporated in the Cayman Islands

“Consideration” The total cash consideration of HK$85 million at which the Property is to be acquired pursuant to the Agreement

“Directors” The directors of the Company

“FPDSavills” FPDSavills (Hong Kong) Limited

“Group” The Company and its subsidiaries

“Group Reorganisation” The corporate reorganisation of the Group, as described in the prospectus of the Company dated 31 January 2002, which was to rationalize the corporate structure of the Group in preparation for the listing of the Shares on the Stock Exchange

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

“Jing Hua” Jing Hua Restaurant Limited, a wholly-owned subsidiary (indirect) of the Company

“Latest Practicable Date” 10 May 2002, being the latest practicable date prior to the printing of this circular for ascertaining certain information contained herein

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

“Property” The property located at 2/F., Allied Plaza, Cosmopolitan Centre, No. 760 Nathan Road, Kowloon

Ð 1 Ð DEFINITION

“Proposed Acquisition” The purchase of the Property by Jing Hua

“SDI Ordinance” The Securities (Disclosure of Interests) Ordinance (Chapter 396 of the Laws of Hong Kong)

“Share(s)” Share(s) of HK$0.01 each in the capital of the Company

“Shareholder(s)” Shareholder(s) of the Company

“Stock Exchange” The Stock Exchange of Hong Kong Limited

“Vendor” Treasure Continuation Company Limited, an independent third party which is not connected with any directors, the chief executive or any of the substantial shareholders of the Company, or any of its subsidiaries, or any of their respective associates as defined in the Listing Rules.

Ð 2 Ð LETTER FROM THE BOARD

Hon Po Group (Lobster King) Limited (incorporated in the Cayman Islands with limited liability)

Executive Directors: Registered office: Mr. Cheung To Sang Century Yard (Chairman and Managing Director) Cricket Square Mr. Chan Nun Chiu (Deputy Chairman) Hutchins Drive Mrs. Cheung Lim Mai Tak, Grace P.O. Box 2681 GT Mr. She Hing Chiu Grand Cayman British West Indies Non-executive Directors: Mr. Cheung Sik Pang (Honorary Chairman) Head office and principal place of Mr. Ng Wing Po business: Units E&F, Ground Floor Independent Non-executive Directors: Phase II, Kingsway Industrial Building Ms. Lee Sin Mei, Olivia 173Ð175 Wo Yi Hop Road Mr. Mak Siu Cheung, Bernard Jaun Kwai Chung Ms. Chan Choi Har, Ivy Hong Kong

27 May 2002

To the Shareholders

Dear Sir or Madam,

MAJOR TRANSACTION AQUISITION OF PROPERTY

INTRODUCTION

On 6 May 2002, the Board announced that Jing Hua had entered into the Agreement on 3 May 2002 with the Vendor for the purchase of the Property.

The Vendor is an independent third party which is not connected with any directors, the chief executive or any of the substantial shareholders of the Company, or any of its subsidiaries, or any of their respective associates as defined in the Listing Rules.

The purpose of this circular is to provide Shareholders with details of the Proposed Acquisition and other information as required under the Listing Rules.

Ð 3 Ð LETTER FROM THE BOARD

THE PROPOSED ACQUISITION

Jing Hua has agreed to purchase from the Vendor a property located at 2/F., Allied Plaza, Cosmopolitan Centre, No. 760 Nathan Road, Kowloon. The gross floor area of the Property is approximately 22,820 square feet. The Property is currently used as a Chinese restaurant. In accordance with the occupation permit, deed of mutual covenant, supplemental deed of mutual covenant and the government lease, there is no restriction on the user of the Property as a restaurant.

The total consideration for the purchase of the Property is HK$85 million. A cash deposit of HK$10 million has been paid by Jing Hua to the Vendor and the balance of the Consideration shall be payable in cash on completion.

According to the valuation of FPDSavills, an independent valuer appointed by the Group, the Property was valued at HK$80 million as at 3 May 2002. The text of a letter dated 27 May 2002 from FPD Savills and its valuation certificate are set forth in Appendix II to this circular.

The Consideration was determined after arm’s length negotiations between the parties and with reference to the valuation of the Property by FPDSavills. Although the Consideration appears to be slightly over the valuation amount, the Directors consider the Consideration to be fair and reasonable and in the best interest of the Group as it is difficult to find premises with quality and location comparable to the Property in the nearby area.

The Proposed Acquisition is conditional upon the occurrence of the following events:

(a) Approval by the shareholders of the Company of the purchase of the Property pursuant to the requirements under paragraph 14.10 (if applicable) of Chapter 14 of the Listing Rules; and

(b) Compliance by the Company with all relevant regulatory requirements, including but not limited to those under the Listing Rules.

Subject to satisfaction of the above conditions, completion of the Acquisition is scheduled to take place on 30 May 2002.

FINANCING

The Consideration will be financed mainly by banking facilities of HK$69.5 million with the remaining balance to be satisfied through the internal resources of HK$15.5 million of the Group. At the Latest Practicable Date, new bank facilities have been granted to the Group to finance the Proposed Acquisition.

Ð 4 Ð LETTER FROM THE BOARD

REASONS FOR THE PROPOSED ACQUISITION

The principal business of the Group is the operation of a chain of Chinese restaurants.

The Board believes that the Property is situated in a prime location for the operation of a Chinese restaurant which is consistent with the expansion plan of the Group’s restaurant business in Hong Kong.

MAJOR TRANSACTION

The Proposed Acquisition constitutes a major transaction of the Company under Chapter 14 of the Listing Rules. As Hon Po Investment Limited, which holds approximately 60.32% of the issued share capital of the Company, does not have any material interest in the Proposed Acquisition and has also given its written approval of the Proposed Acquisition, shareholders’ approval by way of a resolution passed at an extraordinary general meeting will not be required.

GENERAL INFORMATION

Your attention is drawn to the additional information set out in the Appendices to this circular set out on pages 6 to 45.

Yours faithfully, By Order of the Board Cheung To Sang Chairman and Managing Director

Ð 5 Ð APPENDIX I FINANCIAL INFORMATION OF THE GROUP

1. FINANCIAL INFORMATION

The following information has been extracted from the annual report of the Group for the year ended 31 December 2001 and the prospectus of the Company dated 31 January 2002.

(A) Pro Forma Combined Profit and Loss Account Year ended 31 December 2001

2001 2000 1999 Notes HK$’000 HK$’000 HK$’000

TURNOVER 6 798,644 872,297 980,951

Other revenue 6 6,103 5,374 7,557 Cost of inventories consumed (242,996) (277,039) (310,298) Staff costs (282,908) (299,196) (346,938) Operating lease rentals (79,614) (85,122) (85,966) Depreciation (21,570) (20,679) (25,614) Fuel costs and utility expenses (78,570) (84,314) (78,856) Other operating expenses (69,451) (80,792) (95,595)

PROFIT FROM OPERATING ACTIVITIES 7 29,638 30,529 45,241

Finance costs 9 (3,365) (4,357) (4,609)

PROFIT BEFORE TAX 26,273 26,172 40,632

Tax 10 (4,560) (2,386) 1,947

PROFIT BEFORE MINORITY INTERESTS 21,713 23,786 42,579

Minority interests 440 1,895 2,229

NET PROFIT FROM ORDINARY ACTIVITIES ATTRIBUTABLE TO SHAREHOLDERS 22,153 25,681 44,808

EARNINGS PER SHARE Ð Basic 12 HK4.9 cents HK5.6 cents HK9.8 cents

Ð 6 Ð APPENDIX I FINANCIAL INFORMATION OF THE GROUP

(B) Pro Forma Combined Statement of Recognised Gains and Losses Year ended 31 December 2001

2001 2000 Notes HK$’000 HK$’000

Surplus on revaluation of leasehold land and buildings 22 20,175 Ð Surplus on revaluation of investment properties 22 18,752 Ð

Net gains not recognized in the profit and loss account 38,927 Ð Net profit for the year from ordinary activities attributable to shareholders 22,153 25,681

Total recognised gains and losses 61,080 25,681

Ð 7 Ð APPENDIX I FINANCIAL INFORMATION OF THE GROUP

(C) Pro Forma Combined Balance Sheet 31 December 2001

2001 2000 Notes HK$’000 HK$’000

NON-CURRENT ASSETS Fixed assets 13 101,018 65,431 Other assets 5,730 5,730 Rental deposits and other deposits 24,978 30,043

131,726 101,204

CURRENT ASSETS Inventories 12,131 11,544 Accounts receivable 15 2,307 4,009 Deposits, prepayments and other receivables 29,828 12,111 Due from ultimate holding company 16 237,149 207,108 Tax refundable 2,720 2,021 Cash and bank balances 39,793 22,526

323,928 259,319

CURRENT LIABILITIES Accounts payable 17 (31,880) (20,512) Accruals (53,414) (28,474) Tax payable (2,572) (948) Bank overdrafts and bank loans 18 Ð (8,298) Finance lease payables 19 (751) (818)

(88,617) (59,050)

NET CURRENT ASSETS 235,311 200,269

TOTAL ASSETS LESS CURRENT LIABILITIES 367,037 301,473

NON-CURRENT LIABILITIES Other payable (572) (1,452) Rental deposits received (700) (251) Bank loans 18 (37,000) (31,752) Finance lease payables 19 (185) (633) Deferred tax 20 (702) (147)

(39,159) (34,235)

MINORITY INTERESTS (1,932) (2,372)

325,946 264,866

CAPITAL AND RESERVES Issued capital 21 11 Reserves 22 325,945 264,865

325,946 264,866

Ð 8 Ð APPENDIX I FINANCIAL INFORMATION OF THE GROUP

(D) Notes to Financial Statements

1. GROUP REORGANISATION AND BASIS OF PRESENTATION

The Company

The Company was incorporated in the Cayman Islands on 4 April 2001 as an exempted company with limited liability under the Companies Law of the Cayman Islands. On incorporation, the Company had an authorised share capital of HK$10,000,000 divided into 1,000,000,000 shares of HK$0.01 each, of which one subscriber share was subsequently transferred to and held by Hon Po Investment Limited (“Hon Po Investment”) on 4 May 2001. The directors consider Hon Po Investment, a company incorporated in the British Virgin Islands (the “BVI”), to be the Company’s immediate holding company. On 11 October 2001, the authorised share capital of the Company was increased to HK$100,000,000 divided into 10,000,000,000 shares of HK$0.01 each by the creation of an additional 9,000,000,000 new shares of HK$0.01 each. Apart from the aforesaid shares issued, no other transactions were carried out by the Company during the period from 4 April 2001 to 31 December 2001. Accordingly, the Company did not have any results, cash flows or recognised gains or losses for the period ended 31 December 2001.

Since the Company was incorporated on 4 April 2001, no comparative amounts for 31 December 2000 have been presented in the Company’s balance sheet.

Group reorganisation

Pursuant to a reorganisation scheme (the “Group Reorganisation”) to rationalise the structure of the Company and its subsidiaries (hereinafter collectively referred to as the “Group”) in preparation for the listing of the Company’s shares on the Main Board of The Stock Exchange of Hong Kong Limited (the “Stock Exchange”) in February 2002, the Company became the holding company of the companies now comprising the Group on 17 January 2002. This was accomplished by acquiring the entire issued share capital of Hon Po International Limited (“Hon Po International”), a company incorporated in the BVI and the then holding company of the other subsidiaries as set out in note 14 to the financial statements, in consideration and in exchange for the allotment and issue of a total of 99 shares of HK$0.01 each in the share capital of the Company, credited as fully paid, to Hon Po Investment, the former shareholder of Hon Po International.

As further detailed in the Company’s prospectus dated 31 January 2002, the ongoing business concerns relating to the sourcing of food and beverage operations (the “Sourcing Business”) operated by Hon Po Holdings Limited (“Hon Po Holdings”) were transferred to Hon Po Management Limited, a wholly-owned subsidiary of the Company, effective from 26 October 2001. Since then, Hon Po Holdings discontinued its activities of the Sourcing Business. Hon Po Holdings is the ultimate holding company of the Company and is incorporated in Hong Kong with limited liability.

The ongoing business concerns relating to the restaurant operations (the “Restaurant Business”) operated by certain non-Group companies beneficially held by Hon Po Holdings (the “Non-Group Companies”) were transferred to certain subsidiaries of the Company, effective from 15 November 2001 and 11 January 2002. The Restaurant Business includes the leasehold land and buildings and investment properties owned by Chinese King’s Development Limited, one of the Non-Group Companies. Since the date of the transfer, the Non-Group Companies discontinued their activities of operating restaurants.

On 5 January and 14 April 1999, the Group acquired 99% interests of the ongoing business concerns relating to the restaurant operations (the “Acquired Business”) operated by a non-Group company (the “Non-Group Company”) and 99% equity interests in Harmony Sky Investment Limited (“Harmony Sky”), respectively from certain shareholders of Hon Po Holdings for cash. The Non-Group Company discontinued its activities of operating restaurant business since the date of the acquisition.

Ð 9 Ð APPENDIX I FINANCIAL INFORMATION OF THE GROUP

During the years ended 31 December 2001 and 2000, Hon Po Holdings, the Non- Group Companies and the Non-Group Company (collectively referred to as the “Landlords”) provided certain premises for the use by the Group on a rent-free basis. These premises continued to be utilised by the Group after the Company’s shares are listed on the Stock Exchange and rent was charged by the Landlords based on amounts assessed by FPDSavills (Hong Kong) Limited (“FPDSavills”), professional qualified valuers. Had rental expenses been charged by the Landlords, based on assessments made by FPDSavills, the charges would have been HK$14,620,000 and HK$15,792,000 for the years ended 31 December 2001 and 2000, respectively. For the purpose of these pro forma combined financial statements, these rental charges have been reflected in the results of the Group for the years ended 31 December 2001 and 2000 on a pro forma basis.

The pro forma combined financial statements include the pro forma combined results, statement of recognised gains and losses, cash flows and balance sheets of the companies now comprising the Group as if the current Group structure had been in existence throughout the years ended 31 December 2001 and 2000, or since the respective dates of their incorporation or acquisition by the Group where this is a shorter period. In particular, the Sourcing Business and the Restaurant Business have been included in the pro forma combined financial statements as if they had been transferred to the Group from Hon Po Holdings and the Non-Group Companies, respectively, as at the beginning of the earliest period presented. The Acquired Business and Harmony Sky have been included in the pro forma combined financial statements since the dates of their acquisition by the Group.

Basis of presentation

The Group Reorganisation involved companies under common control. For accounting purposes, the Company and its subsidiaries will be regarded and accounted for as a continuing group when the Company prepares its financial statements for the next year ending 31 December 2002. Accordingly, for the benefit of shareholders, pro forma combined financial statements and related notes thereto have been presented as supplementary information of the current year on the basis that the Company is treated as the holding company of its subsidiaries for the financial years presented rather than from the subsequent date of acquisition of the subsidiaries as is required by Statement of Standard Accounting Practice 27 “Accounting for group reconstructions” issued by the Hong Kong Society of Accountants. The pro forma combined results of the Group for the years ended 31 December 2001 and 2000 and the pro forma combined balance sheets as at 31 December 2001 and 2000 have been prepared on the basis that the current Group structure was in place for the two years ended 31 December 2001.

All significant transactions and balances among the companies comprising the Group have been eliminated in the preparation of the pro forma combined financial statements.

Although the Group Reorganisation had not been completed and, accordingly, the Group did not legally exist until 17 January 2002, in the opinion of the directors, the presentation of such supplementary pro forma combined financial statements prepared on the above basis is necessary to apprise the Company’s shareholders of the Group’s results and its state of affairs as a whole.

2. CORPORATE INFORMATION

As at 31 December 2001, the Company had not yet commenced business and the Group was not in existence as at that date. Had the Group Reorganisation been completed on 1 January 2001, the principal activity of the Company would have been investment holding. The principal activity of the Company’s subsidiaries is set out in note 14 to the financial statements. In the opinion of the directors, had the Group Reorganisation been completed on 31 December 2001, the ultimate holding company of the Company would have been Hon Po Holdings. The amount due from Hon Po Holdings was unsecured, interest-free and was repayable on demand. Subsequent to the balance sheet date, the amount due from Hon Po Holdings was partly settled by a special dividend of HK$224,600,000. Further details are also set out in the note 28(d) to the financial statement.

Ð 10 Ð APPENDIX I FINANCIAL INFORMATION OF THE GROUP

3. IMPACT OF NEW AND REVISED STATEMENTS OF STANDARD ACCOUNTING PRACTICE

The following issued and revised Statements of Standard Accounting Practice (“SSAPs”) and related Interpretations are effective for the first time for the current year’s financial statements:

¥ SSAP 9 (Revised) : “Events after the balance sheet date” ¥ SSAP 14 (Revised) : “Leases” ¥ SSAP 18 (Revised) : “Revenue” ¥ SSAP 26 : “Segment reporting” ¥ SSAP 28 : “Provisions, contingent liabilities and contingent assets” ¥ SSAP 29 : “Intangible assets” ¥ SSAP 30 : “Business combinations” ¥ SSAP 31 : “Impairment of assets” ¥ SSAP 32 : “Consolidated financial statements and accounting for investments in subsidiaries” ¥ Interpretation 12 : “Business combinations Ð subsequent adjustment of fair values and goodwill initially reported” ¥ Interpretation 13 : “Goodwill Ð continuing requirements for goodwill and negative goodwill previously eliminated against/credited to reserves”

These SSAPs prescribe new accounting measurement and disclosure practices. The major effects on the Group’s accounting policies and on the amounts disclosed in these financial statements of adopting these SSAPs and Interpretations are summarised as follows:

SSAP 9 (Revised) prescribes which type of events occurring after the balance sheet date require adjustment to the financial statements, and which require disclosure, but no adjustment. Its principal impact on these financial statements is that the proposed final dividend which is not declared and approved until after the balance sheet date, is no longer recognised as a liability at the balance sheet date, but is disclosed as an allocation of retained earnings on a separate line within the capital and reserves section of the balance sheet. The impact of this SSAP is the inclusion of a dividend declared and approved subsequent to the balance sheet date as a post balance sheet event which is detailed in note 28 to the financial statements.

SSAP 14 (Revised) prescribes the basis for lessor and lessee accounting for finance and operating leases, and the required disclosures in respect thereof. The disclosure changes under this SSAP have resulted in changes to the detailed information disclosed for finance leases and operating leases, which are further detailed in notes 19 and 25 to the financial statements.

SSAP 18 (Revised) prescribes the recognition of revenue and was revised as a consequence of the revision to SSAP 9 described above. Proposed final dividends from subsidiaries that are declared and approved by the subsidiaries after the balance sheet date are no longer recognised in the Company’s own financial statements for the year. This SSAP has had no major impact on these financial statements.

SSAP 26 prescribes the principles to be applied for reporting financial information by segment. It requires that management assesses whether the Group’s predominant risks or returns are based on business segments or geographical segments and determines one of these bases to be the primary segment information reporting format, with the other as the secondary segment information reporting format. The impact of this SSAP is the inclusion of significant additional segment reporting disclosures which are set out in note 5 to the financial statements.

SSAP 28 prescribes the recognition criteria and measurement bases to apply to provisions, contingent liabilities and contingent assets, together with the required disclosures in respect thereof. The principal impact of this SSAP on these financial statements is the requirement to discount the amounts of provisions to their present value at the balance sheet date, where the effect of discounting is material. This SSAP has had no major impact on these financial statements.

SSAP 29 prescribes the recognition and measurement criteria for intangible assets, together with the disclosure requirements and has had no major impact on these financial statements.

Ð 11 Ð APPENDIX I FINANCIAL INFORMATION OF THE GROUP

SSAP 30 prescribes the accounting treatment for business combinations, including the determination of the date of acquisition, the method for determining the fair values of the assets and liabilities acquired, and the treatment of goodwill or negative goodwill arising on acquisition. The SSAP requires the disclosure of goodwill and negative goodwill in the non-current assets section of the balance sheet. It requires that goodwill is amortised to the profit and loss account over its estimated useful life. Negative goodwill is recognised in the profit and loss account depending on the circumstances from which it arose, as further described in the accounting policy for negative goodwill disclosed in note 4 to the financial statements. Interpretation 13 prescribes the application of SSAP 30 to goodwill and negative goodwill arising from acquisitions in previous years prior to 1 January 2001, which remains eliminated against reserves or credited to the capital reserve, respectively. Further details of the Group’s goodwill and negative goodwill are set out in note 22 to the financial statements.

SSAP 31 prescribes the recognition and measurement criteria for impairment of assets. This SSAP has had no major impact on these financial statements.

SSAP 32 prescribes the accounting treatment and disclosures for the preparation and presentation of consolidated financial statements, and has had no major impact on the preparation of these financial statements.

In addition to the above new and revised SSAPs and related Interpretations, certain minor revisions to SSAP 17 “Property, plant and equipment” are effective for the first time for the current year’s financial statements. The adoption of this revised SSAP has had no major impact on the current year’s financial statements.

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of preparation

These financial statements have been prepared in accordance with Hong Kong Statements of Standard Accounting Practice, accounting principles generally accepted in Hong Kong and the disclosure requirements of the Hong Kong Companies Ordinance. The pro forma combined financial statements of the Group have been presented on the basis as set out in note 1 above. They have been prepared under the historical cost convention, except for the periodic remeasurement of leasehold land and buildings and investment properties, as further explained below.

Revenue recognition

Revenue is recognised when it is probable that the economic benefits will flow to the Group and when the revenue can be measured reliably, on the following bases:

(a) revenue from restaurant operations, when catering services are provided to customers;

(b) handling charges and sundry income, when services are rendered;

(c) rental income, on a straight-line basis over the lease terms; and

(d) interest income, on a time proportion basis taking into account the principal outstanding and the effective interest rate applicable.

Ð 12 Ð APPENDIX I FINANCIAL INFORMATION OF THE GROUP

Fixed assets and depreciation

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

Changes in the values of fixed assets, other than investment properties, are dealt with as movements in the revaluation reserve. If the total of this reserve is insufficient to cover a deficit, on an individual asset 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. On disposal of a revalued asset, the relevant portion of the revaluation reserve realised in respect of previous valuations is transferred to retained earnings as a movement in reserves.

Depreciation is calculated on the straight-line basis to write off the cost or valuation of each asset over its estimated useful life. The principal annual rates used for this purpose are as follows:

Leasehold land Over the lease terms Buildings 2.5% or over the lease terms, whichever is shorter Leasehold improvements 15% or over the lease terms, whichever is shorter Furniture and fixtures 15% Plant and equipment 15% Motor vehicles 25%

The gain or loss on disposal or retirement of a fixed asset recognised in the profit and loss account, is the difference between the net sales proceeds and the carrying amount of the relevant asset.

All of the Group’s fixed assets, except for the investment properties, prior to the listing of the Company’s shares on the Stock Exchange, were stated at cost less accumulated depreciation. The financial effect arising from the remeasurement of certain of the Group’s fixed assets on a valuation basis amounted to a surplus on revaluation in the amount of HK$20,175,000 which was recognised in the fixed assets revaluation reserve. Further details of the changes in accounting policy for the remeasurement of the Group’s fixed assets are set out in note 13 to the financial statements.

Investment properties

Investment properties are interests in land and buildings in respect of which construction work and development have been completed and which are intended to be held on a long term basis for their investment potential, any rental income being negotiated at arm’s length. Such properties are not depreciated, except where the unexpired term of the lease is 20 years or less, in which case depreciation is provided on the carrying amount over the remaining term of the lease, and are stated at their open market values on the basis of annual professional valuations performed at the end of each financial year. Changes in the values of investment properties are dealt with as movements in the investment property revaluation reserve. If the total of this reserve is insufficient to cover a deficit, 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.

Ð 13 Ð APPENDIX I FINANCIAL INFORMATION OF THE GROUP

On disposal of an investment property, the relevant portion of the investment property revaluation reserve realised in respect of previous valuations is released to the profit and loss account.

Other assets

Other assets represent utensils, linen and uniforms. No depreciation is provided on the initial purchase of utensils, linen and uniforms which are capitalised at cost. The cost of subsequent replacements of these items is charged directly to the profit and loss account in the year in which such expenditure is incurred.

Subsidiaries

A subsidiary is a company whose financial and operating policies the Company controls, directly or indirectly, so as to obtain benefits from its activities.

The Company’s interests/investments in subsidiaries are stated at cost less any impairment losses.

Goodwill

Goodwill arising on the acquisition of subsidiaries represents the excess of the cost of the acquisition over the Group’s share of the fair values of the identifiable assets and liabilities acquired as at the date of acquisition.

Goodwill arising on acquisition is recognised in the balance sheet as an asset and amortised on the straight-line basis over its estimated useful life of not more than 20 years.

In prior years, goodwill arising on acquisitions was eliminated against reserves in the year of acquisition. The Group has adopted the transitional provision of SSAP 30 that permits goodwill on acquisitions which occurred prior to 1 January 2001, to remain eliminated against reserves. Goodwill on subsequent acquisitions is treated according to the new accounting policy above.

On disposal of subsidiaries, the gain or loss on disposal is calculated by reference to the net assets at the date of disposal, including the attributable amount of goodwill which remains unamortised and any relevant reserves, as appropriate. Any attributable goodwill previously eliminated against reserves at the time of acquisition is written back and included in the calculation of the gain or loss on disposal.

The carrying amount of goodwill, including goodwill remaining eliminated against reserves, is reviewed annually and written down for impairment when it is considered necessary. A previously recognised impairment loss for goodwill is not reversed unless the impairment loss was caused by a specific external event of an exceptional nature that was not expected to recur, and subsequent external events have occurred which have reversed the effect of that event.

Negative goodwill

Negative goodwill arising on the acquisition of businesses represents the excess of the Group’s share of the fair values of the identifiable assets and liabilities acquired as at the date of acquisition, over the cost of the acquisition.

To the extent that negative goodwill relates to expectations of future losses and expenses that are identified in the acquisition plan and that can be measured reliably, but which do not represent identifiable liabilities as at the date of acquisition, that portion of negative goodwill is recognised as income in the profit and loss account when the future losses and expenses are recognised.

Ð 14 Ð APPENDIX I FINANCIAL INFORMATION OF THE GROUP

To the extent that negative goodwill does not relate to identifiable expected future losses and expenses as at the date of acquisition, negative goodwill is recognised in the profit and loss account on a systematic basis over the remaining average useful life of the acquired depreciable/amortisable assets. The amount of any negative goodwill in excess of the fair values of the acquired non-monetary assets is recognised as income immediately.

In prior years, negative goodwill arising on acquisitions was credited to the capital reserve in the year of acquisition. The Group has adopted the transitional provision of SSAP 30 that permits negative goodwill on acquisitions which occurred prior to 1 January 2001, to remain credited to the capital reserve. Negative goodwill on subsequent acquisitions is treated according to the new accounting policy above.

On disposal of businesses, the gain or loss on disposal is calculated by reference to the net assets at the date of disposal, including the attributable amount of negative goodwill which has not been recognised in the profit and loss account and any relevant reserves as appropriate. Any attributable negative goodwill previously credited to the capital reserve at the time of acquisition is written back and included in the calculation of the gain or loss on disposal.

Impairment of assets

An assessment is made at each balance sheet date of whether there is any indication of impairment of any asset, or whether there is any indication that an impairment loss previously recognised for an asset in prior years may no longer exist or may have decreased. If any such indication exists, the asset’s recoverable amount is estimated. An asset’s recoverable amount is calculated as the higher of the asset’s value in use or its net selling price.

An impairment loss is recognised only if the carrying amount of an asset exceeds its recoverable amount. An impairment loss is charged to the profit and loss account in the period in which it arises, unless the asset is carried at a revalued amount, when the impairment loss is accounted for in accordance with the relevant accounting policy for that revalued asset.

A previously recognised impairment loss is reversed only if there has been a change in the estimates used to determine the recoverable amount of an asset, however not to an amount higher than the carrying amount that would have been determined (net of any depreciation/amortisation), had no impairment loss been recognised for the asset in prior years.

A reversal of an impairment loss is credited to the profit and loss account in the period in which it arises, unless the asset is carried at a revalued amount, when the reversal of the impairment loss is accounted for in accordance with the relevant accounting policy for that revalued asset.

Accounts receivable

Accounts receivable, which generally have credit terms ranging from one month to six months, are recognised and carried at original invoiced amount less provision for doubtful debts when collection of full amount is no longer probable. Bad debts are written-off as incurred.

Inventories

Inventories, representing food and beverages, are stated at the lower of cost and net realisable value, after making due allowances for any obsolete or slow-moving items. Cost is determined on the first-in, first-out basis. Net realisable value is based on estimated selling prices less any further costs expected to be incurred to disposal.

Ð 15 Ð APPENDIX I FINANCIAL INFORMATION OF THE GROUP

Leased assets

Leases that transfer substantially all the rewards and risks of ownership of assets to the Group, other than legal title, are accounted for as finance leases. At the inception of a finance lease, the cost of the leased asset is capitalised at the present value of the minimum lease payments and is recorded together with the obligation, excluding the interest element, to reflect the purchase and financing. Assets held under capitalised finance leases are included in fixed assets and are depreciated over the shorter of the lease terms and the estimated useful lives of the assets. The finance costs of such leases are charged to the profit and loss account so as to provide a constant periodic rate of charge over the lease terms.

Leases where substantially all the rewards and risks of ownership of assets remain with the lessor are accounted for as operating leases. Where the Group is the lessor, assets leased by the Group under operating leases are included in non-current assets and rentals receivable under the operating leases are credited to the profit and loss account on the straight-line basis over the lease terms. Where the Group is the lessee, rentals payable under the operating leases are charged to the profit and loss account on the straight-line basis over the lease terms.

Dividends

Final dividends proposed by the directors are classified as a separate allocation of retained earnings within capital and reserves in the balance sheet, until they have been approved by the shareholders in a general meeting. When these dividends have been approved by the shareholders and declared, they are recognised as a liability.

Interim dividends are simultaneously proposed and declared, because the Company’s memorandum and articles of association grant the directors the authority to declare interim dividends. Consequently, interim dividends are recognised immediately as a liability when they are proposed and declared.

Deferred tax

Deferred tax is provided, using the liability method, on all significant timing differences to the extent it is probable that the liability will crystallise in the foreseeable future. A deferred tax asset is not recognised until its realisation is assured beyond reasonable doubt.

Foreign currency transactions

Foreign currency transactions are recorded at the applicable rates of exchange ruling at the transaction dates. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are translated at the applicable rates of exchange ruling at that date. Exchange differences are dealt with in the profit and loss account.

Related parties

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 decisions. Parties are also considered to be related if they are subject to common control or common significant influence. Related parties may be individuals or corporate entities.

Cash equivalents

For the purpose of the pro forma combined cash flow statement, cash equivalents represent short term highly liquid investments which are readily convertible into known amounts of cash and which were within three months of maturity when acquired, less advances from banks repayable within three months from the date of the advance.

Ð 16 Ð APPENDIX I FINANCIAL INFORMATION OF THE GROUP

Pension costs

Certain employees of the Group had completed the required number of years of service under the Employment Ordinance, Chapter 57 of the Laws of Hong Kong (the “Ordinance”) to be eligible for long service payments upon termination of their employment. The Group is only liable to make such payments where the termination meets the required circumstances specified in the Ordinance. The Group’s contingent liabilities in respect of such payments are set out in note 24 to the financial statements.

The Group operates a defined contribution Mandatory Provident Fund retirement benefits scheme (the “MPF Scheme”) under the Mandatory Provident Fund Schemes Ordinance for all its employees. The MPF Scheme has operated since 1 December 2000. Contributions are made based on a percentage of the employees’ basic salaries and are charged to the profit and loss account as they become payable in accordance with rules of the MPF Scheme. The assets of the MPF Scheme are held separately from those of the Group in an independently administered fund. The Group’s employer contributions vest fully with the employees when contributed into the MPF Scheme except for the Group’s employer voluntary contributions, which are refunded to the Group when the employee leaves employment prior to the contributions vesting fully, in accordance with the rules of the MPF Scheme.

5. SEGMENT INFORMATION

SSAP 26 was adopted during the year, as detailed in note 3 to the financial statements.

No separate analysis of segment information is presented as the Group’s sole business is engaged in the operation of a chain of Chinese restaurants in Hong Kong.

6. TURNOVER AND OTHER REVENUE

Turnover represents the receipts from restaurant operations. All significant intra-Group transactions have been eliminated on combination. An analysis of the Group’s turnover and other revenue is as follows:

Group 2001 2000 HK$’000 HK$’000

Turnover Receipts from restaurant operations 798,644 872,297

Other revenue Rental income, gross 3,900 3,340 Interest income 59 135 Handling charges received from related companies Ð 126 Sundry income 2,144 1,773

6,103 5,374

Total revenue 804,747 877,671

Ð 17 Ð APPENDIX I FINANCIAL INFORMATION OF THE GROUP

7. PROFIT FROM OPERATING ACTIVITIES

The Group’s profit from operating activities is arrived at after charging/(crediting):

Group 2001 2000 HK$’000 HK$’000

Cost of inventories consumed 242,996 277,039

Depreciation 21,570 20,679

Staff costs (including directors’ remuneration Ð note 8): Wages and salaries 270,720 298,108 Pension costs 12,188 1,088

282,908 299,196

Minimum lease payments under operating leases on land and buildings: Related companies 12,864 13,698 Ultimate holding company 14,620 15,792 Third parties 52,130 55,632

79,614 85,122

Auditors’ remuneration 900 1,200 Loss on disposal of fixed assets Ð 2,607 Net rental income (3,691) (3,184)

As at 31 December 2001, no inventories were stated at net realisable value (31 December 2000: nil).

Ð 18 Ð APPENDIX I FINANCIAL INFORMATION OF THE GROUP

8. DIRECTORS’/EMPLOYEES’ REMUNERATION

The details of the remuneration of the Company’s directors pursuant to Appendix 16 of the Rules Governing the Listing of Securities on the Stock Exchange (the “Listing Rules”) and Section 161 of the Hong Kong Companies Ordinance are as follows:

Group 2001 2000 HK$’000 HK$’000

Fees: Executive directors ÐÐ Non-executive directors ÐÐ Independent non-executive directors ÐÐ

ÐÐ

Basic salaries, housing benefits, other allowances and benefits in kind: Executive directors 1,054 7,536 Non-executive directors Ð 3,420 Independent non-executive directors ÐÐ

1,054 10,956

Pension costs 9 1

1,063 10,957

The number of directors whose remuneration fell within the following bands is as follows:

2001 2000 Number Number of directors of directors

Nil Ð HK$1,000,000 6 1 HK$1,000,001 Ð HK$1,500,000 Ð 1 HK$1,500,001 Ð HK$2,000,000 Ð 3 HK$3,500,001 Ð HK$4,000,000 Ð 1

66

The five highest paid individuals during the year included one (2000: five) director, details of their remuneration have been disclosed above. Details of the remuneration of the remaining four (2000: nil) non-director, highest paid individuals are as follows:

2001 2000 HK$’000 HK$’000

Basic salaries, housing benefits, other allowances and benefits in kind 2,715 Ð Pension costs 56 Ð

2,771 Ð

Ð 19 Ð APPENDIX I FINANCIAL INFORMATION OF THE GROUP

The number of non-director, highest paid individuals whose remuneration fell within the following band is as follows:

Number of employees 2001 2000

Nil to HK$1,000,000 4 Ð

During the years ended 31 December 2001 and 2000, no emoluments were paid by the Group to the directors or any of the five non-director, highest paid individuals as an inducement to join or upon joining the Group, or as compensation for loss of office. There was no arrangement under which a director waived or agreed to waive any remuneration during the years ended 31 December 2001 and 2000.

9. FINANCE COSTS

Group 2001 2000 HK$’000 HK$’000

Interest on bank loans and overdrafts 3,238 4,300 Interest on finance leases 127 57

3,365 4,357

10. TAX

Hong Kong profits tax has been provided at the rate of 16% (2000: 16%) on the estimated assessable profits arising in Hong Kong during the year. Deferred tax has been provided for the year under the liability method at the rate of 16% (2000: 16%) on timing differences.

Group 2001 2000 HK$’000 HK$’000

Current year provision 4,005 2,814 Underprovision in prior year Ð 394 Deferred tax charge/(credit) Ð note 20 555 (822)

Tax charge for the year 4,560 2,386

11. SPECIAL DIVIDENDS

Prior to the Group Reorganisation, the Company did not have any distributable reserves at the balance sheet date.

Subsequent to 31 December 2001, on 28 January 2002, written resolutions were passed pursuant to which, a special dividend of HK$224,600,000 was declared and approved by the directors of the Company. After the Company’s shares were listed on the Stock Exchange, such special dividend had been fully paid to Hon Po Holdings, at the direction of Hon Po Investment, the sole shareholder of the Company registered in the register of members of the Company on 17 January 2002.

Ð 20 Ð APPENDIX I FINANCIAL INFORMATION OF THE GROUP

The directors of the Company proposed the payment of a special dividend of HK$7,560,000, representing HK1.2 cents per share of the Company, out of the Company’s distributable reserves for the year ending 31 December 2002, to the shareholders of the Company whose names appear on the register of members of the Company on 4 June 2002. Subject to the approval of the Company’s shareholders at the Company’s forthcoming annual general meeting to be held on 4 June 2002, this special dividend will be paid on 28 June 2002.

Further details of the dividends are set out in note 28 to the financial statements.

12. EARNINGS PER SHARE

The calculation of pro forma basic earnings per share is based on the pro forma combined net profit from ordinary activities attributable to shareholders for the year ended 31 December 2001 of HK$22,153,000 (2000: HK$25,681,000) and the pro forma weighted average of 455,000,000 (2000: 455,000,000) shares deemed to be in issue as further described in note 21 to the financial statements throughout the year.

There were no potential dilutive ordinary shares in existence for the years ended 31 December 2001 and 2000, and accordingly, no pro forma diluted earnings per share have been presented.

13. FIXED ASSETS

Group

Leasehold Furniture land and Investment Leasehold and Plant and Motor buildings properties improvements fixtures equipment vehicles Total HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000

Cost or valuation: At beginning of year 14,709 11,228 106,914 59,261 9,157 1,219 202,488 Additions ÐÐ14,728 3,509 ÐÐ18,237 Disposals ÐÐÐ(8 ) ÐÐ(8 ) Surplus on revaluation 16,491 17,872 ÐÐÐÐ34,363

At 31 December 2001 31,200 29,100 121,642 62,762 9,157 1,219 255,080

Analysis of cost or valuation: At cost ÐÐ121,642 62,762 9,157 1,219 194,780 At 2001 valuation 31,200 29,100 ÐÐÐÐ60,300

31,200 29,100 121,642 62,762 9,157 1,219 255,080

Accumulated depreciation: At beginning of year 3,359 880 84,298 42,953 4,759 808 137,057 Provided during the year 325 Ð 13,125 6,566 1,395 159 21,570 Written back on disposals ÐÐÐ(1 ) ÐÐ(1 ) Written back on revaluation (3,684 ) (880 ) ÐÐÐÐ(4,564 )

At 31 December 2001 ÐÐ97,423 49,518 6,154 967 154,062

Net book value: At 31 December 2001 31,200 29,100 24,219 13,244 3,003 252 101,018

At 31 December 2000 11,350 10,348 22,616 16,308 4,398 411 65,431

Ð 21 Ð APPENDIX I FINANCIAL INFORMATION OF THE GROUP

The valuation of the Group’s leasehold land and buildings is analysed as follows:

2001 2000 HK$’000 HK$’000

Leasehold land and buildings held under: Long term leases 29,880 13,157 Medium term leases 1,320 1,552

31,200 14,709

The Group’s investment properties were held under long term leases. The leasehold land and buildings and investment properties are all situated in Hong Kong.

The Group’s leasehold land and buildings were valued on an open market, existing use basis at 30 November 2001 by FPDSavills at HK$31,200,000. As advised by FPDSavills, there were no material differences between the values of the leasehold land and buildings as at 30 November 2001 and at the balance sheet date. A surplus of HK$20,175,000 arising therefrom, which represented the excess of the revalued amounts over the then carrying values of the leasehold land and buildings, on an individual asset basis, has been credited to the fixed assets revaluation reserve (note 22).

Had the Group’s leasehold land and buildings been stated at cost less accumulated depreciation, they would have been included in the financial statements at approximately HK$11,025,000 (2000: HK$11,350,000).

The Group’s investment properties were valued on an open market, existing use basis at 30 November 2001 by FPDSavills, at HK$29,100,000. As advised by FPDSavills, there were no material differences between the values of the investment properties as at 30 November 2001 and at the balance sheet date. A surplus of HK$18,752,000 arising therefrom, which represented the excess of the revalued amounts over the then carrying values of the investment properties, on a profolio basis, has been credited to the investment properties revaluation reserve (note 22).

The investment properties are leased to third parties under operating leases, further summary details of which are summarised in note 25(a) to the financial statements.

As at 31 December 2001, the Group’s investment properties and certain leasehold land and buildings, with carrying values of HK$29,100,000 and HK$27,800,000, respectively, were pledged to secure banking facilities granted to the Group (note 18).

The net book values of the fixed assets of the Group held under finance leases included in the total amount of fixed assets were as follows:

2001 2000 HK$’000 HK$’000

Furniture and fixtures 758 748 Plant and equipment 427 510 Motor vehicles 180 399

1,365 1,657

Further particulars of the Group’s investment properties are included in the annual report of the Company for the year ended 31 December 2001.

Ð 22 Ð APPENDIX I FINANCIAL INFORMATION OF THE GROUP

14. PARTICULARS OF SUBSIDIARIES

Particulars of the subsidiaries which were acquired pursuant to the Group Reorganisation are included in the annual report of the Company for the year ended 31 December 2001.

15. ACCOUNTS RECEIVABLE

The general credit terms of the Group range from one to six months. An aged analysis of accounts receivable as at balance sheet date, based on invoice date, is as follows:

2001 2000 HK$’000 HK$’000

Current Ð 3 months 2,305 3,936 4 Ð 6 months 2 73

2,307 4,009

16. DUE FROM ULTIMATE HOLDING COMPANY

Particulars of the amount due from ultimate holding company of the Group disclosed pursuant to Section 161B of the Hong Kong Companies Ordinance are as follows:

Maximum amount outstanding 31 December during 1 January 2001 the year 2001 HK$’000 HK$’000 HK$’000

Due from ultimate holding company 237,149 237,149 207,108

The balance with ultimate holding company was unsecured, interest-free and was repayable on demand. Subsequent to the balance sheet date, the amount due from ultimate holding company was partly settled by a special dividend of HK$224,600,000 (note 28).

Out of the total rental deposits and other deposits as at 31 December 2001, an amount of HK$3,509,000 represented the rental deposits in respect of certain premises rented to the Group by ultimate holding company as detailed in note 1 to the financial statements.

17. ACCOUNTS PAYABLE

The ageing of accounts payable of the Group fell within the range of one to three months as at 31 December 2001 and 2000.

Ð 23 Ð APPENDIX I FINANCIAL INFORMATION OF THE GROUP

18. BANK OVERDRAFTS AND BANK LOANS

Group 2001 2000 HK$’000 HK$’000

Bank overdrafts Ð 203 Bank loans wholly repayable: Within one year Ð 8,095 In the second year 3,968 6,881 In the third to fifth years, inclusive 12,966 17,770 Beyond five years 20,066 7,101

37,000 40,050

Portion classified as current liabilities Ð (8,298)

Long term portion 37,000 31,752

At 31 December 2001, the Group’s banking facilities were secured by certain of the leasehold land and buildings and investment properties (note 13) of the Group and supported by personal guarantees executed by certain directors of the Company. Subsequent to the balance sheet date, the personal guarantees executed by certain directors of the Company were released and replaced by the corporate guarantees from the Company.

19. FINANCE LEASE PAYABLES

The Group leases certain of its fixed assets for its restaurant business (note 13). These leases are classified as finance leases and have remaining lease terms ranging from one to two years.

At 31 December 2001, the total future minimum lease payments under finance leases and their present values, were as follows:

Present Minimum value of minimum lease payments lease payments 2001 2000 2001 2000 Group HK$’000 HK$’000 HK$’000 HK$’000

Amounts payable: Within one year 871 975 751 818 In the second year 205 639 185 601 In the third to fifth years, inclusive Ð 33 Ð 32

Total minimum finance lease payments 1,076 1,647 936 1,451

Future finance charges (140) (196)

Total net finance lease payables 936 1,451 Portion classified as current liabilities (751) (818)

Long term portion 185 633

SSAP 14 was revised and implemented during the year, as detailed in note 3 to the financial statements. Certain new disclosures are required and have been included above.

Ð 24 Ð APPENDIX I FINANCIAL INFORMATION OF THE GROUP

20. DEFERRED TAX

Deferred tax for the year has been provided under the liability method at the rate of 16% (2000: 16%) on timing differences.

Group 2001 2000 HK$’000 HK$’000

Balance at beginning of year 147 969 Charge for the year Ð note 10 558 Ð Overprovision in prior year Ð note 10 (3) (822)

At 31 December 702 147

The principal components of the Group’s provision for deferred tax, and net deferred tax liabilities/(assets) not recognised are as follows:

Provided Unprovided 2001 2000 2001 2000 HK$’000 HK$’000 HK$’000 HK$’000

Accelerated depreciation allowances 720 157 (5,941) (7,043) Tax losses (18) (10) (3,940) (2,671)

702 147 (9,881) (9,714)

The revaluation of the Group’s leasehold land and buildings and investment properties does not constitute a timing difference and, consequently, the amount of potential deferred tax thereon has not been quantified.

The Company had no significant potential deferred tax liabilities or unprovided deferred tax at the balance sheet date.

Ð 25 Ð APPENDIX I FINANCIAL INFORMATION OF THE GROUP

21. SHARE CAPITAL

Shares

The following changes in the Company’s authorised and issued share capital took place during the period from 4 April 2001 (date of incorporation) to 31 December 2001:

(a) On incorporation, the authorised share capital of the Company was HK$10,000,000 divided into 1,000,000,000 shares of HK$0.01 each;

(b) On 4 April 2001, one subscriber share of HK$0.01 was allotted and issued fully paid;

(c) On 4 May 2001, the subscriber share was transferred to and held by Hon Po Investment; and

(d) On 11 October 2001, the authorised share capital of the Company was increased from HK$10,000,000 to HK$100,000,000 by the creation of a further 9,000,000,000 shares of HK$0.01 each, ranking pari passu in all respects with the existing share capital of the Company.

Subsequent to the balance sheet date, there were the following events:

(e) On 17 January 2002, as part of the Group Reorganisation set out in note 1 to the financial statements, an aggregate of 99 shares were allotted and issued, credited as fully paid, to Hon Po Investment as consideration for the acquisition by the Company of, and in exchange for, the 151 shares of US$1.00 each in Hon Po International, representing the entire issued share capital of Hon Po International;

(f) On 28 January 2002, pursuant to a written resolution of the Company, a total of 454,999,900 shares of HK$0.01 each were allotted as fully paid at par to Hon Po Investment as at the close of business on 17 January 2002, by way of the capitalisation of the sum of HK$4,549,999 standing to the credit of the share premium account of the Company (“Capitalisation Issue”). This allotment and capitalisation were conditional on the share premium account being credited as a result of the new shares issued to the public upon the listing of the Company’s shares on the Stock Exchange; and

(g) On 18 February 2002, in connection with the Company’s initial public offering, 175,000,000 shares of HK$0.01 each (“Offer Shares”), were issued at HK$0.2 each for a total cash consideration, before expenses, of HK$35,000,000.

Ð 26 Ð APPENDIX I FINANCIAL INFORMATION OF THE GROUP

A summary of the above movements in the authorised and issued share capital of the Company is as follows:

Number of Nominal authorised Number of value of shares shares issued shares issued Notes HK$’000

On incorporation and subsequent on 4 May 2001, one subscriber share was issued fully paid, and subsequently transferred to Hon Po Investment (a), (b) & (c) 1,000,000,000 1 Ð

Increase in authorised share capital (d) 9,000,000,000 ÐÐ

Shares issued as consideration for the acquisition of the entire issued share capital of Hon Po International (e) Ð 99 1

Capitalisation Issue credited as fully paid conditional on the share premium account of the Company being credited as a result of the issue of the Offer Shares (f) Ð 454,999,900 Ð

Pro forma share capital as at 31 December 2000 and 2001 10,000,000,000 455,000,000 1

New issue on public listing (g) Ð 175,000,000 1,750

Capitalisation of the share premium account as set out above (f) ÐÐ4,550

10,000,000,000 630,000,000 6,301

Pursuant to the basis of presentation set out in note 1 to the financial statements, the pro forma combined financial statements of the Group have been presented as if the Group Reorganisation on 18 February 2002 had taken place prior to the financial years ended 31 December 2001 and 2000.

Share options

The Company operates a share option scheme (the “Scheme”), further details of which are set out under the section “Share option scheme” in the report of the directors.

Since the Scheme became effective and as at the date of this report, no share options have been granted pursuant to the Scheme.

Ð 27 Ð APPENDIX I FINANCIAL INFORMATION OF THE GROUP

22. RESERVES

Group

Fixed Investment assets properties Goodwill Capital revaluation revaluation Retained Surplus reserve reserve reserve reserve profits Total HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000

At 1 January 2000 62,449 (1,690 ) 15,606 ÐÐ162,819 239,184 Profit for the year attributable to shareholders ÐÐÐÐÐ25,681 25,681

At 31 December 2000 and 1 January 2001 62,449 (1,690 ) 15,606 ÐÐ188,500 264,865 Surplus on revaluation ÐÐÐ20,175 18,752 Ð 38,927 Profit for the year attributable to shareholders ÐÐÐÐÐ22,153 22,153

At 31 December 2001 62,449 (1,690 ) 15,606 20,175 18,752 210,653 325,945

The surplus disclosed above represents the combined share capital of the subsidiaries which were acquired by the Company pursuant to the Group Reorganisation.

Goodwill arising on the acquisition of a subsidiary and negative goodwill arising on the acquisition of a business remain eliminated against reserves and credited to the capital reserve, respectively, as explained in notes 3 and 4 to the financial statements.

Ð 28 Ð APPENDIX I FINANCIAL INFORMATION OF THE GROUP

23. NOTES TO PRO FORMA COMBINED CASH FLOW STATEMENT

(a) Reconciliation of profit from operating activities to net cash inflow/(outflow) from operating activities

Group 2001 2000 HK$’000 HK$’000

Profit from operating activities 29,638 30,529 Interest income (59) (135) Depreciation 21,570 20,679 Loss on disposal of fixed assets Ð 2,607 Decrease/(increase) in rental deposits and other deposits 5,065 (17,342) Decrease/(increase) in inventories (587) 3,565 Decrease/(increase) in accounts receivable 1,702 (667) Increase in deposits, prepayments and other receivables (17,717) (2,800) Increase in an amount due from ultimate holding company (30,041) (38,383) Increase/(decrease) in accounts payable 11,368 (4,535) Increase in accruals 24,940 577 Increase/(decrease) in other payable (880) 1,452 Increase in rental deposits received 449 251

Net cash inflow/(outflow) from operating activities 45,448 (4,202)

(b) Analysis of changes in financing of the Group during the year

Issued capital (including pro forma Finance combined lease Minority surplus) payables Bank loans interests HK$’000 HK$’000 HK$’000 HK$’000 Balance as at 1 January 2000 62,450 333 33,805 4,267 Share of loss for the year ÐÐÐ(1,895) Inception of finance leases Ð 1,552 ÐÐ Cash inflow/(outflow) from financing, net Ð (434) 6,042 Ð

Balance as at 31 December 2000 and at 1 January 2001 62,450 1,451 39,847 2,372 Share of loss for the year ÐÐÐ(440) Inception of finance leases Ð 538 ÐÐ Cash outflow from financing, net Ð (1,053) (2,847) Ð

Balance as at 31 December 2001 62,450 936 37,000 1,932

Ð 29 Ð APPENDIX I FINANCIAL INFORMATION OF THE GROUP

(c) Major nonÐcash transaction

During the years ended 31 December 2001 and 2000, the Group entered into finance lease arrangements in respect of fixed assets with a total capital value at the inception of the leases of HK$538,000 and HK$1,552,000, respectively.

24. CONTINGENT LIABILITIES

If the termination of all the employees met the circumstances required by the Ordinance as set out in note 4 to the financial statements, the Group’s liabilities at 31 December 2001 would be HK$25,864,000 (2000: HK$22,212,000). No provision has been made for these amounts. As at 31 December 2001, the Company had no significant contingent liabilities.

25. OPERATING LEASE ARRANGEMENTS

(a) As lessor

The Group leases its investment properties (note 13) under non-cancellable operating lease arrangements with lease terms ranging from two to three years.

At 31 December 2001, the Group had total future minimum lease rental receivables under non-cancellable operating leases falling due as follows:

Group 2001 2000 HK$’000 HK$’000

Within one year 2,789 2,037 In the second to fifth years, inclusive 2,717 655

5,506 2,692

(b) As lessee

The Group leases certain of its restaurants, staff quarters, offices and warehouses under non-cancellable operating lease arrangements with lease terms ranging from one to ten years.

At 31 December 2001, the Group had total future minimum lease payments under non-cancellable operating leases falling due as follows:

Group 2001 2000 HK$’000 HK$’000

Within one year 77,567 43,874 In the second to fifth year, inclusive 127,894 106,417 After five years 25,643 22,207

231,104 172,498

At 31 December 2001, the Company did not have any significant leases.

SSAP 14 (Revised), which was adopted during the year, requires lessors under operating leases to disclose the total future minimum operating lease receivables under non- cancellable operating leases, as detailed in note (a) above. SSAP 14 (Revised) also requires lessees under operating leases to disclose the total future minimum operating lease payments, rather than only the payments to be made during the next year as was previously required.

Ð 30 Ð APPENDIX I FINANCIAL INFORMATION OF THE GROUP

26. COMMITMENTS

In addition to the operating lease commitments detailed in note 25(b) above, the Group had the following commitments at the balance sheet date:

2001 2000 HK$’000 HK$’000

Capital commitments contracted for

Commitments in respect of purchase of fixed assets Ð 1,911

At the balance sheet date, the Company did not have any significant capital commitments.

27. RELATED PARTY TRANSACTIONS

In addition to the transactions inherited to the Group Reorganisation and the transactions and balances detailed elsewhere in these pro forma combined financial statements, the Group had the following material transactions with related parties during the year:

2001 2000 HK$’000 HK$’000

Sales of foodstuff to related companies (i) 786 2,188 Purchases of foodstuff from related companies (ii) 21,081 41,955 Handling charges received from related companies (iii) Ð 126 Minimum lease payments under operating leases on land and buildings paid to related companies (iv) 12,864 13,698 Minimum lease payments under operating lease on land and buildings paid to ultimate holding company (v) 14,620 15,792 Consultancy fees paid to related companies (vi) Ð 189

Notes:

(i) The Group sold foodstuff to Rifeson Investments Limited (“Rifeson”) up to April 2000 and Bestall International Development Limited (“Bestall”), of which the beneficial owners of their corporate directors were also directors of the Company.

The directors consider that the sales of foodstuff were charged by the Group with reference to cost.

(ii) The Group purchased foodstuff from Hop Shing Sucking Pig & Roast Meat Company Limited (“Hop Shing”), of which some of their directors were also directors of the Company, up to February 2001.

The Group purchased foodstuff from Tsin Tao Enterprises Limited, a company beneficially held by Kung Ping Investments Limited and N.W.P. Investments Limited (“N.W.P. Investments”), of which some of their directors were also the directors of the Company.

The Group purchased foodstuff from Tung Cheong Hong and Pacific Good Trading Limited, which are beneficially held by a director of the Company.

The Group purchased foodstuff from Ching Wah Trading Company and Hollimax Limited (“Hollimax”), which are beneficially held by certain family members of certain directors of the Company. The Group purchased foodstuff from Hollimax up to June 2001.

Ð 31 Ð APPENDIX I FINANCIAL INFORMATION OF THE GROUP

The directors of the Company consider that the purchases of foodstuff were charged with reference to cost.

Except for purchases from Hop Shing and Hollimax, the remaining related party transactions also constitute connected transactions as defined under the Listing Rules.

(iii) The handling charges were related to the administrative services provided to Rifeson and Bestall. There were no handling charges received from Rifeson and Bestall since August 2000 and May 2000, respectively.

The directors consider that the handling charges were charged by the Group with reference to cost.

(iv) The rental expenses were paid to N.W.P. Investments, To Sang Management Company Limited (“To Sang Management”), Composite Interest Limited (“Composite”) and Wong Chung Ming Development Fund Company Limited (“WCM Fund”). To Sang Management was beneficially held by certain directors of the Company. Composite and WCM Fund were beneficially held by Mr. Wong Chung Ming who is a minority shareholder with 4% interest in A. Top Investment Limited, a subsidiary of the Company. The rental expenses were based on the agreements signed with the Group.

This related party transaction also constitutes a connected transaction as defined under the Listing Rules.

(v) As detailed in note 1 to the financial statements, certain properties of the Landlords are leased to the Group for its operations and the corresponding pro forma monthly rental expenses payable to the Landlords have been included in the preparation of the pro forma combined financial statements. The rental expenses were valued by FPDSavills for the years ended 31 December 2001 and 2000. The balance was included as an amount due from ultimate holding company at the balance sheet date.

This related party transaction also constitutes a connected transaction as defined under the Listing Rules.

(vi) The consultancy fees were related to the consultancy services provided by To Sang Management. The directors of the Company consider that the fees were charged with reference to cost.

(vii) The Group’s banking facilities are supported by guarantees executed by certain directors of the Company as further detailed in note 18 to the financial statements.

28. POST BALANCE SHEET EVENTS

In addition to the matters set out in note 1 to the financial statements, subsequent to the balance sheet date, there were the following events:

(a) On 28 January 2002, written resolutions were passed pursuant to which the Company conditionally adopted the Scheme. On 18 February 2002, upon the listing of the Company’s shares on the Stock Exchange, such Scheme became effective. Further details of the Scheme are set out under section “Share option scheme” in the report of the directors and in note 21 to the financial statements.

(b) As detailed in note 21(f) to the financial statements, the Capitalisation Issue was credited as fully paid as a result of the issue of the Offer Shares.

(c) As detailed in note 21(g) to the financial statements, on 18 February 2002, the Offer Shares were issued at HK$0.2 each for a total cash consideration, before expenses of HK$15,364,000, of HK$35,000,000.

Ð 32 Ð APPENDIX I FINANCIAL INFORMATION OF THE GROUP

(d) On 28 January 2002, written resolutions were passed pursuant to which, a special dividend of HK$224,600,000 was declared and approved by the directors of the Company. After the Company’s shares were listed on the Stock Exchange, such special dividend had been fully paid in full to Hon Po Holdings at the direction of Hon Po Investment, the sole shareholder of the Company registered in the register of members of the Company on 17 January 2002.

(e) The directors of the Company proposed the payment of a special dividend of HK$7,560,000, representing HK1.2 cents per share of the Company, out of the Company’s distributable reserves for the year ending 31 December 2002, to the shareholders of the Company whose names appear on the register of members of the Company on 4 June 2002. Subject to the approval of the Company’s shareholders at the Company’s forthcoming annual general meeting to be held on 4 June 2002, this special dividend will be paid on 28 June 2002.

An adjusted pro forma combined balance sheet of the Group as at 31 December 2001, which is based on the pro forma combined balance sheet of the Group as at 31 December 2001 and adjusted as if the events subsequent to the balance sheet date as set out in notes 28(b), (c) and (d) to the financial statements above had taken place on 31 December 2001, is presented below:

Adjusted Pro forma pro forma combined Pro forma combined balance sheet post balance sheet events balance sheet as at adjustments as at 31 December Capitalisation Placing Special 31 December 2001 of shares of shares dividend 2001 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 (note 28 (b)) (note 28 (c)) (note 28 (d))

Non-current assets 131,726 131,726

Current assets 323,928 19,636 (224,600) 118,964 Current liabilities (88,617) (88,617)

Net current assets 235,311 30,347

Non-current liabilities (39,159) (39,159) Minority interests (1,932) (1,932)

Net assets 325,946 120,982

Share capital 1 4,550 1,750 6,301 Reserves 325,945 (4,550) 17,886 (224,600) 114,681

325,946 120,982

29. APPROVAL OF THE FINANCIAL STATEMENTS

The financial statements were approved and authorised for issue by the board of directors on 23 April 2002.

2. MATERIAL ADVERSE CHANGE

The Group has continued to carry on the business of operating a chain of Chinese restaurants and has commenced the business of food manufacturing during the year 2002.

Ð 33 Ð APPENDIX I FINANCIAL INFORMATION OF THE GROUP

The Board are not aware of any material adverse change in the financial or trading position of the Group since 31 December 2001, the date to which the latest published audited financial statements of the Group were made up.

3. EFFECT ON ASSETS AND LIABILITIES ON THE GROUP

Upon the completion of the Proposed Acquisition, the fixed assets will be increased by HK$85 million with a corresponding increase in bank loan and a decrease in bank balance of the Group (to the extent that the Proposed Acquisition is financed by internal resources of the Group) and there will be no effect on the consolidated net tangible asset value of the Group.

4. INDEBTEDNESS

At the close of business on 30 April 2002, being the latest practicable date for the purpose of ascertaining information contained in this indebtedness statement prior to the printing of this circular, the Group had total outstanding borrowings of approximately HK$37.6 million. The borrowings comprised secured bank loans of approximately HK$37 million and obligations under finance lease contracts of approximately HK$0.6 million.

As at 30 April 2002, the Group had aggregate banking facilities of approximately HK$38 million, of which approximately HK$37 million had been utilised. The Group’s banking facilities are secured by certain of the Group’s investment properties and leasehold land and buildings situated in Hong Kong, and such banking facilities are supported by the corporate guarantees of the Company.

As at 30 April 2002, the finance lease contracts of the Group are entered into by Hon Po Holdings Limited, the ultimate holding company of the Company, and certain fellow subsidiaries of the Company. As part of the group restructuring for the purpose of the listing of the Company’s shares on the Stock Exchange, the Group is currently in the process of novating the above-mentioned finance lease contracts to the Company’s subsidiaries.

As at 30 April 2002, the Group had contingent liabilities not provided for amounting to approximately HK$32 million in respect of long service payments to eligible employees upon termination of their employment pursuant to the Employment Ordinance, Chapter 57 of the Laws of Hong Kong.

Save as aforesaid or as otherwise disclosed herein and apart from any intra-Group liabilities, the Group did not have, at the close of business on 30 April 2002, any loan capital issued and outstanding or agreed to be issued, outstanding bank overdrafts and liabilities under acceptance (other than normal trade bills) or other similar indebtedness, debentures, mortgages, charges or loans or acceptance credits, finance lease or hire purchase commitments or guarantees or material contingent liabilities.

Ð 34 Ð APPENDIX I FINANCIAL INFORMATION OF THE GROUP

The Directors have confirmed that there have been no material changes in the indebtedness or contingent liabilities of the Group since 30 April 2002.

5. WORKING CAPITAL

Taking into account the available banking facilities (including new banking facilities raised for the acquisition of the Property) and internal resources of the Group, the Board is of the opinion that the Group has sufficient working capital for its present requirements.

Ð 35 Ð APPENDIX II PROPERTY VALUATION

The following is the text of a letter and valuation certificate from FPDSavills (Hong Kong) Limited, in connection with its valuation of the Property as at 3 May 2002 prepared for the purpose of incorporation in this circular.

FPDSavills (Hong Kong) Limited 23/F Two Exchange Square Central Hong Kong EA Licence: C-002450

Telephone: (852) 2801 6100 Direct Line: (852) 2801 6100 Direct Fax: (852) 2530 0756 www.fpdsavills.com www.fpdsavillsproperty.com

27 May 2002

The Directors Hon Po Group (Lobster King) Limited Units E & F on Ground Floor Phase II Kingsway Industrial Building 173-175 Wo Yi Hop Road Kwai Chung New Territories

Dear Sirs,

Re : 2nd Floor, Allied Plaza, Cosmopolitan Centre, (Formerly Known as E. S. K. Ho- Tung Building), No. 760 Nathan Road, Mong Kok, Kowloon

In accordance with your instructions for us to prepare a report on the open market value of the above property, we confirm that we have inspected the property, caused land searches at the Land Registry, made relevant enquiries and investigations as we consider necessary for the purpose of providing you with our opinion of the value of the property as at 3 May, 2002.

Our valuation is our opinion of the open market value which we would define as intended to mean “the best price at which the sale of an interest in property would have been completed unconditionally for cash consideration on the date of valuation, assuming:

(a) a willing seller;

Ð 36 Ð APPENDIX II PROPERTY VALUATION

(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;

(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.”

Our valuation is made in accordance with the Guidance Notes on the Valuation of Property Assets published by the Hong Kong Institute of Surveyors.

Our valuation has been made on the assumption that the owner sells the property in the open market without the benefit of a deferred term contract, leaseback, joint venture, management agreement or any similar arrangement which would serve to affect the value of the property.

We have relied to a very considerable extent on information provided by your Company and have accepted advice given to us on such matters as statutory notices, occupancy details, easements, floor area and other relevant matters.

All documents have been used for reference only. Except otherwise stated, all dimensions, measurements and areas included in the valuation certificate are based on information contained in the documents provided to us by your Company and are therefore approximate. We have no reason to doubt the truth and accuracy of the information provided to us by your Company. We have also been advised by your Company that no material facts have been omitted from the information provided and have no reason to suspect that any material information has been withheld.

Other special assumptions of the property have been stated in the footnotes of the valuation certificate for the property.

We have not been provided with copies of the title documents relating to the property but have caused searches to be made at the Land Registry. However, we have not searched the original documents to verify ownership or to verify any lease amendments which may not appear on the copies handed to us.

Ð 37 Ð APPENDIX II PROPERTY VALUATION

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

No structural survey has been made nor were any tests carried out on any of the services. We are therefore unable to report whether the property is free from rot, infestation or any other defects.

We have not verified and make no representation that the property, including any plant and equipment therein, is millennium compliant, or that the value of the property is not adversely affected in any way by any part of it not being millennium compliant within the meaning of BSI definition of Year 2000 compliance.

Our valuation certificate is attached hereto.

Yours faithfully, For and on behalf of FPDSavills (Hong Kong) Limited Gilbert C H Chan BSc (Hons), AHKIS, MRICS, RPS(GP) Associate Director Valuation and Consultancy

Note: Mr Gilbert C H Chan is a chartered surveyor with over 9 years’ valuation experience on all landed properties in Hong Kong

Ð 38 Ð APPENDIX II PROPERTY VALUATION

VALUATION CERTIFICATE

Open Market Value Property Description and Tenure Particulars of Occupancy as at 3 May 2002

2nd Floor, Allied The property comprises the The property is currently HK$80,000,000 Plaza, Cosmopolitan whole of 2nd floor of the owner-occupied for Centre, (Formerly commercial podium (known restaurant business. Known as E. S. K. as Allied Plaza) in a Ho-Tung Building), composite development No. 760 Nathan Road, completed in 1973. Mong Kok, Kowloon The gross floor area of the 400/1,900 of 190/ property is approximately 250th shares of and in 22,820 sq.ft. (2,120.05 sq.m.). the Remaining Portion The saleable area of the of Kowloon Inland Lot property is approximately No. 9729 20,929 sq.ft. (1,944.37 sq.m.).

The property is held under Conditions of Regrant No. 8933 for a lease term of 150 years commencing on 26 June, 1899.

Notes:

1. The current registered owner of the property is Treasure Continuation Company Limited vide Memorial No. 6423936 dated 29 September, 1995.

2. The property is subject to the following encumbrances:

(i) Occupation Permit No. K69/73 vide Memorial No. 1007467 dated 18 July 1973.

(ii) Deed of Mutual Covenant vide Memorial No. 1014472 dated 1 August 1973.

(iii) Supplemental Deed of Mutual Covenant vide Memorial No. 3333670 dated 31 March 1987.

(iv) Deed Poll vide Memorial No. 6132631 dated 29 September 1994.

(v) Deed of Mutual Grant of Right of Way vide Memorial No. 6146771 dated 29 September 1994.

(vi) Mortgage to secure general banking facilities in favour of Bank of China vide Memorial No. 29 September 1995.

3. We have valued the property on an open market basis assuming sale with the benefit of vacant possession.

4. We have valued the property by direct comparison method. This method is conducted by collecting and the analysing the relevant sales comparables most transacted within recent six months in the locality.

Ð 39 Ð APPENDIX III GENERAL INFORMATION

1. RESPONSIBILITY STATEMENT

This circular includes particulars given in compliance with the Listing Rules for the purpose of giving information with regard to the Group. The Directors collectively and individually accept full responsibility for the accuracy of the information contained in this circular and confirm, having made all reasonable enquiries, that to the best of their knowledge and belief, there are no other facts the omission of which would make any statement contained in this circular misleading.

2. DISCLOSURE OF INTERESTS

(i) As at the Latest Practicable Date, the interests of the Directors and their associates in the equity or debt securities of the Company or any of its associated corporations (within the meaning of the SDI Ordinance) which are required to be notified to the Company and the Stock Exchange pursuant to Section 28 of the SDI Ordinance (including interests which they are taken or deemed to have under Section 31 or Part I of the Schedule to the SDI Ordinance) or which are required pursuant to Section 29 of the SDI Ordinance, to be entered in the register referred to therein, or which are required to be notified to the Company and the Stock Exchange pursuant to the Model Code for Securities Transactions by Directors of Listed Companies, were as follows:

Number of shares held and nature of interest in Hon Po Holdings Limited, an associated corporation.

Personal Family Corporate Total interest interest interest interests

Mr. Cheung To Sang (Note 1) 73,996,437 17.51% (Note 2)

Mr. Chan Nun Chiu 53,963,137 12.77% (Note 3)

Mrs. Cheung Lim Mai Tak, (Note 1) 43,762,162 10.35% Grace (Note 4)

Mr. She Hing Chiu 5,152,338 7,821,000 3.07% (Note 5)

Mr. Ng Wing Po 45,913,287 10.86% (Note 6)

Mr. Cheung Sik Pang 56,037,637 13.26% (Note 7)

Ð 40 Ð APPENDIX III GENERAL INFORMATION

Notes:

1. Interests in shares of his/her spouse are excluded in accordance with Section 31(1)a of SDI Ordinance.

2. The shares are held by To Sang Management Company Limited, a company which is controlled indirectly by a discretionary trust of which Mr. Cheung To Sang and certain of his children are beneficiaries.

3. The shares are held by Nun Chiu Investments Limited, a company in which each of Mr. Chan Nun Chiu and his wife has a controlling interest.

4. Shares of 4,700,750 are held by Tabo Development Limited, a company in which Mrs. Cheung Lim Mai Tak, Grace owns approximately 74% of the issued capital. Shares of 39,061,412 are held by Lim Mai Tak Consultants and Investments Limited, a company which is controlled indirectly by a discretionary trust of which Mrs. Cheung Lim Mai Tak and certain of her children are beneficiaries.

5. The shares are held by Tread Wood Investment Limited, a company in which Mr. She Hing Chiu owns approximately 50% of the issued capital.

6. The shares are held by N.W.P. Investments Limited, a company which is controlled indirectly by a discretionary trust of which Mr. Ng Wing Po’s wife and certain of his children are beneficiaries.

7. The shares are held by Kung Ping Investments Limited, a company which is deemed to be controlled by Mr. Cheung Sik Pang and his wife.

Save as disclosed herein, none of the Directors and their associates has any interests in the equity or debt securities of the Company or any of its associated corporations (within the meaning of the SDI Ordinance) which are required to be notified to the Company and the Stock Exchange pursuant to Section 28 of the SDI Ordinance (including interests which they are taken or deemed to have under Section 31 or Part I of the Schedule to the SDI Ordinance), or which are required, pursuant to Section 29 of the SDI Ordinance, to be entered in the register referred to therein, or which are required to be notified to the Company and the Stock Exchange pursuant to the Model Code for Securities Transactions by Directors of Listed Companies.

(ii) Each of the executive and non-executive Directors (other than independent non- executive Directors) has a service contract with the Company for an initial term of three years commencing from 1 February 2002, which will continue thereafter until terminated by either party giving not less than three months’ notice in writing.

Save as disclosed above, no director has a service contract with the Company which is not determinable by the Company within one year without payment of compensation, other than statutory compensation.

Ð 41 Ð APPENDIX III GENERAL INFORMATION

Ms. Lee Sin Mei, Olivia, an independent non-executive director of the Company, is a partner in the firm of White & Case, which may receive normal and usual professional fees from the Group for providing legal services to the Group from time to time.

(iii) Saved as those disclosed in note 27 and 28 of Appendix I, the annual report of the Group for the financial year ended 31 December 2001 and the Prospectus (including those ongoing connected transactions which have already been waived by the Stock Exchange from strict compliance with the requirements of the Listing Rules), none of the Directors has any direct or indirect interest in any assets which have since 31 December 2001 (being the date to which the latest published audited financial statements of the Company were made up) been acquired or disposed of by or leased to any member of the Group, or are proposed to be acquired or disposed of by or leased to any member of the Group.

(iv) Mr. Cheung Sik Pang, being a partner and a beneficial shareholder of Tung Cheong Hong and Pacific Good Trading Limited respectively, was interested in the supplies of tea leaves and seafood to the Group respectively. These ongoing transactions have already been waived by the Stock Exchange from strict compliance with the requirements of the Listing Rule.

Save as disclosed above, there is no contract or arrangement subsisting at the date of this circular in which any of the Directors is materially interested and which is significant in relation to the business of the Group.

3. SUBSTANTIAL SHAREHOLDERS

(a) At the Latest Practicable Date, the following interests of 10% or more in the issued share capital of the Company were recorded in the register of interests in shares required to be kept by the Company pursuant to Section 16(1) of the SDI Ordinance:

Percentage of Number of the Company’s Name shares held issued share capital

Hon Po Holdings Limited 380,000,000 60.32 Hon Po Investment Limited 380,000,000 60.32

Note:

In accordance with the provisions of the SDI Ordinance, the interest of Hon Po Investment Limited in the shares of the Company is also attributed to Hon Po Holdings Limited on the basis that Hon Po Investment Limited is wholly owned by Hon Po Holdings Limited, a company incorporated in Hong Kong.

Ð 42 Ð APPENDIX III GENERAL INFORMATION

(b) So far as the Directors are aware, at the Latest Practicable Date, the holder (other than members of the Group) of 10% or more of voting rights exercisable at general meetings of the subsidiaries of the Company is:

Name of other shareholders (not Percentage of the being a member subsidiary’s issued Name of subsidiary of the Group) share capital

Oriental Team Investments Megalopolis Limited 32.97% Limited (note)

Note:

Megalopolis Limited is a company in which Mr. Wong Chung Ming and his children are beneficially interested. Mr. Wong Chung Ming is a director of A. Top Investment Limited and Oriental Team Investments Limited which are non wholly-owned subsidiaries (indirect) of the Company.

Save as disclosed above, at the Latest Practicable Date, no person had registered an interest in the share capital of the Company that was required to be recorded under Section 16(1) of the SDI Ordinance and so far as is known by the Directors, no person (other than a Director) is, directly or indirectly, interested in 10% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of any member of the Group or holds any options in respect of any such capital.

4. QUALIFICATION OF EXPERTS

The following are the qualifications of the experts which have given their opinion or advice which is contained in, or referred to in, this circular.

Expert Qualification

FPDSavills Professional surveyors

The above expert does not have any shareholding in any member of the Group or any right to subscribe for or to nominate persons to subscribe for securities in any member of the Group.

At the Latest Practicable Date, FPDSavills does not have any direct or indirect interest in any assets which have since 31 December 2001 (being the date to which the latest published audited financial statements of the Company were made up) been acquired or disposed of by or leased to any member of the Group, or are proposed to be acquired or disposed of by or leased to any member of the Group.

Ð 43 Ð APPENDIX III GENERAL INFORMATION

5. CONSENTS OF EXPERTS

FPDSavills has given and has not withdrawn its written consent to the issue of this circular with the inclusion of its letter, valuation certificate and reference to its name included herein in the form and context in which it appears.

6. MATERIAL CONTRACTS

Details of all the contracts except the Agreement referred to herein (not being contracts entered into the ordinary course of business), which have been entered into by members of the Group within two years preceding the date of this circular and which are or may be material, have already been included in the prospectus of the Company dated 31 January 2002. Please refer to the prospectus for any details of such contracts.

7. LITIGATION

As at the Latest Practicable Date, no member of the Group is engaged in any litigation or arbitration or claim of any material importance which is known to the Directors to be pending or threatened against any member of the Group.

8. REGISTERED OFFICE AND TRANSFER OFFICE

The Company’s registered office is situated at Century Yard, Cricket Square, Hutchins Drive, P.O. Box 2681 GT, Grand Cayman, British West Indies. The Company’s head office and principal place of business is at Unit E&F, G/F., Phase II, Kingsway Industrial Building, 173-175 Wo Yi Hop Road, Kwai Chung, Hong Kong. The principal share registrar and transfer office is the Bank of Butterfield International (Cayman) Ltd., at Butterfield House, 68 Fort Street, P.O. Box 705, George Town, Grand Cayman, Cayman Islands. The Hong Kong branch share registrar and transfer office is Tengis Limited, at 4th Floor, Hutchison House, 10 Harcourt Road, Central, Hong Kong.

9. COMPANY SECRETARY

The company secretary of the Company is Mr. Lai Po Sing, a Certified Public Accountant in Hong Kong and a fellow member of both the Hong Kong Society of Accountants and the Association of Chartered Certified Accountants.

Ð 44 Ð APPENDIX III GENERAL INFORMATION

10. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents will be available for inspection at the head office and principal place of business of the Company at Units E&F, G/F, Phase II, Kingsway Industrial Building, 173Ð175 Wo Yi Hop Road, Kwai Chung, Hong Kong during normal business hours from 28 May 2002 up to (and including) 11 June 2002:

a. the memorandum and articles of association of the Company;

b. the letter, and valuation certificate relating to the Property prepared by FPDSavills, the text of which is set out in Appendix II;

c. the service agreements referred to in item 2 (ii) of Appendix III;

d. the material contracts referred to in the section headed “Material contracts” in Appendix III;

e. the written consents referred to in the section headed “Consents of experts” in Appendix III;

f. the annual report for the financial year ended 31 December 2001; and

g. the prospectus of the Company dated 31 January 2002.

Ð 45 Ð